CRS Examines Factors Limiting Housing Credit Use for Rental Housing Programs

The population of persons age 65 and older in the United States is expected to grow both in numbers and as a percentage of the total population over the next 25 years, through 2030. In 2002, a bipartisan commission created by Congress issued a report, A Quiet Crisis in America, that detailed the need for affordable assisted housing and supportive services for elderly persons and the shortage the country will likely face as the population ages. The Department of Housing and Urban Development (HUD) operates a number of programs that provide assisted housing and supportive services for low-income elderly persons (defined by HUD as households where one or more persons are age 62 or older) to ensure that elderly residents in HUD-assisted housing can remain in their apartments as they age. This report describes those programs, along with current developments in the area of housing for elderly households.

HUD operates five programs that designate assisted housing developments for either low-income elderly residents alone, or low-income elderly residents and residents with disabilities. The primary HUD program that provides housing for low-income elderly households is the Section 202 Supportive Housing for the Elderly program. Established in 1959, it is the only HUD program that currently provides housing exclusively for elderly residents. The Section 221(d)(3) Below Market Interest Rate and Section 236 programs are mortgage subsidy programs that provide housing for all age levels, but have properties specifically dedicated to elderly households. The Public Housing and project-based Section 8 housing programs also have projects dedicated to elderly households.

In addition to providing housing, HUD operates four supportive services programs for elderly persons residing in HUD-assisted properties. The Congregate Housing program, Service Coordinator program, and Resident Opportunity and Self-Sufficiency (ROSS) Service Coordinator program each provide services such as meals and assistance with activities of daily living to help residents remain independent. The Assisted Living Conversion program makes grants to HUD-assisted developments so that they can convert units or entire buildings into assisted living facilities.

Among current issues involving Section 202 housing for elderly residents is the need to rehabilitate and modernize aging structures. One way in which property owners may obtain funds for improving their properties is by paying off the original Section 202 loan and refinancing. In the 111^th Congress, the Section 202 Supportive Housing for the Elderly Act (P.L. 111-372) removed one of the impediments to the ability of owners of older Section 202 developments to refinance and make improvements. Under previous law, owners could only refinance into loans with lower interest rates and reduced debt service -- the oldest Section 202 developments (those funded prior to 1974) were financed with low interest rate loans, and it was difficult, if not impossible, to enter into a new loan with a lower interest rate and reduced debt service. These owners can now refinance as long as they address the physical needs of the property. In addition to P.L. 111-372's refinancing provisions, the new law authorizes "Senior Preservation Rental Assistance" for use in cases of refinancing, establishes a new category of housing with services within the Assisted Living Conversion Program called "Service Enriched Housing," and creates a National Senior Housing Clearinghouse to help eligible seniors find affordable housing.

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In 1999, Congress created a bipartisan commission to study the housing needs of the senior population as it ages. The commission's final report, entitled A Quiet Crisis in America, warned of the nation's growing senior population and the lack of affordable housing and supportive services programs to meet future demand.¹ The percentage of individuals age 65 and older is beginning to make up a larger percentage of the total U. S. population, and is expected to continue to grow through 2030.² Between 2000 and 2030, the number of persons age 65 and older is expected to grow from 35.0 million to 71.5 million, and from 12.4% of the population to 19.6%.³ In particular, the "oldest old," those individuals aged 85 and older, are becoming a larger share of the elderly population, raising concerns about the availability of supportive services in addition to affordable housing. The bipartisan housing commission estimated that the aging of the population will result in the need for an additional 730,000 units of affordable housing by 2020.⁴

The Department of Housing and Urban Development (HUD) operates a number of programs that provide both housing and supportive services for elderly households.⁵ HUD defines "elderly person" as a household composed of one or more persons in which at least one person is age 62 or older at the time of initial occupancy.⁶ Five HUD programs provide affordable rental housing that is designated for low-income elderly households. Of these five, only one, the Section 202 Supportive Housing for the Elderly program, provides housing exclusively for elderly persons. The other four programs provide housing for all age groups, but allow some properties to be devoted primarily to housing elderly residents. The Section 236 and Section 221(d)(3) programs insured loans to private developers during the 1960s and early 1970s so that they could build low-income housing, some of which included buildings dedicated to elderly residents (neither program makes new loans, although some buildings still have active mortgages). The Public Housing and project-based Section 8 programs also dedicate some buildings primarily for use by elderly households.

In addition to housing, HUD funds four supportive services programs for elderly residents in its subsidized properties. These programs are the Congregate Housing program, the Service Coordinator program, the Resident Opportunity and Self-Sufficiency (ROSS) Service Coordinator program, and the Assisted Living Conversion program. Each program works to allow elderly persons living in HUD-eligible properties to remain in their apartments through assistance and services.

This report provides a summary of the HUD programs that provide multi-family rental housing for low-income elderly households and their related supportive services programs. It also discusses funding and current issues in the area of assisted housing for low-income elderly persons. However, the report does not include a comprehensive look at all housing programs that serve elderly households. Major sources of assistance that are not discussed include HUD's Section 8 voucher program,⁷ HUD's mortgage insurance and reverse mortgage programs,⁸ and the Department of Agriculture's rural housing programs that provide assistance to elderly households.⁹

HUD Housing Programs

The Section 202 Supportive Housing for the Elderly Program

The Section 202 Supportive Housing for the Elderly program is the only HUD program that currently provides housing exclusively for elderly households, with approximately 263,000 units available for elderly households (this does not include Section 202 units for persons with disabilities).¹⁰ Established as part of the Housing Act of 1959 (P.L. 86-372) and last authorized in FY2003 (P.L. 106-569), the current version of the Section 202 program makes capital grants and project rental assistance available to developers so that they can build housing that is affordable to very low-income elderly households. The program was not always structured this way, however, and it has changed several times since its inception. During the 50 years that the Section 202 program has existed, the system of providing financing for developments has changed from loans to grants, the tenant population it targets has moved from moderate-income elderly households to very low-income elderly households, and the program has gone from serving only elderly households to serving elderly and disabled households, and then back to serving elderly households exclusively. The history of Section 202 is important because many projects developed in the early years of the program continue to operate under the rules in place at the time they were built.

The history of the Section 202 program can be divided into three distinct phases based primarily on changes to its financing structure and the income eligibility of tenants. From 1959 to 1974, the program provided housing units affordable to moderate-income elderly households and households with an adult member with a disability by extending low-interest construction loans to nonprofit developers. Between 1974 and 1990, the program continued to extend loans to developers, but added project-based Section 8 rental assistance to subsidize tenant rents so that developers could afford to rent units to low-income elderly and disabled households (those with incomes at or below 80% of area median income) or, beginning in 1981, very low-income households (those with incomes at or below 50% of area median income).¹¹ Finally, beginning in 1990, HUD replaced the Section 202 loan program with capital grants and a different form of rental assistance referred to as PRAC (project rental assistance contracts). These units are available to very low-income elderly households.

History of the Section 202 Program: 1959 to 1974

When the Section 202 program was established in 1959, its purpose was to provide housing for moderate-income elderly tenants -- those with too much income for Public Housing but insufficient income for market-rate housing.¹² Through the program, the government loaned funds to private nonprofit developers so that they could build housing for elderly families and individuals. Unlike most of its loan programs, HUD made the Section 202 loans directly to developers rather than insuring loans from private lenders.¹³ The interest rates on the loans were low -- approximately 3% -- and had a duration of up to 50 years.¹⁴ The developers, assisted by low-interest mortgage payments, could set rents in their buildings at levels that were affordable to elderly households with moderate incomes. At the time, there were no income eligibility restrictions on the properties. Between 1959 and 1968, developers constructed 45,257 Section 202 units in 335 projects, with an average of 135 units per building, most of which were efficiency apartments.¹⁵

In 1962, HUD began setting rents for Section 202 properties on a community-by-community basis. The new rents were meant to be affordable for lower-middle-income elderly households, and they varied across the country.¹⁶ In 1968, HUD set income eligibility limits for all Section 202 developments at the higher of 135% of Public Housing limits or 80% of area median income.¹⁷ To make units affordable for low-income elderly tenants (those with incomes at or below 80% of area median income), Congress enacted a rental subsidy program called the Rent Supplement program (described later in this report) as part of the Housing and Urban Development Act of 1965 (P.L. 89-117).¹⁸ Those tenants receiving rent subsidies made up a relatively small percentage of total tenants during the early years of the Section 202 program, however.¹⁹

The eligible tenant population for the Section 202 program changed in 1964 when non-elderly "handicapped" individuals and families were added to the definition of "elderly families" as part of the Housing Act of 1964 (P.L. 88-560).²⁰ Yet very few tenants who were considered non-elderly handicapped participated in the Section 202 program between 1964 and 1974. Although data were not kept, HUD surveyed property owners and estimated that through 1977, less than 1% of tenants were non-elderly handicapped.²¹

In FY1970, the Section 202 program was not funded for the first time since its enactment. The Nixon Administration did not propose any new funds for the program and Congress did not appropriate them. The Administration's rationale was, at least in part, that the large size of the Section 202 loans had a negative effect on the size of the federal budget.²² This was due to the fact that the program showed only expenditures and not the offsets made when developers paid back the Section 202 loans.²³ Between 1970 and 1974, the Section 202 program did not fund any new construction projects. Instead, housing for elderly households was constructed using the Section 236 mortgage subsidy program, established as part of the Housing and Civil Rights Act of 1968 (P.L. 90-448, discussed later in this report).

Of the Section 202 properties funded prior to 1974, there are approximately 245 buildings, representing more than 33,000 units, that still have active loans.²⁴ These properties continue to accept tenants according to the rules in place at the time they were developed. Section 202 developments that applied for HUD funds prior to 1962 are not subject to income limits, while those constructed after 1962 but prior to July 1972 are subject to the income limits approved by HUD at the time.²⁵ In addition, in the years since many pre-1974 Section 202 developments were constructed, HUD has provided rental assistance for approximately 38% of the units, primarily through the Loan Management Set Aside (LMSA) program. LMSA was a special allocation of project-based Section 8 assistance contracts available for units in troubled multi-family projects with FHA-insured or HUD-held mortgages.

