Elderly Housing: Project Funding and Other Factors Delay Assistance to Needy Households
Published: 2003-05-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: According to the Department of Housing and Urban Development (HUD),  the most widespread and urgent housing problem facing elderly  households is affordability—that is, finding housing that is not too  expensive relative to household income. In 2001, there were about 26  million households nationwide in which the householder or householder’s  spouse was 62 years or older. Of these elderly households, about 3.3  million were renters with very low incomes, which HUD defines as 50  percent or less of area median income. The Section 202 Supportive Housing  for the Elderly Program (the Section 202 program) provides funds to  nonprofit organizations to develop affordable rental housing exclusively  for very low income elderly households that are not receiving other forms  of housing assistance. In fiscal year 2002, the Section 202 program received  about $783 million in appropriations to fund, among other things, the  construction of over 6,000 rental units.
The Section 202 program provides two types of financial support to  nonprofit sponsors that develop and operate projects. First, project  sponsors receive a capital advance, or a grant, to cover land and  construction costs for projects of modest design that comply with HUD’s  minimum property standards. HUD determines the amounts of capital  advances using its published development cost limits, adjusted for areas  with high construction costs. HUD’s policy is to have the capital advance  cover total development costs without the need for sponsors to obtain  additional funding from other sources. Second, after the project is  completed and elderly tenants move in, the sponsor receives monthly  rental assistance payments to defray some of the operating expenses. The  combination of a debt-free project and rental assistance payments enables  project sponsors to offer units at rents that are generally equal to 30  percent of the renter’s income. Section 202 also has requirements to ensure  that sponsors make the appropriate supportive services, such as  housekeeping and transportation, available to elderly tenants.
Each year HUD announces the availability of Section 202 funds. Potential  project sponsors submit their applications for these funds to HUD’s field  offices. An application includes the description of the sponsor’s nonprofit  status, past experiences in providing housing and supportive services, and  the housing needs of the elderly in the market area to be served. Once the  applications are ranked according to criteria published in the Federal  Register, field offices make their selection recommendations to HUD  headquarters. If HUD headquarters approves these recommendations, HUD  reserves funds for these proposed projects and sends notification letters to  project sponsors. Between the time HUD sends notification letters and  approves the start of construction, the sponsors’ must complete, and HUD  must approve, design plans and other documentation. These actions are  referred to as project processing. Generally, 45 of HUD’s 81 field offices are  responsible for processing Section 202 projects.
HUD’s guidelines stipulate that HUD field offices and project sponsors  should complete project processing within 18 months of the date the  funding is awarded.   However, the field offices may grant extensions of up  to 6 months. Delays in processing hold up the distribution of funds and  contribute to the program’s annual unexpended balances. Between fiscal  years 1998 and 2002, for example, the program’s unexpended balances  increased from about $4.8 billion to $5.2 billion. Delays in processing also  hinder efforts to provide much-needed housing to very low income elderly  renter households.
This report addresses the role of the Section 202 program in responding to  the housing affordability needs of elderly renter households with very low  incomes and the program’s timeliness in processing projects for  construction and expending appropriated funds. As agreed with your  offices, our report discusses: (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 HUD’s time  guideline for project processing, and (3) the factors that keep Section 202  projects from meeting HUD’s time guideline for project processing.
To address these objectives, we analyzed data from the American Housing  Survey and other sources on the affordability of rental housing for very low  income elderly households and the levels of assistance the Section 202  program provides. In addition, we reviewed HUD program and budget  data, surveyed all HUD field offices that process Section 202 projects,  conducted site visits at selected offices, surveyed and interviewed project  sponsors and consultants experienced in working with the Section 202  program, and observed a HUD training program on processing Section 202  projects. Unless stated otherwise, our analysis focused on Section 202  projects funded between fiscal years 1998 and 2000. Lack of reliable  program data prevented us from reviewing all Section 202 projects funded  before fiscal year 1998. Appendix I provides detailed information on our  scope and methodology.
We conducted our work primarily in Washington, D.C., between May 2002  and March 2003, in accordance with generally accepted government  auditing standards.
subsections: section_title: Background
paragraphs: Elderly households occupied about 25 percent (26 million) of the  approximately 106 million housing units in the U.S. in 2001, according to  the Housing Survey. A large majority of these elderly households were  homeowners. The homeownership rate was considerably higher for elderly  households than for nonelderly households (fig.1). A smaller share of  elderly households (19 percent) rented their homes. These elderly renter  households comprised about 15 percent of all renter households  nationwide.
The Housing Act of 1959 (P.L. 86-372) established the Section 202 program,  which began as a direct loan program that provided below-market interest  rate loans to private nonprofit developers, among others, to build rental  housing for the elderly and people with disabilities. In 1990, the Cranston- Gonzalez National Affordable Housing Act (P.L. 101-625) modified Section  202 by converting it from a direct loan program into a capital advance  program. In addition, the 1990 act created Section 811, another capital  advance program, to produce housing specifically for people with  disabilities and limited Section 202 to housing for the elderly.
In its current form, Section 202 provides capital advances—effectively  grants—to private nonprofit organizations (usually referred to as sponsors  or owners) to pay for the costs of developing elderly rental housing. As  long as rents on the units remain within the program’s guidelines for at  least 40 years, the sponsor does not have to pay back the capital advance.  HUD calculates capital advances in accordance with development cost  limits that it determines annually. These limits must account for several  factors, including the costs of construction, reconstruction, or  rehabilitation of supportive housing for the elderly that meets applicable  state and local housing and building codes. HUD must, by statute, use  current data that reflect these costs for each market area. HUD’s policy is  that these limits should cover the reasonable and necessary costs of  developing a project of modest design that complies with HUD’s minimum  property standards, accessibility requirements, and project design and cost  standards. Once HUD calculates a capital advance, the amount is placed on  reserve, and the funds are made available to the sponsor.
To be eligible to receive Section 202 housing assistance, tenants must have  (1) one household member who is at least 62 years old and (2) household  income that does not exceed the program’s income limits. HUD has  established general income categories that it and other federal agencies use  to determine eligibility for many federal rental housing assistance  programs (table 1). These amounts are subject to adjustments in areas  with unusually high or low incomes or housing costs and are published.  Only very low income households—those with incomes below 50 percent  of the area’s median income—are eligible for the Section 202 program.
Very low income households in Section 202 projects generally pay 30  percent of their income for rent. Because tenants’ rent payments are not  sufficient to cover the property’s operating costs, the project sponsor  receives an operating subsidy from HUD, called a project rental assistance  contract. Under the project rental assistance contract, HUD pays the  difference between the property’s operating expenses (as approved by  HUD) and total tenant rental receipts. Section 202 rental assistance is a  project-based subsidy and, as such, is tied to rental units. The households  receiving assistance can benefit from a project-based subsidy only while  living in Section 202 units.
For fiscal year 2002, Congress appropriated about $783 million for the  Section 202 program to fund the construction of over 6,000 new units as  well as new multiyear rental assistance contracts, service coordinators,  renewals of expiring rental assistance contracts, and other activities as  authorized by Section 202. From year to year, the Section 202 program has  carried balances of unexpended appropriated dollars. According to HUD,  in fiscal year 2002, the unexpended balance for Section 202 was  approximately $5.2 billion. About 41 percent of this balance was for capital  advance funds and 59 percent for rental assistance funds. Generally, some  of the program’s unexpended funds have not yet been awarded to projects,  and others are attributable to projects that have not begun construction.  Once construction begins, funds are expended over several years during  the construction phase and during the term of the project rental assistance  contract. See appendix II for additional budgetary data for the Section 202  program.
section_title: Section 202 Is an Important Source of Housing for Elderly Households with Very Low Incomes
paragraphs: 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—that is, that pay over 30 percent  of their income for rent and do not receive housing assistance. Nationwide,  about 1.7 of the 3.3 million elderly renter households with very low  incomes have a housing affordability problem.   Section 202 insulates  tenants in housing units subsidized by the program from increases in  housing costs by limiting rents to 30 percent of household income. The  program is a significant source of new and affordable housing for very low  income elderly households: in 2001, 1.3 million such households received  government housing assistance (about 40 percent of the total), and Section  202 provided housing for roughly one-fifth of them. Even with the  program’s exclusive focus on the very low income elderly, Section 202 has  reached only a small share of eligible households. Though some other  federal programs provide more housing for the elderly, they do not focus  exclusively on these renter households.
subsections: section_title: Section 202 Targets Very Low Income Elderly Households and Makes Supportive Services Available
paragraphs: Congress specifically intended the Section 202 program to serve very low  income elderly households and to expand the supply of affordable housing  that can accommodate the special needs of this group.   HUD takes into  account the level of need for the kind of housing Section 202 provides when  allocating program funds to the field offices. Thus, the criteria for  allocating funds to the 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.
