HUD Publishes Section 811 and Section 202 Proposed Rule

HUD recently published a proposed rule in the Federal Register for implementing statutory reforms made to the Section 811 Housing for Persons with Disabilities and Section 202 Housing for the Elderly programs by the Frank Melville Supportive Housing Investment Act of 2010 and the Section 202 Supportive Housing for the Elderly Act of 2010, both of which were enacted on Jan. 4, 2011.

The extensive, proposed rule would establish the requirements and procedures for:

• Using the new project rental assistance for supportive housing for persons with disabilities that provides funding to state housing finance agencies for rental assistance to extremely low-income, non-elderly adults with disabilities. This new authority is separate from the existing project rental assistance that provides capital advances and contracts for project rental assistance.
• Implementing an enhanced project rental assistance contract (ePRAC) that would allow operating subsidies to pay debt service under specific circumstances not currently allowed. ePRACs would have 20-year terms for both the Section 202 and Section 811 programs; however, if a Section 811-assisted development also uses Low Income Housing Tax Credits, the ePRAC term would have to be 30 years.
• Allowing a set-aside for a number of units for elderly individuals with functional limitations in order to better align the Section 202 program with federal, state, and local health care initiatives that support very low-income elderly individuals and provide for enhanced project rental assistance contracts. The exact percentage of the allowable set-aside would be determined through a Notice of Funding Availability.
• Implementing the new form of rental assistance called Senior Preservation Rental Assistance Contracts (SPRACs) to be provided in the refinancing of certain Section 202 projects where no debt service savings are anticipated and where unassisted residents would otherwise face potential rent increases.
• Modernizing the capital advance for supportive housing for persons with disabilities by authorizing the use of project rental assistance for emergency situations.
• Providing grants for applicants that do not have sufficient capital to prepare a housing site to compete for funding.

The proposed rule would also make significant changes for the prepayment of certain loans for supportive housing for the elderly. It would also add a new part 892 to establish regulations for the Service Coordinator in Multifamily Housing program. Section 811-assisted properties must make supportive services available to persons with disabilities, but these services do not have to be accepted.

Comments are due Dec. 8, 2014. You can find the proposed rule here.