History of the Section 202 Program: 1974 to 1990

In 1974, the Housing and Community Development Act of 1974 (P.L. 93-383) both reactivated the Section 202 program and instituted a number of changes. The primary change was to make project-based Section 8 rental assistance available to building owners. Project-based Section 8 rental assistance is a rent subsidy that, at the time, made up the difference between 25% of tenant income and market rate rent as established by HUD (tenant payments were later raised to 30% of income), and was available only to low-income tenants. Although the law did not restrict Section 202 units only to those households that qualified for project-based Section 8 rental assistance, the availability to owners of the rental subsidy meant that more low-income tenants began to live in Section 202 projects, a change from the program's previous tendency to serve mostly moderate-income elderly families.²⁶ Contracts for project-based Section 8 rental assistance payments between HUD and Section 202 owners were initially set for up to 20 years and were renewable.²⁷

Loans for the construction of Section 202 housing continued to be available to developers when the program was reactivated; however, P.L. 93-383 changed the interest rate, raising it from 3% to the U.S. Treasury's cost of borrowing, while the duration of the loan term dropped from 50 years to 40 years. Another change was in the distribution of Section 202 loan funds. Prior to 1974, Section 202 developments were largely concentrated in urban areas.²⁸ However, the Housing and Community Development Act directed that 20% to 25% of funds go to nonmetropolitan areas.²⁹ By 1988, the share of Section 202 units located in cities with populations less than 10,000 rose to 11.5%, compared to 2.7% through 1974.³⁰ A final change to the Section 202 program in P.L. 93383 was the requirement that Section 202 developments support state and local plans to provide services such as transportation, homemaker services, and counseling and referral services to elderly tenants.

In 1981, the tenant income guidelines for Section 202 units that received project-based Section 8 rental assistance were changed as part of the Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35).³¹ The law required that HUD units receiving project-based Section 8 rental assistance, including Section 202 projects, be made available primarily to very low-income households -- those with incomes at or below 50% of area median income. The law specified that, of the units receiving project-based Section 8 rental assistance prior to 1981, 10% could be occupied by households with incomes between 50% and 80% of the area median income (those households considered low income), while only 5% of new units could be occupied by families with incomes between 50% and 80% of the area median. These percentages were later changed to 25% and 15%, respectively.³²

Between 1974 and 1988, an estimated 128,636 additional units of Section 202 housing were built using construction loans and project-based Section 8 rental assistance.³³ The average size of developments declined from 153 units in developments built between 1959 and 1974 to 92 units in developments built between 1975 and 1984, and then to 56 units in developments built between 1985 and 1988.³⁴ Only 5.4% of the units built between 1974 and 1985 were efficiencies, compared to more than 60% prior to 1974; however, between 1985 and 1988 the percentage of efficiencies rose again, to 18.9%.³⁵

History of the Section 202 Program: 1990 to the Present

In 1990, the Cranston-Gonzalez National Affordable Housing Act (P.L. 101-625) again changed the financing scheme of the Section 202 program. The law replaced loans to developers with capital advances. The capital advances do not accrue interest, and developers need not pay them back as long as the properties are made available to very low-income elderly households for at least 40 years.

The change in financing was prompted by concern about the costs involved in paying back Section 202 loans. Under the Section 202 loan program, developers often used project-based Section 8 rental assistance to service their loan debt in addition to using it to supplement tenant rents -- its intended purpose.³⁶ At the time P.L. 101-625 was enacted, it was estimated that approximately 75% of Section 8 project-based rental assistance was used by developers to service their loan debt, leaving only 25% for operating expenses and improvements.³⁷ Under the new program of capital grants, it was thought that developers would no longer need to use rental assistance to make loan payments, allowing HUD to make lower project-based rental assistance payments, requiring less budget authority.³⁸

Both the method of providing project-based rental assistance and the way in which development cost limitations for Section 202 projects are determined also changed as a result of P.L. 101-625. Rental subsidies are no longer provided through the Section 8 program, meaning that rents are not based on Section 8 fair market rents (FMRs).³⁹ The new project rental assistance -- referred to as PRAC -- is meant to ensure that owners have the capacity to determine the needs of residents for supportive services, coordinate those services, and identify sources of funding to deliver the services.⁴⁰ Although the duration of the new project rental assistance contracts was initially 20 years, HUD's current practice is to extend new rental assistance contracts for three years. In addition, P.L. 101-625 provided that project development costs be calculated on the basis of factors specific to constructing Section 202 projects rather than using FMR standards, as had been the case. These new factors include the prevailing costs of construction, rehabilitation, and acquisition of property; the costs of special design features for elderly residents; and the costs of adding congregate space.⁴¹ The new system is meant to ensure that all areas of the country have adequate funds to develop and maintain Section 202 housing; under the old system of FMRs, those areas of the country with low FMRs often could not afford to develop Section 202 projects.⁴²

Another significant change in P.L. 101-625 was the removal of housing for persons with disabilities from the Section 202 program. Congress began to initiate the split between housing for elderly and disabled households in 1978 when the Housing and Community Development Amendments (P.L. 95-557) required that, beginning in FY1979, at least $50 million of the amounts available for loans under the Section 202 program be devoted to housing for non-elderly "handicapped" individuals.⁴³ Later, as part of the Housing and Community Development Act of 1987 (P.L. 100-242), Congress further specified that 15% of total Section 202 funds should be devoted to housing for persons with disabilities. In P.L. 101-625, Congress directed that beginning in 1992, housing for persons with disabilities be provided through a completely separate program called the Section 811 Supportive Housing for Persons with Disabilities program.⁴⁴ As with the Section 202 program, developers of Section 811 housing receive capital grants and project rental assistance to construct, rehabilitate, or acquire housing for very low-income individuals with disabilities. The advent of Section 811 has not completely eliminated Section 202's role in serving disabled households, however; Section 202 developments constructed before 1992 continue to provide housing for persons with disabilities according to the rules that existed at the time of construction.

Between 1993 and 1998, the Section 202 program created approximately 27,632 units of housing for elderly households,⁴⁵ and between 2000 and 2006, another 35,281 units were constructed.⁴⁶ In this phase of the Section 202 program, developments have become smaller, with an average of 50 units per project through 1998, and 42 units per site in those developed between 2000 and 2006.⁴⁷ These newer Section 202 developments have virtually no efficiency units.⁴⁸

The Section 202 Program's Grant Process

HUD awards Section 202 grants to private nonprofit groups and to for-profit general partnerships where the sole general partner is a nonprofit organization. The grant process consists of two parts, one of which involves a formula and the other a competitive process. In the first step, HUD uses a need-based formula to allocate the total amount of Section 202 funds available for capital grants and project rental assistance in a fiscal year to each of the 18 HUD multifamily hubs.⁴⁹ Of the funds available, HUD allocates 85% to metropolitan areas and 15% to non-metropolitan areas. Until the FY2010 competition, these funds had been further subdivided among the 52 local program offices within each hub; each of the local area offices received funding sufficient to support at least 20 units in metropolitan areas and five units in nonmetropolitan areas. However, with the FY2010 Notice of Funding Availability (NOFA), HUD did not subdivide the funds to local offices. This is meant to better target funds to areas with the greatest unmet need.⁵⁰ In addition, the FY2010 NOFA does not have a minimum set-aside of five units in nonmetropolitan areas. This leaves the New York and Los Angeles hubs with no non-metro set-aside of units.

The formula for allocating Section 202 funds to the HUD field offices looks at "relevant characteristics of the elderly population" in each field office's jurisdiction, including the population of elderly renters.⁵¹ HUD also considers the number of one-person elderly renter households that have incomes at or below 50% of the area median income, together with one of three "housing conditions." These three housing conditions are paying more than 30% of income toward rent, occupying a unit without a kitchen or plumbing, or occupying an overcrowded unit (defined as accommodating 1.01 or more persons per room).⁵²

In the second step in the grant process, applicants apply for the funds that have been allocated to their areas. HUD then evaluates grantee applications and uses a point system to assign up to 102 points per application.⁵³ Points are awarded in the following categories:

• up to 23 points are awarded for the applicant's capacity to provide housing, including experience in providing housing to minorities;

• up to 12 points are awarded for the need for funding in the applicant's target area;

• up to 49 points are awarded for the approach to providing housing, including the quality and effectiveness of the proposal, the involvement of elderly persons in designing the proposal, and the proximity and accessibility of the site to transportation and services;

• up to 6 points are awarded for the applicant's ability to secure funding from other sources; and

• up to 10 points are awarded for development of an evaluation plan to measure performance of the project.

Section 202 and Low-Income Housing Tax Credits

Financing affordable housing, including housing for elderly residents, may require multiple streams of funding in order to support the design, construction, and ongoing operating costs of a project. In addition to federal funds provided through HUD programs, affordable housing developers may use mortgage revenue bonds, tax credits, and local housing trust fund resources, among other sources, to develop housing for low-income and special-needs populations. While HUD funds might once have been sufficient on their own to develop an affordable housing project, that is not always the case today. This is true for Section 202 developers, who may bring together multiple sources of funding to develop a project. One of the primary sources of funding available for developing affordable housing is the Low-Income Housing Tax Credit (LIHTC). The LIHTC was enacted as part of the Tax Reform Act of 1986 (P.L. 99-514) and provides incentives for the development of affordable rental housing through federal tax credits administered by the Internal Revenue Service (IRS). The IRS allocates tax credits to states based on population, and states award the credits to developers to use as a source of financing for the development of affordable rental housing.⁵⁵

In 2000, in order to help Section 202 (and Section 811) developers bring together multiple financing sources, Congress enacted a law that makes the interaction of Section 202 funds and LIHTCs more feasible by changing the way in which federal funds are treated. The value of LIHTCs are determined, in part, based on the cost of developing a property -- referred to as the qualified basis.⁵⁶ The costs of constructing, acquiring, and rehabilitating a property (among other costs⁵⁷) are included in calculating the qualified basis, but the amount must then be reduced by any federal grants received by the developer, which in turn reduces the value of the tax credits. Therefore, if a nonprofit developer were to receive a Section 202 capital grant, its value would be subtracted in calculating the qualified basis, which could result in minimal LIHTCs. The Homeownership and Economic Opportunity Act (P.L. 106-569), enacted in 2000, allowed for-profit limited partnerships, where a nonprofit organization is the sole general partner, to be eligible Section 202 owners. The changed law allows a nonprofit Section 202 grantee to loan the Section 202 capital grant to the limited partnership. Under this arrangement, the Section 202 funds are no longer a "federal grant" to be subtracted in calculating the qualified basis, potentially increasing the value of LIHTCs.