HUD’s allocation formula takes into account the amount of rent households  pay in relation to their income. According to the American Housing Survey,  in 2001 about 1.7 million households paid over 30 percent of their income  for rent. HUD classified the “rent burden” these households face as either  “moderate”—between 31 and 50 percent of household income—or  “severe”—more than 50 percent of household income. As figure 2  illustrates, about 35 percent (over 1 million) of all elderly renter  households with very low incomes had severe rent burdens, and about 15  percent (about 500,000) had moderate rent burdens. For detailed data on  housing needs of these households, including data for metropolitan and  nonmetropolitan areas, see appendix III.
Since Section 202 provides projects with rental assistance payments that  cover a portion of the rent for each unit, the tenants themselves pay rents  that equal a percentage of their household incomes—generally 30 percent.  This percentage remains constant, so the amount of rent tenants pay  increases only when household income rises, protecting them from rent  increases that might be imposed in the private housing market when, for  example, market conditions change. In contrast, low income elderly renter  households that do not receive this type of assistance—especially those  with very low incomes—are vulnerable to high rent burdens and increases  in housing costs. Most of these households have few or no financial  resources, such as cash savings and other investments, and rely primarily  on fixed incomes that may not increase at the same rate as housing costs.
Section 202 serves another important function, potentially allowing  households to live independently longer by offering tenants a range of  services that support independent living—for example, meal services,  housekeeping, personal assistance, and transportation. HUD ensures that  sponsors have the managerial capacity to assess residents’ needs,  coordinate the provision of supportive services, and seek new sources of  assistance to ensure long-term support. HUD pays a small portion of the  costs of providing these services through its rental assistance payments.
section_title: Section 202 Provides an Estimated One-fifth of All Government-subsidized Housing for Very Low Income Elderly Renters
paragraphs: Section 202 is an important source of housing for elderly households with  very low incomes. Between 1998 and 2001, Section 202 approved the  construction of from 3,890 to 7,350 assisted units annually, for an average  of about 5,690 units. According to the American Housing Survey, in 2001  about 1.3 million, or 40 percent, of elderly renter households with very low  incomes received some form of rental assistance in 2001 from a  government housing program, including Section 202, public housing, or  housing vouchers (fig. 2). According to our analysis of HUD program data,  about 260,000 Section 202 units with rental assistance contracts (assisted  units) generally served very low income elderly households through 2001.  Taken together, these two sources of data suggest that around one-fifth of the 1.3 million assisted households identified in the American Housing  Survey received assistance from Section 202.
Although Section 202 is an important source of affordable elderly housing,  the program reached a relatively small fraction of very low income elderly  renter households. Between 1985 and 2001 the number of units assisted  under the Section 202 program grew by about 4 percent annually, while the  number of very low income elderly renter households declined by almost 1  percent annually. Yet at any given point in this period, Section 202 had  reached no more than about 8 percent of these households that were  eligible for assistance under the program (fig. 3). Also, during this period,  many of these elderly renter households with very low incomes—ranging  from about 45 to 50 percent—had housing affordability problems.
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. For  example, the Low-Income Housing Tax Credit Program, the largest of all  current production programs, subsidizes the construction of about 86,000  units annually. However, according to one source, only around 13,200 of  these units are intended for the elderly—and, unlike Section 202, not all of  these units serve very low income elderly renter households. In addition,  these programs also do not have specific requirements ensuring that  supportive services be available to elderly tenants. Appendix IV provides  additional information on other federal housing programs.
section_title: Section 202 Projects Reviewed Generally Did Not Meet Guidelines for Timeliness
paragraphs: According to HUD policy, Section 202 projects should complete project  processing and be approved to start construction within 18 months after  they are funded. Overall, 73 percent of Section 202 projects funded  between fiscal years 1998 and 2000 did not meet this processing time  guideline. However, about 55 percent of the projects were approved within  24 months. Projects located in metropolitan areas were about twice as  likely as projects in nonmetropolitan areas to take more than 18 months to  be approved. The percentage of projects approved within the specified  time frame differed widely across HUD’s field offices, with field offices  located in the northeast and west approving the lowest percentages. As  well as taking longer to complete than other projects—thus delaying  benefits to very low income elderly tenants—projects that were not  approved for construction after the 18-month time frame accounted for 14  percent of the Section 202 program’s balance of unexpended  appropriations.
subsections: section_title: HUD Expects Projects to Be Approved to Start Construction within 18 Months
paragraphs: Once HUD has made a funding award for a Section 202 project, HUD field  office staff and project sponsors must complete various tasks, meetings,  and paperwork before construction can commence (fig. 4). In this report,  we refer to the tasks that take place between (1) the date when HUD sends  a funding award letter to the sponsor and (2) the date that HUD authorizes  the sponsor both to begin construction and to start drawing down the  capital advance amount (initial closing) as project processing. The  duration of the project processing period depends, in part, on project  sponsors’ timeliness in submitting the required documentation to HUD’s  field office reviewers. For example, sponsors must create owner  corporations, hire consultants, obtain local permits and zoning approval,  and design architectural and cost plans, among other things. HUD field  offices must review all documentation before projects can be approved for  construction.
As figure 4 illustrates, HUD’s current time guideline for project processing  is 18 months. Individual field offices have the discretion to extend  processing for up to 6 more months without approval from HUD  headquarters, but all extensions beyond those additional 6 months (that is,  24 months after the funding award) require approval from headquarters.  After construction is authorized to begin, HUD gradually expends capital  advance funds to cover development costs incurred by the sponsor. When  construction is completed, HUD approves the final costs, and sponsors can  begin leasing to eligible tenants. Over time, sponsors draw down funds  from the reserved rental assistance amounts to support operating costs.
To help assure that field office staff and project sponsors could complete  project processing requirements within the 18-month time guideline, HUD  adopted changes in 1996 that were intended to streamline procedures.  One of the key changes included requiring field office staff to accept  sponsor-provided certifications of architectural plans, cost estimates, and  land appraisals. Previously, field office staff performed detailed technical  reviews of these items. According to HUD policy, these streamlined  procedures should have been used to process all projects in our analysis,  which were funded between fiscal years 1998 and 2000.
section_title: HUD Took Longer Than 18 Months to Approve Most Projects for Construction
paragraphs: Most Section 202 projects that received funding awards did not receive  approval to begin construction within the 18-month guideline set out by  HUD. Altogether, 73 percent of projects funded from fiscal years 1998  through 2000 did not meet the 18-month guideline. These projects  accounted for 79 percent of the nearly $1.9 billion in funding awarded to  projects during this period. The percentage of projects exceeding the  guideline remained relatively stable over the years at around 72 percent  (fiscal year 1998) to 75 percent (fiscal year 2000). During this period, the  projects located in metropolitan areas (72 percent of all projects) were  about twice as likely as projects in nonmetropolitan areas to exceed the 18- month guideline (see app. V for more detail).
