Elderly Housing: Federal Housing Programs That Offer Assistance for the Elderly
Released: 2005-03-16T00:00:00

Letter

Background

The federal government has helped provide affordable housing to low- income households since the 1930s. Since then, a number of federal housing programs have subsidized the construction of housing for the poor, provided rental assistance to tenants in existing privately owned housing, and insured mortgages for both single- and multifamily properties. Today, HUD administers the majority of federal housing assistance programs in urban areas, and USDA’s Rural Housing Service (RHS) implements housing programs in rural areas.

In general, both HUD and USDA programs target families at lower income levels. HUD programs target families with incomes that are: extremely low (no more than 30 percent of an area’s median), very low (no more than 50 percent of an area’s median), and low (no more than 80 percent of an area’s median). USDA programs also target families with incomes that are very low and low. In addition, some USDA programs target families with moderate incomes (no more than 115 percent of an area’s median).

HUD and USDA provide many types of housing assistance programs, including single-family programs, multifamily programs, rental assistance programs, and public housing. Housing developments can be assisted by multiple programs. For example, a loan or mortgage on a multifamily property may be insured through a HUD or USDA program, and the property may have tenants that receive rental assistance from these agencies. Federal housing assistance can generally be categorized as follows: Single-family programs that provide mortgage insurance, loan guarantees, or direct loans for homeowners and grants or loans for home repairs or modifications; Multifamily programs that provide loans, subsidies, mortgage insurance or loan guarantees, or a combination of these to support the development and rehabilitation of rental properties, including: Production programs that provide federal funds to construct or substantially rehabilitate units for households with extremely low to moderate incomes; and Mortgage insurance/loan guarantee programs that provide incentives for lenders to finance rental housing by reducing risk; Rental assistance programs, which can be used for multifamily and some single-family housing and generally pay property owners the difference between 30 percent of a household’s adjusted income and its rent, including: Tenant-based rental assistance that provides vouchers for eligible tenants to rent privately owned apartments or single-family homes and that tenants can use in new residences if they move; and Project-based rental assistance that is attached to specific properties and is available to tenants only when they are living in units at these properties; and Public housing, which is provided through HUD and offers units for eligible tenants in properties administered by public housing authorities.

The RHS implements all of the USDA programs we reviewed. Two offices administer the HUD programs covered in this report: The Office of Housing, which administers multifamily subsidy and mortgage insurance programs, multifamily production programs, and a variety of single-family programs; and The Office of Public and Indian Housing, which administers the Public Housing, Housing Choice Voucher, and Section 8 Moderate Rehabilitation Programs.

HUD has specific goals for increasing housing opportunities for the elderly. As outlined in its fiscal year 2004 Annual Performance Plan, these goals include (1) increasing the availability of affordable housing for the elderly, (2) increasing the number of assisted-living units, (3) increasing the number of elderly households living in privately owned, federally assisted multifamily housing served by a service coordinator, and (4) increasing elderly families’ satisfaction with their Section 202 units.

USDA does not have specific goals related to the elderly in its fiscal year 2004 Annual Performance Plan. However, USDA does have the broad objective of improving the quality of life of rural families by financing, among other things, quality housing. To reach this objective, USDA has established two housing-related goals: (1) to increase financial assistance to rural households to buy a home, and (2) to increase the number of minority homeowners.

Many Housing Programs Offer Assistance for the Elderly, but Information on Their Effectiveness Is Limited

We identified a total of 23 federal housing programs that are targeted at or have special features for the elderly: 2 that are intended for the elderly only, 3 that are targeted to the elderly and disabled, and another 18 that have special features, such as properties designated for elderly occupants and income adjustments that lower elderly households’ rental payments. Some or all units in many multifamily and public housing properties are designated for the elderly. Data on the number of elderly served are not available for each program; however, analysis of available data shows that the elderly occupied at least 1.3 million units provided through several of these programs. Limited information is available about the effectiveness of most housing programs in assisting elderly households.

A Variety of Programs Target the Elderly or Have Special Features for Them

HUD and USDA offer 23 housing programs that either target or have special features for the elderly. Two programs—HUD’s multifamily Section 202 program and USDA’s single-family Section 504 Rural Housing Repair and Rehabilitation Grants program—are currently intended for elderly beneficiaries only. Three multifamily programs target the elderly and the disabled: HUD’s ALCP and two mortgage insurance programs (Section 231 and Section 232). Although not targeted to the elderly, another 18 programs have special features for them. For example, public housing and some multifamily programs allow properties to be wholly or partially designated for occupancy by the elderly. Also, rental assistance programs and USDA single-family programs make adjustments to elderly households’ incomes when determining program eligibility or calculating benefits. These programs are briefly described in Figure 1, and in more detail in Appendix III. Although most of the 23 programs are intended for households with low, very low, or extremely low incomes, 7 of the multifamily insurance programs may provide benefits for households of all income levels (that is, there are no income restrictions or limits).

Among these 23 programs, 13 have approximately 943,000 units designated for the elderly, based on available data (fig. 2). Some public and multifamily housing programs may designate properties wholly or partially for the elderly, but the number of units set aside varies across programs. As figure 2 shows, the Section 202 and Section 231 programs have designated most of their units for the elderly (84 percent and 90 percent, respectively), consistent with these programs’ targeting of the elderly or the elderly and disabled. The Section 202 program designates the most units for the elderly—about 268,000 units.

HUD, USDA, and other agencies also administer other housing programs for which the elderly are eligible, but which do not have special features for the elderly. For example, under the Low-Income Housing Tax Credit program, the largest active multifamily housing production program, states receive annual allocations of tax credits and distribute them at their discretion. In their guidelines for the distribution of tax credits, some states have established preferences for properties intended for the elderly, but the federal government does not require such preferences. Similarly, HUD’s single-family mortgage insurance program does not have features that apply only to elderly borrowers. HUD's Home Equity Conversion Mortgage program, which targets only elderly homeowners, did not meet our definition of housing assistance for this review. This program allows elderly homeowners to borrow against the equity in their homes and defer repayment for as long as they occupy their homes, but the money can be used for any purpose, not just housing. Appendix I explains our methodology for determining which programs to include, and Appendix IV provides brief descriptions of some programs that were excluded from this review.

The Elderly Occupied At Least 1.3 Million Units Provided under Federal Housing Programs, but Complete Data on Elderly Occupancy Are Lacking

Elderly households occupied at least 1.3 million units provided through HUD and USDA rental assistance, public, and multifamily housing programs for which data on occupancy were available between April and June 2004 (fig. 3). The household counts by program do not match the unit counts presented in figure 2 and Appendix III, because some units may have been vacant or current data on tenants may have been incomplete. The data include households in units designated for the elderly as well as other elderly households receiving assistance through the programs. Overall, elderly households comprised approximately 30 percent of the households participating in programs for which data were available.

