Section 202 and Other HUD Rental Housing Programs for Low-Income Elderly Residents
Prepared for Members and Committees of Congress
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
which 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 person is 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 program. Established in 1959, it is the only HUD program that 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 Section 8
project-based 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 program for elderly persons
and persons with disabilities each provide services such as meals and assistance with activities of
daily living to help residents remain independent. The Assisted Living Conversion program gives
grants to HUD-assisted developments so that they can convert units or entire buildings into
assisted living facilities.
Among current issues involving HUD-assisted housing for elderly residents is housing
preservation. In its report A Quiet Crisis in America, the Commission on Affordable Housing and st
Health Facility Needs for Seniors in the 21 Century noted that units of affordable housing for
low-income elderly households could be converted to market-rate housing in the coming years
due to mortgage maturity and prepayment. Another concern is the deterioration of existing
housing developments. Two similar bills, both entitled the Section 202 Supportive Housing for
the Elderly Act (H.R. 2930 and S. 2736), would amend current law to increase the opportunities
for building owners to refinance properties and use proceeds to improve the facilities. Both bills
would also create a new project rental assistance program for units in certain Section 202
developments and would revise the definition of assisted living facility. H.R. 2930 was approved
by the House on December 5, 2007.
Introduc tion ..................................................................................................................................... 1
HUD Housing Programs.................................................................................................................2
The Section 202 Supportive Housing for the Elderly Program.................................................2
History of the Section 202 Program: 1959 to 1974............................................................3
History of the Section 202 Program: 1974 to 1990............................................................4
History of the Section 202 Program: 1990 to the Present...................................................5
The Section 202 Program’s Grant Process..........................................................................7
Section 221(d)(3) Below Market Interest Rate Program...........................................................8
The Section 236 Program..........................................................................................................9
Section 8 Project-Based Housing............................................................................................12
Supportive Services and Assisted Living Programs......................................................................13
Multi-Family Housing Service Coordinators..........................................................................15
Resident Opportunity and Self-Sufficiency (ROSS) Service Coordinators Program.............15
Assisted Living Conversion....................................................................................................16
Funding and Current Issues...........................................................................................................17
Funding ........................................................................................................................ ........... 17
Legi slation ............................................................................................................................... 18
The Section 202 Supportive Housing for the Elderly Act (H.R. 2930 and S. 2736)........18
Preservation of Federally Assisted Housing............................................................................20
Section 202 Program.........................................................................................................20
Section 221(d)(3) and Section 236 Programs...................................................................21
Section 8 Project-Based Rental Assistance.......................................................................22
Children Living in Housing Developments for Elderly Residents..........................................22
Table 1. HUD Rental Housing Programs for Low-Income Elderly Households...........................12
Table 2. Supportive Services and Assisted Living Programs........................................................17
Table 3. Funding for Selected Programs, FY2001-FY2008..........................................................18
Author Contact Information..........................................................................................................23
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 1
services programs to meet future demand. The percentage of individuals aged 65 and older is
beginning to make up a larger percentage of the total United States population, and is expected to 2
continue to grow through 2030. 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 3
19.6%. 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 4
population will result in the need for an additional 730,000 units of affordable housing by 2020.
The Department of Housing and Urban Development (HUD) operates a number of programs that
provide both housing and supportive services for elderly households. HUD defines elderly 5
persons as households composed of one or more persons, at least one of whom is age 62 or older.
Five HUD programs provide affordable rental housing 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 provided subsidized loans in the 1960s and early
1970s so that developers 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 for use primarily 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) program for elderly
persons and persons with disabilities, 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. The report does not include a comprehensive look at all housing programs that serve
elderly households, however. Major sources of assistance that are not discussed include HUD’s
1 The report by the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century was
released to four congressional committees on June 30, 2002: the House and Senate Appropriations Committees, the
House Financial Services Committee, and the Senate Banking, Housing and Urban Affairs Committee. The report is
available at http://govinfo.library.unt.edu/seniorscommission/pages/final_report/finalreport.pdf.
2 Wan He, Manisha Sengupta, Victoria A. Velkoff, and Kimberly A. DeBarros, 65+ In the United States: 2005, U.S.
Census Bureau, December 2005, available at http://www.census.gov/prod/2006pubs/p23-209.pdf.
3 Ibid., pp. 12-13.
4 A Quiet Crisis in America, p. 22.
5 12 U.S.C. §1701q(k)(1).
Section 8 voucher program,6 HUD’s mortgage insurance and reverse mortgage programs,7 and the
Department of Agriculture’s rural housing programs that provide assistance to elderly 8
The Section 202 Supportive Housing for the Elderly program is the only HUD program that
provides housing exclusively for elderly households. With more than 268,000 units available for
elderly households (this does not include Section 202 units for persons with disabilities), it
provides more than any of the other HUD rental housing programs that designate housing for 9
elderly residents. 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 has changed several times since its inception. During the nearly 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 targeted 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 and disabled families by
extending low-interest construction loans to nonprofit developers. Between 1974 and 1990, the
program continued to extend loans to developers, but added Section 8 project-based 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 10
median income). Finally, beginning in 1990, HUD replaced the Section 202 loan program with
6 For more information on Section 8 vouchers, see CRS Report RL32284, An Overview of the Section 8 Housing
Programs, by Maggie McCarty.