HUD field offices may grant up to 6-month extensions after the 18-month  guideline for projects needing more time to gain approval to start  construction, and many projects were approved within that 6-month time  frame. HUD approved 55 percent of the projects funded from fiscal years  1998 through 2000 for construction within 24 months of the funding  award—27 percent within 18 months and 28 percent within 19 to 24  months. The remaining 45 percent of projects took more than 24 months to  be approved. In addition, metropolitan projects were about twice as likely  as nonmetropolitan projects to take more than 24 months to gain approval  to start construction.
section_title: Field Offices’ Performance in Meeting the Time Guideline Varied
paragraphs: We looked at the performance of the 45 individual HUD field offices that  process Section 202 projects and found that they had varying degrees of  success in meeting the 18-month guideline. We evaluated their performance  by estimating the percentage of projects approved for construction (project  approval rate) within 18 months for each field office. Among these offices,  the median project approval rate for construction within 18 months was 22  percent (table 2), but field offices’ performance varied widely. Eight field  offices had no projects that met the 18-month guideline, while more than 90  percent of projects at one office did (see app. V for a breakdown of  approval rates by field office). Field offices’ performance varied by region,  with those located in the northeast and west being least likely to approve  projects within 18 months of the funding award. Table 2 also shows the rate  of projects approved within 24 months.
section_title: Delayed Projects Affect the Program’s Production Times and Expenditures
paragraphs: Meeting processing time guidelines is important because most of the delays  in total production time—that is, the time between funding award and  construction completion—stem from the project processing phase. When  we compared the average total production times for completed projects  that did not meet HUD’s 18-month processing guideline and those that did,  the delayed projects took 11 months longer than other projects to proceed  from funding award to construction completion (fig. 5). Since the average  time taken for the construction phase was very similar for all projects,  most of the 11-month difference in total production time was attributable  to the extra 10 months that delayed projects took to complete the  processing phase.
Delayed processing of Section 202 projects also affected the Section 202  program’s overall balances of unexpended appropriations. At the end of  fiscal year 2002, for example, HUD had a total of $5.2 billion in unexpended  Section 202 funds (fig. 6). A relatively small part of these unexpended  funds—about 14 percent—was attributable to projects that had not yet  been approved to start construction, even though they had exceeded HUD’s  18-month processing time guideline. Consequently, none of the funds  reserved for these projects had been expended. By contrast, the remaining  86 percent of unexpended funds were associated with projects for which  HUD was in the process of expending funds for construction or rental  assistance. For example, almost half of the unexpended balances—about  48 percent—resulted from projects that had already been completed but  were still drawing down their rental assistance funds as intended under the  multiyear project rental assistance contract between HUD and the project  sponsor. (For additional details on unexpended fund balances, see app. II.)
section_title: Various Factors Can Impede the Timely Processing of Projects
paragraphs: Our review of projects funded from fiscal years 1998 through 2000 shows  that several factors can prevent Section 202 projects from meeting the 18- month processing time guideline, including: issues related to capital  advances, field office practices and the training and guidance that HUD has  provided to field office staff, and HUD’s program administration and  oversight. First, despite HUD’s intent, capital advances were not always  sufficient to meet development costs.   According to some sponsors and  consultants, this factor often led sponsors to seek funding from other  sources, including other HUD programs, which takes time. Second, some  field offices, sponsors, and consultants reported that some field office staff  had not fully implemented HUD’s streamlined processing procedures and  that HUD had offered only limited training and guidance to field office staff  on processing policies and procedures. Third, additional time was needed  for cases in which HUD headquarters responded to project sponsors’  requests for additional funds or processing time. Fourth, limitations in  HUD’s project monitoring system impeded its ability to oversee project  processing. Finally, factors external to HUD, such as sponsors’ level of  development experience and requirements established by local  governments, also hindered processing.
subsections: section_title: Insufficient Capital Advances Caused Some Sponsors to Seek Other Funding
paragraphs: 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. Most field offices, and every sponsor and  consultant that we surveyed, reported that insufficient capital advances  negatively affected project processing time, and a substantial majority of  respondents indicated that this problem occurred frequently (fig. 7). Many  respondents also reported that securing secondary financing to supplement  the capital advance amount often added to processing time. According to  some sponsors and consultants, the capital advance amounts set by HUD  were often inadequate to cover land, labor, and construction costs as well  as fees imposed by local government. As a result, sponsors had to seek  secondary financing from other federal, state, and local resources— including other HUD programs—or redesign projects to cut costs, or both.  Some sponsors and consultants said that the search for secondary  financing could add months to the construction approval process because  funding application and award cycles for other programs varied and  because sponsors had to meet HUD’s documentation requirements for  every additional funding source before the agency could authorize  construction.
HUD has recognized that the development cost limits it uses to calculate  capital advances have sometimes been inadequate and that, as a result, a  number of sponsors have had to seek additional funding to construct their  projects. According to a HUD official, the agency is currently considering  initiating a study to determine how to calculate capital advances that can  cover project development costs.
Our survey and program data showed that field offices that reported  problems with insufficient capital advances and sponsors securing  secondary financing had a lower percentage of projects that met the 18- month time guideline than other offices (table 3). The median percentage  of projects meeting the 18-month guideline was much lower for field offices  that reported these problems than those that did not. In addition, field  offices in the northeast and west—the regions with the lowest percentage  of projects meeting the processing time guideline (see table 2 above)— were more likely than those in the south and midwest to report having  problems with these factors.
section_title: Varying Field Office Practices and Inadequate Staff Training and Guidance Affected Timely Processing
paragraphs: Differences in the procedures field offices use to approve projects for  construction and the extent of staff training and experience affected  project processing time. For example, most consultants and sponsors in  our survey responded that the unwillingness of field office staff to  implement policy changes that HUD had adopted to streamline processing  caused delays, as did insufficient training for and inexperience of field  office staff (fig. 8). About 40 percent of them also reported that these  problems occurred frequently. In addition, some consultants and sponsors  whom we interviewed told us that some field offices continued to conduct  much more detailed and time-consuming technical reviews of project plans  than HUD’s current policies require. These sponsors and consultants said  that field staff departing from program guidelines caused confusion for  sponsors about the type of information HUD required and delayed the  process of obtaining HUD’s approval to begin construction. A majority of  HUD field office representatives also reported that a lack of staff training  and experience can have a negative effect on processing time. However,  HUD field office staff regarded these problems, as well as staff  unwillingness to implement policy changes, as infrequent problems. HUD  officials at headquarters acknowledged that some field staff were  performing technical reviews contrary to program guidelines, but the  officials did not know how many staff were doing so.
HUD has provided limited guidance for field office staff on processing  policies and procedures, which would ensure that all staff are up to date on  the most current guidelines and requirements. In 1999, HUD headquarters  issued a memorandum that reminded field office staff to process projects  in accordance with streamlined procedures that had been adopted in 1996,  such as replacing detailed technical review of project plans by field office  staff with sponsor-provided certifications. Yet at the time of our review,  most field office staff had not received any formal training on Section 202  project processing. According to HUD, in 2002, the agency required  representatives from each field office to attend the first formal training on  project processing for field office staff since at least 1992. Although HUD  headquarters expected those who attended to relay what they had learned  to other staff members in their own offices, our survey showed that by  November 2002 no on-site training had occurred at about a quarter of the  field offices. Also, only two field offices (5 percent) reported that training  was relayed in a formal setting.
We also found that HUD’s field office staff was relying on out-of-date  program handbooks that did not reflect the streamlined processing  procedures. Although HUD stated that the agency intended to issue  revised handbooks in order to ensure that all field offices follow current  procedures, it had not yet done so at the time of our review. Based on  written comments in our survey, some field office staff felt that an updated  handbook would aid in the timely processing of Section 202 projects.
section_title: Administrative and Oversight Weaknesses at HUD Headquarters Contributed to Delays
paragraphs: The time that HUD headquarters took to make certain administrative  decisions also added to the time taken to process Section 202 projects.  HUD headquarters must approve all requests for additional time to  complete processing beyond 24 months after funding award and for  additional capital advance funds. A HUD official noted that projects must  already have exceeded the 18-month time guideline, and the discretionary  6-month extension, before HUD headquarters would be called on to  approve a request for a time extension beyond 24 months. However, most  of the field office representatives and project sponsors and consultants in  our survey agreed that the time HUD headquarters took to make these  decisions further prolonged processing time, with many respondents   reporting that this issue was a frequent problem (fig. 9).
