Section 202 Supportive Housing for the Elderly: B Program Status and Performance Measurement

September 30, 2010 By Steve Kornspan

Excerpt from the HUD 154 page document –

Executive Summary

The Section 202 Supportive Housing for the Elderly program provides capital advances and project rental assistance under Section 202 of the Housing Act of 1959 (as amended), for housing projects serving elderly households. The Office of Policy Development and Research (PD&R) at the Department of Housing and Urban Development (HUD) has conducted a study to assess whether the program has been effective in meeting the needs of very low-income elderly Americans.

Description of Section 202 Supportive Housing

Since enactment of the program in 1959, Section 202 has provided direct loans or capital advances from the federal government to enable private, not-for-profit sponsors to produce secure, barrier-free, and supportive housing facilities for older persons.1 Careful sponsor screening and rental subsidies have resulted in fewer defaults and greater financial stability in the Section 202 program than in most other federal housing programs. HUD’s administrative data show that, as of December 2006, over 6,000 Section 202 facilities housed approximately 263,000 households of older persons. Waiting lists for Section 202 facilities are long, especially when compared to the number of housing units becoming vacant each year. The relatively high demand for this housing means that applicants frequently must wait over two years for a unit.

Persons are eligible to apply for assistance if their incomes are very low, which is generally equal to 50 percent of the area median family income, adjusted for household size. Residents are predominantly elderly women living alone with incomes between $5,000 and $15,000. The median 2006 income of about $10,000 is well below the income eligibility limit for the program.

Housing made available under the Section 202 program is of good quality, and performs better during on-site physical inspections than other HUD-assisted housing programs. Available information on resident satisfaction suggests that residents of Section 202 facilities are more satisfied with their home and immediate surroundings than participants in the Housing Choice Voucher program or unassisted very low-income elderly persons.

In 2006, the median age of Section 202 residents was 74 years, and 31 percent were age 80 or older. For elderly persons admitted to Section 202 housing that year, the median age was 70 years, and about 19 percent of all persons admitted to Section 202 housing were age 80 or older.

Residents of Section 202 projects in 2006 had a median tenure of 4 years. Eighteen percent of all households had lived in the project for more than ten years. On average, elderly persons admitted to Section 202 projects generally resided for longer periods of time in this kind of housing than elders admitted to public housing, other multifamily assisted housing, or using Housing Choice Vouchers.

1 Elderly households are those with a head, spouse or co-head age 62 or older.

Unique Aspects of Section 202 Supportive Housing

A critical aspect of Section 202 housing is that it can accommodate residents with supportive services as they become more frail. A majority of facilities (73.9 percent) have grab rails, and 91.1 percent have a ramp or a level entrance. In the newer projects (built since 1990), nearly 100 percent of projects have at least one accessible unit, and 43 percent of all units are wheelchair-accessible.

A majority of Section 202 projects have the capacity to provide an array of communal services for their residents. Community space for social and recreational facilities is available and used in 90.2 percent of projects. Spaces for congregate dining and supportive service providers are used in about half of projects.

Costs of formal services are generally not paid by HUD, but instead are paid through a variety of other sources, principally through Medicaid. Examples of formal services are meals, housekeeping, assistance with medications, bathing, etc. A service coordinator is a person trained to work with residents and their families when supportive services are needed. In 2006, 38 percent of all Section 202 properties reported having a service coordinator on staff. Almost half of all facilities built before 1984 reported having one on staff, while the smallest service coordinator presence (26.9 percent) was reported at newer Section 202 projects developed after 1990. Older facilities tend to be larger than newer projects, which permits greater economies of scale in staffing than in the newer, smaller facilities.

Section 202 Supportive Housing for the Elderly

September 30, 2010 By Steve Kornspan

May 6, 2009

By Nancy Libson, Director of Housing Policy, American Association of Homes and Services for the Aging.

The Section 202 Supportive Housing for the Elderly program provides capital and operating funds to nonprofit organizations that develop and operate housing for seniors with very low incomes. According to HUD, senior households with very low incomes are the likeliest to pay more than they can afford for their housing. As the U.S. population ages, both the creation of new Section 202 units and the preservation of existing units will be increasingly important.

The Section 202 program is administered by HUD’s Office of Housing Assistance and Grant Administration under the Assistant Secretary for Housing/FHA Commissioner.

