In 1990, the  Cranston-Gonzalez National Affordable Housing Act amended the  Housing Act of 1959 and created separate programs: (1) the Section 202  Supportive Housing for the Elderly program to support affordable housing  for very low-income elderly persons and (2) the Section 811 program for  very low-income persons with disabilities. Section 202 and Section 811 sponsors are not  required to repay the capital advance as long as they continue to make  supportive housing affordable to eligible households for 40 years. Although Congress continues to appropriate funds for  rental assistance for existing Section 202 and Section 811 units, these  appropriations also declined from 2011 to 2013. HUD Allocated Capital Advances to Its Regional Offices Based on Relative Regional Housing Needs

Until fiscal year 2012, when funding for new units ceased, HUD used a  two-phase process to allocate and award Section 202 and Section 811  capital advances (see fig. First, HUD headquarters allocated the total  amount of appropriated funds for capital advances to each of the 18 Hubs  (which in this report we refer to as regional offices) based on a funding  formula, which accounted for regional housing needs and cost  characteristics. Second, applicants submitted applications online and  staff from the applicable regional office evaluated applications using a  technical review and a point system and awarded capital advances to the  highest-scoring applicants. While our discussion of funding below  analyzes the number of capital advances and the amount by state, award  determinations were based on applications received in each regional  office. According to HUD officials, in fiscal year 2010, HUD implemented  changes in the way it distributed capital advances among the regional  offices to better target resources for the Section 202 program. At that time, each local program office received  a minimum set-aside for metropolitan and nonmetropolitan areas. However, in the combined fiscal year 2010/2011  capital advance competition, HUD did not subdivide the funds to local  offices and discontinued the minimum set-aside of 20 units in  metropolitan and 5 units in nonmetropolitan areas in order to fund  properties at a higher level. HUD Regional Offices Scored Applicants for Section 202 and Section 811 Capital Advances in a Competitive Process

Both Section 202 and Section 811 followed a similar competitive process  for awarding capital advances. Most but Not All States Had Applicants That Received Capital Advances during Fiscal Years 2008 through 2011

From fiscal years 2008 through 2011, most states had at least one  Section 202 applicant that received capital advance award dollars. Total capital advance amounts awarded varied across states for the  Section 202 program (see fig. From fiscal years 2008 through 2011,  three states received total capital advances of $75 million or more. Since applications were only maintained for 3 years, HUD officials  were not able to tell us why a specific application did not receive funding,  but they identified possible reasons why applicants may not have  received funding during this period. Specifically, HUD officials noted that  applications that were submitted may have been ineligible; applications  may have failed to meet the minimum point threshold for selection; or  higher-scoring applications from other states may have been selected  instead. HUD officials said that sponsors in these  states did not receive capital advances for reasons similar to those for the  Section 202 program. Agency Comments and Our Evaluation

We provided a copy of this report to HUD for its review. Appendix I: Number and Amount of Section 202 and Section 811 Capital Advance Awards, Fiscal Years 2008 through 2011

Tables 4 through 7 show the number of Section 202 and Section 811  capital advance awards and the total dollar amounts by state (including  the District of Columbia and Puerto Rico) from fiscal years 2008 through  2011.
Why GAO Did This Study

Over 151,000 very low-income elderly and disabled households rely on the Section 202 and the Section 811 programs to provide affordable rents and housing with supportive services. Before fiscal year 2012, nonprofit organizations interested in developing units for these populations could apply to HUD for grants known as capital advances, which did not have to be repaid as long as the property continued to serve these populations for 40 years. Since fiscal year 2012, Congress has not appropriated any funding for capital advances for either program, although it has continued to fund rental assistance for existing developments.
The House report accompanying the Consolidated and Further Continuing Appropriations Act of 2015 contained a provision for GAO to provide information on HUD capital advances for the Section 202 and Section 811 programs from 2008–2013.
This report examines (1) how HUD determined the capital advance amounts awarded to sponsors for Section 202 and Section 811 and (2) the number of capital advance awards and amounts by state from fiscal years 2008–2011 and any changes in the distribution of capital advances over that period. GAO reviewed budget documents and funding announcements and interviewed agency officials.
GAO makes no recommendations in this report. GAO provided a draft to HUD for its review and received technical comments, which were incorporated as appropriate.

What GAO Found

Until program funding for new development ceased in fiscal year 2012, the Department of Housing and Urban Development (HUD) used a two-phase process to allocate and award capital advances for Section 202 Supportive Housing for the Elderly (Section 202) and Section 811 Supportive Housing for Persons with Disabilities (Section 811). First, HUD headquarters allocated the amount of appropriated funds for capital advances to each of the 18 regional offices using a funding formula, which accounted for regional housing needs and cost characteristics. Funding was further divided among 52 local offices using a set-aside formula and was also split between metropolitan and nonmetropolitan areas for Section 202. In 2010, HUD eliminated the set-aside which had guaranteed a minimum amount of funding for each local field office. The process for making capital advance awards did not change, but HUD was better able fund properties at a higher level. Second, applicants submitted applications to the applicable HUD regional office, and staff from these offices evaluated and scored applications based on various criteria, including capacity to provide housing and ability to secure funding from other sources. Applicants in each regional office were ranked highest to lowest and funded in that order. Any residual funds that were not sufficient to fund the next project in rank order were pooled nationwide and HUD headquarters used a national ranking to fund additional projects.
Most but not all states (including the District of Columbia and Puerto Rico) had applicants that received capital advances for Section 202 and Section 811 in fiscal years 2008 through 2011. GAO found that some states had applicants that received capital advances in each of the years reviewed, while other states did not. In the period reviewed, four states had no applicants that received Section 202 capital advance awards, and eight states had no applicants that received Section 811 capital advance awards. HUD officials cited several reasons applicants from some states may not have received funding during this period, including applications that were submitted may have been ineligible or higher-scoring applications from other states may have been selected instead. The capital advance amounts varied. For Section 202, total capital advance amounts for fiscal years 2008-2011 for states that received at least one award ranged from less than $24 million to more than $75 million. For Section 811, total capital advance amounts for fiscal years 2008-2011 for states that received at least one capital advance award ranged from less than $4 million to more than $15 million.