To prevent displacement of elderly residents and to preserve and maintain the affordability of certain Section 202 Supportive Housing for the Elderly projects, Congress passed the Section 202 Supportive Housing for the Elderly Act of 2010. The act authorized HUD to provide 20-year term Senior Preservation Rental Assistance Contracts (SPRACs). An advance notice in the January 8 Federal Register explains HUD’s proposed method of allocating $16 million for SPRAC and provides a 60-day comment period. HUD anticipates that $16 million could fund up to 2,000 unassisted units.HUD oversees a portfolio of 209 Section 202 properties financed before 1974 with original interest rates of 6% or less. The mortgages on these properties, originally for 40- or 50-year terms, are reaching maturity. When the mortgages mature, the income eligibility and rent affordability restrictions expire, putting current residents and long-term affordability of the units at risk.In addition, many of these properties are in need of significant capital repair. Owners may wish to prepay the Section 202 Direct Loan in order to obtain new financing to address physical needs, leading to increased debt service costs. Because not all units in most pre-1974 Section 202 Direct Loan projects receive Section 8 Project-based Rental Assistance, unassisted elderly residents are likely to have to pay increased rent to cover the costs of the new loan. Rent increases could lead to displacement of some residents.SPRAC will provide rental assistance for some of the 18,600 previously unassisted units. Over the next decade, HUD estimates that an average of 2,000 units per year risk losing affordability due to maturing Section 202 Direct Loans. SPRAC may be provided to Section 202 Direct Loan properties with original interest rates of 6% or less if the property is refinanced to make capital repairs and the owner does not anticipate debt service savings. At the end of an initial 20-year term SPRAC contract, HUD may renew it for an additional 20 years. Priority consideration will be given to applicants that commit to using SPRAC for existing low income (80% of area median income [AMI]) and very low income (50% of AMI) residents, and for new very low income residents when units turn over. If there are not enough such applications, HUD will then consider those merely meeting the 80% AMI income eligibility cap.Click here for the Federal Register notice. For more about the Section 202 program, see page 154 of NLIHC’s 2012 Advocates’ Guide.