History
The Section 202 program was established under the Housing Act of 1959. Enacted to allow seniors to live with dignity by providing assistance with housing and supportive services, the program has gone through various programmatic iterations during its lifetime before taking the form it does today. Between 1974 and 1990, Section 202 funds were provided as loans and subsidized by project-based Section 8 contracts. Prior to 1974, Section 202 funds were 3% loans that may or may not have had either Section 8 or rent supplement assistance for all or some of the units.

Until the creation of the Section 811 program in 1990, the Section 202 program funded housing for both seniors and people with disabilities.

Program Summary
The Section 202 Supportive Housing for the Elderly program provides capital and operating funds to nonprofit organizations, known as sponsors, that develop and operate senior housing. Many Section 202 project sponsors are faith-based groups.

The Section 202 grant program has two main components, a capital advance that covers expenses related to housing construction, and operating assistance that supports the buildings’ ongoing operating costs. Both the capital and operating funding streams are allocated to nonprofits on a competitive basis, through a HUD NOFA (notice of funding availability).

Capital Funding. The first component provides capital advance funds to nonprofits for the construction, rehabilitation or acquisition of supportive housing for seniors. These funds can now be augmented by tax credit debt and equity to either build additional units or supplement the capital advance as gap financing in so-called mixed finance transactions. The Section 202 program is HUD’s largest directly funded construction program; however, the capital advances rarely support 100% of the construction costs.

Operating Funding. The second provides rental assistance in the form of Project Rental Assistance Contracts (PRACs) to subsidize the operating expenses of the developments. Residents pay rent equal to 30% of their adjusted income, and PRAC makes up the difference between rental income and operating expenses.

In addition to the core components of the Section 202 program, HUD administers three relatively new companion programs:
Predevelopment grants to help nonprofits use Section 202 funds effectively;
Assisted living conversion program to help meet the great need for affordable assisted living options for low income seniors; and
Emergency capital repair grants for federally-assisted senior properties.

All of these accounts have been established by Congress to help meet the needs of seniors aging in place.

About a third of Section 202 properties also have a service coordinator funded as part of the Section 202 appropriation. These HUD grants provide funding for full-time service coordinators who assist Section 202 residents and low income elderly or disabled families living in the vicinity of Section 202 properties. Service coordinators assess residents’ needs, identify and link residents to services and monitor the delivery of services. The older Section 202 properties are eligible for grant funding, while the Section 202/PRAC properties may include the cost of service coordinators in their operating budgets if funds are available.

There are more than 300,000 Section 202 units serving very low income seniors. Section 202 tenants must generally be at least 62 years old and have incomes less than 50% of their area median income (AMI) (very low income). Some facilities have a percentage of units designed to be accessible to non-elderly persons with mobility impairments or may serve other targeted disabilities.

The average age of a Section 202 resident is 79, and nearly 39% of residents are over the age of 80. The average annual income of a resident is little more than $10,000. According to HUD, senior households with very low incomes are the likeliest to pay more than they can afford for their housing. The number of senior rental households with worst-case housing needs is 22%, or 1.13 million, of the estimated 5.18 million households with worst-case housing needs.

Funding
In FY09, Congress appropriated $626.4 million for new Section 202 construction and project rental assistance. In addition, the FY09 appropriation included $20 million for Section 202 predevelopment grants, about $90 million for service coordinators and $25 million for assisted living conversion and emergency capital repair grants.

Section 202 projects will also have access to $250 million in 2009 economic recovery funds (American Recovery and Reinvestment Act; ARRA) for energy retrofit grants and loans.

What Advocates Need to Know Now
There are three main issues confronting the Section 202 program:

A growing demand for increases in the supply of affordable senior housing. A lack of adequate new Section 202 construction funds means that the growing demand for affordable senior housing will not be met. The senior population is expected to double to 70 million by 2030 with the most growth among those over 85. Over the last several years, the funding available for new construction of Section 202 units has produced fewer than 4,000 units each year, many fewer than are needed to meet the growing demand. A recent HUD study has recommended that 10,000 Section 202 units be produced each year for the next 10 to 15 years to meet the growing senior population as an important and cost-effective alternative to premature placement in institutional settings, and necessary where states are engaged in transitioning seniors from costly nursing homes to the community. An AARP study released in January 2006 estimates that there are 10 residents for every one unit that becomes available.