Further, HUD’s project monitoring system was not as effective as it could  have been and may have impeded HUD’s oversight of project processing.  HUD officials stated that, to monitor project processing, headquarters has  periodically used its Development Application Processing (DAP) system to  identify projects that exceeded the 18-month processing time guideline. In  addition, the officials stated that headquarters contacted field offices on a quarterly basis to discuss the status of these delayed projects.  Nevertheless, HUD headquarters officials have acknowledged that there  are data inaccuracies in the DAP system, and the agency has instituted  efforts to improve the system’s reliability in identifying delayed projects.  Furthermore, according to HUD, the DAP system does not collect data that  would allow both headquarters and field office staff to follow a project  through every stage of development and, as a result, many field offices  maintain their own tracking systems to monitor projects through these  stages. The lack of reliable, centralized data on the processing of Section  202 projects has limited HUD headquarters’ ability to oversee projects’  status, determine problematic processing stages, and identify field offices  that might need additional assistance. HUD officials stated that enhancing  the DAP system is a priority, but that a lack of funding has hindered such  efforts.
section_title: Issues External to HUD Caused Some Delays
paragraphs: Finally, other factors outside of HUD’s direct control kept some projects  from meeting time guidelines. Ninety-five percent of field office  representatives and 90 percent of sponsors and consultants surveyed  reported that project processing time was negatively affected when project  sponsors were inexperienced. Nearly 60 percent of field offices, and almost  40 percent of sponsors and consultants, indicated that this problem  occurred frequently. Local government requirements also negatively  affected project processing, according to about 60 percent of field offices  and about 85 percent of sponsors and consultants. About 35 percent of field  offices and about 60 percent of sponsors and consultants reported that  these requirements were frequently a problem. Also about 70 percent of  field offices, sponsors, and consultants reported that, specifically, the local  zoning process had a negative effect on project processing time, with about  40 percent of field offices and about 50 percent of sponsors and consultants  indicating that this problem was frequent.
Most field offices, sponsors, and consultants reported that other factors,  such as community opposition and environmental issues, affected  processing times but were not frequent problems for Section 202 projects.  Although about 50 percent of field offices, and about 60 percent of  sponsors and consultants, reported that community opposition had a  negative effect on project processing time when it occurred, less than 10  percent of field offices, and about 30 percent of sponsors and consultants,  reported such opposition to be a frequent problem. Also, about 50 percent  of field offices, sponsors, and consultants indicated that environmental  problems negatively affect processing when they occur, but only about 20  percent of them considered environmental problems to occur frequently.  Appendixes VI and VII provides additional details on the results of our  survey of HUD field office staff, sponsors, and consultants.
section_title: Conclusions
paragraphs: 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. Considering the urgent housing needs of the  Section 202 program’s target population, ensuring that its projects are  completed as soon as possible is critical. Delays in timely Section 202  processing can prolong project completion, on average, by nearly a year  and result in higher balances of unexpended funds. Awarding capital  advances that are sufficient to cover project development costs can  alleviate delays by averting the need for sponsors to seek secondary  financing or request approval from HUD headquarters for additional  funding. While sufficient capital advance funding for projects, absent  additional appropriations, can result in fewer units funded annually, it can  also result in the prompt delivery of housing assistance to needy  households and in the reduction of unexpended balances attributable to  delayed projects. In addition, issuing an updated program handbook and  providing adequate formal training can help in timely project processing by  ensuring that staff are accountable for applying and interpreting HUD  policies and procedures in a consistent manner. Finally, HUD’s project  monitoring system, in its current form, is not as effective as it can be and  may hinder HUD’s oversight. Maintaining reliable, centralized data on the  processing of Section 202 projects is essential to overseeing projects’ status  as well as determining problematic processing stages.
section_title: Recommendations
paragraphs: 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. In addition, to improve the performance of HUD field office and  headquarters staff in processing projects in a timely manner, we  recommend that HUD  provide regular training to ensure that all field office staff are  knowledgeable of and held accountable for following current  processing procedures,  update its handbook to reflect current processing procedures, and  improve the accuracy and completeness of information entered in the  DAP system by field office staff and expand the system’s capabilities to  track key project processing stages.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to HUD for its review and comment. In a  letter from the Assistant Secretary for Housing (see app. VIII), HUD agreed  with the report’s conclusions, stating that the report demonstrated an  excellent understanding of the importance of the Section 202 program in  delivering affordable housing to very low income elderly households. HUD  also concurred with the recommendations and provided information on  how it intends to implement them. Regarding our recommendations  concerning HUD’s capital advance formula, the agency agreed that, in some  locations, capital advances may be insufficient to cover project  development costs and that delays can result when sponsors must seek  additional funds from other sources. However, HUD also noted that  increasing the per-unit development cost limits would result in fewer units  constructed. Our draft report reached the same conclusion, but also stated  that sufficient capital advances yield important benefits, such as the  prompt delivery of housing assistance to needy households.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to interested  members of Congress and congressional committees. We also will send  copies to the HUD Secretary and make copies available to others upon  request. In addition, the report will be available at no charge on the GAO  Web site at http://www.gao.gov.
Please contact me at (202) 512-8678 or Paul Schmidt at (312) 220-7681, if  you or your staff have any questions concerning this report. Key  contributors to this report were Susan Campbell, Emily Chalmers,  Mark Egger, Daniel Garcia-Diaz, Curtis Groves, Ron La Due Lake,  Marc Molino, Melissa Roye, William Sparling, and Julianne Stephens.
section_title: Scope and Methodology
paragraphs: 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.
To determine the role of the Section 202 program in meeting housing needs  of elderly households, we analyzed household income and rental housing  cost data from the American Housing Survey. The Bureau of the Census  performs the survey for HUD every odd-numbered year. Appendix III  provides a detailed discussion of the American Housing Survey. We also  reviewed studies that involved the housing needs of elderly households.
To determine the extent to which HUD’s Section 202 and other housing  programs serve elderly households, we used data from HUD’s Real Estate  Management System (REMS) as of the beginning of calendar year 2003.  Specifically, we analyzed information on the overall number of properties  and their associated units under Section 202 and other housing programs  that serve the needs of elderly households. Although we did not  independently verify the accuracy of the program data, we did perform  internal checks to determine (1) the extent to which the data fields were  populated, (2) the reasonableness of the values contained in the data fields,  and (3) if any aberrations existed in the data we used. We concluded that  the REMS data was reliable for purposes of this report. We also reviewed  relevant regulations, policies, and procedures for Section 202 and other  active federal programs.
To explore the issue of timeliness in processing and some of the factors  that may impede timely processing, we reviewed HUD program and budget  data from HUD’s Development Application Processing (DAP) System as of  the end of calendar year 2002. Because HUD headquarters officials told us  that program data from this system was not reliable for Section 202  projects funded before fiscal year 1998, we limited our review of Section  202 projects to those funded from fiscal years 1998 to 2000. While we did  not independently verify the accuracy of the program data from this  system, we periodically discussed the accuracy and interpretation of the  data we used with HUD officials. In addition, we compared file records for  projects funded since fiscal year 1998 with the data entered in the system  for those projects by three HUD field offices that process Section 202  projects and generally found the data to be accurate. Also, we performed  internal checks to determine the extent to which the data fields in DAP  were populated and the reasonableness of the values contained in these  fields. In cases where the data were not reasonable or questions arose, we  contacted a HUD official to identify and correct errors. To determine the  reasons why HUD awarded time extensions for certain projects listed in  the system, we compiled and analyzed HUD’s published notices of these  extensions in the Federal Register.
We also used a questionnaire to survey of all HUD field offices that process  Section 202 projects. About 98 percent (44 out of 45) of the field offices that  process Section 202 projects completed the questionnaire. We also  conducted site visits at the Greensboro and Richmond field offices to  obtain field office staff perceptions on factors that may impede timely  processing. In addition, to gain a fuller perspective on these issues, we  surveyed sponsors and consultants, identified by HUD and others, that  were experienced in working with Section 202 projects. Collectively, these  sponsors and consultants worked on approximately 260 projects since  fiscal year 1998 representing approximately 40 percent of Section 202 units  funded. In addition, we observed a HUD training session on processing  Section 202 projects in August 2002.