In addition to the elderly households in public and multifamily housing programs, at least 69,650 elderly households received loans or grants through 4 USDA single-family programs from October 1995 through April 2004, the time period for which we were able to obtain data (fig. 4). Specifically, USDA’s Section 504 grants program, which provides home repair grants to elderly homeowners, made at least 40,697 grants to elderly recipients during that period. Also, the Section 502 Rural Housing Loans (Direct), Section 502 Direct Housing Natural Disaster Loans, and Section 504 Rural Housing Repair and Rehabilitation Loans programs, which offer loans for home purchase or repair, had at least 28,953 elderly borrowers. USDA generally did not have data on the age of borrowers in its Section 502 guaranteed loan program, which had more than 167,500 active loans as of April 2004.

Limited Information Is Available About the Effectiveness of Housing Programs in Assisting the Elderly

Program effectiveness can be assessed in a number of ways—for example, by evaluating the extent to which programs reach or serve intended beneficiaries or examining the efficiency with which they serve those that they do reach. In evaluation research, “effectiveness” is often defined in terms of the achievement of program goals or outcomes. While HUD and USDA have not established specific goals for each housing program that offers assistance for the elderly in their annual Performance and Accountability Reports, these reports contain limited information on some programs’ performance—that is, the extent to which a program met specific goals and objectives or contributed to the attainment of larger overarching goals. The Office of Management and Budget (OMB), has used its standardized Program Assessment Rating Tool (PART) to assess five of the programs, finding that three had not demonstrated results, one was ineffective, and one was moderately effective.

While we also identified academic studies of some programs we reviewed, they generally did not evaluate the effectiveness of a program in terms of the extent to which it reached its goals. For example, some academic studies analyzed the impact of the public housing and housing choice voucher programs upon property values. However, affecting property values is not a goal of these programs. Finally, we also identified information on how effectively some of the housing programs are implemented.

Information on the Effectiveness of Programs Targeted to the Elderly

Of the two programs that are targeted to the elderly, only HUD’s Section 202 program is included in the agencies’ fiscal year 2003 Performance and Accountability Reports. HUD addresses this program under its overall goal of improving housing options for the elderly. According to HUD’s Performance and Accountability Report, HUD exceeded its goal of approving 250 Section 202 and Section 811 projects to start construction during fiscal year 2003, approving 334 projects. While HUD exceeded this goal, the number of projects approved for construction is a limited measure of the effectiveness of the Section 202 program. USDA’s fiscal year 2003 Performance and Accountability Report did not address the effectiveness of the Section 504 program.

OMB rated the Section 202 program in its fiscal year 2004 PART assessment. PART is designed to assess the effectiveness of federal programs through a series of diagnostic questions intended to provide a consistent approach to rating federal programs. Drawing on available performance and evaluation information, the questionnaire attempts to determine the strengths and weaknesses of federal programs with a particular focus on individual program results. According to this assessment, the results of the Section 202 program had not been demonstrated, and: The program lacked evidence showing the overall level of impact that the program had on poor elderly individuals; HUD had not established quantifiable long-term performance goals with outcomes for this program, so progress could not be measured; The program had produced about 6,000 units per year, yet there is a need for over a million units for the elderly.

We also have reported specifically on how effectively the Section 202 program has been managed. Our 2003 report on the Section 202 program outlined several factors that prevented efficient and effective implementation. Appendix II contains an update on HUD’s efforts to improve these deficiencies.

Information on the Effectiveness of Programs Targeted to the Elderly and Disabled

HUD’s fiscal year 2003 Performance and Accountability Report also provides information on two of the three HUD programs targeted to the elderly and disabled—the Assisted Living Conversion Program and the Section 232 mortgage insurance program. According to this report, HUD: Met its goal for increasing the number of assisted living units for the elderly by adding 2,618 units or beds to the estimated 18,000 already in place in 325 properties insured by the Section 232 mortgage insurance program; Exceeded its goal of converting 10 properties through the ALCP by converting 13 properties, adding an additional 407 assisted living units.

Information on the Effectiveness of Programs That Have Special Features for the Elderly

While performance and accountability information does not directly address the extent to which programs that have special features for the elderly—such as HUD’s public housing, project-based rental assistance, and housing choice voucher programs—are effective in assisting the elderly, it does provide additional context. For example, HUD’s fiscal year 2003 Performance and Accountability Report has an indicator to track the share of units receiving assistance through these programs that are occupied by the elderly, but HUD has not established goals for this indicator because housing providers have discretion regarding admissions policies.

USDA’s Office of Inspector General (OIG) has reported on how effectively USDA’s multifamily housing programs are implemented. For example: In 2004, the OIG reported that USDA’s Rural Housing Service missed by three projects its target of having no more than 140 multifamily housing projects with accounts more than 180 days past due. According to the report, this indicator is a measure of how effectively and efficiently the multifamily housing loan portfolio is being managed.

Also in 2004, the OIG reported that RHS had not implemented all of the policy changes that it had agreed to implement to better monitor the owners of Section 515 developments. As a result, according to the OIG, rural rental housing funds remained vulnerable to theft and abuse.

In addition, we identified two studies that provided information related to the effectiveness of housing choice vouchers in assisting the elderly and the effectiveness of the Section 502 Rural Housing Loans (Direct) Program in helping the elderly become homeowners and obtain better quality housing: A 2001 study on the Housing Choice Voucher Program showed that the elderly had less success finding and leasing a unit than other household types, possibly because elderly renters may have difficulty looking at multiple units.

A 1999 study of USDA’s Section 502 Rural Housing Loans (Direct) Program, which provides loans to very-low and low-income rural residents for the purchase or repair of single-family homes, reported the results of a 1998 survey and found that of respondents with at least one elderly person on the mortgage, 30 percent were first-time homebuyers, and almost 90 percent reported that their current home was of better quality than their previous home.

Finally, OMB’s fiscal year 2004 PART assessments included information about the effectiveness of 4 of the 18 programs that provide special features for the elderly—the Housing Choice Voucher Program, project- based rental assistance, and the Sections 515 and 521 programs (table 1).

While Performance and Accountability Reports can be helpful in assessing program effectiveness, their usefulness is limited. For example, USDA’s fiscal year 2003 report provides little useful information on the effectiveness of USDA’s housing programs in assisting the elderly because of the lack of specific goals and objectives related to improving housing options for the elderly. Similarly, HUD’s fiscal year 2003 report identifies such goals for only 3 of the 23 programs we reviewed. Further, HUD’s goals are not necessarily specific; for example, although information was available on HUD’s Section 232 program, targeted goals were not established for this program, such as increasing the number of assisted- living units through Section 232 insurance by a specific percentage. Without such specific criteria, HUD management and outside evaluators lack the essential information needed to assess this aspect of the program’s effectiveness.

In addition, GAO has previously reported that the usefulness of PART assessments is limited, for the following reasons: Many PART questions contained subjective terms that were open to interpretation. We noted that such subjective terminology could influence program ratings by permitting OMB staff’s views about a program’s purpose to affect assessments.

OMB assigned overall program ratings and individual section scores.