7 For more information on reverse mortgages, see CRS Report RL33843, Reverse Mortgages: Background and Issues,
by Bruce E. Foote.
8 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.
9 Government Accountability Office, Federal Housing Programs that Offer Assistance for the Elderly, GAO-05-174,
February 2005, p. 11, available at http://www.gao.gov/new.items/d05174.pdf. 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 and disabled
households is 320,000.
10 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.
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.
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 11
insufficient income for market-rate housing. 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 12
developers rather than insuring loans from private lenders. The interest rates on the loans were 13
low—approximately 3%—and had a duration of up to 50 years. 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
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, 15
and they varied across the country. In 1968, HUD set income eligibility limits for all Section
income. 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 17
Development Act of 1965 (P.L. 89-117). Those tenants receiving rent subsidies made up a
relatively small percentage of total tenants during the early years of the Section 202 program, 18
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). Yet very few tenants who were considered non-elderly
handicapped participated in the Section 202 program between 1964 and 1974. Although data were
11 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
12 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.
13 Housing for the Elderly and Handicapped, p. 18.
14 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, 98th Cong., 2nd sess., (Washington: GPO, 1984), p. 7.
15 Housing for the Elderly and Handicapped, p. 29.
16 Ibid., p. 18.
17 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.
18 Housing for the Elderly and Handicapped, p. 97.
not kept, HUD estimates that through 1977, less than 1% of tenants were non-elderly 19
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 20
Section 202 loans had a negative effect on the size of the federal budget. This was due to the
fact that the program showed only expenditures and not the offsets made when developers paid 21
back the Section 202 loans. Between 1970 and 1974, the Section 202 program did not fund any
new construction projects. Housing for elderly households was instead constructed using the
Section 236 mortgage subsidy program, established as part of the Housing and Civil Rights Act of
Of the Section 202 properties funded prior to 1974, there are approximately 278 buildings, 22
representing more than 39,000 units, that still have active loans. 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 23
HUD at the time. 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
Section 8 project-based assistance contracts available for units in troubled FHA-insured
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
Section 8 project-based rental assistance available to building owners. Section 8 project-based
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 Section 8 project-based 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-24
income elderly families. Contracts for Section 8 project-based rental assistance payments 25
between HUD and Section 202 owners were initially set for up to 20 years and were renewable.
19 Ibid., p. 36.
20 Senate Committee on Aging, Subcommittee on Housing for the Elderly, Examination of Proposed Section 202
Housing Regulations, hearing before the 94th Cong., 1st sess., June 6, 1975, p. 2.
21 M. Powell Lawton, Planning and Managing Housing for the Elderly (New York: John Wiley & Sons, 1975), p. 38.
22 CRS analysis of HUD data.
23 HUD Handbook 4350.3: Occupancy Requirements of Subsidized Multifamily Housing Programs, June 2007, chapter
3, paragraph 3-23, available at http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4350.3/index.cfm, (hereafter
“HUD Handbook 4350.3”).
24 Housing for the Elderly and Handicapped, pp. 105-106.
25 An exception for contracts up to 40 years was made for developments built or rehabilitated by loans from state or
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, 26
Section 202 developments were largely concentrated in urban areas. However, the Housing and 27
Community Development Act directed that 20% to 25% of funds go to nonmetropolitan areas.
By 1988, the share of Section 202 units located in cities with populations less than 10,000 rose to 28
383 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
In 1981, the tenant income guidelines for Section 202 units that receive Section 8 project-based
rental assistance were changed as part of the Omnibus Budget Reconciliation Act of 1981 (P.L. 29
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 Section 8 project-based 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 earning
between 50% and 80% of the area median. These percentages were later changed to 25% and 30
Between 1974 and 1988, an estimated 128,636 additional units of Section 202 housing were built 31
using construction loans and Section 8 project-based rental assistance. 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, to 56 units in developments built between 1985 32
and 1988. 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 33
rose again, to 18.9%.
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
26 Housing for the Elderly and Handicapped, p. 38.
27 P.L. 93-383, section 213(d).
28 House Committee on Aging, Subcommittee on Housing and Consumer Interests, The 1988 National Survey of
Section 202 Housing for the Elderly and Handicapped, 101st Cong., 1st sess., December 1, 1989, p. 29.
29 See Section 323.
30 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).
31 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, available at http://assets.aarp.org/
32 The 1988 National Survey of Section 202 Housing for the Elderly and Handicapped, p. 27.
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 Section 8 project-
based rental assistance to service their loan debt in addition to using it to supplement tenant 34
rents—its intended purpose. At the time P.L. 101-625 was enacted, it was estimated that
approximately 75% of Section 8 project rental assistance was used by developers to service their 35
loan debt, leaving only 25% for rent subsidies and improvements. 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 rental assistance payments, requiring 36
less budget authority.
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 37
based on Section 8 fair market rents (FMRs). 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 38
services. 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 39
adding congregate space. 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 40
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 the Housing and Community Development Act of 1987
(P.L. 100-242), specifying 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
34 Senate Committee on Banking, Housing, and Urban Affairs, The National Housing Act, Senate report to accompany
S. 566, 101st Cong., 2nd sess., S.Rept. 101-316, June 8, 1990, p. 133.
36 Ibid., p. 34.
37 FMRs are generally set at the 40th percentile of rents paid in an area, although in some high-cost areas, FMRs are set
at the 50th percentile.