We conducted our work primarily in Washington, D.C., between May 2002  and March 2003, in accordance with generally accepted government  auditing standards.
section_title: Budget Information for the Section 202 Program
paragraphs: This appendix provides information on the Housing for Special Populations  appropriations account, which provides funding for the Section 202 and  Section 811 programs. In fiscal year 2002, Congress appropriated over $1  billion for the Housing for Special Populations account—of which $783  million was earmarked for the Section 202 program. From year to year, the  Section 202 program carries significant balances of unexpended  appropriated funds. In fiscal year 2002, the unexpended balance for the  Section 202 program was $5.2 billion.
subsections: section_title: Section 202 Appropriations
paragraphs: In fiscal year 2002, Congress appropriated over $1 billion for the Housing  for Special Populations appropriations account, which provides funding for  both the Section 202 Supportive Housing for the Elderly and the Section  811 Supportive Housing for Persons with Disabilities Programs. Since  fiscal year 1998, a total of $4.6 billion in appropriations were made  available for both programs (table 4). In fiscal year 2002, the lion’s share of  the appropriations for the Housing for Special Populations account, about  $783 million or 76 percent, went to the Section 202 program to fund, among  other things, capital advances and project rental assistance contracts  (PRACs) for new projects and PRAC renewals for existing projects. Since  fiscal year 1998, about $3.6 billion have been appropriated for the Section  202 program. Appropriations for the Section 202 program in nominal  dollars (that is, unadjusted for inflation) have increased since fiscal year  1998 at an average annual rate of about 5 percent. However, appropriations  for Section 202 in constant 1998 dollars have increased by an average rate  of about 2 percent annually.
section_title: Section 202 Unexpended Balances
paragraphs: The Section 202 program carries significant balances of unexpended  appropriations from year to year. Unexpended balances include the  cumulative amount of budget authority that has not been spent (outlayed)  and may consist of either obligated or unobligated funds. Some of the  unexpended balances are expected to be carried over annually for various  programmatic reasons, including the time required for project sponsors to  prepare their application for program funds and finalize plans as well as the  time required for HUD’s field offices to review and process them. However,  some unexpended funds can also result from problems in the timeliness of  project processing. Between fiscal years 1998 and 2002, the program’s  unexpended balance increased from about $4.8 billion to $5.2 billion. In  nominal dollars, this balance has increased by an average annual rate of  about 2 percent between fiscal years 1998 and 2002. In constant 1998  dollars, unexpended balances for Section 202 actually decreased by an  average rate of less than 1 percent annually. Table 5 shows the annual  balances of unexpended appropriations for the Section 202 program since  fiscal year 1998.
As table 5 shows, unexpended PRAC funds account for a large share of the  total unexpended balances for the Section 202 program as well as for the  overall Housing for Special Populations account. Before fiscal year 1997,  HUD provided individual projects with PRAC amounts that covered rental  assistance payments generally for 20 years. Since fiscal year 1997, HUD  provided PRAC amounts that covered rental assistance payments for 5  years. In both cases, PRAC funds are obligated, but remain unexpended, for  multiple years after project occupancy—unlike capital advance funds,  which are fully expended by project completion. With the reduction of the  PRAC term from 20 to 5 years, HUD expects PRAC funds to comprise a  declining share of the overall unexpended balance for the Section 202  program.
section_title: Data Issues Concerning the American Housing Survey
paragraphs: In reporting on the housing affordability problems of elderly renter  households with very low incomes, this report relies on data from the 2001  American Housing Survey (AHS). We assessed the reliability of the data by  reviewing AHS documentation, performing electronic testing of the data  files to check for completeness of data files, and replicating published  tables. We determined that the data are reliable enough for the purposes of  this report.
AHS is a probability sample of about 55,700 housing units interviewed  between August and November 2001. Because this sample is based on  random selections, the specific sample selected is only one of a large  number of samples that might have been drawn. Since each sample could  have provided different estimates, we express our confidence in the  precision of this sample’s results as 95 percent confidence intervals (for  example, +7 percentage points). This is the interval that would contain the  actual population value for 95 percent of the samples that could have been  drawn. As a result, we are 95 percent confident that each of the confidence  intervals in this report will include the true values in the study population.     In the following section, we provide 95 percent confidence intervals for the  estimates used in this report. We calculated these confidence intervals by  adding and subtracting the sampling error for each estimate to or from the  estimate itself.
Estimates from the survey are also subject to certain nonsampling errors,  such as incomplete data and wrong answers. According to the survey  documentation, errors due to incomplete data and wrong answers can be  greater than sampling errors for some survey questions. Of the survey  questions we rely upon for our analysis (age, tenure, income, housing costs,  rent subsidies, and location), the survey question on income was subject to  a high level of inconsistency in survey responses.   Also relevant to this  report, AHS is known to underreport income when compared to the  Current Population Survey and other independent sources. However, our  analysis concentrates on elderly renters with very low income, for which  this should be less of an issue. According to a Census study based on  relatively older data (from the early 1980s), much of the underreporting of  income in the survey seems to derive from interest and dividend income as  well as wages and salary. Consequently, the underreporting of income may  be less of a problem among very low income elderly households who do  not tend to rely on these sources of income. Generally, HUD’s own internal  analysis suggests that very low income renters in AHS tend to report their  income more accurately than other groups. For example, in an unpublished  analysis, HUD found that the income reported by very low income renters  in the 1989 AHS was about 2 percent greater than the income reported in  the 1990 Decennial Census. Nonetheless, current information on the extent  of underreporting, especially among elderly renter households with very  low incomes, is not available.
The survey also collects data on the type of government housing assistance  the household receives. For example, it asks if the household lives in a unit  owned by a public housing authority or receives vouchers. However,  households surveyed may misreport their specific programs. As a result,  the survey does not provide sufficient and reliable detail on the specific  housing assistance program that is serving the household. According to the  survey documentation, units requiring income verification are usually  subsidized.
Table 6 shows the distribution of units that are occupied by homeowners  and renters in 2001. A great majority of elderly households were  homeowners. About 21 million (± 460,000) of 26 million (± 498,000) elderly  households owned their homes. Elderly renter households consisted of  about 5 million (± 242,000) households.
Table 7 provides details on the estimated number of households who  owned or rented their homes by income category (very low income and low  income) in 2001. About 3.7 million (± 208,000) elderly renter households  have very low incomes. About 4.3 million (± 223,000) elderly renter  households have low incomes. These figures include households that do  not pay cash rent. Based on the data from tables 6 and 7, over four-fifths (85  ± 2 percent) of elderly renter households have low incomes and  approximately three-quarters (73 ± 3 percent) have very low incomes.
Table 8 shows the number of units occupied by elderly renter households  with very low incomes by subsidy status and rent burden. About 1.7 million  (± 141,000) elderly renter households with very low incomes have  moderate or severe rent burdens. The majority of these actually have  severe rent burdens. About 1.3 million (± 125,000) renter households with  very low incomes receive some form of government assistance.  Households that do not pay cash rent appear in the tables above in this  appendix for informational purposes. However, since they do not pay cash  rents, we exclude these households from our estimates of rent burdens in  this report.
Table 9 looks at unassisted elderly renter households with rent burdens. Of  the 1.7 million (± 141,000) households with rent burdens, about 60 percent  are located either in the northeast or the south regions. The northeast and  south contained about 542,000 (± 81,000) and 477,000 (± 76,000),  respectively, of the nation’s rent burdened elderly renter households with  very low incomes.
The following four tables show the number and proportion of units  occupied by elderly renter households with very low incomes by subsidy  status and rent burden in metropolitan areas (tables 10 and 11) and  nonmetropolitan areas (tables 12 and 13). About 1.4 million (± 131,000)  elderly renter households with very low incomes in metropolitan areas and  234,000 (± 53,000) in nonmetropolitan areas have moderate or severe rent  burden (tables 10 and 12). The proportion of households with rent burdens  was generally higher in metropolitan areas than in nonmetropolitan areas  (tables 11 and 13). In addition, households in nonmetropolitan areas were  less likely than those in metropolitan areas to have severe rent burdens.