Overall ratings encourage a determination of the effectiveness of a program even when performance data are unavailable, the quality of those data is uneven, or they convey a mixed message on performance.

OMB inconsistently defined appropriate measures—outcomes versus outputs—for programs.

Most other studies we identified on various aspects of the programs we reviewed did not evaluate either the programs’ overall effectiveness, or their specific effect on the elderly. We also found some academic studies that provided information related to effectiveness but that were based on a prohibitively small sample of elderly program participants or did not use reasonably current data.

The overall lack of information on the effectiveness of the programs we reviewed in assisting the elderly may be due to the fact that, as GAO has previously reported, many agencies lack the capacity to undertake program evaluations to assess a federal program’s contributions to results. Agencies’ capability to gather and use performance information has posed a persistent challenge.

Finally, we did not evaluate the extent to which the programs we reviewed addressed the needs of eligible elderly households because (1) complete data on the number of elderly households occupying units provided by federal housing programs were not available, and (2) eligibility criteria for each program varied, making it difficult to establish the number of eligible elderly households.

Most Federal Housing Assistance Programs Are Not Required To Provide Supportive Services for the Elderly

Generally, HUD and USDA’s housing assistance programs are not required to provide supportive services to the elderly. Of the 23 housing assistance programs that we reviewed, 4 required the owners of properties developed under the programs to ensure that supportive services were available. HUD has programs that link the elderly to or provide them with supportive services. Two of these programs, the Service Coordinator and the Resident Opportunities and Self Sufficiency (ROSS) programs, link residents with appropriate supportive services that are available in the community. In addition, the Congregate Housing Services Program funds meals and other needed services in public and multifamily housing properties, and the Neighborhood Networks program provides resources for establishing computer centers at such sites. Owners of public and multifamily housing may also provide supportive services by establishing partnerships with public and private organizations in the community.

Four Housing Assistance Programs Require That Supportive Services Be Made Available to Elderly Residents

HUD’s Section 202 program, the ALCP, and Section 232 Mortgage Insurance, and USDA’s Section 515 Congregate Housing Program, which is a sub-program of the Section 515 program (see Appendix III) require property owners to make supportive services available to their residents.

Generally, HUD and USDA do not provide funding for these services. The property owners typically obtain other funds to provide supportive services or must ensure that appropriate services are available in the community (see table 2).

HUD Has Other Programs that Assist the Elderly in Obtaining Supportive Services

While USDA does not generally provide funding for supportive services for residents of federally assisted housing, HUD has two programs that link residents of public and multifamily properties developed under HUD programs to supportive services, and two that provide supportive services. None of these four programs is just for the elderly, but they either can be used in properties designated for the elderly or have funding specifically for the elderly. The Service Coordinator Program, for example, provides funding for managers of multifamily properties designated for the elderly and disabled to hire coordinators to assist residents in obtaining supportive services from community agencies. These services, which may include personal assistance, transportation, counseling, meal delivery, and healthcare, are intended to help the elderly live independently and to prevent premature and inappropriate institutionalization. Service coordinators can be funded through competitive grant funds, residual receipts (excess income from a property), or rent increases. According to HUD’s fiscal year 2003 Performance and Accountability Report, service coordinators were serving more than 111,000 units in elderly properties.

Similarly, HUD’s ROSS grant program links residents with appropriate services. This program differs from the Service Coordinator Program in that it is designed specifically for public housing residents. The ROSS program has five funding categories, including the Resident Service Delivery Models for the Elderly and Persons with Disabilities (Resident Services) and the Elderly/Disabled Service Coordinator Program. Resident Services funds can be used to hire a project coordinator; assess residents’ needs for supportive services and link residents to federal, state, and local assistance programs; provide wellness programs; and coordinate and set up meal and transportation services. The Elderly/Disabled Service Coordinator Program has not provided new grants since 1995 but still services existing grants.

The Congregate Housing Services Program provides grants for the delivery of meals and nonmedical supportive services to elderly and disabled residents of public and multifamily housing, including USDA’s Section 515 housing. While HUD provides up to 40 percent of the cost of supportive services, grantees must pay at least 50 percent of the costs, and program participants pay fees to cover at least 10 percent. Like the Elderly/Disabled Services Coordinator Program under ROSS, the Congregate Housing Services Program has provided no new grants since 1995, but Congress has provided funds to extend expiring grants on an annual basis.

In addition, the Neighborhood Networks program encourages property owners, managers, and residents of HUD-insured and -assisted housing to develop computer centers. Although computer accessibility is not a traditional supportive service for the elderly, a senior HUD official told us that having computers available enhances elderly residents’ quality of life. HUD does not fund each center's planned costs, but encourages property owners to seek cash grants, in-kind support, and donations from sources such as state and local governments, educational institutions, private foundations, and corporations.

Private Partnerships and Federal Health Care Programs May Provide Some Supportive Services

Elderly residents of public and federally subsidized multifamily housing can also receive supportive services through partnerships between property owners and local organizations and through programs provided by the Department of Health and Human Services (HHS). For example, property owners can establish relationships with local nonprofit organizations, including churches, to ensure that residents have access to the services that they need. At their discretion, property owners may establish relationships that give the elderly access to meals, transportation, and housekeeping and personal care services. In site visits to HUD and USDA multifamily properties, we found several examples of such partnerships: In Greensboro, North Carolina, Dolan Manor, a Section 202 housing development, has established a relationship with a volunteer group from a local church. The volunteer group provides a variety of services for the residents, such as transportation.

In Plain City, Ohio, residents of Pleasant Valley Garden, a Section 515 property, receive meals five times a week in the community’s senior center (a $2 donation is suggested). A local hospital donates the food and a nursing home facility prepares it. Volunteers, including residents, serve the meals. The senior center uses the funds collected from the lunch for its activities. In addition, local grocery stores donate bread products to the senior center daily. The United Way provides most of the funding for the senior center.

In Guthrie, Oklahoma, Guthrie Properties, a Section 515 property, has established a relationship with the local Area Agency on Aging. The agency assists residents of Guthrie Properties in obtaining a variety of services, including meals and transportation to a senior center.

Some elderly residents of public and federally subsidized housing may also obtain health-related services through programs run by HHS. For example, HHS’s Public Housing Primary Care Program provides public housing residents with access to affordable comprehensive primary and preventive health care through clinics that are located either within public housing properties or in immediately accessible locations. The program awards grants to public and nonprofit private entities to establish the clinics. The organizations must work with public housing authorities to obtain the physical space for the clinics and to establish relationships with residents. Currently, there are 35 grantees, 3 of which are in rural areas. According to a program administrator, although clinics are not specifically geared toward elderly-designated public housing, they can be established at such properties.

Elderly residents of federally subsidized housing may also be eligible for the Medicaid Home and Community-Based Services (HCBS) Waiver Program, which is administered by HHS’s Centers for Medicare and Medicaid Services. Through this waiver program, individuals eligible for Medicaid can receive needed health care without having to live in an institutional setting. HUD has identified the use of these waivers as an innovative model for assisting the frail elderly in public housing.