The change in the law to allow for-profit limited partnerships to own Section 202 housing developments has not immediately made mixed financing arrangements common, however. The transactions are complicated and may require extensive expertise in housing finance to make them work. HUD acknowledges that "most developers seek to avoid the use of federal grant financing in most LIHTC projects."⁵⁸ In addition, the treatment of Section 202 PRAC in tax credit transactions has been unclear. Although the IRS has created exceptions to the rule that federal grants do not count toward the qualified basis of a property for certain categories of rental assistance, Section 202 PRAC has not been among the exceptions. The programs that have been exempted from the requirement include project-based Section 8 rental assistance payments and public housing capital and operating funds,⁵⁹ the Native American Housing Block Grant Program,⁶⁰ Rent Supplement and Rental Assistance Payments programs,⁶¹ and the Shelter Plus Care and Single Room Occupancy programs.⁶² Despite language in the Homeownership and Economic Opportunity Act of 2000 indicating that Congress intended Section 202 (and Section 811) assistance to be included in calculating qualified basis (rather than subtracted from it), the IRS has not issued a ruling that would be necessary to make this possible.⁶³

Another possible limitation in developing mixed finance projects using federal grants, such as Section 202 together with the LIHTC, was removed with passage of the Housing and Economic Recovery Act of 2008 (P.L. 110-289). Under LIHTC law, developers may qualify for tax credits worth roughly 9% or 4%.⁶⁴ Under previous LIHTC law, the higher 9% credit was available for new construction that was not federally subsidized, while the 4% credit was available for either federally subsidized new construction or existing buildings. The statutory definition of "federally subsidized" included below market federal loans (the structure used by limited partnerships to loan Section 202 capital grants).⁶⁵ The fact that developers of federally subsidized buildings did not qualify for the higher tax credit made financing projects with the LIHTC less lucrative. Developers either had to accept the lower 4% credit or set up a system through which federal grants were loaned to the project at a market rate of interest.⁶⁶

However, P.L. 110-289 removed the phrase "below market federal loans" from the definition of federal subsidy in the LIHTC statute. This allows for the eligibility of new construction developed with below-market federal loans placed in service after the effective date of P.L. 110-289. The 9% credits are very competitive,⁶⁷ however, and it may still be difficult for Section 202 developers to obtain them.

Section 221(d)(3) Below Market Interest Rate Program

In 1961, Congress enacted the Section 221(d)(3) Below Market Interest Rate (BMIR) program (P.L. 87-70) to help public agencies, cooperatives, limited dividend corporations, and nonprofit sponsors create housing for low- and moderate-income families.⁶⁸The BMIR program has not provided funds for new developments since 1968, but properties with active mortgages continue to operate. The program, like the Section 202 program at the time it was created, was meant to serve those families with incomes too high for Public Housing, but too low for market-rate rents.⁶⁹ The program was, and continues to be, run by the Federal Housing Administration (FHA). Through the program, private lenders extended FHA-insured loans with interest rates of 3% and durations of up to 40 years to developers of multi-family rental housing projects of at least five units.⁷⁰ Lenders then sold the mortgages to the Federal National Mortgage Association (Fannie Mae).⁷¹ The program continued until 1968, when the Section 236 program replaced it as a vehicle for producing multi-family housing for low-income families. Section 221(d)(3) BMIR properties are still active, providing approximately 1,154 units in projects dedicated to the elderly.⁷² Units are open to households with incomes of up to 95% of the area median income.⁷³

The Rent Supplement program was enacted as part of the Housing and Urban Development Act of 1965 (P.L. 89-117) to subsidize the rent payments of low-income households living in Section 221(d)(3) BMIR housing developments. FHA entered into contracts with building owners to make up the difference between 25% of tenant income (later raised to 30%) and the fair market rent as determined by HUD.⁷⁴ Generally, up to 20% of units in a building were eligible for Rent Supplement payments, although the Housing and Urban Development Act of 1969 (P.L. 91-152) made up to 40% of units eligible for subsidy payments if the HUD Secretary determined it was necessary.⁷⁵ Most, but not all, of these contracts have been converted to project-based Section 8 rental assistance.⁷⁶

The Section 236 Program

In 1968, Congress determined that the Section 221(d)(3) program and the Section 202 program were of limited usefulness in developing large numbers of assisted housing units. The Section 221(d)(3) program depended on Fannie Mae to purchase loans, and only limited funds were available for this purpose.⁷⁷ And the Section 202 program's system of direct loans had a large negative effect on the budget. As a result, the Housing and Urban Development Act of 1968 (P.L. 90-448) established the Section 236 program to provide housing for low- and moderate-income families, including facilities dedicated to elderly persons and persons with disabilities. The program was intended to replace the Section 221(d)(3) and Section 202 programs,⁷⁸ and for a time it did. The program produced approximately 400,000 new units in 3,601 developments by 1976.⁷⁹ But after January 1973, when President Nixon imposed a moratorium on the new construction of subsidized housing, the program did not receive new funds, although it has continued to subsidize existing developments.

The Section 236 program assisted both private for-profit and nonprofit owners of rental housing projects for low-income and moderate-income households by providing FHA insurance for mortgages for construction or substantial rehabilitation of buildings, and by subsidizing the mortgage payments. Under the program, project owners borrowed funds from private lenders at the market interest rate, and the government then made (and continues to make) subsidy payments to the owners, called Interest Reduction Payments (IRPs), so that owners effectively pay an interest rate of only 1% on their mortgages. By paying the low 1% interest rate, owners are expected to be able to charge tenants affordable rents. Each Section 236 unit has both a basic rent and a market rent: the basic rent is the payment amount needed to operate the project at a 1% mortgage interest rate, and the market rent is the amount needed to operate the project at the actual mortgage interest rate.⁸⁰ Tenants pay the higher of the basic rent or 30% of their income (initially, tenants paid 25%), but rent cannot exceed the fair market rent amount.⁸¹ Households with low incomes -- at or below 80% of area median income -- are eligible for Section 236 housing. Approximately 66,000 units, 23% of all Section 236 units, are reserved for elderly residents.⁸²

In order to help make Section 236 housing more affordable to low-income households, some projects receive rent subsidies through a program called Rental Assistance Payments (RAP). Congress enacted the program in 1974 (P.L. 93-383) to ensure that tenants did not have to pay more than 25% of their income toward rent. Building owners were able to receive RAP for up to 20% of the units in a project (subject to increase or decrease at the discretion of the Secretary). In addition, Section 236 owners were eligible to receive Rent Supplement payments, originally developed for the Section 221(d)(3) BMIR program and made available to the Section 236 program in the Housing and Urban Development Act of 1968 (P.L. 90-448). Both RAP and Rent Supplement payments have largely been converted to project-based Section 8 rental assistance.⁸³

Public Housing

Public Housing is the original federally-assisted housing program for low-income families, created as part of the Housing Act of 1937 (P.L. 75-412). The program provides housing for very low-income households (those with incomes at or below 50% of the area median income) and requires tenants to pay 30% of their income toward rent. Public Housing projects have long dedicated buildings to elderly tenants. The Housing Act of 1956 (P.L. 84-1020) authorized the Public Housing Administration (a predecessor to HUD) to provide units specifically for low-income elderly individuals (prior to this, HUD's definition of elderly families did not include single individuals), which increased the number of elderly households living in Public Housing. Congress did not intend to separate elderly residents from younger tenants.⁸⁴ Rather, units for elderly residents were to be integrated with those of non-elderly families. Despite this desire not to segregate elderly tenants, by 1960 the first elderly-only Public Housing development had been created.⁸⁵ Today, approximately 76,000 Public Housing units are designated exclusively for elderly residents.⁸⁶

Beginning in 1961, persons with disabilities were included in the definition of "elderly families" for purposes of the Public Housing program. Combining elderly residents and residents with disabilities in Public Housing has been controversial. During the early years of Public Housing for elderly persons, residents with disabilities made up only a small proportion of residents. However, the number of residents with disabilities in Public Housing for the elderly began to increase in the 1980s and early 1990s for at least two reasons. First, individuals with mental illnesses were less likely to be institutionalized as a result of the availability of outpatient mental health care, and were therefore in need of affordable housing.⁸⁷ A second factor was passage of the 1988 Fair Housing Act Amendments (P.L. 100-430). The amendments added "handicapped" individuals to the class of individuals protected from discrimination in the provision of housing. The definition of "handicapped" included individuals with alcohol and drug addictions.⁸⁸ As a result of the increase of younger residents with disabilities in Public Housing, often with mental illnesses and addictions, Public Housing Authorities faced a greater number of incidents of disruptive behavior, and some elderly residents reported feeling unsafe.⁸⁹

Due to the conflicts between tenants with disabilities and elderly residents, Congress in 1992 allowed Public Housing Authorities (PHAs) to designate buildings as elderly only, disabled only, or elderly and disabled only.⁹⁰ In 1996, The Public Housing Opportunity Extension Act of 1996 (P.L. 104-120) streamlined the process for designating buildings as elderly-only. If a PHA wants to change the composition of a building to only elderly residents, it must submit a plan to HUD to ask for approval. If the plan is approved, PHAs cannot evict non-elderly residents with disabilities, although PHAs may help residents relocate if they want to move. The law also requires that, if a PHA is unable to rent an available unit to an elderly household within 60 days, it must make the unit available to near-elderly tenants (where the head of household or spouse is age 50 or older). If the unit cannot be rented to near-elderly families, then it must be made available to all families.

Project-Based Section 8 Housing

Between 1974 and 1983, the Section 8 new construction and substantial rehabilitation programs made rental assistance available to developers that were creating new and rehabilitated rental housing for low-income families.⁹¹ The rental assistance was meant to act as an incentive so that developers would build or rehabilitate affordable housing. In some cases, rental assistance was attached to units of housing that were developed using other assistance streams. For example, as mentioned earlier in this report (in the section entitled "History of the Section 202 Program: 1974 to 1990"), units of Section 202 housing developed between approximately 1974 and 1990 received Section 8 rental assistance in addition to direct loans from HUD. However, Section 8 rental assistance was also made available for units not developed through any other specific program.

From the inception of the Section 8 program, owners were able to develop properties dedicated for use by elderly households and households with an adult member who has a disability. Today, elderly residents and residents with disabilities continue to live together in project-based Section 8 housing. Although owners may give a preference to elderly families (P.L. 102-550),⁹² unlike Public Housing, most Section 8 properties may not completely exclude residents with disabilities. The statute requires that owners continue to reserve some units for tenants with disabilities; the number is either the number of units occupied by residents with disabilities in 1992 or 10%, whichever is lower. If owners are unable to rent units to elderly families, they may give preference to near-elderly families with an adult member who has a disability. After the Section 202 program, project-based Section 8 housing provides the most housing dedicated specifically to elderly households. Of the number of units that continue to receive project-based rental assistance, approximately 200,000 are dedicated to elderly households.⁹³

^b The units are those in use as of 2005. The number of units does not include units for non-elderly residents with disabilities and includes only those units specifically designated for elderly residents (elderly residents may also reside in units not specifically designated for their use).

