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primarily through public housing authorities to build and operate housing for low-income families. In the early 1960's the Federal government, while maintaining its commitment to public housing, also established new housing programs that were intended to encourage private developers, owners, and managers to provide affordable housing. The National Housing Act of 1968 created federal mortgage insurance, below market interest rate loans, and operating subsidies under the Sections 221 (d) (3), 221 (d) (4), and 236 programs which were very effective at encouraging the development of new affordable housing. Since 1961, nearly two million privately owned federally subsidized units of housing for low-income households have been constructed nationally. More recently a myriad of state and local financing tools have been established to finance affordable housing. As was the case with federal subsidies, owners participating in these programs agreed to use restrictions which limited the amount by which rents could be raised for a specific period of time. The duration of the use restriction varied depending on the type of subsidy received, type of project owner, and the underlying mortgage financing. Many of the federal incentives provided established 40 year mortgages that prohibited prepayment without HUD's consent for 20 years and regulatory agreements that were coterminous with the mortgage. Many state or local programs had affordability requirements of as little as fifteen years. Impact Of The Termination Of Housing Subsidies Many of the privately owned affordable housing units constructed with public subsidies in the 1960's and 1970's will be eligible for conversion to market rate rentals or sale as condominiums in the 1990's. Four primary factors threaten the continued operation of this low-income housing stock: Increased numbers of owners will become eligible to prepay their federal mortgages as their loans reach their twentieth anniversary with the largest effect being felt between 1990 and 1994. Rental assistance contracts provided through the Loan Management Set Asides (LMSAs) are expiring with the largest effect being felt between 1997 and 1999. As a consequence, owners will experience a drop in rental income and tenants will no longer be assured that they can afford the rents. Second notes on many older properties in the inventory will mature. Ownership will revert to the second note holders if the current owners are unable to pay off the second note at maturity. I