38 S.Rept. 101-316, Report of the Senate Committee on Banking, Housing, and Urban Affairs, to accompany S. 566, the
National Affordable Housing Act, 101st Cong., 2nd 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.
39 Cranston-Gonzalez National Affordable Housing Act, conference report to accompany S. 566, 101st Cong., 2nd sess.,
H.Rept. 101-943, October 25, 1990, p. 484.
40 S.Rept. 101-316, p. 134.
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 41
for elderly households. HUD estimates that funds appropriated in the years FY1999 through 42
FY2007 were sufficient to support nearly 51,000 units. In this phase of the Section 202
program, developments have become smaller, with an average of 50 units per project, and have 43
virtually no efficiency units. The developments also serve a slightly older population. In 1983,
the average age was 72, and in 1999 it was 75. The oldest buildings house the oldest residents. In
Section 202 developments built between 1959 and 1974, 58.6% of residents are age 76 or older, 44
while in developments built between 1993 and 1998, 35.6% of residents are age 76 or older.
One of the most recent changes to the Section 202 program occurred in 2000 as part of the
American Homeownership and Economic Opportunity Act (P.L. 106-569). Until enactment of
P.L. 106-569, Section 202 developers could not use Low Income Housing Tax Credits (LIHTCs)
in conjunction with the Section 202 capital grants. LIHTCs provide incentives for the
development of affordable rental housing through federal tax credits administered through the 45
Internal Revenue Service. The Section 202 grants could not be combined with LIHTCs due to
the ownership requirements of the Section 202 program. Section 202 owners were required by
statute to be private nonprofit entities. However, for a nonprofit organization to successfully use
LIHTCs, they must partner with a for-profit entity that will be able to take advantage of the
financial benefits of the tax credits. The value of tax credits is that they reduce an investor’s
federal income tax liability annually over a 10-year period. Because nonprofit organizations are
tax exempt by definition, they cannot benefit from the tax credits.
In order to make it possible for owners of Section 202 properties to benefit from the LIHTCs, the
Homeownership and Economic Opportunity Act made for-profit limited partnerships eligible
owners under the Section 202 program (see Section 831 of the act). Under the changed law,
private nonprofit organizations may partner with for-profit entities (as long as the nonprofit
organization is the sole general partner or owner) and still be eligible property owners as required
by HUD statute.
HUD awards Section 202 grants to private nonprofit groups and 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
41 The 1999 National Survey of Section 202 Elderly Housing, p. 9.
42 HUD Budget Justifications for FY2001 through FY2009.
43 The 1999 National Survey of Section 202 Elderly Housing, p. 10.
44 Ibid., p. 18-19.
45 For more information about LIHTCs, see CRS Report RS22389, An Introduction to the Design of the Low-Income
Housing Tax Credit, by Mark P. Keightley.
and project rental assistance in a fiscal year to each of the 18 HUD field offices. Of the funds 46
available, HUD allocates 85% to metropolitan areas and 15% to non-metropolitan areas.
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 47
population of elderly renters. 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 48
(defined as accommodating 1.01 or more persons per room).
In the second step in the grant process, applicants apply directly to their field offices for the funds
that have been allocated to their areas. HUD then evaluates grantee applications and uses a point 49
system to assign up to 102 points per application. Points are awarded in the following
• Up to 23 points are awarded for the applicant’s capacity to provide housing,
including experience in providing housing to minorities;
• Up to 13 points are awarded for the need for funding in the applicant’s target
• Up to 47 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 5 points are awarded for the applicant’s ability to secure funding from
other sources; and
• Up to 12 points are awarded for development of an evaluation plan to measure
performance of the project.
In FY2007, $519 million was distributed to grant recipients in 38 states to construct or convert 50
nearly 3,900 units of housing for elderly households.
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 51
sponsors create housing for low- and moderate-income families. The BMIR program has not
46 For the most recent guidelines on the Section 202 grant distribution process, see HUD’s Notice of Funding
Availability, Federal Register, vol. 73, no. 92, May 12, 2008, pp. 27295-27317 (hereinafter “FY2008 NOFA”).
47 24 CFR § 791.402(c).
48 FY2008 NOFA, p. 27927.
49 Ibid., p. 27311. Two of the points are bonus points awarded for projects that are part of renewal communities,
empowerment zones, or enterprise communities.
50 The list of grantees is available at http://www.hud.gov/news/releases/pr07-157.pdf.
51 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
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 52
serve those families with incomes too high for public housing, but too low for market-rate rents.
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 53
units. Lenders then sold the mortgages to the Federal National Mortgage Association (Fannie 54
Mae). 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 55
are still active, providing 1,154 units in projects dedicated to the elderly. Units are open to 56
households with incomes of up to 95% of the area median income.
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 57
rent as determined by HUD. 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 58
necessary. Most, but not all, of these contracts have been converted to Section 8 project-based 59
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
available for this purpose. 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 61
program was intended to replace the Section 221(d)(3) and Section 202 programs, and for a
Section 221(d)(3) of the National Housing Act (Washington, DC: Urban America, Inc., 1968), p. 4.
