A  small share of elderly households, about 19 percent or 5 million, rented  their homes (compared to about 36 percent of nonelderly households),  and about 3.3 million of these elderly households were renters with very  low incomes—that is, 50 percent or less of area median income. Because their rental payments are not sufficient to cover the property’s  operating costs, the project sponsor receives rental assistance payments  from HUD to cover the difference between the property’s operating  expenses (as approved by HUD) and total tenant rental receipts. Other federal programs can provide housing assistance to needy elderly  households, albeit not exclusively. Section 202 Is an Important Source of Housing for Elderly Households with Very Low Incomes

Section 202 is the only federal housing program that targets all of its rental  units to very low income elderly households. Because these households  often have difficulty affording market rents, program funding is directed to  localities based in part on their proportions of elderly renter households  that have a housing affordability problem. Even with the program’s exclusive focus on the very  low income elderly, Section 202 has reached only a small share of eligible  households. The criteria for allocating  funds to the field offices include, among other things, the total number of  very low income elderly renters in the area and the number in this group  that pay more than 30 percent of their incomes for rent. Between 1985 and 2001, Section 202 reached no more  than about 8 percent of elderly households eligible for assistance under  the program. Section 202 Projects Generally Did Not Meet Guidelines for Timeliness

Most of the Section 202 projects funded between fiscal years 1998 and  2000 did not meet HUD’s guideline for approving the start of construction  within 18 months. However, a slight majority of the projects were  processed and approved to start construction within 24 months. Various Factors Can Delay the Approval of Projects for Construction

Our review of projects funded from fiscal years 1998 through 2000 shows  that several factors impeded Section 202 projects from meeting the 18- month processing time guideline, including insufficient capital advances,  limited training and guidance for HUD field office staff on processing  policies and procedures, and limitations in HUD’s project monitoring  system. Insufficient Capital Advances Caused Some Sponsors to Seek Other Funding

Although HUD policy intends for capital advances to fund the cost of  constructing a modestly designed project, capital advances have not  always been sufficient to cover these expenses.
Why GAO Did This Study

In 2001, an estimated 2 million elderly households with very low incomes (50 percent or less of area median income) did not receive housing assistance. The Department of Housing and Urban Development (HUD) considered most of these households to be "rent burdened" because they spent more than 30 percent of their incomes on rent. The Section 202 Supportive Housing for the Elderly Program provides capital advances (grants) to nonprofit organizations to develop affordable rental housing exclusively for these households. Based on a report issued in May 2003, this testimony discusses the role of the Section 202 program in addressing the need for affordable elderly housing and factors affecting the timeliness of approving and constructing new projects.

What GAO Found

As the only federal housing program that targets all of its rental units to very low-income elderly households, HUD's Section 202 program provides a valuable housing resource for these households. Although they represent a small share of all elderly households, very low income elderly renters have acute housing affordability problems because of their limited incomes and need for supportive services. The Section 202 program offers about 260,000 rental units nationwide and ensures that residents receive rental assistance and access to services that promote independent living. However, even with the program's exclusive focus, Section 202 has only reached an estimated 8 percent of very low-income elderly households. More than 70 percent of Section 202 projects in GAO's analysis did not meet HUD's time guideline for gaining approval to start construction. These delays held up the delivery of housing assistance to needy elderly households by nearly a year compared with projects that met HUD's guideline. Several factors contributed to these delays, particularly capital advances that were not sufficient to cover development costs. Project sponsors reported that because of insufficient capital advances, they often had to spend time seeking additional funds from HUD and other sources. Although HUD's policy is to provide sufficient funding to cover the cost of constructing a modestly designed project, HUD has acknowledged that its capital advances for the Section 202 program sometimes fall short. Other factors affecting the timeliness of the approval process include inadequate training and guidance for field staff responsible for the approval process, inexperienced project sponsors, and local zoning and permit requirements.