In addition, eligible elderly residents of federally subsidized housing may also receive health care through the Program of All-Inclusive Care for the Elderly (PACE), which is also administered by the Centers for Medicare and Medicaid Services. Like the HCBS waiver program, this program enables eligible elderly individuals to obtain needed services without having to live in an institutional setting. The program integrates Medicare and Medicaid financing to provide comprehensive, coordinated care to older adults eligible for nursing homes. Figure 5 provides information on the housing assistance programs that can use federally funded supportive services programs that assist the elderly.

HUD and USDA Have Policies in Place to Avoid Duplicating Programs

Although the potential for duplication exists, HUD and USDA have established policies and procedures to guide the development of multifamily housing for the elderly in rural areas. A 1991 agreement between the agencies and subsequent guidance to HUD and USDA field offices established a framework for coordinating efforts to provide housing assistance to low-income rural households. As noted, HUD develops rental housing for the elderly in rural areas through its Section 202 program, and USDA can develop such housing through its Section 515 program. In addition to obtaining one another’s input on proposed developments, HUD field office and state USDA office staffs assess the markets in areas where a new development is proposed. Site visits to HUD and USDA field offices in three states revealed that while staff did not consistently follow coordination procedures, each office did analyze market conditions in the proposed locations. In addition, the potential for unnecessary overlap and duplication between these programs has been limited by funding levels and the geographic areas in which HUD and USDA develop new housing.

Policies are in Place to Guide the Coordination of Rural Housing Development

Policies and procedures designed to coordinate HUD and USDA efforts to develop rental housing in rural areas have been in place since the early 1990s. In 1991 HUD and USDA signed a Memorandum of Understanding and agreed to maintain an on-going working relationship to address issues related to providing housing assistance to rural areas in a cooperative, cost effective, and nonduplicative manner. As a result of this agreement, HUD and USDA issued guidance, in 1991 and 1992 respectively, specifying how the agencies should coordinate. Specifically, the guidance outlined coordination procedures that each agency should follow when reviewing applications for funds to develop rental units. For HUD, this policy applied to several programs, including the Section 202 program. For USDA, this policy applied specifically to the Section 515 program, which can be used to develop properties for families or the elderly. Among the programs we included, HUD’s Section 202 program and USDA’s Section 515 program are the only two that actively produce rental units for the elderly in rural areas.

While neither the original agreement between HUD and USDA nor the resulting guidance has been updated since the early 1990s, the Section 515 program instructions and the Section 202 program’s annual Notice of Funding Availability, which announces the availability of funding as well as program requirements, describe current procedures. According to the Section 515 program instructions, the purpose of the coordination effort is to (1) foster better communication, (2) obtain additional documentation to determine market feasibility, (3) prevent overdevelopment of subsidized housing, and (4) prevent adverse effects on proposed or existing units that provide similar types of rental housing. The program instructions also state that state USDA offices will forward basic loan information on Section 515 loan applications that are selected for further processing to the applicable HUD field office. HUD field office staff will identify any pending, authorized, or existing units in the market area and provide comments, positive or negative, on the proposed market area to USDA within 2 weeks. When HUD staff have concerns about market feasibility or the impact of a proposed project on existing or authorized HUD units, they also provide documentation to support their concerns. HUD has established a similar process for notifying USDA of proposed developments. HUD’s fiscal year 2004 Notice of Funding Availability for the Section 202 program requires HUD to seek USDA’s input on Section 202 applications, giving USDA the opportunity to respond if it has concerns about the demand for additional assisted housing or possible harm to existing housing in the same market area.

In addition to seeking input from one another on the markets in which new rural rental housing is proposed, both HUD and USDA assess market conditions when they evaluate applications for Section 202 and Section 515 funds. For example, HUD’s guidance instructs HUD’s economists to evaluate the markets in which all Section 202 applications propose development to determine if sufficient demand for the units exists and to assure that any new units will not have a long-term adverse impact on existing assisted housing for the elderly. If this analysis shows that sufficient demand for the units proposed in an application does not exist, then the application cannot be funded. Similarly, according to USDA officials, USDA state office staffs analyze market data to determine need and demand for the units proposed in Section 515 applications. Applications are not approved if: another rural rental housing loan has already been selected for further processing in the same market; a previously authorized USDA, HUD, Low-Income Housing Tax Credit, or similar type of project in the same market area has not been completed, has not reached its projected occupancy level, or is experiencing high vacancies; or the need in the market area is for additional rental assistance and not for additional housing units.

We visited HUD field offices and USDA state offices in North Carolina, Ohio, and Oklahoma to determine whether and how these offices were following these policies and procedures. We chose these states because they had the largest numbers of approved Section 202 grants in rural areas and Section 515 loan awards in fiscal years 2002 and 2003 (see Appendix I). Our observations from the site visits are not necessarily representative of all field offices.

Overall, the HUD and USDA field offices in the three states we visited did not consistently follow the policies and procedures designed to facilitate coordination in fiscal years 2002 or 2003. For example, while local USDA officials in North Carolina and Oklahoma obtained input from HUD on Section 515 loan applications in fiscal years 2002 and 2003, USDA officials in Ohio did not. According to a senior official from USDA’s Ohio state office, the agency did not seek HUD’s input on the sites funded in fiscal years 2002 or 2003 because USDA determined that market demand existed for the units. Moreover, this official stated that they had sought HUD’s input on Ohio’s list of “designated places”—cities, towns, and communities for which USDA could approve new Section 515 development. Based on input from HUD and USDA field offices, USDA state offices can remove places from the list if a market for additional rental housing does not exist.

Since HUD officials had not raised concerns about the two places on Ohio’s list for which Section 515 housing was proposed in fiscal years 2002 and 2003 and funds were ultimately allocated, USDA officials did not think that it was necessary to request their input again.

Only one of the HUD offices visited sought USDA’s input on Section 202 grant applications in fiscal year 2002, and none sought USDA’s input in fiscal year 2003. According to HUD officials in the field offices we visited, HUD offices did not seek input for various reasons. For example, in North Carolina and Oklahoma there were staffing changes. In Ohio, funds were awarded to a site that had been funded in fiscal year 2002. Since contact was made with USDA officials in fiscal year 2002 regarding this site, HUD officials did not see a need to contact them again in fiscal year 2003.

Although coordination between the HUD and USDA offices we visited was inconsistent in fiscal years 2002 and 2003, we found that these offices based their funding decisions on market analyses. For example, HUD economists evaluated the markets in which all Section 202 applications proposed development. If the economists determined that a sufficient market for development did not exist, the application was not funded. Similarly, in each state USDA office we visited, officials explained that if they determined that the market for Section 515 development was insufficient in a place where development was proposed, they would not fund the application. Possibly as a result of these market analyses, we did not identify any examples of HUD and USDA providing unnecessarily duplicative housing assistance for the elderly.