52 Senate Committee on Banking and Currency, Housing Act of 1961, Senate report to accompany S. 1922, 87th Cong.,
1st sess., S.Rept. 281, May 19, 1961.
53 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.
54 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.
55 Federal Housing Programs that Offer Assistance to the Elderly, p. 11.
56 HUD Handbook 4350.3, chapter 3, paragraph 3-6.
57 12 U.S.C. §1701s(d).
58 12 U.S.C. §1701s(j)(1)(d).
59 HUD FY2009 Budget Justifications, p. J-1, available at http://www.hud.gov/offices/cfo/reports/2009/cjs/hsg1.pdf.
60 House Committee on Banking and Currency, Housing and Urban Development Act of 1968, House report to
accompany H.R. 17989, 90th Cong., 2nd sess., H.Rept. 1585, June 25, 1968.
time it did. The program produced approximately 400,000 new units in 3,601 developments by 62
1976. 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 and nonprofit owners of rental housing projects for
low-income and moderate-income households by insuring 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 63
rent is the amount needed to operate the project at the actual mortgage interest rate. Tenants pay
the higher of the basic rent or 30% of their income (initially, tenants paid 25%), but rent cannot 64
exceed the fair market rent amount. 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 65
Section 236 units, are reserved for elderly residents.
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 need not 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 66
Supplement payments have largely been converted to Section 8 project-based rental assistance.
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.
62 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, available at http://archive.gao.gov/f0402/100542.pdf.
63 12 U.S.C. §1715z-1(f)(1). The Section 236 market rent is different from Section 8 fair market rent.
64 Charles L. Edson, “Sections 235 and 236—The First Year,” Urban Lawyer 2, No. 14 (1970), p. 22.
65 Federal Housing Programs that Offer Assistance to the Elderly, p. 11.
66 HUD FY2009 Budget Justifications, p. K-3, available at http://www.hud.gov/offices/cfo/reports/2009/cjs/hsg1.pdf.
The exceptions in the RAP program are state-aided, uninsured projects.
Congress did not intend to separate elderly residents from younger tenants.67 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 68
created. Today, more than 76,000 public housing units are designated exclusively for elderly 69
Beginning in 1961, persons with disabilities were included in the definition of “elderly families”
for purposes of the public housing program. Combining elderly and disabled residents in public
housing has been controversial. During the early years of public housing for elderly persons,
disabled residents 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 70
in need of affordable housing. 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 71
“handicapped” included individuals with alcohol and drug addictions. As a result of the increase
of younger, disabled residents in public housing, often with mental illnesses and addictions,
public housing authorities faced a greater number of incidents of disruptive behavior, and many 72
elderly residents reported feeling unsafe.
Due to the conflicts between tenants with disabilities and elderly residents, in 1992 Congress
allowed public housing authorities (PHAs) to designate buildings as elderly only, disabled only, 73
or elderly and disabled only. 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.
67 House Committee on Banking and Currency, Housing Act of 1956, House report to accompany H.R. 11742, 84th
Cong., 2nd sess., H.Rept. 2363, July 15, 1956.
68 Frances Merchant Carp, A Future for the Aged, Victoria Plaza and Its Residents (Austin: University of Texas Press,
69 Federal Housing Programs that Offer Assistance to the Elderly, p. 11.
70 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, available at http://archive.gao.gov/d33t10/
71 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 CFR §41.31.
72 Housing 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.
73 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 CFR §945.101-945.303.
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 74
housing for low-income families. From the inception of the program, owners were able to
develop properties dedicated for use by elderly and disabled families. Today, elderly and disabled
households continue to live together in Section 8 project-based housing. Although owners may 75
give a preference to elderly families (P.L. 102-550), 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 disabled households; the number is either the number of units
occupied by disabled families in 1992 or 10%, whichever is lower. If owners are unable to rent
units to elderly families, they may give preference to near-elderly disabled families. After the
Section 202 program, Section 8 project-based housing provides the most housing dedicated
specifically to elderly households. Of the number of units that continue to receive project-based 76
rental assistance, approximately 200,000 are dedicated to elderly households.
Table 1. HUD Rental Housing Programs for Low-Income Elderly Households
Units for Elderly
Program Income Eligibilitya Tenant Rent Only
Section 202 268,251
1959 to 1962 No income limits. Set by owner based on funds required
to support building operation.
1962 to 1968 Income limits set on a Set by owner.
1968 to 1974 Higher of 80% of area Set by owner.
median income or 135% of
public housing income limits.
1974 to 1981 80% of area median income.c For units with Section 8 project-based
rental assistance, the greater of 30%
of adjusted income or 10% of gross
1981 to present 50% of area median income.d The greater of 30% of adjusted
income or 10% of gross income.
Section 221(d)(3) 95% of area median income. Rent is set building-by-building and 1,154
BMIR approved by HUD.
Section 236 80% of area median income. The greater of 30% of adjusted 65,877
income or “basic rent” as calculated
74 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, by Maggie McCarty.
75 42 U.S.C. §§13611-13620.
