HUD Proposes Section 202, 811 Reforms

Recently, HUD proposed a rule to modify Section 202 and 811 program regulations. The most significant part of the proposed rule deals with program regulations governing mixed-finance developments or those projects that receive funding from both the low-income housing tax credit and Section 202/811 programs.

The change is aimed at increasing the private development community's involvement in creating mixed-finance properties by removing restrictions on the portions of developments not funded through capital advances. For example, HUD proposes allowing the release of capital advance funds upon project completion and allowing those funds to be used to pay off bridge or construction financing.

This practice is prohibited under the current regulations. HUD says these modifications would permit broader flexibility in the design of Section 202 and 811 units and allow mixed-finance developers to use the low-income housing tax credit more effectively.