At the very least, $775 million is needed in FY10 for construction and project rental assistance contracts (PRACs) alone. Although insufficient to meet the needs of the growing elderly population, this will allow construction of approximately 7,500 new units. In addition, in FY10, $20 million will be needed for grants to nonprofits to cover costs of architectural and engineering work, site control and other planning relating to the development of Section 202 housing. Federal assistance with these costs can ensure the timely development of quality housing.

Preservation of existing units. Those currently residing in assisted senior housing are aging in place. And just as the residents are aging in place, the buildings are aging and lack the amenities to provide supportive services. Further, the problems of low income seniors facing multi-year housing assistance waiting lists are only exacerbated by the shrinking supply of suitable, affordable housing as some owners sell their properties to new owners who will convert existing units to market-rate housing at the end of the original mortgage term. Finally, the oldest Section 202 mortgages are nearing the end of their mortgage terms. Some mortgages have been refinanced and some properties have already been sold out of the inventory. New tools are needed to help preserve these units as well as the second cohort of Section 202/8 properties that can be refinanced and to provide the supportive services that are so necessary for an aging population.

Tools that should be enacted or implemented include exit tax relief to remove the disincentives that existing for-profit owners have in selling properties to not-for-profits and others who would preserve the housing as affordable housing, and new capital and rental assistance programs to encourage the preservation of housing with maturing mortgages as affordable housing in the future.

Although typically the capital required to rehabilitate and preserve senior housing is raised through refinancing older, higher interest loans that many Section 202 properties built between 1974 and 1992 hold, there is one federal grant program available to convert existing senior housing to assisted living for the frail elderly. Funded as part of the Section 202 account, the Assisted Living Conversion Program provides grants to convert existing senior housing to licensed assisted living. In FY10, $50 million should be provided for the Assisted Living Conversion Program (ALCP), $20 million to increase the number of affordable housing units with supportive services and $30 million for capital repairs. Finally, in order to provide supportive housing so that seniors can age in place, at least $100 million should be provided to fund service coordinators.

Section 202 programmatic reform. Under the current Section 202 program, the development and preservation of existing communities can be time-consuming, bureaucratic and often require duplicative waivers from HUD. In 2007, the House passed Section 202 reform legislation that would streamline and simplify the Section 202 new construction and refinancing or preservation program, but the Senate’s companion legislation was never acted on.

In the 111th Congress, on the first day of the session, Senators Herb Kohl (D-WI) and Charles Schumer (D-NY) reintroduced the Section 202 Supportive Housing for the Elderly Act of 2009 (S.118), with eight additional cosponsors. The House companion legislation is expected to be included as a separate title in the larger preservation legislation that House Financial Services Committee Chair Barney Frank (D-MA) is expected to introduce to further the preservation of all affordable housing.

Specifically, the legislation would provide new construction reforms, including:
permitting a preference for homeless elderly and establishing a new non-metro allocation system to facilitate viable rural projects and refinancing and preservation reforms including permitting the refinancing for the oldest Section 202 properties (1959-1974) to address the physical needs of the project and promote long-term affordability;
allowing the refinancing proceeds not used for rehabilitation to be used for other affordable senior housing and related supportive services;
allowing use of residual receipts for supportive services;
creating a new Senior Preservation Contract to provide project based rental subsidies for older, unassisted Section 202 seniors in order to prevent displacement of residents;
and other technical changes.

The legislation also eliminates the licensure requirement for the Assisted Living Conversion Program where sponsors make supportive services available either directly or through licensed or certified service providers; and creates a national clearinghouse of affordable, supportive senior housing including Section 202 properties, Section 8 properties, low income housing tax credit properties, assisted living properties insured under section 232 of the National Housing Act, assisted living conversion properties, and any other federally assisted or subsidized housing for the elderly.

What to Say to Legislators
Advocates concerned with senior housing issues should encourage their Members of Congress to take the following actions:

Increase Section 202 funding.
Increase funding for service coordinators.
Appropriate sufficient renewal funding for 12 month funding, as opposed to the shorter term renewals funded in 2007 and 2008, for all expiring PRACS and Section 8 contracts in FY10 to preserve affordable senior housing.
Enact Section 202 reform legislation to streamline and simplify both the Section 202 new construction and Section 202 refinancing programs.
Enact preservation legislation to protect affordable senior housing and its residents in the future.
Enact preservation legislation to address the unique issues of senior housing with mortgages that will soon mature.

For More Information
American Association of Homes and Services for the Aging • 202-508-9476 • www.aahsa.org