Excluded from these estimates are the housing affordability needs of very  low income homeowners.  Although homeowners can experience housing  affordability problems, homeowners and renters face different challenges  in affording their homes. Unlike renters, homeowners have equity in their  homes—about 68 percent (± 1 percent) of elderly homeowners own their  homes free and clear. In addition, elderly homeowners face certain  challenges in maintaining their housing, such as paying for property  maintenance and accessibility modification. As a result, rental programs,  such as Section 202, do not directly address the problems homeowners  experience.
section_title: Federal Housing Programs and the Elderly
paragraphs: The federal government has multiple housing programs that subsidize the  development of rental properties.  Many of these programs also subsidize  the development of properties that are intended to serve primarily elderly  households.  Unlike Section 202, most federal housing programs do not  target a single type of household.  Rather, they serve many different types  of households, such as families with children, people with disabilities, and  the elderly, and they produce units with rents that are affordable to  households at different income levels.
subsections: section_title: Housing Production Programs That Develop Elderly Housing
paragraphs: In addition to Section 202, the federal government has multiple active  housing production programs that continue to expand the number of  assisted households by subsidizing the development of new rental housing.   These federal programs, described below, can also subsidize individual  rental properties that are intended primarily to serve elderly households.
subsections: section_title: Active Housing Production Programs
paragraphs: Low-Income Housing Tax Credits and Tax-Exempt Multifamily  Housing Bonds provide federal tax incentives for private investment  and are often used in conjunction with other federal and state subsidies  in the production of new and rehabilitated rental housing.
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.
Section 515/521 Rural Rental Assistance provides below-market loans  and rental assistance to support the development of rental housing in  rural areas.
Multifamily mortgage insurance programs provide mortgage  insurance for the development of rental housing without federally- funded interest rate subsidies or project-based rental assistance.
The Housing Choice Voucher program (housing vouchers) is another  important source of assistance for elderly households.  The program  supplements tenants’ rental payments in privately owned, moderately  priced apartments chosen by the tenants.  Currently, about 260,000 of the  approximately 1.5 million voucher households are elderly.  However, unlike  the Section 202 or other programs discussed, housing vouchers is not a  production program and does not directly subsidize the development of  new or rehabilitated housing.
In addition to the active housing production programs, the federal  government also has programs that no longer subsidize the development of  rental properties but, in some cases, continue to provide operating  subsidies, rental assistance payments, or other subsidies for rental  properties that were developed under these programs in the past.  Over the  years, these inactive housing production programs, described in the next  section, subsidized many rental properties that were intended primarily to  serve elderly households.
section_title: Inactive Housing Production Programs
paragraphs: Public Housing financed the development and operation of properties  managed and owned by local housing authorities.
Section 236 and Section 221(d)(3) Below Market Interest Rate  provided mortgage insurance for the development of rental housing  with federally funded interest rate subsidies.
Section 8 project-based rental assistance programs provided project- based rental assistance to properties that were financed with  Department of Housing and Urban Development (HUD) mortgage  insurance, tax exempt bonds, and below-market interest rate loans.
section_title: Target Households
paragraphs: Unlike Section 202, most active federal housing programs do not target a  single type of household.  Rather, they serve many different types of  households, such as families with children, persons with disabilities, and  the elderly.  Furthermore, most federal housing programs target  households at different income levels, not just households with very low  incomes (50 percent or less of area media income) as does Section 202.   Table 14 provides information on targeted household types and rent levels  of the active housing production and insurance programs.
Low-Income Housing Tax Credits (tax credits), Tax-Exempt Multifamily  Housing Bonds (tax-exempt bonds), and HOME set aside some of their  units for very low-income households and can provide housing for the  elderly (table 14).  Congress has granted considerable latitude to state and  local agencies that administer these programs in deciding who will be served with federal housing resources.  In addition, mortgage insurance  programs for multifamily rental properties under HUD’s Federal Housing  Administration (FHA) currently do not have any specific age or income  requirements for tenants.  However, since rents for newly developed FHA- insured properties are often set at market levels, these programs may not  be able to reach very low-income households without the use of other  subsidies.
section_title: Annual Housing Production Levels
paragraphs: Although Section 202’s annual production levels are small when compared  to the total production levels of other housing programs, such as tax  credits—the largest of all current production programs—Section 202,  nonetheless, is a relatively important source of subsidized rental housing  units for the elderly.   Table 15 presents the volume of new production by  rental housing production program.  The volume of housing production  illustrates individual program activity but, due to limitations in the data, it  is not possible to accurately estimate what percentage of elderly units  produced through federal housing programs is from Section 202 because  units produced through these programs can overlap with each other.  For  example, HOME funding can be used in conjunction with programs such as  tax credits, tax-exempt bonds, or HUD mortgage insurance programs to  finance new production.  As a result, adding units together for any of the  programs in table 15 will likely result in double counting.
section_title: Section 202 Program Data
paragraphs: This appendix provides additional information on the extent to which  Section 202 projects meet the Department of Housing and Urban  Development’s (HUD’s) 18-month processing time guideline. In particular,  we present data on projects’ status in meeting the guideline, HUD field  offices’ rate of success in meeting the guideline, and the factors cited by  HUD in its approvals of processing time extensions. Table 16 profiles the  projects funded in fiscal years 1998 through 2000 according to the projects’  status in gaining HUD’s approval to start construction.
Table 17 compares the status of projects located in metropolitan and  nonmetropolitan areas in gaining approval to start construction within  either 18 or 24 months. In both cases, metropolitan projects were about  twice as likely as projects in nonmetropolitan areas to take more than  either 18 or 24 months to be approved. That is, the odds of a metropolitan  project taking more than 18 or 24 months to be approved for construction  were about twice the odds of a nonmetropolitan project taking more than  18 or 24 months, respectively.
Tables 18, 19, and 20 present the rate of project approvals within either 18  or 24 months for all field offices that have responsibility for processing  Section 202 projects. Table 18 shows the results for all projects, table 19  shows the results only for projects located in metropolitan areas, and table  20 shows the results for projects located in nonmetropolitan areas. The  rate of project approvals for each field office is the percentage of projects,  funded between fiscal years 1998 and 2000, that HUD approved for  construction within the 18-month processing time guideline or within the  24-month period after the funding award—that is, 18 months plus the 6- month discretionary extension.
Table 21 shows the average number of months that projects took to  complete various stages of the development process between Congress’s  appropriation of funds for the Section 202 program and completion of  construction. For projects funded between fiscal years 1998 and 2000 that  had been approved to start construction at the time of our analysis, the  average time taken from appropriation to approval to start construction  was 36 months. Projects that had also completed construction took  another 11 months, on average, from beginning to end of construction.  From appropriation to end of construction, the average time taken was 47  months or almost 4 years.
Table 22 summarizes the factors that HUD cited in extending the  processing time for projects beyond 24 months after the funding award.  This table draws on extension waivers approved between January 1998 and  June 2002 for projects funded between fiscal years 1998 and 2000, showing  the number and percentage of extended projects affected by each factor.
section_title: Survey of HUD Field Office Representatives
paragraphs: The official or officials in your office who are  administration of the Section 202 Supportive Housing  responsible for the day-to-day management of Section  for the Elderly program.  The Senate Special Committee  202 processing should complete this survey.
Please complete this survey by November 18, 2002  advances. and fax it to (202) 512-2502.
subsections: section_title: We are interested in obtaining your valuable insights
paragraphs: Daniel Garcia-Diaz by phone at (202) 512-4529 or by  interested in learning more about the implementation of  email at garciadiazd@gao.gov.
section_title: HUD Notice H 96 - 102, which was designed to
paragraphs: facilitate project processing.  1.  In case we would like to clarify any of your responses, please provide the name, title, office/location, telephone  number, and e-mail address of the individual primarily responsible for gathering the information requested in this  survey.