The Potential for Unnecessary Overlap and Duplication between Section 515 and Section 202 Developments Is Limited

Several factors limit the potential for unnecessarily duplicative Section 202 and Section 515 housing for the elderly in rural areas: funding constraints, geographic restrictions, and, in some areas, demand for additional rental units. First, the way that Section 202 funding is allocated and the amount of Section 515 funding limit the number of units these programs produce in rural areas. HUD generally allocates only a portion of Section 202 funds to nonmetropolitan areas, which are more likely than metropolitan areas to be considered rural and thus eligible for USDA funds. In fiscal years 2002 through 2004, for example, HUD set aside enough funds for each of its local offices to fund a minimum of five units in nonmetropolitan areas and allocated 15 percent of all funds appropriated for the Section 202 program to these areas. And although the Section 515 program provides funding exclusively in rural areas, funding for this program has fallen sharply since its peak in 1979. During the peak funding years, the program produced more than 20,000 new units annually. Since 2000, fewer than 2,000 new units have been produced annually. Also, not all new Section 515 units are for the elderly, further reducing the potential for overdevelopment of elderly housing in rural areas.

Second, geographic restrictions on areas where Section 515 funds can be used limit the extent to which the Section 515 and Section 202 programs can overlap. Section 202 properties can be developed anywhere in the United States. In contrast, not only must Section 515 properties be in rural areas, but also new development can occur only in designated places. State USDA offices develop lists of places with a need for multifamily rental housing, and invite Section 515 applications for these places. According to the USDA officials we interviewed, this list can be refined through input from HUD and USDA field offices. As a result, new Section 515 properties could potentially be developed and overlap with new Section 202 development only in a small number of areas.

Finally, officials at the HUD field offices and state USDA offices we visited told us that oversaturating a market with both HUD and USDA units for the elderly was not a concern for several reasons, including a high demand for such units. In some cases, they said, existing elderly properties had waiting lists, and new properties generally rented quickly. According to other officials, given the limited number of elderly units that could be constructed with available funding, overlap and duplication between HUD and USDA housing for the elderly was not a concern.

Agency Comments

We provided a draft of this report to USDA and HUD for their review and comment. USDA had no comments on the report. HUD provided comments in a letter from the Assistant Secretary for Housing – Federal Housing Commissioner (see Appendix V).

The letter stated that the report does not give HUD’s programs full credit for their contributions in assisting the elderly. HUD’s specific comments in this regard, and our responses, are as follows: HUD commented that the report should include more detail on partnership arrangements and overall supportive services provided to the elderly. We believe that the report covers these issues at a level of detail appropriate to our objective. The report includes information on the four federal housing assistance programs that require that supportive services be made available to elderly residents, and four programs that can be used to either link residents to supportive services or provide services directly. In addition, it includes examples of private partnerships and health care programs to convey a broader sense of the supportive services that can be available to the elderly.

HUD noted that the draft did not include data on units designated for a mixed population of the elderly and disabled. We initially determined that the 6,004 units that fall into this category were not significant enough to merit inclusion. However, in response to HUD’s comment, we have included this data as a note to Figure 2.

HUD stated that the report fails to give Home Equity Conversion Mortgages (HECM) sufficient credit. As detailed in the Objectives, Scope, and Methodology (see Appendix I), this report focuses upon programs that met our definition of housing assistance. While the HECM program did not meet this definition, both the body of the report and Appendix IV acknowledge HECM as a program that assists elderly families.

HUD agreed that GAO used the appropriate definition of elderly households, but stated that the report should acknowledge that other households may have members aged 62 or older (that are not the head, co-head, or spouse). While we did not initially provide data on such households because they are not, by definition, elderly households, we did add a note to Figure 3 to acknowledge that housing assistance programs can also benefit this group.

As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the report date. At that time, we will send copies to the Secretaries of Agriculture and Housing and Urban Development. We will make copies available to others upon request. This report will also be available at no charge on GAO’s Web site at http://www.gao.gov.

Please call me at (202) 512-8678 if you or your staff have any questions about this report. Key contributors to this report are listed in Appendix VI.

Objectives, Scope, and Methodology

To determine the extent to which federal housing assistance programs provide benefits to elderly households, we first identified the relevant programs through a literature search, review of the Catalog of Federal Domestic Assistance, and consultation with Department of Housing and Urban Development (HUD) and Department of Agriculture (USDA) officials. As used in this report, housing assistance programs are those that: subsidize mortgage interest rates, rent, or housing repair or provide mortgage insurance, loan guarantees, or direct loans for single- family or multifamily housing; and support the construction, rehabilitation, or purchase of multifamily housing or assisted living facilities.

We excluded programs that are administered by government-sponsored enterprises such as Fannie Mae, Freddie Mac, and Federal Home Loan Banks; are used exclusively to fund nursing homes or supportive housing for the homeless; are not used exclusively to provide housing assistance; or lack special features that apply to the elderly.

We then reviewed laws and regulations to determine which housing assistance programs were (1) targeted to the elderly as the only beneficiaries, (2) targeted to the elderly and disabled only, and (3) were not targeted to the elderly but had special features for them. Appendix III describes the programs we included, and Appendix IV describes some programs we excluded, even though they can benefit elderly households. For each of the programs we included, we interviewed agency officials and reviewed laws, regulations, handbooks, and other documentation to describe the programs and how they benefit the elderly.

We used various HUD and USDA databases to analyze the extent to which the programs within our scope either designated units for the elderly or were occupied by elderly households. Specifically: To determine the number of units under HUD’s multifamily programs, we used data from HUD’s Multifamily Portfolio Reporting Database as of April 1, 2004. HUD provided corrected unit counts for 32 properties in August 2004. Unit counts were not available for 42 percent of the Section 207 Manufactured Home Parks properties, 57 percent of Section 232 properties, and 23 percent of Section 542(b) and (c) properties, so we could not produce a reliable count of the total number of units for these programs. For the other HUD multifamily programs, fewer than 2 percent of the properties were missing unit counts (except that 4.5 percent of Section 207/223(f) properties were missing unit counts), so we considered the data sufficient for our purposes. We combined these data with the results of HUD’s Multifamily Housing Inventory Survey, conducted between June 2002 and January 2003, to determine the number of multifamily units designated for the elderly under each program.

To determine the number of elderly households living in properties under HUD’s multifamily programs, we used data from HUD’s Tenant Rental Assistance Certification System as of May 25, 2004. However, we were only able to determine the number of households receiving project-based rental assistance. Not all units under HUD’s multifamily program receive project-based rental assistance, and occupancy data on these unassisted units were not available. As a result, the numbers that we report for these programs do not reflect the total number of elderly households in these programs but only the number of elderly households receiving project-based rental assistance.

To determine the number of elderly households living in public housing or receiving rental assistance through the Housing Choice Voucher or Section 8 Moderate Rehabilitation programs, we used data from HUD’s Public and Indian Housing Information Center as of June 3, 2004. We excluded outdated data (29 percent of the records) by including in our analysis only households whose records had been updated within the last 15 months. To determine the number of public housing units designated for the elderly, we used a July 14, 2004, Designated Housing Plan Status Report—a spreadsheet that HUD uses to track public housing authorities that have requested or been approved to formally designate units for the elderly.