^c Although it was not mandated that Section 202 projects serve tenants with low incomes beginning in 1974, the availability of project-based Section 8 rental assistance for low-income tenants meant that eligibility for most Section 202 units was the same as that for the Section 8 program -- 80% of area median income.

^d In 1981, P.L. 97-35 required that the majority of units receiving project-based Section 8 rental assistance must be made available to very low-income households.

^e Note that the Section 8 project-based units do not include Section 202 units that receive Section 8 rental assistance.

Four federal programs are available to provide services for elderly residents who live in HUD-subsidized buildings. The programs are the Congregate Housing program, the Service Coordinator program, the Resident Opportunity and Self Sufficiency (ROSS) Service Coordinator program, and the Assisted Living Conversion program. Three of the four programs -- Congregate Housing, Service Coordinator, and Assisted Living Conversion -- base their services on whether residents are considered to be either frail elderly or at-risk elderly. In the ROSS program, services are available whether residents are frail or not. Whether individuals are frail elderly or at-risk elderly depends on their ability to engage in activities of daily living (ADLs). ADLs consist of five or six categories of activities considered necessary for an individual to maintain independent functioning and their own personal care; the number of categories of activities varies slightly by program. The five common categories of activities included in all three programs are

• eating, which includes cooking and serving food;

• dressing;

• bathing, which includes getting in and out of a tub or shower;

• grooming; and

• home management, which includes housework, shopping, and laundry.⁹⁴

Residents who are age 62 or older and unable to perform at least three ADLs to some degree are considered frail, while those who are unable to perform one or two ADLs are considered at risk.⁹⁵ However, each of the three programs specifies that residents must be able to participate in ADLs at some minimal level. For example, residents must be able to feed, dress, and wash themselves; be able take care of their personal appearance; and be mobile (including use of a wheelchair). In the Congregate Housing and Assisted Living Conversion programs, residents qualify for assistance on an individual basis, while in the Service Coordinator program, entire buildings are eligible for services if a high enough percentage of residents is frail or at risk.

Congregate Housing

The Congregate Housing Services program, enacted as part of the Housing and Community Development Amendments of 1978 (P.L. 95-557), was the first federal program to make funds available so that HUD housing facilities could provide services for elderly residents. The purpose of the program was to prevent senior residents of Section 202 and Public Housing developments from moving to nursing homes by providing meals and other supports like housekeeping, case management, personal care, and transportation. In 1990, the Cranston-Gonzalez National Affordable Housing Act (P.L. 101-625) expanded eligible developments to include those assisted under project-based Section 8 rental assistance contracts, and those assisted through the Section 221(d)(3) and Section 236 programs. Cranston-Gonzalez also specified that Congregate Housing funds could be used to renovate properties to make them accessible to elderly residents with mobility problems, and to hire service coordinators to assist residents.

Since 1995, no new Congregate Housing contracts have been awarded, but HUD continues to fund contracts that were already in existence through funds appropriated to the Service Coordinator program (described below).⁹⁶ Current regulations provide that HUD will pay up to 40% of Congregate Housing costs, grant recipients must pay 50% of costs, and elderly participants must make payments that total at least 10% of total program costs.⁹⁷ Not all project residents are eligible for Congregate Housing services. They must be frail: defined as deficient in at least three ADLs.⁹⁸ Eligible project residents are identified by a committee appointed by grantees and made up of three individuals, at least one of whom is a medical professional, who are competent to determine the abilities of elderly residents.⁹⁹

Multi-Family Housing Service Coordinators

Service coordinators in HUD developments for elderly persons and persons with disabilities work with residents to provide a wide range of services. These include the arrangement of transportation; meal services; housekeeping; medication management; visits from nurses, dentists, and massage therapists; haircuts; and social activities. Service coordinators became eligible for funding through the Section 202 program starting in 1990 (P.L. 101-625). HUD developments funded through the Section 221(d)(3) and Section 236 programs were made eligible for service coordinator funding in the Housing and Community Development Act of 1992 (P.L. 102-550).¹⁰⁰ In 2000, the law was further amended to allow service coordinators to assist those elderly residents and residents with disabilities living in the vicinity of the HUD-subsidized buildings in which the service coordinators work (P.L. 106-569).

Funding for the Service Coordinator program is awarded on a competitive basis. Owners of eligible properties may apply for funds on an annual basis through HUD's grant process.¹⁰¹ To qualify, at least 25% of residents in a development must be considered frail elderly, at-risk elderly, or disabled non-elderly.¹⁰² Applicants must also show that they have no other funds available to pay for a service coordinator. Grants are made for three years and are renewable.

Resident Opportunity and Self-Sufficiency (ROSS) Service Coordinators Program

The ROSS program was established in the FY1999 HUD Appropriations Act (P.L. 105-276) to assist Public Housing residents making the transition from welfare to work, and to provide service coordinators and supportive services for elderly residents and residents with disabilities living in designated Public Housing developments.¹⁰³ The ROSS program for those making the transition from welfare to work was referred to as the ROSS Family Self-Sufficiency program, whereas the program for elderly residents was referred to as the ROSS Elderly/Persons with Disabilities program.¹⁰⁴ In the FY2008 grant year, HUD combined the ROSS Elderly/Persons with Disabilities program with the ROSS Family and Homeownership Program to become one grant program: ROSS Service Coordinators.¹⁰⁵

The ROSS program is much like the Service Coordinator program. Its service coordinators may arrange for meals, transportation, housekeeping, health and nutrition programs, case management, job training, and assistance with personal care.¹⁰⁶ ROSS funds are made available annually to PHAs, tribes, and nonprofit organizations through a competitive grant process. Awards are based on factors that include (1) the applicant's capacity and resources to implement services using a service coordinator; (2) the need for service coordinators and supportive services in the community, together with identification of service providers to meet the need; (3) the applicant's ability to leverage additional resources; and (4) the development of a system to measure the grantee's performance.¹⁰⁷ The ROSS program requires grant recipients to provide a 25% cash or in-kind match to the federal grant, and initial grants are made for three years. Beginning in FY2008, unlike previous grant years, recipient grantees may only use funds to pay for service coordinators, not for the services themselves.

Most recently, in FY2009 HUD made $28 million available for Service Coordinator contracts;¹⁰⁸ this includes all service coordinators, not just the Elderly/Persons with Disabilities program. When ROSS last separated funding for elderly residents and residents with disabilities, in FY2007, $16.7 million was awarded to grantees.¹⁰⁹

Assisted Living Conversion

The HUD Appropriations Act of FY2000 (P.L. 106-74) created the Assisted Living Conversion program to allow HUD-subsidized facilities for elderly residents to modify their apartments and common areas to accommodate elderly persons and persons with disabilities who need additional assistance in order to remain in their units.¹¹⁰ HUD-funded buildings developed under the Section 202 program, Section 236 program, and Section 221(d)(3) program, or units supported by project-based Section 8 rental assistance, are eligible to apply for funds. Owners may use funds to convert some or all units in a building for use as assisted living units.

HUD's definition of an assisted living facility contains three parts: (1) the facility is licensed and regulated by the state in which it is located, (2) it provides supportive services to assist residents in carrying out activities of daily living, and (3) it has separate housing units for residents, together with common rooms.¹¹¹ There is no uniform state definition for what constitutes an assisted living facility, and the level of care required by state law varies.¹¹² Requirements for physical standards such as unit size and the presence of a kitchen also vary from state to state. Recipients of assisted living conversion grants must comply with state or HUD requirements regarding physical standards, whichever are more stringent. To be eligible for Assisted Living Conversion funds, HUD requires that facilities contain a central kitchen and lounge and/or recreational areas available to all residents.¹¹³ HUD also requires that assisted living facilities meet certain program requirements and construction requirements. Program requirements include staff ability to respond to a crisis 24 hours a day, supervision of nutrition and medication for dependent residents, and the availability of three meals per day.¹¹⁴ Construction requirements include bathrooms that are accessible to persons with disabilities and a 24-hour emergency response system in each unit.¹¹⁵

Owners of eligible properties may apply for assisted living conversion funds through HUD's annual NOFA process. Grant recipients may use the funds to make units accessible by installing grab bars, widening doors, installing accessible appliances and counters, and adding emergency alert systems, among other modifications.¹¹⁶ Grant recipients may also use funds to renovate common spaces for kitchen, dining, or recreational use, and to provide furniture, appliances, and equipment for those areas.

           Table 2. Supportive Services and Assisted Living Programs

Funding

The Section 202 program has been proposed for funding reductions under the administrations of both President Bush and President Obama. From FY2007 through FY2009, the Bush Administration proposed to reduce the combined funding level for the programs that provide housing and services for elderly households (primarily the Section 202 program, but also Service Coordinators and the Assisted Living Conversion program) -- by 26% in FY2007, by 22% in FY2008, and by nearly 27% in FY2009. However, in each of these fiscal years Congress did not reduce funding for the program.

In FY2010, President Obama proposed to maintain funding for Section 202 and related programs at $765 million. However, in FY2011 the Administration proposed that no new units of Section 202 housing be funded in order to give HUD time to "redesign" the program.¹¹⁷ The proposal would have resulted in $274 million for the program compared to $825 million in FY2010. Funding for Section 202 was ultimately reduced in FY2011 to $400 million in the Department of Defense and Full-Year Continuing Appropriations Act (P.L. 112-10). In addition to the $425 million reduction for Section 202 from the FY2010 level, an across-the-board rescission of 0.2% for discretionary accounts further reduced funding by another $800,000. The Service Coordinator program and Assisted Living Conversion program will continue to be funded at FY2010 levels -- $89 million and $40 million, respectively.¹¹⁸ The law specifically stated that up to $100 million be made available for capital grants and rental assistance, and that no funding be used for planning grants. This leaves approximately $170 million to renew existing rental assistance contracts.

See Table 3 for Section 202 funding levels for FY2011 and previous years, as well as funding for the multifamily Service Coordinator and Assisted Living Conversion programs. For more information about current year appropriations, see CRS Report R41233, The Department of Housing and Urban Development (HUD): FY2011 Appropriations, coordinated by Maggie McCarty.