FUND RESERVATION AND PROJECT MONITORING  2.  While HUD does not require systematic tracking of Section 202 project progress from fund reservation to initial  closing, we are interested in learning about any steps you may take to monitor project progress from fiscal year 1998  through the present. a.  Was every Section 202 Sponsor/Owner contacted to schedule a project planning conference within 30 to  45 days of the sponsor’s acceptance of fund reservation award letter? (N=44) 1.   Yes, for all Section 202 projects. (81.8%) 2.   Yes, but only for projects needing special attention (i.e., for new sponsors or projects facing major  obstacles). (13.6%) 3.   No, project planning conferences were not scheduled for all projects within 30 to 45 days. (4.6%)
section_title: Section 202 Supportive Housing for the Elderly: Development Process Survey
paragraphs: b.  From fiscal year 1998 through the present, how frequently has your office monitored the progress of the  project Sponsor/Owners between fund reservation and initial closing?  For each category below, please  indicate the frequency that best describes your contact.  (Please check one box for each row) (N=44) (1) (2) (3) (4)
section_title: a. For all Section 202 projects?
paragraphs: (please specify) b. For Section 202 Projects needing special  attention? (6.8% did not respond) (please specify)
section_title: 3. a. Does your office currently develop internal monitoring reports to track project progress of Section 202 fund
paragraphs: reservations (other than the Aged Pipeline Report prepared at HUD Headquarters)? (N=44) 1.   Yes  (86.4%) 2.   No  Please skip to question 4. (13.6%) b.  How often are these reports prepared? c. Who receives these internal monitoring  (check all that apply) (N=38) reports in your office? (check all that  apply) (N=38)
1.   Weekly (31.6%) 2.   Biweekly (18.4%) 3.   Monthly (36.8%) 4.   Quarterly (0.0%) 5.   Semi-annually (0.0%) 6.   Annually (0.0%) 7.   Other (Please specify) (18.4%)
1.   Hub Director (57.9%) 2.   Program Center Director (73.7%) 3.   Project Manager(s) (81.6%) 4.   Technical staff (71.1%) 5.   Program Center Assistant (39.5%) 6.   Other (Please specify title) (42.1%)  7.   Other (Please specify title) (18.4%)
section_title: 4. HUD Notice H 96-102 revised the Section 202 Handbook to bypass the conditional commitment application stage. It
paragraphs: also directed that HUD technical staff must (1) accept Sponsor/Owner certifications (i.e., architecture and engineering  final plans) rather than conduct detailed technical reviews; and (2) conduct detailed reviews only under specified  circumstances. (N=44) a.  Does your office require submission of a conditional commitment application?   1.   Yes (0.0%) 2.   No (100.0%) b.  Does your office have written standards for time spent by its technical staff on technical reviews?  1.   Yes (9.1%) 2.   No (86.4%) (4.6% did not respond) any written standards.)
Section 202 Supportive Housing for the Elderly: Development Process Survey  5.  HUD Notice H 96-102 stresses the importance of conducting a comprehensive project planning conference and  includes a suggested agenda to be used at the conference.  The agenda includes items such as project development,  legal considerations, project design/contractor/construction issues, and project development schedule.
We are interested in obtaining the following information on project planning conferences held at your office for fund  reservations from fiscal year 1998 through the present. (Please check one box for each row) (Unless otherwise  noted, N=44) (1) (2) (3) (4) (5)
section_title: a. How frequently have planning conferences been held
paragraphs: within 30 to 45 days of the sponsor’s acceptance of fund  reservation award letter? b.  How frequently have all relevant agenda items identified  in section 3-1 of HUD Notice H 96-102 been covered  during each planning conference?  c.  How frequently have Sponsor/Owners, their consultant  (if used), design architect, and attorney all participated  in the project planning conferences?  d.  How frequently have all HUD technical experts (design  architect, cost analyst, attorneys, etc.), responsible for  reviewing project paperwork participated in each project  planning conference?  e.  Were there instances when specific HUD technical  experts who were responsible for project paperwork did  not participate in project planning conferences?
Yes  Continue to question 5f. (50.0%)
No  Please read introduction  below, then answer question 6 on next  page. (47.7%)  (2.3% did not respond)
section_title: f. When they did not participate in the planning
paragraphs: conference, how frequently did these technical experts  contact Sponsor/Owners directly to offer technical  assistance? (N=23)
We are interested in identifying factors that may contribute to the untimely processing of Section 202 projects from fund reservation to initial closing.  We understand that there are three basic factors that can add to project processing time.
These factors may include (1) the actions or characteristics of Project Sponsors/Owners; (2) HUD staff, funding, and  policies; and (3) State, local, and/or other requirements.  Your responses to the following questions (6, 7, 8) will provide  valuable insight into the significance of these factors.
6.  Based on your experience with all projects receiving fund reservations in your office since fiscal year 1998: Part A: For each factor related to Sponsors or Owners, select a single box that most commonly describes the factor’s impact on the overall processing  Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects in your office by selecting a single box that most commonly describes the frequency of the factor’s impact on the overall processing time.  (For example, the factor ‘Seldom if ever’ prevents timely  processing, ‘Sometimes’ prevents timely processing, etc.)
Sponsor / Owner Factors That May Negatively Influence Timely Processing of Section 202 Projects  (N=44)
B. Frequency Of Factor Preventing Timely Processing  (check one box for each factor) (check one box for each factor) (1) (2) (3) (4) (1) (2) (3) (4) (5)
subsections: section_title: a. Doesn’t attend pre-application
paragraphs: workshop (2.3% did not  respond in part A and 4.6%  b.  Lacks experience in Section 202  c.  Does not effectively manage  e.  Has difficulty designing project  f.  Lacks sufficient funds for pre- advance (e.g., environmental  reviews, site control, etc.)  g.  Doesn’t fulfill requirements in a  timely fashion (e.g., set up  complete required forms, etc.)  h.  Other (Please specify) (84.1% did  not respond in parts A/B)
Section 202 Supportive Housing for the Elderly: Development Process Survey  7.  Based on your experience with all projects receiving fund reservations in your office since fiscal year 1998: Part A: For each factor related to HUD staff, funding, or policies, select a single box that most commonly describes the factor’s impact on the overall processing time.
Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects in your office by selecting a single box that most commonly  describes the frequency of the factor’s impact on the overall processing time.  (For example, the factor ‘Seldom if ever’ prevents timely processing, ‘Sometimes’ prevents  timely processing, etc.)
HUD Factors That May Negatively Influence Timely Processing of Section 202 Projects  (N=44)
B. Frequency Of Factor Preventing Timely Processing  (check one box for each factor) (check one box for each factor) (1) (2) (3) (4) (1) (2) (3) (4) (5)
section_title: c. Section 202 workload (e.g.,
paragraphs: funded projects)  d.  FHA loan processing can be, at  certain times, higher priority than  e.  Some staff unwilling to fully  implement HUD Notice H 96-102  (including turnover in project  coordinator position) (2.3% did  not respond in parts A/B) g.  Capital advance insufficient to  fund projects (2.3% did not  respond in part B) h.  Award letters not mailed during  i.  Availability of HUD amendment  funds (after other funding sources  exhausted) (2.3% did not respond  in parts A/B) j.  Time spent by HUD HQ  (extensions, amendment funds)  k.  Other (Please specify) (90.9% did  not respond in parts A/B)
Section 202 Supportive Housing for the Elderly: Development Process Survey  8.  Based on your experience with all projects receiving fund reservations in your office since fiscal year 1998: Part A: For each factor related to State, Local, and/or Other requirements, select a single box that most commonly describes the factor’s impact on the  overall processing time.
Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects in your office by selecting a single box that most commonly describes the frequency of the factor’s impact on the overall processing time.  (For example, the factor ‘Seldom if ever’ prevents timely  processing, ‘Sometimes’ prevents timely processing, etc.)