For USDA’s Section 515 program, we used data from USDA’s Multi- Family Integrated System as of April 30, 2004, and July 13, 2004, to determine the number of units, units designated for the elderly, and units occupied by elderly households (including households receiving Section 521 rental assistance).

To determine the number of Section 538 units, we used (1) a report from USDA’s Guaranteed Loan System as of June 3, 2004, covering Section 538 properties guaranteed beginning in fiscal year 2000 and (2) a June 16, 2004, report listing data on Section 538 properties guaranteed through fiscal year 1999 but not maintained in USDA’s central data systems. Data on the occupants of Section 538 properties were not available.

For USDA’s Section 502 and 504 single-family programs, we used data from USDA’s Dedicated Loan Origination and Servicing System and Guaranteed Loan System as of April 30, 2004, to determine the total number of loans and grants and the number of borrowers or grantees who were elderly at the time they applied for a loan or grant. However, the Guaranteed Loan System only had the primary or secondary borrower age for about 2 percent of the Section 502 Guaranteed Loans, a percentage that was insufficient for our purposes.

In order to assess the reliability of the program data described above, we reviewed related documentation and interviewed agency officials and contractors who worked with these databases. In addition, we performed internal checks to determine the extent to which the data fields were populated and the reasonableness of the values contained in the data fields. During our internal checks, for household counts based on the age of household members, we identified 0.01 percent of cases where the age appeared to be erroneous due to unreasonably high values. We concluded that the data we used were reliable for purposes of this report.

To provide information on the effectiveness of the programs within our scope in assisting the elderly, we reviewed studies and reports by federal agencies, research institutions, and the HUD and USDA Offices of Inspector General. We reviewed the methodologies used in relevant studies to ensure that the results reported were reasonable. We excluded studies that did not focus on the effectiveness of a program in assisting the elderly, were more than 15 years old, or were not focused upon the goals of the program. We also reviewed the Office of Management and Budget’s Program Assessment Rating Tool assessments for programs within our scope. In addition, we used HUD and USDA fiscal year 2003 Performance and Accountability Reports to determine if program goals or performance measures specific to the elderly had been established for these programs. For those programs with such goals, we provided information on whether the goal was reached. For those programs that did not have these goals, we summarized available information related to the effectiveness of the programs in assisting the elderly.

To describe the types of supportive services that federal housing assistance programs provide for the elderly, we first reviewed laws and regulations to determine which of the programs within our scope were required to ensure that supportive services were available. Next, we identified supportive services programs that could be used with various housing assistance programs, whether or not the housing assistance program required such services. For example, while public housing authorities that manage public housing are not required to provide supportive services, housing authorities may implement such services voluntarily. We identified supportive services programs by reviewing literature and descriptions of housing assistance programs and interviewing administrators of the housing assistance programs within our scope, as well as representatives of advocacy organizations and professional associations interested in elderly housing issues and supportive services. We obtained descriptions of these supportive services programs by interviewing officials from HUD, USDA, and the Department of Health and Human Services. We also reviewed program descriptions, notices of funding availability, and other documentation to develop descriptions of these supportive service programs.

To determine how HUD and USDA avoid overlap and duplication in programs that offer similar types of housing assistance to the elderly, we first determined which programs were actively producing new units in the same areas. We found that both HUD and USDA were actively producing new multifamily rental units in rural areas through the Section 202 and Section 515 programs, respectively. While Section 202 units can be constructed in metropolitan areas, Section 515 units cannot. As a result, we focused our analysis upon rural areas. We reviewed agreements, policies, and procedures established by HUD and USDA to coordinate the development of subsidized housing in rural areas and interviewed HUD and USDA officials responsible for administering these programs. We also visited HUD and USDA field offices in Greensboro and Raleigh, North Carolina; Columbus, Ohio; and Oklahoma City and Stillwater, Oklahoma to determine whether and how the policies and procedures for coordinating were being followed. We identified these states as having received, when both programs are considered together, the most Section 202 grants in rural areas and the most Section 515 new construction loans made in fiscal years 2002 and 2003.

To determine the status of HUD’s efforts to improve administration of the Section 202 program (Appendix II), we interviewed HUD officials and reviewed related documentation to identify steps HUD had taken to implement the recommendations we made in our 2003 report on the Section 202 program. We also obtained a HUD report on the number of delayed Section 202 properties as of November 10, 2004, and compared this report with data we presented in our 2003 report.

We conducted our work primarily in Baltimore, Maryland; Greensboro and Raleigh, North Carolina; Columbus, Ohio; Oklahoma City and Stillwater, Oklahoma, and Washington, D.C., between December 2003 and December 2004, in accordance with generally accepted government auditing standards.

Status of HUD’s Efforts to Improve Administration of the Section 202 Program

Our May 2003 report to the Senate Special Committee on Aging noted the significance of the Department of Housing and Urban Development’s (HUD) Section 202 Supportive Housing for the Elderly (Section 202) Program, which subsidizes the development of rental housing and provides rental assistance for elderly households with very low incomes. Among other things, the report found that many Section 202 properties encountered delays before beginning construction, and we made several recommendations to improve the program’s timeliness and oversight. Specifically, we recommended that HUD: Evaluate the effectiveness of the current methods for calculating the capital advances that project sponsors receive and 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; Provide regular training to ensure that all field office staff are knowledgeable of and held accountable for following current processing procedures required to approve projects to begin construction; Update the Section 202 program handbook to reflect current processing Improve the accuracy and completeness of information that field staff enter in the program’s database system and expand the system’s capabilities to track key project processing stages.

At the time we completed our work, HUD had made some progress but had not fully implemented these four recommendations. First, in our 2003 report, we found that construction of Section 202 properties was sometimes delayed, in part because HUD awarded inadequate capital advance amounts. As a result, sponsors had to put off construction while they sought additional funding. We recommended that HUD evaluate the effectiveness of its methods for calculating capital advances and make any changes necessary to cover the development costs of Section 202 projects. HUD commissioned a study to examine how the development cost limits used to calculate capital advance amounts compared with indicators of local construction costs and to recommend any needed changes in limits for high-cost areas. A HUD official said that the agency received the results of the study in the fall of 2004, but had not determined whether to make any changes in its methods for calculating capital advances.

In addition, HUD had not implemented the two recommendations related to training field staff and updating the Section 202 program handbook. We concluded in our 2003 report that providing adequate formal training for field office staff responsible for reviewing Section 202 properties before approving them to begin construction and issuing an updated program handbook could reduce delays in approving projects for construction by ensuring that staff were accountable for applying and interpreting HUD policies and procedures consistently. HUD agreed with these recommendations. According to senior agency officials, HUD’s goal at the time we completed our work was to provide formal training to field staff in fiscal year 2005 in the technical implementation of the agency’s new rules for using Low-Income Housing Tax Credits or other mixed financing to help fund Section 202 properties. These officials also said that HUD’s goal was to update its program handbooks in fiscal year 2005 to reflect these new rules and other updates to policies and procedures.