The Administration's Proposal to "Redesign" the Section 202 Program

The FY2011 HUD budget proposed several ways in which the Section 202 program could be modernized in order to better reflect the way in which affordable housing units are financed and developed. While none of these proposals were adopted by Congress (and the President did not propose the changes for FY2012), some of the ways in which HUD will score applications for Section 202 grants under the FY2010 NOFA were changed to reflect aspects of the proposal. Where the application was changed, it is noted below.

HUD budget documents for FY2011 described the Section 202 program as follows:

The Administration also proposed to change the way in which Section 202 funds are awarded to grantees. Currently, HUD uses a need-based formula to allocate the total amount of Section 202 funds available for capital grants and project-based rental assistance in a fiscal year to each of the 18 HUD multifamily hubs. Of the funds available, HUD allocates 85% to metropolitan areas and 15% to non-metropolitan areas. This method ensures funding for a minimum number of units for each multifamily hub. However, sometimes the number of units, particularly in rural areas, may be so small as to be difficult to sustain. (For example, in the FY2009 competition some non-metropolitan allocations were sufficient to support only five units of housing.¹²³) HUD proposed to change the distribution of funds by allocating units according to demand for housing rather than geography, and to establish minimum project sizes so that developments are economically sustainable. While HUD's proposal was not adopted, the FY2010 Section 202 NOFA no longer includes the minimum set-aside of five non-metropolitan units per multifamily hub.¹²⁴ HUD's intent is to ensure that funding goes to areas with the greatest unmet need.

HUD also proposed that supportive services play a greater role in Section 202 housing through a partnership between HUD and the Department of Health and Human Services (HHS) to provide integrated housing and supportive services through programs such as the HHS Program of All-Inclusive Care for the Elderly (PACE).¹²⁵ In PACE, elderly individuals who meet a nursing home level of care receive Medicare- and Medicaid-financed health care and supportive services at a central location while continuing to live in their homes. According to HUD's proposal, developing common space for a PACE site within a Section 202 development would be an eligible project cost. The PACE site would be open to residents in the community as well as those who live in the Section 202 development. Although HUD's proposal was not implemented, the FY2010 Section 202 NOFA puts more emphasis on the ability of potential owners to provide supportive services. For example, in order to receive maximum points regarding the extent of service provision, an applicant must provide a signed memorandum of understanding with service providers, something that was not part of the FY2009 NOFA.¹²⁶

In September 2010, HUD posted on its website draft legislation that would accomplish some of the goals outlined in the President's FY2011 budget. For more information, see the "Legislation" section of this report.

             Table 3. Funding for Selected Programs, FY2001-FY2012

The Section 202 Supportive Housing for the Elderly Act (P.L. 111-372)

A bill that makes some changes and additions to current law governing the Section 202 program, the Section 202 Supportive Housing for the Elderly Act (P.L. 111-372), was passed by the full Senate on December 18, 2010, and by the House on December 21, 2010. The President signed the law on January 4, 2011. Among other provisions, the law addresses the refinancing of existing Section 202 projects, and adds a new category of housing -- Service Enriched Housing -- to the Assisted Living Conversion Program. These and other changes are described below.

Refinancing Provisions

One of the issues addressed by P.L. 111-372 is the difficulty faced by owners of older Section 202 developments who want to refinance and make improvements to their properties. Under the Section 202 statute, owners must obtain HUD approval to prepay their loans (in most cases¹²⁷), and, prior to enactment of P.L. 111-372, the law required that any refinancing result in "a lower interest rate on the principal of the loan for the project and in reductions in debt service" (i.e., reduced principal and interest payments).¹²⁸ For owners of Section 202 properties that were financed prior to 1974, when interest rates were set at about 3%, it was difficult, if not impossible, to meet the requirement of a lower interest rate and reduced debt service. P.L. 111372 changed the law to allow owners with interest rates at or below 6% to refinance as long as they use proceeds from the new loan to address the physical needs of the property (notwithstanding the reduced interest rate and lower debt service requirement). In addition, the new law gives HUD the authority to subordinate existing Section 202 debt when owners obtain new financing for the project.

In the case of a refinancing, Section 202 owners must use the proceeds from the new loan either in a manner that is advantageous to the tenants or to provide affordable rental housing and social services for elderly persons living in another HUD-assisted property owned by the same entity. The law also enumerates purposes that would fulfill these requirements. Among the new purposes for which owners can use refinancing proceeds under P.L. 111-372 are 15% for supportive services, or more with a waiver from HUD (prior law did not allow for HUD waiver), rehabilitation that results in a reduction in total units (e.g., converting efficiency units to one-bedroom units), and payment of developers' fees.

P.L. 111-372 also extends the term of the property's affordability when owners prepay their Section 202 loans (with or without refinancing). Congress initially allowed prepayment of Section 202 loans as long as property owners continue to operate their properties on terms at least as favorable to tenants as the terms under the original loan agreement up through the original date of loan maturity (P.L. 98-181). In 2000, the American Homeownership and Economic Opportunity Act (P.L. 106-569) added that, if there is a rental-assistance contract in place, the property owner must continue to operate under the terms required by the rental-assistance contract through loan maturity. P.L. 111-372 now provides that in order to gain HUD approval to prepay an existing Section 202 loan, an owner must agree to maintain affordability under the terms of the original loan or existing project-based rental assistance contract for 20 years beyond the date of the original loan's maturation.

Another change to existing law contained in P.L. 111-372 is the authorization of "Senior Preservation Rental Assistance" for previously unassisted units in cases where owners prepay their Section 202 loans. In general, unassisted units are in properties that were financed prior to 1974, when most units did not receive rental assistance.¹²⁹ The rental assistance is available to prevent displacement of tenants in cases where a refinancing results in increased rents. The law also provides that Section 8 rental assistance is not to increase as the result of a refinancing unless it occurs pursuant to mark-up-to-market and mark-up-to-budget transactions under the Multifamily Assisted Housing Reform and Affordability Act (MAHRA).¹³⁰

Before P.L. 111-372 was enacted, Congress had included similar refinancing provisions in the FY2009 Omnibus Appropriations Act (P.L. 111-8) and the FY2010 Consolidated Appropriations Act (P.L. 111-117).¹³¹ However, the refinancing provisions did not specifically amend existing law, so they were in effect only for the duration of the fiscal year that the appropriations law was in effect. As in P.L. 111-372, under the appropriations laws, owners were able to refinance loans with interest rates at or below 6% in order to address a property's physical needs. However, the language in the appropriations acts contained some provisions that were not part of P.L. 111-372. For example, the transactions were to meet a cost benefit analysis established by HUD, and, instead of providing project-based rental assistance to previously-unassisted units in cases of increased rents, the appropriations laws provided for enhanced Section 8 vouchers. On July 27, 2010, HUD released a notice with policies and procedures governing the refinancing of Section 202 loans pursuant to P.L. 111-8 and P.L. 111-117.¹³²

Service Enriched Housing

P.L. 111-372 also adds a new category of housing to the Assisted Living Conversion Program (ALCP) called "Service Enriched Housing." Under the ALCP statute, an assisted living facility is defined as a facility owned by a public, proprietary, or private nonprofit organization that is (1) licensed by the state (or locality), (2) makes available to residents assistance with activities of daily living, and (3) provides separate dwelling units for residents along with common areas suitable for supportive services. The activities of daily living listed in statute are "bathing, dressing, eating, getting in and out of bed or chairs, walking, going outdoors, using the toilet, laundry, home management, preparing meals, shopping for personal items, obtaining and taking medication, managing money, using the telephone, or performing light or heavy housework."¹³³ The facilities may also make home health care services available.

The new category of service enriched housing is defined similarly to assisted living facilities. It is housing that (1) makes available to residents assistance with the same activities of daily living, including home health care services, that are included in the ALCP definition, (2) includes a service coordinator on staff, (3) provides separate dwelling units, each with a kitchen and bath, as well as common areas for supportive services, and (4) gives residents control over whether to accept services and who provides the services. Service enriched housing, as defined in P.L. 111372 differs from an assisted living facility in that the facility itself does not have to be licensed as long as the service providers are licensed or certified, and each unit contains its own kitchen and bath (the assisted living facility definition states that each unit may contain a kitchen and bath).

Other Provisions

Following are additional provisions that were included in P.L. 111-372:

• The new law changes the definition of "private nonprofit organization." Under prior law, nonprofits were required to have governing boards that are responsible for operation of the Section 202 project. In order to fulfill this requirement, national nonprofit organizations that own multiple Section 202 properties often create stand-alone nonprofit sponsors for each property. P.L. 111-372 allows the stand-alone nonprofit sponsors of a single Section 202 development to share or transfer administrative responsibilities for the property to the national nonprofit with HUD's approval.

• P.L. 111-372 adds a factor to the selection criteria used by HUD to determine new Section 202 capital grant awards: whether the owner plans to employ a service coordinator.

• The law gives HUD an option in awarding Section 202 capital grants to non-metropolitan areas. It can be done either through a nation-wide, non-metro award process or through an allocation of funds to the 10 HUD regional offices (until the release of the FY2010 Section 202 NOFA, funds were distributed via the 18 HUD multifamily offices, with further assignments to 52 local program offices).

In October 2010, HUD posted draft Section 202 legislation on its website and accepted comments from interested parties through November 15, 2010. The focus of the HUD draft legislation is to change the way in which new Section 202 developments are financed (unlike P.L. 111-372, the bill does not address the refinancing of existing Section 202 loans). The Section 202 capital grants would be termed "gap financing," and would be used "to the maximum extent practicable" in conjunction with low-income housing tax credits, private loans, state and local government assistance, and private funding. Eligible applicants for funds would be expanded to include state and local government entities, including Public Housing Authorities. Rental assistance would be provided through Section 8 contracts rather than PRAC, and would not be required to be paired with Section 202 gap financing -- owners could finance housing through other funding sources and still qualify for rental assistance.

New criteria would be considered as part of the grantee selection process for both gap financing and rental assistance, focusing on use of outside funding sources and the ability of owners to serve frail and near-frail elderly tenants. The selection criteria would include (1) the number of units for elderly residents proposed to be developed compared to the amount of gap financing requested, (2) whether an applicant is from a state that has not been awarded funding in the two or more previous years, (3) whether applicants only require rental assistance (and not gap financing), (4) the extent to which the applicant will leverage private sources of funding, and (5) the extent to which applicants set aside housing units for frail or near-frail elderly individuals who will be served by licensed supportive services organizations. Owners that serve a significant number of frail or near-frail elderly tenants would be required to provide service coordination (to the extent that rental assistance is available to cover the cost).