76 Federal Housing Programs that Offer Assistance to the Elderly, p. 11.
Units for Elderly
Program Income Eligibilitya Tenant Rent Only
Public Housing 80% of area median income. The greater of 30% of adjusted 76,638
income or 10% of gross income.
Section 8 Project-50% of area median income.d The greater of 30% of adjusted 200,455
Based Rental income or 10% of gross income.
Source: Prepared by CRS based on HUD Handbook 4350.3, chapter 3, paragraph 3-6 and chapter 5, paragraphs
5-25 through 5-30. Federal Housing Programs that Offer Assistance for the Elderly, Government Accountability
Office, February 2005, p. 11.
a. Income limits are subject to exceptions. This table provides information on the majority of housing units for
b. The units are those currently in use. The number of units does not include units for non-elderly residents
c. Although it was not mandated that Section 202 projects serve tenants with low incomes beginning in 1974,
the availability of Section 8 project-based 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 Section 8 project-based rental assistance
must be made available to very low-income households.
Four 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) 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. 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;
• bathing, which includes getting in and out of a tub or shower;
• grooming; and
• home management, which includes housework, shopping, and laundry.77
The Congregate Housing program contains one additional ADL focused on an individual’s ability
to move, and includes getting in and out of chairs, walking, going outdoors, and using the toilet.
77 For the Service Coordinator and Assisted Living Conversion programs, ADLs are listed at 24 CFR §891.205. For the
Congregate Housing program, they are listed at 24 CFR §700.105.
Residents who are age 62 or older and unable to perform at least three ADLs to some degree are 78
considered frail, while those who are unable to perform one or two ADLs are considered at risk.
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,
take care of their personal appearance, and must 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. In the ROSS program, services
are available whether residents are frail or not.
The Congregate Housing Services program, enacted as part of the Housing and Community
Development Amendments of 1978 (P.L. 95-557), was the first 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 Section 8 project-based 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 79
Coordinator program (described below). To receive Congregate Housing funds, nonprofit
owners and public housing authorities applied to HUD for funds. Current regulations provide that
HUD will pay up to 40% of Congregate Housing costs, grant recipients must pay 50% of costs, 80
and elderly participants must make payments that total at least 10% of total program costs. Not
all project residents are eligible for Congregate Housing services. They must be frail, defined as 81
deficient in at least three ADLs. 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 82
professional, who are competent to determine the abilities of elderly residents.
78 The at-risk category applies only to the Service Coordinator program.
79 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
80 24 CFR §700.145.
81 24 CFR §700.135.
82 HUD Handbook 4640.1: Congregate Housing Services Program Operating Procedures, November 6, 1996, chapter 2,
paragraph 2-8, available at http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4640.1/46401c2HSGH.pdf.
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 83
coordinator funding in the Housing and Community Development Act of 1992 (P.L. 102-550).
In 2000, the law was further amended to allow service coordinators to assist those elderly and
disabled residents 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 84
eligible properties may apply for funds on an annual basis through HUD’s grant process. To
qualify, at least 25% of residents in a development must be considered frail elderly, at-risk 85
elderly, or disabled non-elderly. 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.
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 and disabled public housing residents living in 86
developments designated for elderly persons and persons with disabilities. 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. Prior to the ROSS program, grants were available
from HUD to public housing authorities (PHAs) to fund service coordinators beginning in
FY1994 (P.L. 103-124), and congregate housing and supportive services beginning in FY1996
(P.L. 104-134). 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 87
program: ROSS Service Coordinators.
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,
83 See Section 676.
84 Note that Section 202 developments that receive Section 8 project-based rental assistance are not eligible for service
coordinator funds. Instead they may request an increase in their rental assistance payments to support a service
85 This requirement is present in HUD’s Notice of Funding Availability for Service Coordinators. The most recent
NOFA can be found in the Federal Register, vol. 72, no. 48, March 13, 2007, p. 11691.
86 See the program’s first Notice of Funding Availability, Federal Register, vol. 64, no. 153, August 10, 1999, p.
87 See FY2008 Resident Opportunity and Self-Sufficiency Programs Webcast Presentation, May 13, 2008, available at
job training, and assistance with personal care.88 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 89
grantee’s performance. 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. In FY2008, unlike
previous grant years, recipient grantees may only use funds to pay for service coordinators, not
for the services themselves.
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 90
assistance in order to remain in their units. HUD-funded buildings developed under the Section
202 program, Section 236 program, and Section 221(d)(3) program, or units supported by Section
8 project-based 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, 91
together with common rooms. There is no uniform state definition for what constitutes an 92
assisted living facility, and the level of care required by state law varies. 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 93
recreational areas available to all residents. 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 94
residents, and the availability of three meals per day. Construction requirements include
88 HUD FY2008 Notice of Funding Availability for ROSS, Federal Register, vol. 73, no. 92, May 12, 2008, pp. 27233-
89 Ibid., pp. 27237-27238.
90 The statute governing the Assisted Living Conversion program is at 12 U.S.C. §1701q-2.
91 12 U.S.C. §1715w(b)(6).
