California Real Estate Practice Exam

Which of the following is primarily responsible for the considerable increase in low cost rental housing for low income groups?

1. Federal Housing Administration

2. Public Housing Administration

3. State Housing Act

4. Urban Renewal Service

The correct answer is: Federal Housing Administration

The Federal Housing Administration (FHA) plays a significant role in increasing low-cost rental housing for low-income groups through its various programs designed to make housing more accessible and affordable. The FHA provides mortgage insurance on loans made by approved lenders to borrowers who might not qualify for conventional financing. This insurance reduces the risk for lenders, encouraging them to offer loans with lower down payments and favorable terms. By facilitating these loans, the FHA helps stimulate the construction and rehabilitation of rental housing, leading to the creation of more units that serve low-income groups. This is particularly important for those who might struggle to secure adequate housing without assistance. The other options, while they have a role in housing policy, do not focus primarily on the same scope as the FHA. For instance, while the Public Housing Administration does manage public housing projects, its overarching influence has been more about direct housing allocations rather than financing and facilitating the broader market for low-cost rentals. The State Housing Act primarily regulates the policies at the state level and does not have the same direct impact on increasing low-cost rental units. Urban Renewal Service deals with revitalizing urban areas but often focuses on the broader development context rather than strictly low-cost rental housing.