The draft legislation would also change the definition of "assisted living facility" in the Assisted Living Conversion Program to include facilities that are either licensed by the state or locality in which the facility is located or that make available the supportive services described in the statute governing FHA insurance for assisted living facilities.¹³⁴

Preservation of Federally Assisted Housing

The housing finance and rental assistance programs discussed in this report all operate through private for-profit or nonprofit entities. In the Section 202, Section 221(d)(3), and Section 236 programs, HUD entered into agreements with private owners to maintain affordable housing for a period of years, ranging from 20 years to 50 years. Similarly, HUD has entered into rental assistance contracts with many owners to provide rental support for the units for a period of time. The affordability terms agreed to by property owners participating in these programs, sometimes referred to as "affordability restrictions," began to come to an end in the 1980s. When the restrictions on these properties end, there is a risk that they will become unaffordable to low- and moderate-income tenants, and that those tenants will be displaced. Efforts to maintain the affordability of the remaining HUD-assisted properties as their affordability restrictions come to an end are often referred to as "assisted housing preservation."

Affordable housing units may be converted to market-rate housing under several circumstances. First, when HUD-subsidized mortgages or direct loans reach maturity or when owners decide to prepay their mortgages, they may decide to convert the units to market-rate rentals. A second possibility is that owners receiving project-based Section 8 rental assistance could lose or terminate their contracts. A third concern is that owners of older buildings will not have enough funds to modernize or renovate deteriorating facilities, and units will be unavailable because they are not habitable. The possibilities vary depending on the type of mortgage subsidy program or rental assistance contract. Below is a brief summary of how HUD assistance can come to an end. For more information about the issue of HUD-assisted housing preservation, see CRS Report R41182, Preservation of HUD-Assisted Housing, by Maggie McCarty and Libby Perl.

• Loan Maturity -- Owners of Section 202, Section 221(d)(3), and Section 236 financed properties may convert units to market-rate rents upon mortgage maturation provided there is no rental assistance contract attached to the unit. For units receiving Section 8 assistance, the assistance continues until the end of the contract (although the contract may be renewed after loan maturation), at which point tenants receive Section 8 vouchers. In the case of RAP and Rent Supplement, the rental assistance contracts generally end at loan maturity. Tenants receiving assistance under Rent Supplement do not receive Section 8 vouchers, while RAP-assisted tenants are eligible for vouchers.

• Loan Prepayment -- Many, though not all, owners of Section 221(d)(3) and Section 236 properties can prepay their HUD-insured mortgages without HUD's permission and end affordability restrictions. However, income-eligible tenants receive Section 8 vouchers.

• Opt Out of Rental Assistance Contracts -- When owners opt out of Section 8 contracts, assisted tenants receive Section 8 vouchers. Tenants receiving assistance under Rent Supplement do not receive Section 8 vouchers, while RAP-assisted tenants are eligible for vouchers.

Toward the end of FY2010, HUD began publishing notices that would enable Section 202 and other property owners to make improvements to their multifamily housing developments, potentially preserving affordable units that would otherwise fall into disrepair. One notice, published on December 20, 2010, gives HUD the discretion to subordinate Section 202 loans when owners have "immediate needs for rehabilitation, significant or emergency repairs," but are unable to go through the refinancing process to pay off the Section 202 loan.¹³⁵ Owners must be able to show that the subordination is necessary in order to preserve the project, and must enter into extended use agreements for the longer of 20 years beyond the loan's original maturity date or the date on which the subordinated loan is paid off.

Similarly, HUD issued a notice that gives it the authority to defer the repayment of flexible subsidy debt in circumstances that would assist in preserving properties.¹³⁶ From the late 1970s to the mid-1990s, the flexible subsidy program provided loans to properties with HUD-assisted financing that were having financial difficulties (the last year in which Congress gave new obligation authority was FY1995). HUD may approve deferral of payment in cases where an owner refinances a loan but the funds are not sufficient to pay off the flexible subsidy debt. As with subordination of Section 202 loans, an owner has to show that the deferral is necessary to ensure preservation of the project and must agree to an extended use agreement for the longer of 20 years beyond the flexible subsidy loan's original maturity date or the loan's payoff date.

Another HUD notice, issued on February 1, 2011, allows Section 202 owners, among others, to convert efficiency units to one-bedroom units, even if conversion results in fewer total units in the building.¹³⁷ Conversion may occur because efficiency units are undesirable and owners are unable to rent them, resulting in lack of income to keep properties operational. In order to be able to convert units, owners must demonstrate that the local market demand is such that conversion is necessary and that it will put the property in a better financial position.

Children Living in Housing Developments for Elderly Residents

According to Census estimates, in the year 2000 approximately 2.4 million grandparents were raising grandchildren, and of that number 19% of the grandparents were poor.¹³⁸ The number of grandparent caregivers has risen over the course of the decade according to a 2010 report from the Pew Research Center, reaching 2.6 million in 2008.¹³⁹ Of the grandparents caring for grandchildren in 2008, nearly 18% were estimated to be poor.

The HUD guidelines governing the Section 202, Section 221(d)(3), Section 236, and certain project-based Section 8 assistance programs specifically prohibit the exclusion of children from these developments ("owners may not exclude otherwise eligible elderly families with children from elderly properties . . .").¹⁴⁰ Guidelines governing Public Housing developments are less specific, although the guidance states that "there is nothing in the definition of elderly family that excludes children. Many elderly families today consist of grandparents with custody of grandchildren. This is an elderly family."¹⁴¹

Even if developments designed for elderly residents do allow children, however, they might not be equipped to serve families with both elderly members and young children. For example, most units in elderly housing developments are either efficiencies or have only one bedroom, and may not have the space to accommodate family members. In addition, elderly developments might lack common spaces where children might play, or the after-school programs that are often a part of HUD-subsidized complexes for families.

In order to address the growing number of grandparents raising grandchildren, Congress enacted the Living Equitably -- Grandparents Aiding Children and Youth (LEGACY) Act in 2003 as part of the American Dream Downpayment Act (P.L. 108-186). The LEGACY Act provides for the funding of housing units in the Section 202 program for elderly residents raising grandchildren or other relatives age 19 or younger. Congress did not fund the LEGACY Act until FY2006, when it appropriated $3.96 million for an Intergenerational Families Demonstration Project. On April 25, 2008, HUD released a Notice of Funding Availability (NOFA) to solicit grant applications for LEGACY Act funds.¹⁴² In December 2008, HUD announced two awardees, both of which received capital grants and rental assistance: one project consisting of 10 units will be located in Chicago, while the other, consisting of nine units, will be in Smithville, TN.¹⁴³

The LEGACY Act also called for HUD, together with the Census Bureau, to produce a study of the affordable housing needs of grandparents raising grandchildren. In April 2008, HUD released a Report to Congress on Intergenerational Housing Needs and HUD Programs.¹⁴⁴ The report describes the number, characteristics, and housing conditions of grandparent-headed households and households with other relatives raising related children. The report estimated that 265,000 grandparent-headed households and 225,000 households headed by other relatives would qualify for assistance under the LEGACY Act.¹⁴⁵

Author Contact Information

Libby Perl

² Wan He, Manisha Sengupta, Victoria A. Velkoff, and Kimberly A. DeBarros, 65+ In the United States: 2005, U.S. Census Bureau, December 2005, http://www.census.gov/prod/2006pubs/p23-209.pdf.

³ Ibid., pp. 12-13.

⁴A Quiet Crisis in America, p. 22.

⁵ Although other terms such as "Older Americans" may be preferred, this report uses the term "elderly" to refer to those individuals eligible for HUD-assisted housing for persons age 62 or older because it is the term used by HUD and has a meaning specific to HUD's housing programs.

⁶ 12 U.S.C. § 1701q(k)(1).

⁷ For more information on Section 8 vouchers, see CRS Report RL32284, An Overview of the Section 8 Housing Programs: Housing Choice Vouchers and Project-Based Rental Assistance, by Maggie McCarty.

⁸ For more information on reverse mortgages, see CRS Report RL33843, Reverse Mortgages: Background and Issues, by Bruce E. Foote.

⁹ For more information on the Department of Agriculture's rural housing programs, see CRS Report RL33421, USDA Rural Housing Programs: An Overview, by Bruce E. Foote.

¹⁰ Barbara A. Haley and Robert W. Gray, Section 202 Supportive Housing for the Elderly: Program Status and Performance Measurement, U.S. Department of Housing and Urban Development, Office of Policy Development and Research, June 2008, p. 22, http://www.huduser.org/Publications/pdf/sec_202_1.pdf (hereinafter, Section 202 Supportive Housing for the Elderly: Program Status and Performance Measurement). Although the Section 202 program no longer provides housing for persons with disabilities, between 1965 and 1992, Section 202 housing was developed for both elderly and disabled households. The total number of Section 202 units available for both elderly households and households with an adult member who has a disability is around 303,000 units. Ibid.

¹¹ In 1981, the Housing and Community Development Amendments (P.L. 97-35) required that Section 202 units be made available primarily to very low-income households.

¹² U.S. Department of Housing and Urban Development, Housing for the Elderly and Handicapped: The Experience of the Section 202 Program from 1959 to 1977, January 1979, p. 29 (hereinafter, Housing for the Elderly and Handicapped).

¹³ Barry G. Jacobs, Kenneth R. Harney, Charles L. Edson, and Bruce S. Lane, Guide to Federal Housing Programs (Washington, DC: Bureau of National Affairs, 1982), p. 77.

¹⁴Housing for the Elderly and Handicapped, p. 18.

¹⁵ Ibid., p. 17. See also United States Senate Special Committee on Aging, Section 202 Housing for the Elderly: A National Survey, committee print 98-257, 98^th Cong., 2^nd sess., (Washington, DC: GPO, 1984), p. 7.

¹⁶Housing for the Elderly and Handicapped, p. 29.

¹⁷ Ibid., p. 18.

¹⁸ The Rent Supplement program primarily provided rent subsidies for tenants living in Section 221(d)(3) housing, but Section 202 residents were eligible as well.

¹⁹Housing for the Elderly and Handicapped, p. 97.

²⁰ For more information about housing for persons with disabilities, see CRS Report RL34728, Section 811 and Other HUD Housing Programs for Persons with Disabilities, by Libby Perl.

²¹ Ibid., p. 36.

²² Senate Committee on Aging, Subcommittee on Housing for the Elderly, Examination of Proposed Section 202 Housing Regulations, hearing before the 94^th Cong., 1^st sess., June 6, 1975, p. 2.

²³ M. Powell Lawton, Planning and Managing Housing for the Elderly (New York: John Wiley & Sons, 1975), p. 38.