Although HUD had not fully implemented our recommendations for improving the timeliness of the Section 202 program, the number of delayed Section 202 properties had declined. In our 2003 report, we found that construction on 169 properties that had received Section 202 capital advance awards had been delayed as of the end of fiscal year 2002. By November 2004, all but 18 of these properties had been approved for construction, according to our analysis of a report prepared by HUD. These 18 properties had been awarded capital advances in fiscal years 1998 through 2000. An additional 108 projects funded in fiscal years 2001 and 2002 had been delayed, for a total of 126 delayed projects as of November 10, 2004. Senior HUD officials said that management staff in headquarters were monitoring the progress of these delayed projects by meeting quarterly with field office managers to discuss steps that could be taken to help the projects proceed to construction.

Finally, HUD had identified needed enhancements to its program database but had not implemented the improvements, as we suggested. To improve HUD’s oversight of the Section 202 program, we recommended that HUD improve the accuracy and completeness of information entered into its program database and expand the system’s capabilities to track key stages of the development process. Senior HUD officials said that the agency had hired a new contractor in the summer of 2004 to work on the program database and had developed a list of needed enhancements that would address our recommendation. The list included improving the system’s ability to track properties’ progress, correcting data errors, and automating reports. However, the officials did not have a timeline for when they expected the enhancements to be complete.

Summaries of Federal Housing Programs That Serve the Elderly

This appendix presents information on 23 federal programs we identified that provide housing assistance to the elderly. The programs, which are administered by the departments of Agriculture (USDA) and Housing and Urban Development (HUD), are organized alphabetically by agency into three categories. The first category includes programs that are targeted to the elderly, the second programs that are targeted to the elderly and disabled, and the third programs that are not targeted to the elderly or disabled but have special features for the elderly. This appendix includes active programs as well as programs that no longer actively produce or subsidize new units yet still fund existing units.

In general, both HUD and USDA programs target families at lower income levels. HUD programs target families with incomes that are: extremely low (no more than 30 percent of an area’s median), very low (no more than 50 percent of an area’s median), and low (no more than 80 percent of an area’s median). USDA programs also target families with incomes that are very low and low. In addition, some USDA programs target families with moderate incomes (no more than 115 percent of an area’s median).

According to HUD and USDA officials, the terms “family” and “household” are generally used interchangeably. HUD’s definition of family specifically includes elderly families, which are families whose head, spouse, or sole member is a person who is at least 62 years of age. It may include two or more persons who are at least 62 years of age living together or one or more persons who are at least 62 years of age living with one or more live- in aides. In general, USDA’s definition of an elderly household also includes the disabled—that is, the head, spouse, or sole member is at least 62 years old or is a disabled person of any age. However, for the Section 504 grants and Section 538 programs, nonelderly disabled households are not included in the definition of elderly.

Project-based rental assistance provides subsidies for tenants in specific properties so that the subsidy is not portable if a tenant moves. Tenant- based rental assistance provides vouchers for eligible tenants to rent single or multifamily units. Through both project-based and tenant-based forms of rental assistance, the renter generally pays 30 percent of adjusted income towards rent.

Service coordinators are individuals that can generally be hired to work in public or other federally subsidized multifamily housing to assist residents in obtaining supportive services.

For each program, we identify the federal agency responsible for administering the program, the type of assistance provided, and the type of housing. We also provide brief descriptions of (1) the program’s purpose and objectives; (2) how the program is administered; (3) eligibility requirements; (4) special features for the elderly; (5) supportive services provided; and (6) available data on the extent to which the program targets or serves the elderly.

We obtained the information for the summaries from the Catalog of Federal Domestic Assistance, program fact sheets, program handbooks, various HUD and USDA databases, and agency officials.

Additional Housing Programs

This appendix describes some additional housing programs that can benefit the elderly but that either did not meet our definition of housing assistance or were not considered by agency officials to be “key” in assisting the elderly. The appendix does not include all of the housing assistance programs that serve the elderly.

A variety of federal agencies are responsible for these programs, including the departments of Agriculture (USDA), Health and Human Services (HHS), Housing and Urban Development (HUD), and Veterans Affairs (VA). The programs are organized in alphabetical order according to their administering agency.

Department of Agriculture

Community Facilities Direct Loan, Guaranteed Loan, and Grant Programs

These programs provide a direct loan, guaranteed loan, or project grant assistance to construct, enlarge, extend, or otherwise improve community facilities, such as medical clinics, schools, fire and rescue stations, and child care centers for public use in rural areas. These programs finance a range of service centers for the elderly, including nursing homes, boarding care, assisted care facilities, adult day care, and intergenerational care facilities.

To be eligible, applicants must be entities such as city, county, and state agencies; private nonprofit corporations; or federally recognized tribal governments. Priority is given to projects that will enhance public safety or provide health care facilities.

Section 514/516 Farm Labor Housing Loans and Grants

This program provides loans or project grants to provide decent, safe, and sanitary low-rent housing for domestic farm laborers. Loans are available to farmers, family farm partnerships, family farm corporations, or associations of farmers. Loans and grants are available to states, public or private nonprofit organizations, federally recognized Indian Tribes, and nonprofit corporations of farm workers. Grants are available to eligible applicants only when there is a pressing need and when such facilities cannot be obtained without grant assistance. Loans are usually for 33 years at 1 percent interest, and grants may cover up to 90 percent of development costs.

Section 533 Rural Housing Preservation Grants

This program provides grants to sponsoring organizations for the repair or rehabilitation of housing for very low- and low-income rural residents. To be eligible, an applicant must be a state or political subdivision, public nonprofit corporation, Indian tribal corporation authorized to receive and administer housing preservation grants, private nonprofit corporation, or a consortium of such entities. Organizations may use less than 20 percent of the Housing Preservation Grant funds for program administration purposes, such as to hire personnel and pay necessary and reasonable administrative expenses. Eighty percent or more of the funds must be used for loans, grants, or other assistance on individual homes, homeowners, rental properties, or cooperatives to pay any part of the cost for repair or rehabilitation of structures.

Department of Health and Human Services

Low-Income Home Energy Assistance Program

This federally funded program helps low-income households meet their home heating and cooling needs. The program provides funding to states, federally- or state- recognized Indian tribes and tribal organizations, and insular areas, such as Puerto Rico and Guam, in the form of block grants for home energy assistance, energy crisis intervention or assistance, and low-cost residential weatherization and other energy-related home repair. The program targets (1) households with a high energy burden (those households with the lowest incomes and highest home energy costs), and (2) vulnerable households, including those with frail older individuals, individuals with disabilities, and very young children.

Department of Housing and Urban Development

Community Development Block Grant Program

According to the Congressional Research Service, this program is the largest source of federal financial assistance for state and local governments’ community development and neighborhood revitalization activities. The program’s objective is to develop viable urban communities by providing housing and expanding economic opportunities, principally for individuals with low to moderate incomes. For example, Community Development Block Grant funds have been used to rehabilitate affordable senior housing, construct senior centers, and provide services such as congregate meals and transportation.