92 For more information on state requirements see Robert Mollica and Heather Johnson-LeMarche, State Residential
Care and Assisted-Living Policy: 2004, Department of Health and Human Services, March 31, 2005, available at
93 HUD FY2008 Notice of Funding Availability for the Assisted Living Conversion Program, Federal Register, vol. 73,
no. 92, May 12, 2008, p. 27282.
94 Ibid., p. 27284.
bathrooms that are accessible to persons with disabilities and a 24-hour emergency response 95
system in each unit.
Owners of eligible properties may apply for assisted living conversion funds through HUD’s 96
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 97
alert systems, among other modifications. 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
Developments that Qualify for
Programs Services Eligibility
Congregate Housing Section 202 Frail elderly and non-elderly persons with
Section 221(d)(3) disabilities.
Section 8 Project-Based Rental
Service Coordinator Section 202 All residents if at least 25% of residents
Section 221(d)(3) are frail elderly, at-risk elderly, or non-
Section 236 elderly persons with disabilities.
ROSS Public Housing All residents.
Assisted Living Conversion Section 202 Frail elderly and non-elderly persons with
Section 221(d)(3) disabilities.
Section 8 Project-Based Rental
Source: Prepared by CRS on the basis of 42 U.S.C. §8011(k)(6) and (7); Notice of Funding Availability for
Service Coordinators, Federal Register, vol. 72, no. 48, March 13, 2007, pp. 11691; P.L. 105-276; 12 U.S.C.
During the last three fiscal years, the President’s budget proposed to reduce the combined funding
level for the programs that provide housing and services for elderly households (primarily the
Section 202 program)—in FY2007 by 26%, in FY2008 by 22%, and in FY2009 by nearly 27%.
However, in FY2007 and FY2008, Congress has not cut funds for the program, and funding for
Section 202 has remained stable in recent years. For Section 202 funding levels, as well as
funding for supportive services programs, see Table 3. For more information about current year
95 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.
96 The most recent Notice of Funding Availability for Assisted Living Conversion is available at Federal Register, vol.
73, no. 92, May 12, 2008, pp. 27281-27294.
97 Ibid., p. 27283.
appropriations, see CRS Report RL34504, The Department of Housing and Urban Development:
FY2009 Appropriations, by Maggie McCarty et al.
Table 3. Funding for Selected Programs, FY2001-FY2008
(dollars in millions)
Fiscal Year Section 202a Service Coordinators ROSS Assisted Living Conversion
2001 677.0 49.9 —b 49.9
2002 682.6 50.0 —b 50.0
2003 678.5 49.6 9.3 24.8
2004 698.7 29.8 11.4 24.8
2005 648.3 49.6 16.3 24.8
2006 634.7 51.1 8.8 24.6
2007 638.7 51.1 16.7 24.6
2008 —c 60.0 —d 24.8
Source: Prepared by CRS on the basis of FY2000 to FY2009 HUD Budget Justifications, P.L. 110-5, P.L. 110-161,
and HUD Funding Notices (ROSS).
a. Includes funds for new capital grants, new project rental assistance, and renewals of project rental assistance
b. From FY2000 through FY2002, HUD split ROSS grants between non-elderly families and elderly and
disabled residents. In FY2000 and FY2001, $24 million was distributed; in FY2002, $22.9 million was
c. P.L. 110-161 does not specify an amount for Section 202 in FY2008.
d. ROSS funding for FY2008 has not yet been awarded.
Two similar bills in the 110th Congress, both entitled the Section 202 Supportive Housing for the
Elderly Act (H.R. 2930 and S. 2736), would make some changes and additions to current law
regarding the financing of new Section 202 construction projects as well as to how existing
properties are refinanced. Both bills would also change the definition of assisted living facilities
in the Assisted Living Conversion program. The House approved its version of the bill, H.R.
In the area of financing for new Section 202 developments, H.R. 2930 and S. 2736 would direct
HUD to delegate to state housing finance agencies (HFAs) the ability to process capital grants.
Both bills would also provide that, upon expiration of a contract for Section 202 rental assistance,
HUD shall adjust the contract to account for reasonable project costs as well as the increased
costs of project reserves, service coordinators, and supportive services. The bills would also make
a change to the definition of “private nonprofit organization.” Under current law, nonprofits must
have governing boards that are responsible for operation of the Section 202 project. H.R. 2930
and S. 2736 would allow national nonprofit sponsors to form local advisory boards to fulfill this
requirement. Another provision in both H.R. 2930 and S. 2736 would give Section 202 project
owners authority to give a preference to homeless elderly applicants.
Various provisions in H.R. 2930 and S. 2736 would address refinancing of existing Section 202
properties. Currently, Section 202 owners may refinance their properties if they agree to operate
the project under terms at least as advantageous to tenants as the terms of the existing loan and if
the refinancing results in a lower interest rate and reduced debt service. Under H.R. 2930 and S.
2736, the new loan would not be required to have a lower interest rate as long as the project
owner would use the new funding to address the project’s physical needs. S. 2736 would further
require owners who refinance to continue to maintain affordability for twenty years beyond the
term of the existing loan and would allow a refinancing that results in increased debt service costs
to occur only when the interest rate on the original mortgage was at or below 6%.
Another change to existing law contained in both bills would be a new “preservation project
rental assistance” program for owners with Section 202 units that were built prior to 1974, when 98
most units did not receive rental assistance. The bills would also expand the ways that owners
could use the proceeds from refinancing to include payment of equity and developers’ fees.