Factors Related to State, Local, or Other Requirements That May Negatively Influence Timely Processing of Section 202 Projects  (N=44)
Factors Related to State, Local, or  (check one box for each factor) (check one box for each factor) (1) (2) (3) (4) (1) (2) (3) (4) (5)
section_title: a. Project is new construction (2.3%
paragraphs: did not respond in part B) b.  Project involves rehabilitation  (4.6% did not respond in parts  c.  Project site zoning approval (2.3% did not respond in part A) d.  Local permits (i.e., obtaining  and/or cost of permits)  e.  State and local historic  (2.3% did not respond in part A)  g.  Securing secondary financing (e.g.,  time needed to secure additional  funding and obtain approval of  financing documents)  i.  General local opposition to project   j.  Other (Please specify) (86.4% did  not respond in parts A/B)
9.  What are the three most important factors (from those listed in the tables above) that can negatively impact timely  processing of Section 202 projects?  10.  a.  Did any staff members from your office attend HUD’s Section 202/811 field office staff training titled “The  Process Imperative: Moving Quickly from Fund Reservation to Initial Closing” held this past summer in St. Louis,  Missouri or Washington, D.C.? (N=44)
1.   Yes  (100.0%) 2.   No  Please skip to question 11 (0.0%) b.  How many staff members attended from your office?   (Mean = 1.9 persons)_  c.  How many staff members in your office process Section 202 projects (full time or part-time)?  (Mean =  d.  Have those who attended shared the content of the training with staff who did not attend?  1.   Yes  (75.0%) 2.   No  Please skip to question 11. (22.7%)  (2.3% did not respond)
section_title: Section 202 Supportive Housing for the Elderly: Development Process Survey
paragraphs: e.  How was the content of the training shared with staff members in your office who did not attend the  training?(Unless otherwise noted, N=34)
section_title: Formal training
paragraphs: 1.   Yes  (5.9%)
section_title: a. Training session held (at least 1 full day)
paragraphs: 2.   No (79.4%) (N=3) (14.7% did not respond)
section_title: Informal training
paragraphs: b.  Meeting or information session held (less than  1.   Yes  (64.7%)
1 full day)
2.   No (20.6%) (N=19) (14.7% did not respond)
section_title: c. Trained staff answer project processing
paragraphs: 1.   Yes  (82.4%) questions and provide guidance to other staff  2.   No (11.8%) (N=18) (5.9% did not respond)
section_title: d. Trained staff provided a written summary of
paragraphs: 1.   Yes  (17.7%) 2.   No (55.9%) (N=6) (26.5% did not respond) 1.   Yes (14.7%)
section_title: e. Other (please explain)
paragraphs: 2.   No (0.0%) (N=1) (85.3% did not respond) 1.   Yes  (2.9%) 2.   No (0.0%) (N=1) (97.1% did not respond)
section_title: 11. Please identify up to three policy changes within HUD’s control that you believe would aid the timely processing of
section_title: Survey of Section 202 Sponsors and Consultants
paragraphs: The United States General Accounting Office is contacting sponsors and consultants who have  significant experience with housing development under the Section 202 Supportive Housing  for the Elderly program.  The Senate Special Committee on Aging asked GAO to explore the  issues involved in the processing of projects that have been awarded capital advances.
We are interested in obtaining your valuable insights into the processing of Section 202  projects from fund reservation to initial closing.  As you complete the survey, please  consider your experience since 1998 with the Section 202 program only.
Please complete this survey by December 13, 2002 and fax it to (202) 512-2502.
If you have any questions about this survey or have problems submitting your response, please  contact Melissa A. Roye by phone at (202) 512-6426 or by email at royem@gao.gov.  1.  In case we would like to clarify any of your responses, please provide your sponsor or  consultant name, respondent name and title, location, telephone number, and e-mail  address of the individual primarily responsible for gathering the information requested in  this survey.
Name of Sponsor or Consultant:  E-mail address:  2.  Based on your experience with all Section 202 projects (not Section 811) receiving fund  reservations since 1998, please list the states in which you have sponsored or consulted  on at least one project per year OR a total of at least three projects since 1998.  3.  Approximately how many Section 202 projects have you sponsored or consulted on in total  since 1998 _Mean=12.3_ (N=21), since 1992 _Mean=25.6_ (N=21)?
We are interested in identifying factors that may contribute to the untimely processing of only  Section 202 projects from fund reservation to initial closing.  We understand that there are  three basic factors that can add to project processing time.  These factors may include (1) the  actions or characteristics of Project Sponsors/Owners; (2) HUD staff, funding, and policies;  and (3) State, local, and/or other requirements.  Your responses to the following questions (4,  5, 6, 7) will provide valuable insight into the significance of these factors.
4.  Based on your experience with all projects you have sponsored or consulted on that have received fund reservations since 1998: Part A: For each factor related to Sponsors or Owners, select a single box that most commonly describes the factor’s impact on the overall processing  Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects by selecting a single box that most commonly  describes the frequency of the factor’s impact on the overall processing time.  (For example, the factor ‘Seldom if ever’ prevents timely processing,  ‘Sometimes’ prevents timely processing, etc.)
Sponsor / Owner Factors That May Negatively Influence Timely Processing of Section 202 Projects  (N=21)
B. Frequency Of Factor Preventing Timely Processing  (check one box for each factor) (check one box for each factor) (1) (2) (3) (4) (1) (2) (3) (4) (5) a.  Doesn’t attend pre-application workshop  (9.5% did not respond for part B) b.  Lacks experience in Section 202 program/  multi-family project development (9.5% did  not respond for part B) c.  Does not effectively manage project  development process (9.5% did not respond  for part B) d.  Lacks effective consultant (4.8% did not  respond for part A and 19.1% for part B) e.  Has difficulty designing project within fund  reservation amount (9.5% did not respond  for part B) f.  Lacks sufficient funds for pre-construction  costs required before receipt of capital  advance (e.g., environmental reviews, site  control, etc.) (9.5% did not respond for  g.  Doesn’t fulfill requirements in a timely  fashion (e.g., set up Owner corporation,  submit complete required forms, etc.)  (14.3% did not respond to part B) h.  Other (Please specify) (71.4% did not  respond to parts A/B)
9.5%  5.  Based on your experience with all projects you have sponsored or consulted on that have received fund reservations since 1998: Part A: For each factor related to HUD staff, funding, or policies, select a single box that most commonly describes the factor’s impact on the overall  processing time.
Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects by selecting a single box that most commonly  describes the frequency of the factor’s impact on the overall processing time.  (For example, the factor ‘Seldom if ever’ prevents timely processing,  ‘Sometimes’ prevents timely processing, etc.)
HUD Factors That May Negatively Influence Timely Processing of Section 202 Projects  (N=21)
B. Frequency Of Factor Preventing Timely Processing  (check one box for each factor) (check one box for each factor) (1) (2) (3) (4) (1) (2) (3) (4) (5) a.  Staff lack Section 202 experience  b.  Staff lack Section 202 training  c.  Section 202 workload (e.g., simultaneously  reviewing new applications and paperwork  for funded projects) (14.3% did not  respond for part B) d.  FHA loan processing can be, at certain  times, higher priority than Section 202  project processing (14.3% did not respond  for parts A/B) e.  Some staff unwilling to fully implement  HUD Notice H 96-102 (4.8% did not  respond for part A)
Insufficient project coordination (including  turnover in project coordinator position)  g.  Capital advance insufficient to fund projects  h.  Award letters not mailed during fiscal year  i.  Availability of HUD amendment funds  (after other funding sources exhausted)  (4.8% did not respond for part A and  19.1% for part B) j.  Time spent by HUD HQ considering waiver  requests (extensions, amendment funds)  k.  Other (Please specify) (71.4% did not  respond for parts A/B)
14.3%  6.  Based on your experience with all projects you have sponsored or consulted on that have received fund reservations since 1998: Part A: For each factor related to State, Local, and/or Other requirements, select a single box that most commonly describes the factor’s impact on the  overall processing time.
Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects by selecting a single box that most commonly  describes the frequency of the factor’s impact on the overall processing time.  (For example, the factor ‘Seldom if ever’ prevents timely processing,  ‘Sometimes’ prevents timely processing, etc.)
Factors Related to State, Local, or Other Requirements That May Negatively Influence Timely Processing of Section 202 Projects  (N=21)
Factors Related to State, Local, or  (check one box for each factor) (check one box for each factor) (1) (2) (3) (4) (1) (2) (3) (4) (5) a.  Project is new construction  b.  Project involves rehabilitation  (14.3% did not respond in part A  and 19.1% in part B) c.  Project site zoning approval (9.5%  did not respond in part B) d.  Local permits (i.e., obtaining  and/or cost of permits)  e.  State and local historic  (4.8% did not respond in part A  and 14.3% in part B) g.  Securing secondary financing (e.g.,  time needed to secure additional  funding and obtain approval of  financing documents) (4.8% did  not respond in part A and 9.5%  h.  Legal challenges (4.8% did not  respond in part A and 14.3% in  i.  General local opposition to project   (9.5% did not respond in part B) j.  Other (Please specify) (81.0% did  not respond in parts A/B)
subsections: section_title: 7. What are the three most important factors (from those listed in the tables above) that can negatively impact
paragraphs: timely processing of Section 202 projects?  a) b) c) 8.  Please identify up to three policy changes within HUD’s control that you believe would aid the timely  processing of Section 202 projects from fund reservation to initial closing:  a) b) c)
Thank you very much for your time.
section_title: Comments from the Department of Housing and Urban Development
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