²⁴ CRS analysis of HUD data downloaded in August 2010.

²⁵ HUD Handbook 4350.3: Occupancy Requirements of Subsidized Multifamily Housing Programs, June 2007, chapter 3, paragraph 3-23, http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4350.3/index.cfm (hereinafter, "HUD Handbook 4350.3").

²⁶Housing for the Elderly and Handicapped, pp. 105-106.

²⁷ An exception for contracts up to 40 years was made for developments built or rehabilitated by loans from state or local agencies.

²⁸Housing for the Elderly and Handicapped, p. 38.

²⁹ P.L. 93-383, section 213(d).

³⁰ House Committee on Aging, Subcommittee on Housing and Consumer Interests, The 1988 National Survey of Section 202 Housing for the Elderly and Handicapped, 101^st Cong., 1^st sess., December 1, 1989, p. 29.

³¹ See Section 323.

³² The Supplemental Appropriations Act of 1984 (P.L. 98-181) changed the requirement for units assisted prior to 1981 from 10% to 25%, and the Housing and Community Development Act of 1987 (P.L. 100-242) changed the requirement for units assisted after 1981 from 5% to 15%. See 42 U.S.C. § 1437n(c).

³³ Leonard F. Heumann, Karen Winter-Nelson, and James R. Anderson, The 1999 National Survey of Section 202 Elderly Housing, American Association of Retired Persons, January 2001, p. 9, http://assets.aarp.org/rgcenter/il/2001_02_housing.pdf (hereinafter, The 1999 National Survey of Section 202 Elderly Housing).

³⁴The 1988 National Survey of Section 202 Housing for the Elderly and Handicapped, p. 27.

³⁵ Ibid.

³⁶ Senate Committee on Banking, Housing, and Urban Affairs, The National Housing Act, Senate report to accompany S. 566, 101^st Cong., 2^nd sess., S.Rept. 101-316, June 8, 1990, p. 133.

³⁷ Ibid.

³⁸ Ibid., p. 34.

³⁹ FMRs are generally set at the 40^th percentile of rents paid in an area, although in some high-cost areas, FMRs are set at the 50^th percentile.

⁴⁰ S.Rept. 101-316, Report of the Senate Committee on Banking, Housing, and Urban Affairs, to accompany S. 566, the National Affordable Housing Act, 101^st Cong., 2^nd sess., June 8, 1990, pp. 133-134. The provisions in S. 566 regarding Section 202 were adopted in P.L. 101-625. See H.Rept. 101-943.

⁴¹Cranston-Gonzalez National Affordable Housing Act, conference report to accompany S. 566, 101^st Cong., 2^nd sess., H.Rept. 101-943, October 25, 1990, p. 484.

⁴² S.Rept. 101-316, p. 134.

⁴³ Housing provided for persons with disabilities through the Section 202 program is sometimes referred to as "Section 202(h)" housing, referring to the subparagraph that was added to the Section 202 statute by P.L. 95-557.

⁴⁴ For more information about the Section 811 program, see CRS Report RL34728, Section 811 and Other HUD Housing Programs for Persons with Disabilities, by Libby Perl.

⁴⁵The 1999 National Survey of Section 202 Elderly Housing, p. 9.

⁴⁶Section 202 Supportive Housing for the Elderly: Program Status and Performance Measurement, p. 20.

⁴⁷ Ibid.

⁴⁸ Ibid., p. 29.

⁴⁹ See U.S. Department of Housing and Urban Development, Notice of Funding Availability (NOFA) for HUD's Fiscal Year 2010 Section 202 Supportive Housing for the Elderly Program, March 4, 2011, p. 6, http://www.hud.gov/offices/adm/grants/nofa10/202elderly.pdf (hereinafter, FY2010 Section 202 NOFA). The multifamily hubs are Atlanta, GA, Baltimore, MD, Boston, MA, Buffalo, NY, Chicago, IL, Columbus, OH, Denver, CO, Detroit, MI, Fort Worth, TX, Greensboro, NC, Jacksonville, FL, Kansas City, MO, Los Angeles, CA, Minneapolis, MN, New York, NY, Philadelphia, PA, San Francisco, CA, and Northwest/Alaska.

⁵⁰ See HUD's FY2010 Section 202 NOFA Webcast at http://portal.hud.gov/hudportal/HUD?src=/press/multimedia/videos.

⁵¹ 24 C.F.R. § 791.402(c).

⁵² FY2010 Section 202 NOFA, p. 5.

⁵³ Ibid., p. 49. Two of the points are bonus points awarded for projects that are part of renewal communities, empowerment zones, or enterprise communities.

⁵⁴ The list of grantees is available at http://portal.hud.gov/portal/page/portal/HUD/documents/202_and_811_Grant_Summaries.pdf.

⁵⁵ For more information on the LIHTC, see CRS Report RS22389, An Introduction to the Design of the Low-Income Housing Tax Credit, by Mark P. Keightley.

⁵⁶ Specifically, a property's qualified basis is determined as follows: (1) the cost of constructing, acquiring, or rehabilitating the property is calculated, (2) this amount is reduced by federal grants received by the developer, and (3) the resulting value is then multiplied by the percentage of space in the housing development that is devoted to low-income use. This percentage is the lower of either the "unit fraction" -- the ratio of low-income units to all units in the building -- or the "floor space fraction" -- the ratio of square footage in low-income units to total square footage. 26 U.S.C. § 42(c). The qualified basis is then multiplied by the value of the tax credits -- these are roughly either 9% or 4% -- to determine the total annual value of the tax credits.

⁵⁷ In addition to the costs of materials, construction, and/or rehabilitation, among the costs included in determining qualified basis are contractor fees, developer fees, engineering fees, and the cost of drawing up architectural specifications. Among the costs that are not included are the cost of land and fees associated with long-term financing. See Joseph Guggenheim, Tax Credits for Low Income Housing (Glen Echo, MD: Simon Publications, 1996) p. 37.

⁵⁸ See HUD website, "Calculating the Qualified Basis," http://www.hud.gov/offices/cpd/affordablehousing/training/web/lihtc/calculating/qualifiedbasis.cfm.

⁵⁹ 26 C.F.R. § 1.42-16.

⁶⁰Rev. Rul. 2008-6.

⁶¹Rev. Rul. 2002-65.

⁶²Rev. Rul. 98-49.

⁶³ P.L. 106-569 amended the Section 202 statute to state that "[n]otwithstanding any other provision of law, assistance amounts provided under this section may be treated as amounts not derived from a Federal grant." See Section 832. On September 17, 2003, the IRS issued a letter stating that it was reviewing the applicability of the LIHTC section of federal grants to PRAC under the Section 202 program. The letter is available at http://www.irs.gov/pub/irs-wd/040061.pdf.

⁶⁴ These credit rates are not set exactly at 9% and 4% -- they vary depending on the current interest rate used in the Department of the Treasury credit rate formula. For more information about this issue, see CRS Report RS22917, The Low-Income Housing Tax Credit Program: The Fixed Subsidy and Variable Rate, by Mark P. Keightley.

⁶⁵ The statute also specifically exempted funds received under CDBG, HOME, and Native American Housing and Self Determination Act programs from the definition of federally subsidized, so those projects have been eligible for the 9% credit all along.

⁶⁶ See U.S. Department of Housing and Urban Development, "Mixed Finance Development for Supportive Housing for the Elderly or Persons with Disabilities: Final Rule," Federal Register, vol. 70, no. 176, September 13, 2005, p. 54202.

⁶⁷ See, for example, Liz Enochs, "Affordable Housing Equity: Developers Share Tips for Converting Projects That Fail to Win 9% LIHTCs into 4% Deals," Affordable Housing Finance, July 2007, http://www.housingfinance.com/ahf/articles/2007/jul/AFFORDABLE0707.htm.

⁶⁸ The Section 221(d)(3) program also contained a market interest rate component, but unlike the BMIR program, it was not designed to ensure affordability. John R. Gallagher, Nonprofit Housing Rent Supplement Program Under Section 221(d)(3) of the National Housing Act (Washington, DC: Urban America, Inc., 1968), p. 4.

⁶⁹ Senate Committee on Banking and Currency, Housing Act of 1961, Senate report to accompany S. 1922, 87^th Cong., 1^st sess., S.Rept. 281, May 19, 1961.

⁷⁰ Leonard Garland Gaston, "The 221(d)(3) Below Market Interest Rate and Rent Supplement Housing Program" (Ph.D. dissertation, Ohio State University, 1969), p. 120.

⁷¹ John R. Gallagher and John J. O'Donnell, Nonprofit Housing Under Section 221(d)(3) of the National Housing Act (Washington, DC: Urban America, Inc., 1966), p. 20.

⁷² U.S. Government Accountability Office, Federal Housing Programs That Offer Assistance to the Elderly, GAO-05174, February 2005, p. 11, http://www.gao.gov/new.items/d05174.pdf (hereinafter, Federal Housing Programs that Offer Assistance to the Elderly).

⁷³ HUD Handbook 4350.3, chapter 3, paragraph 3-6.

⁷⁴ 12 U.S.C. § 1701s(d).

⁷⁵ 12 U.S.C. § 1701s(j)(1)(d).

⁷⁶ HUD FY2010 Budget Justifications, p. N-1, http://www.hud.gov/offices/cfo/reports/2010/cjs/hsg2010.pdf.

⁷⁷ House Committee on Banking and Currency, Housing and Urban Development Act of 1968, House report to accompany H.R. 17989, 90^th Cong., 2^nd sess., H.Rept. 1585, June 25, 1968.

⁷⁸ Ibid.

⁷⁹ General Accounting Office (now the Government Accountability Office), Little Accomplished in Insuring that Proper Rents Are Charged Under the Section 236 Rental Assistance Housing Program, CED-76-146, October 5, 1976, p. 2, http://archive.gao.gov/f0402/100542.pdf.

⁸⁰ 12 U.S.C. § 1715z-1(f)(1). The Section 236 market rent is different from Section 8 fair market rent.

⁸¹ Charles L. Edson, "Sections 235 and 236 -- The First Year," Urban Lawyer 2, No. 14 (1970), p. 22.

⁸²Federal Housing Programs that Offer Assistance to the Elderly, p. 11.

⁸³ HUD FY2009 Budget Justifications, p. K-3, http://www.hud.gov/offices/cfo/reports/2009/cjs/hsg1.pdf. The exceptions in the RAP program are state-aided, uninsured projects.