Additionally, a provision in both bills would limit HUD’s ability to put conditions on the amount
of proceeds that Section 202 owners may realize from a sale or refinancing, or the way in which
owners use the proceeds. HUD would only be able to impose conditions on the amount or use of
proceeds if there were an existing contract between HUD and the project owner that authorized
the conditions. And whereas S. 2736 would create a mortgage sale demonstration project in which
Section 202 loans would be sold to state HFAs, H.R. 2930 would require HUD to conduct a study
of the potential costs and benefits of such a demonstration project.
Both H.R. 2930 and S. 2736 would change the definition of “assisted living facility.” Under
current law, an assisted living facility is owned by a private nonprofit corporation, is licensed by
the state (or locality), makes available certain supportive services, and provides separate dwelling
units for residents. The two bills would each change the definition so that private nonprofit
organizations may meet the requirements either through state or local licensure or by providing
certain supportive services to assist residents with activities of daily living.
Finally, S. 2736 would create a National Senior Housing Clearinghouse within HUD to
disseminate information about available rental units for elderly tenants and characteristics of
those rental units. The Clearinghouse would include not only units in Section 202 facilities, but
also units subsidized through the Section 8 program, the Low Income Housing Tax Credit, the
Assisted Living Conversion program, and other programs that subsidize units dedicated for use
by elderly households. Information would be made available to prospective residents through a
website and a toll-free number.
The provision in H.R. 2930 and S. 2736 regarding the “delegated processing” of Section 202
capital grants to state HFAs was included in P.L. 110-289, the Housing and Economic Recovery
Act of 2008, which was enacted on July 30, 2008. Under this provision, those grantee
organizations that are awarded Section 202 capital grants, and that also intend to use Low Income
Housing Tax Credits to develop their properties, may have their state HFA review and process the
capital grant instead of HUD. Because HFAs are the agencies that administer tax credits,
98 However, some pre-1974 properties later received rental assistance through the Rent Supplement program and the
Loan Management Set Aside program.
delegating the processing of the Section 202 capital grant to the HFA, together with the tax credit,
is thought to be more efficient. As part of the delegated processing, HFAs may recommend
project rental assistance in excess of the amount awarded by HUD, though an increase is subject
to HUD approval.
On July 10, 2008, the Senate Appropriations Committee approved its version of the Departments
of Transportation and HUD funding bill (S. 3261). The bill includes a refinancing provision
similar to one included in both H.R. 2930 and S. 2736. This provision would allow Section 202
owners to refinance into a new loan with a higher interest rate as long as the project owner would
use the new funding to address the project’s physical needs. The Senate Appropriations
Committee bill also includes a provision that would require HUD to provide enhanced vouchers
to Section 202 tenants in cases where insufficient project-based rental assistance is made
available to the development.
A growing concern exists that the market will lose assisted housing units for elderly tenants
because private and nonprofit owners of Section 202, 221(d)(3), and 236 developments have no
obligation to continue providing subsidized housing beyond their contract terms. Therefore,
owners may eventually convert these units to market-rate rental housing, jeopardizing the
availability of affordable housing for their tenants. Affordable housing units may be converted
under several circumstances. First, when HUD-subsidized mortgages 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 Section 8 project-based rental assistance
could lose or terminate their contracts. A final 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. Congress has enacted several laws that have attempted to prevent
the loss of affordable housing units due to these factors.
Most owners of Section 202 properties may prepay their loans with HUD approval, however, in 99
general, they must maintain the affordability of the units. Congress initially addressed the
prepayment of Section 202 mortgage loans in 1984 (P.L. 98-181) by allowing prepayment only if
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. In 2000,
the American Homeownership and Economic Opportunity Act (P.L. 106-569) added provisions
that allow owners to refinance as part of the prepayment if the terms of the new loan result in a
lower interest rate and reduced debt service payments. HUD will then make at least 50% of its
savings from reduced rental assistance payments available to owners to assist tenants either
through supportive services, facility improvements, or rent reductions for unassisted tenants. In th
the 110 Congress, legislation has been introduced that would make some changes to the way in
which Section 202 loans are refinanced (see the previous section for a discussion of H.R. 2930
and S. 2736).
99 Some Section 202 loans made during the late 1970s and early 1980s may be prepaid without HUD approval.
Although the initial mortgage subsidy contracts between HUD and property owners in the Section 100
221(d)(3) and Section 236 programs had a duration of 40 years, in order to attract developers to
the program, HUD gave owners the right to prepay their mortgages (and potentially leave the 101
program) after 20 years. By the late 1980s, many Section 236 and 221(d)(3) project owners
were in the position to prepay their mortgages and charge market rate rents, displacing the low-
income tenants who lived in their developments. Recognizing that HUD could lose thousands of 102
affordable housing units in the coming years, in 1990 Congress enacted Title VI of the
Cranston-Gonzalez National Affordable Housing Act (P.L. 101-625), the Low-Income Housing
Preservation and Resident Homeownership Act (LIHPRHA). The act created incentives for
building owners to continue offering affordable housing through the Section 221(d)(3) and 103
Section 236 programs.
