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. Even with the  program’s exclusive focus on the very low income elderly, Section 202 has  reached only a small share of eligible households. Other federal programs that develop rental housing generally target  different income levels, serve other populations in addition to the elderly  (including families with children and people with disabilities) and do not  require housing providers to offer supportive services for the elderly. 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. HUD field staff, project  sponsors, and consultants reported that program limits on capital advances  often kept projects from meeting HUD’s time guideline for approving  projects for construction. 8). Conclusions

The housing affordability problems of very low income elderly renter  households—although they represent a small share of all elderly  households—are particularly acute. These households represent one of the  more vulnerable populations in the nation given their small incomes and  need for supportive services. Recommendations

To reduce the time required for projects to receive approval to start  construction, we recommend that the Secretary of Housing and Urban  Development direct the Assistant Secretary for Housing to (1) evaluate the  effectiveness of the current methods for calculating capital advances and  (2) make any necessary changes to these methods, based on this  evaluation, so that capital advances adequately cover the development  costs of Section 202 projects consistent with HUD’s project design and cost  standards. Scope and Methodology

We conducted this review to address: (1) the role of the Section 202  program in meeting the housing needs of elderly renter households with  very low incomes, (2) the extent to which Section 202 projects meet the  Department of Housing and Urban Development’s (HUD) time guidelines  for project processing, and (3) the factors that keep Section 202 projects  from meeting HUD’s time guidelines for project processing. About 3.7 million (± 208,000) elderly renter households  have very low incomes. HOME Investment Partnerships provides formula-based grants to  states and localities to build, acquire, or rehabilitate affordable rental  housing or provide tenant-based rental assistance. a.
Why GAO Did This Study

According to the Department of Housing and Urban Development (HUD), the most widespread and urgent housing problem facing elderly households is affordability. About 3.3 million elderly renter households in the United States have very low incomes (50 percent or less of median area income). 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. GAO was asked to determine the role of the Section 202 program in addressing the need for affordable elderly housing and the factors affecting the timeliness of approving and constructing new projects.

What GAO Found

HUD's Section 202 program provides a valuable housing resource for very low income elderly 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 income and the need for supportive services. The Section 202 program, which offers about 260,000 rental units nationwide and ensures that residents receive rental assistance and access to services that promote independent living, is the only federal program devoted exclusively to providing this type of housing. However, even with the program's exclusive focus, Section 202 has reached only about an estimated 8 percent of very low income elderly households. About three-quarters 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, in particular capital advances that were not sufficient to cover development costs. Project sponsors reported that insufficient capital advances often forced them 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.