HUD’s Office of Multifamily Housing Programs issued Notice H 2018-02, providing guidance to owners of pre-1974 Section 202 Direct Loan properties serving the elderly that have the option of refinancing to make capital improvements and/or to reduce the interest rate. To prevent displacement of elderly residents, owners may seek Tenant Protection Vouchers (TPVs) or Senior Preservation Rental Assistance Contracts (SPRACs).
The Notice clarifies that public housing agencies (PHAs) may use TPVs as project-based vouchers (PBVs), as well as regular tenant-based vouchers. Using TPVs as PBVs will help to preserve a refinanced property as affordable. The FY17 Appropriations Act allows refinanced pre-1974 Section 202 properties to directly receive project-based assistance. The clarification in Notice H 2018-02 is needed because Notice H 2013-17 governing refinancing does not provide clear guidance regarding the PBV option.
The FY17 Appropriations Act also provided $10 million to use either for Section 202 capital advances to develop new housing for the elderly with project rental assistance contracts, and/or to provide SPRACs to preserve refinanced pre-1974 Section 202 Direct Loan projects that do not have rent subsidies. The Notice states that HUD will use up to $5 million for SPRACs for any units that cannot be covered under a PBV Housing Assistance Payment (HAP) contract. Owners must demonstrate that proposed SPRAC units could not be covered by a PBV HAP contract, and they must commit to serving very low income elderly residents upon unit turnover. Initial SPRAC rents will be based on the lesser of comparable market rents or 150% of the fair market rent. SPRACs have a 20-year term.
More information about Section 202 is on page 4-29 of NLIHC’s 2018 Advocates’ Guide at: https://bit.ly/2GiF9lp