LIHPRHA continued to allow owners to prepay their mortgages after 20 years, but only as long
as the change did not create economic hardship for current tenants or reduce the availability of 104
low-income housing, housing near jobs, or housing for minorities. To convince owners to
maintain affordable properties, HUD could ensure that owners receive rent subsidies sufficient to
guarantee an 8% return after mortgage payments and operating expenses were paid and adequate
reserves were established.
If building owners still chose to prepay their mortgages and begin charging market-rate rents,
HUD protected tenants by issuing enhanced Section 8 vouchers. Enhanced vouchers require
building owners in low vacancy areas, or with elderly tenants and tenants with disabilities, to
accept the vouchers, allowing tenants to remain in the building at the lower rental amount for up 105
to three years. The law also required owners to pay 50% of tenant moving expenses. LIHPRHA
has not been funded since FY1997 (P.L. 104-204), but during the 1990s it is estimated to have 106
preserved 110,000 units of Section 221(d)(3) and Section 236 housing. Current law requires
that owners give Section 221(d)(3) and Section 236 tenants at least 150 days’ notice when they 107
plan to prepay their mortgages.
100 See Senate Subcommittee on Housing for the Elderly of the Special Committee on Aging, Adequacy of Federal
Response to Housing Needs of Older Americans, hearing, 92nd Cong., 1st sess., August 2, 1971, p. 130.
101 House Subcommittee on Housing and Community Development of the Committee on Banking, Finance and Urban
Affairs, Preventing the Disappearance of Low-Income Housing, hearing, 100th Cong., 2nd sess., June 8, 1988, p. 4. See, stnd
also, Cranston-Gonzalez National Affordable Housing Act, conference report to accompany S. 566, 101 Cong., 2
sess., H.Rept. 101-943, October 25, 1990, p. 457.
102 In 1990, Congress noted that over the next 12 years, more than 360,000 units of federally assisted housing could be
lost. H.Rept. 101-943, p. 457.
103 The act is codified at 12 U.S.C. §§4101-4125.
104 12 U.S.C. §4108.
105 12 U.S.C. §4113.
106 The National Housing Law Project, HUD Housing Programs: Tenants’ Rights (Oakland, CA: The National Housing
Law Project, 2004), 15/37.
107 P.L. 105-276.
A large number of assisted housing units for elderly households are supported with Section 8
project-based rental assistance contracts. When Section 8 rental assistance contracts began to
expire in the 1990s, many owners began to opt out of the program. In its FY1998 HUD
Appropriations Act (P.L. 105-65), Congress responded to the opt-outs by providing that contracts
for rental assistance with HUD could be renewed at rental rates up to the rate prevailing in the
market whenever market rate rents exceed the contract rent. (Market rent is based on either the
rent levels of comparable unassisted properties in a building’s area or on area fair market rent
levels as determined by HUD.) This provision is sometimes called “mark up to market,” and it
attempts to give incentives to owners to stay in the Section 8 program even if they could
otherwise make more money in the private market. If owners decide to opt out of the rental
assistance program, tenants may qualify for enhanced Section 8 vouchers that they may use to 108
either remain in the building or move elsewhere. P.L. 105-65 also created the “mark-to-market”
program for cases in which Section 8 payments exceed market-rate rents. Mark-to-market allows
those owners with above-market rents to renew their rental assistance contracts with HUD,
although at a lower rate, while also restructuring their outstanding debt on the property. The
program is designed both to ensure that HUD pays reasonable market rents for subsidized
properties and to provide incentives for owners of assisted properties to renew their contracts with
The most recent Census estimated that 2.4 million grandparents were raising grandchildren, and 109
that of this number, approximately 19% of grandparents were poor. The HUD guidelines
governing the Section 202, Section 221(d)(3), Section 236, and certain Section 8 project-based
assistance programs specifically prohibit the exclusion of children from these developments
(“owners may not exclude otherwise eligible elderly families with children from elderly 110
properties ...”). 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 111
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.
108 42 U.S.C. §1437f(t).
109 Tavia Simmons and Jane Lawler Dye, Grandparents Living with Grandchildren: 2000, U.S. Census Bureau,
October 2003, pp. 1, 9, available at http://www.census.gov/prod/2003pubs/c2kbr-31.pdf.
110 HUD Handbook 4350.3, chapter 3, paragraph 3-23, available at http://www.hud.gov/offices/adm/hudclips/
111 HUD Public Housing Occupancy Guidebook, June 2003, Section 2.2, p. 25., available at http://www.hud.gov/
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,
LEGACY Act funds. The available funds are expected to support two to four grants for
retrofitting existing facilities for intergenerational housing, developing new facilities, or creating 113
an annex to an existing project. Rental assistance will also be available for eligible grantees.
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 114
a Report to Congress on Intergenerational Housing Needs and HUD Programs. The report
describes the number, characteristics, and housing conditions of grandparent-headed households
and households with other relatives raising related children. The report estimates that that
qualify for assistance under the LEGACY Act.
Analyst in Housing
112 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.
113 Ibid., p. 22761.
114 The report is available at http://www.huduser.org/Publications/pdf/intergenerational.pdf and the data tables are at
115 Ibid., p. 6.