Title II of the Housing and Community Development Act of 1974 created the project-based Section 8 New Construction and Substantial Rehabilitation programs. Under these programs, HUD contracted directly with private developers who constructed or substantially rehabilitated housing for the Section 8 program that would subsidize low income tenants’ rents. HUD agreed to pay owners the difference between HUD-approved contract rents and rent payments by tenants whose incomes were less than or equal to 80% of the area median income (AMI). Twenty percent of the units had to be occupied by households with income less than or equal to 50% AMI. Tenants paid no more than 25% of their income for rent and utilities, the “Brooke rent” at the time. Title II also created the Section 8 tenant-based certificate program, which later became the Housing Choice Voucher program.
One of the existing federal programs that the project-based Section 8 New Construction program was intended to replace was the Section 23 Leased Housing program. Created by the Housing and Community Development Act of 1965, Section 23 provided annual contributions to local public housing agencies to make privately owned properties available to low income households.
Hometown Village in Wisconsin was among the first properties developed under the Section 8 New Construction program. Hometown Village was a scattered site development of 178 low income senior apartments across ten rural small towns in Wisconsin. It is something of a historical accident that Hometown Village was a pioneering Section 8 New Construction development. It was originally conceived as a Section 23 Leased Housing program, but because it took so long to clear both state and HUD approval processes, the Section 8 New Construction program was ultimately used to make rents affordable for low income households.
Hometown Village was developed and owned by the Madsen Development Corporation, with the state playing a significant role in the financing and administration of the property. Hometown Village was designed to address the extreme shortage of affordable housing in small farming communities. Of the ten localities selected as sites for Hometown Village, the largest had a population of 2,921.
In 1983, Congress voted to halt funding for most new Section 8 project-based housing. Today’s project-based Section 8 funding continues to provide project-based rental assistance to private properties constructed or substantially rehabilitated under the original Section 8 program, or originally financed or insured under earlier programs such as the Section 236 and Section 221(d)(3) Below Market Interest Rate programs. However, each year 10,000 to 15,000 units leave the inventory when owners decide not to renew a Section 8 Housing Assistance Payment contract by “opting out,” or when the affordability period for the project expires upon mortgage maturity.
This article was written with significant help from Bill Perkins, firstname.lastname@example.org, long-time and now retired Executive Director of the Wisconsin Partnership for Housing Development, an NLIHC State Coalition Partner.
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