⁸⁴ House Committee on Banking and Currency, Housing Act of 1956, House report to accompany H.R. 11742, 84^th Cong., 2^nd sess., H.Rept. 2363, July 15, 1956.

⁸⁵ Frances Merchant Carp, A Future for the Aged, Victoria Plaza and Its Residents (Austin: University of Texas Press, 1966).

⁸⁶Federal Housing Programs That Offer Assistance to the Elderly, p. 11.

⁸⁷ See General Accounting Office (now the Government Accountability Office), Housing Persons with Mental Disabilities with the Elderly, GAO/RCED-92-81, August 1992, pp. 10-11, http://archive.gao.gov/d33t10/147294.pdf.

⁸⁸ Congress intended the definition of handicap to be interpreted consistently with the Rehabilitation Act of 1973 (P.L. 93-112), which includes drug addiction and alcoholism as physical or mental impairments. 28 C.F.R. § 41.31.

⁸⁹Housing Persons with Mental Disabilities with the Elderly, p. 17. See, also, remarks of Representative Peter Blute, Congressional Record, daily edition, vol. 142 (February 27, 1996), p. H1274.

⁹⁰ The Housing and Community Development Act of 1992, P.L. 102-550. The provisions are codified at 42 U.S.C. § 1437e; the regulations are at 24 C.F.R. §§ 945.101-945.303.

⁹¹ The new construction and substantial rehabilitation programs were created in P.L. 93-383 and abolished in P.L. 98 181. For more information on Section 8 housing, see CRS Report RL32284, An Overview of the Section 8 Housing Programs: Housing Choice Vouchers and Project-Based Rental Assistance, by Maggie McCarty.

⁹² 42 U.S.C. §§ 13611-13620.

⁹³Federal Housing Programs that Offer Assistance to the Elderly, p. 11.

⁹⁴ For the Service Coordinator and Assisted Living Conversion programs, ADLs are listed at 24 C.F.R. § 891.205. The HUD Notices of Funding Availability for the Assisted Living Conversion program refer to 24 C.F.R. § 891.205, while the NOFA for Service Coordinators uses an identical definition to the one in 24 C.F.R. § 891.205. ADLs for the Congregate Housing program are listed at 24 C.F.R. § 700.105.

⁹⁵ The at-risk category applies only to the Service Coordinator program.

⁹⁶ Although the President's budget for FY1996 did not propose funds for the Congregate Housing program, it did propose that projects similar to the Congregate Housing program would be funded through a new initiative called the Housing Certificates for Families and Individuals Performance Funds program. Congress did not appropriate funds for the program.

⁹⁷ 24 C.F.R. § 700.145.

⁹⁸ 24 C.F.R. § 700.135.

⁹⁹ HUD Handbook 4640.1: Congregate Housing Services Program Operating Procedures, November 6, 1996, chapter 2, paragraph 2-8, http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4640.1/46401c2HSGH.pdf.

¹⁰⁰ See Section 676.

¹⁰¹ Note that Section 202 developments that receive PRAC rental assistance are not eligible for service coordinator funds. Instead, they may request an increase in their rental assistance payments to support a service coordinator.

¹⁰² This requirement is present in HUD's Notice of Funding Availability for Service Coordinators. The most recent NOFA can be found on HUD's website, http://www.hud.gov/offices/adm/grants/nofa09/scmhsec.pdf.

¹⁰³ See the program's first Notice of Funding Availability, Federal Register, vol. 64, no. 153, August 10, 1999, p. 43543.

¹⁰⁴ Prior to the ROSS program, grants were available from HUD to Public Housing Authorities to fund service coordinators beginning in FY1994 (P.L. 103-124), and congregate housing and supportive services beginning in FY1996 (P.L. 104-134).

¹⁰⁵ See FY2008 Resident Opportunity and Self-Sufficiency Programs Webcast Presentation, May 13, 2008, http://www.hud.gov/offices/adm/grants/nofa08/grpross.cfm.

¹⁰⁶ HUD FY2009 Notice of Funding Availability for ROSS, pp. 15-20, http://www.hud.gov/offices/adm/grants/nofa09/rossscsec.pdf.

¹⁰⁷ Ibid., pp 20-30.

¹⁰⁸ U.S. Department of Housing and Urban Development, Notice of Funding Availability (NOFA) for HUD's Fiscal Year 2009 Resident Opportunity and Self-Sufficiency (ROSS) -- Service Coordinators Program, p. 3, http://www.hud.gov/offices/adm/grants/nofa09/rossscsec.pdf.

¹⁰⁹ U.S. Department of Housing and Urban Development, "HUD Awards $50 Million to Aid Seniors and Families Who Live in Public Housing," press release, March 4, 2008, http://archives.hud.gov/news/2008/pr08-027.cfm.

¹¹⁰ The statute governing the Assisted Living Conversion program is at 12 U.S.C. § 1701q-2.

¹¹¹ 12 U.S.C. § 1715w(b)(6).

¹¹² For more information on state requirements, see Robert Mollica, Kristin Sims-Kastelein, and Janet O'Keeffe, Residential Care and Assisted Living Compendium: 2007, U.S. Department of Health and Human Services, November 30, 2007, http://aspe.hhs.gov/daltcp/reports/2007/07alcom.htm.

¹¹³ See FY2009 Notice of Funding Availability for the Assisted Living Conversion Program, p. 3, http://www.hud.gov/offices/adm/grants/nofa09/alcpsec.pdf.

¹¹⁴ Ibid., pp. 11-15.

¹¹⁵ HUD Handbook 4600.1: Residential Care Facilities -- Nursing Homes, Board and Care Homes, and Assisted Living Facilities, January 17, 1995, chapter 13, paragraph 13-7.

¹¹⁶ Ibid., p. 27283.

¹¹⁷ U.S. Department of Housing and Urban Development, FY2011 Budget Summary: Investing in People and Places, pp. 20-21, http://hud.gov/budgetsummary2011/full-budget-2011.pdf.

¹¹⁸ P.L. 112-10 maintained funding for programs at FY2010 levels unless otherwise stated in the law. The Service Coordinator and Assisted Living Conversion program were not mentioned in P.L. 112-10.

¹¹⁹ Ibid., p. 20.

¹²⁰ FY2010 Section 202 NOFA, pp. 49-50.

¹²¹ Ibid., p. 57.

¹²² Ibid., p. 58.

¹²³ U.S. Department of Housing and Urban Development, Notice of Funding Availability (NOFA) for HUD's Fiscal Year 2009 Section 202 Supportive Housing for the Elderly, August 20, 2009, pp. 7-9, http://www.hud.gov/offices/adm/grants/nofa09/sec202esec.pdf.

¹²⁴ FY2010 Section 202 NOFA, p. 6.

¹²⁵ For more details, see HUD's FY2011 Section 202 Budget Justification, http://hud.gov/offices/cfo/reports/2011/cjs/Housing_For_The_Elderly_2011.pdf.

¹²⁶ FY2010 Section 202 NOFA, p. 56.

¹²⁷ Some Section 202 loans made during the late 1970s and early 1980s may be prepaid without HUD approval.

¹²⁸ 12 U.S.C. § 1701q, note.

¹²⁹ However, some pre-1974 properties later received rental assistance through the Rent Supplement program and the Loan Management Set Aside program.

¹³⁰ For more information about MAHRA, see CRS Report R41182, Preservation of HUD-Assisted Housing, by Maggie McCarty and Libby Perl. The relevant section of the report is entitled "Section 8 Expiring Contracts, Renewals, and the Multifamily Assisted Housing Reform and Accountability Act (MAHRA)."

¹³¹ See Section 234 of "General Provisions -- Department of Housing and Urban Development" in Division I of the FY2009 Omnibus Appropriations Act and Section 229 of the FY2010 Consolidated Appropriations Act.

¹³² U.S. Department of Housing and Urban Development, Notice H 2010-14, Policy and Procedure for Prepayment and Refinancing of Section 202 Projects Funded prior to 1975, July 27, 2010, http://portal.hud.gov/portal/page/portal/HUD/program_offices/administration/hudclips/notices/hsg/files/10-14hsgn.doc.

¹³³ The Assisted Living Conversion Program statute refers to the FHA definition of assisted living facility at 12 U.S.C. § 1715w(b).

¹³⁴ 12 U.S.C. § 1715w(b).

¹³⁵ U.S. Department of Housing and Urban Development, Notice 2010-26, Subordination of Section 202 Direct Loans, December 20, 2010, http://portal.hud.gov/hudportal/documents/huddoc?id=H2010-26.pdf.

¹³⁶ U.S. Department of Housing and Urban Development, Notice H 2011-05, Policies and Procedures for the Deferred Repayment of Operating Assistance Flexible Subsidy Loans, February 14, 2011, http://portal.hud.gov/hudportal/documents/huddoc?id=11-05hsgn.pdf.

¹³⁷ U.S. Department of Housing and Urban Development, Notice H 2011-03, Policies and Procedures for the Conversion of Efficiency Units to One-Bedroom Units, February 1, 2011, http://portal.hud.gov/hudportal/documents/huddoc?id=11-03hsgn.pdf.

¹³⁸ Tavia Simmons and Jane Lawler Dye, Grandparents Living with Grandchildren: 2000, U.S. Census Bureau, October 2003, pp. 1, 9, http://www.census.gov/prod/2003pubs/c2kbr-31.pdf.

¹³⁹ Paul Taylor, Gretchen Livingston, and Kim Parker, et al., Since the Start of the Great Recession, More Children Raised by Grandparents, Pew Research Center, September 9, 2010, http://pewsocialtrends.org/assets/pdf/764-childrenraised-by-grandparents.pdf.

¹⁴⁰ HUD Handbook 4350.3, chapter 3, paragraph 3-23, http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4350.3/43503c3HSGH.pdf.

¹⁴¹ HUD Public Housing Occupancy Guidebook, June 2003, Section 2.2, p. 25, http://www.hud.gov/offices/pih/programs/ph/rhiip/phguidebooknew.pdf.

¹⁴² See Notice of Funding Availability for FY2007 Demonstration Program for Elderly Housing for Intergenerational Families, Federal Register, vol. 73, no. 81, April 25, 2008, pp. 22759-22776.

¹⁴³ See HUD's funding announcement, http://www.hud.gov/offices/hsg/mfh/eldfam/announcement.pdf.

¹⁴⁴ The report is available at http://www.huduser.org/Publications/pdf/intergenerational.pdf, and the data tables are at http://www.huduser.org/Publications/pdf/intergenerational_tables.pdf.

¹⁴⁵ Ibid., p. 6.