Home Equity Conversion Mortgages

This program enables elderly homeowners to withdraw some of the equity in their home in the form of monthly payments for life or a fixed term, or in a lump sum, or through a line of credit. This reverse mortgage program allows families to stay in their home while using some of its equity. The total income that an owner can receive through the program is the maximum claim amount, which is calculated with a formula including the age of the owner, the interest rate, and the value of the home. The borrower remains the owner of the home and may sell it and move at any time, keeping the sales proceeds that exceed the mortgage balance. No repayment is required until the borrower moves, sells, or dies.

HOME Investment Partnerships Program

This program is a federal formula block grant to state and local governments designed to create affordable housing for low-income households. The program provides funds to states and localities to build, buy, and rehabilitate affordable housing for rent or homeownership. Also, funds can be used to provide direct rental assistance to low-income people. For rental housing, at least 90 percent of HOME funds must benefit low- and very low-income families at 60 percent of the area median income; the remaining ten percent must benefit families below 80 percent of the area median income. Assistance to homeowners and homebuyers must go to families below 80 percent of the area median. HOME gives grantees the flexibility to use a variety of mechanisms to fund housing projects that meet local priorities, and is routinely combined with other public and private financing for affordable housing such as Housing Choice Vouchers and the Low-Income Housing Tax Credit.

Housing Counseling Assistance Program

This program provides counseling to consumers on seeking, financing, maintaining, renting, or owning a home. The Housing Counseling Assistance Program enables individuals wanting to rent or own housing— whether through a HUD program, a Veterans Affairs program, other Federal programs, a State or local program, or the regular private market— to get the counseling needed to make their rent or mortgage payments and to be a responsible tenant or owner in other ways. The counseling is provided by HUD-approved housing counseling agencies.

There are three strategic goals for the program: (1) to improve the quality of renter and homeowner education, (2) to develop a reliable stream of funding and resources for counseling agencies, and (3) to enhance coordination among local housing providers.

Section 203(b) Mortgage Insurance

This program promotes homeownership among families with low to moderate incomes by providing mortgage insurance for the purchase or refinancing of a principal residence. This program provides mortgage insurance to protect lenders, such as mortgage companies, banks and savings and loan associations, against the risk of default on loans to qualified buyers. Insured loans may be used to purchase new or existing one- to four- family homes, as well as to refinance debt. The insurance allows homebuyers to finance up to 97 percent of the home’s cost through their mortgage.

Section 203(k) Rehabilitation Mortgage Insurance

This program enables homebuyers and homeowners to finance the purchase (or refinancing) of a house that is at least a year old and the cost of its rehabilitation through a single mortgage. The cost of rehabilitation must be at least $5000, but the total value of the property must still fall within the mortgage limit for the area.

Section 220 Mortgage Insurance (Urban Renewal Mortgage Insurance)

This program provides federal insurance for mortgage loans on multifamily rental projects located in urban renewal areas and areas where local governments have undertaken designated revitalization activities. The purpose of Section 220 is to encourage the development of quality rental housing in urban areas targeted for overall revitalization, and to insure lenders against loss on mortgage defaults. The maximum amount of the mortgage loan may not exceed 90 percent of the estimated replacement cost for new construction or 90 percent of the estimated cost of the repair and the estimated value of the property before the repair for substantial rehabilitation.

Section 234(c) Mortgage Insurance–Purchase of Units in Condominiums

This program insures loans for terms of up to 30 years for the purchase of a unit in a condominium building. The building must contain at least four dwelling units and can be detached or semidetached, a rowhouse or walk-up, or an elevator structure. The insurance covers loans made by lending institutions such as mortgage companies, banks, and savings and loan associations.

Section 811 Supportive Housing for Persons with Disabilities

This program is designed to allow very low-income adults with disabilities to live independently in the community by funding the development of rental housing with appropriate supportive services. HUD provides interest-free capital advances to nonprofit sponsors to help finance the development of supportive housing. The advance does not have to be repaid as long as the housing remains available for very low-income persons with disabilities for at least 40 years. The program also provides project rental assistance, which covers the difference between the operating costs of the development as approved by HUD and the tenants’ contribution toward rent (usually 30 percent of adjusted income). Each project must have a supportive services plan. The services offered may vary with the target population but could include case management, training in independent living skills, and assistance in obtaining employment.

Title I (Property Improvement Loan Insurance for Improving All Existing Structures and Building of New Nonresidential Structures)

This program facilitates the financing of improvements to homes and other existing structures and the building of new nonresidential structures. The maximum loan amount is $25,000 for improving a single family home or for improving or building a nonresidential structure. For improving a multifamily structure, the maximum loan amount is $12,000 per family unit, not to exceed a total of $60,000 for the structure. HUD insures private lenders against losses of up to 90 percent of any single loan.

Department of Veterans Affairs

VA Homeless Providers Grant and Per Diem Program

This program provides funding to community agencies providing services to homeless veterans. The program’s purpose is to help homeless veterans achieve residential stability, increase their skill levels and income, and obtain greater self-determination by promoting the development of housing with supportive services. Only programs with supportive housing or service centers are eligible for the two levels of funding: grants and per diem.

VA Home Loans

This program helps veterans, certain service personnel, and certain unmarried surviving spouses of veterans obtain credit for the purchase, construction, or improvement of homes on more liberal terms than are generally available to nonveterans. Lenders, such as mortgage companies, savings and loan associations, or banks, make the loans and VA provides the guarantee. The amount guaranteed varies with the amount of the loan and previous use of the program. With the current maximum guarantee, a veteran who has not previously used the benefit may be able to obtain a loan up to $240,000, depending on the borrower’s income level and the appraised value of the property.

Federal Home Loan Banks

Affordable Housing Program

This program subsidizes the purchase, construction, rehabilitation, or refinancing of (1) owner-occupied housing for very low- to moderate- income households, and (2) rental housing in which very-low-income households can afford and will occupy at least 20 percent of the units. The Federal Home Loan Banks offer both grants and loans with below-cost interest rates.

Community Investment Program

This program provides a favorably priced source of wholesale funds for any member involved in lending for community and economic development. The funds can be used for development of commercial projects, infrastructure improvements, or business that creates jobs. The funds are available to finance home purchases by families whose income does not exceed moderate-income levels, for purchase or rehabilitation of housing for occupancy by families whose income does not exceed moderate- income levels, or for commercial and economic development activities that benefit low- and moderate-income families or neighborhoods.

Internal Revenue Service (IRS)

Low-Income Housing Tax Credit

This tax credit program, which IRS and the states administer jointly, is the principal federal program designed to support the development and rehabilitation of housing for low-income households. Under this program, states are authorized to allocate federal tax credits as an incentive to the private sector to develop low-income rental housing. In their guidelines for the distribution of tax credits, some states have established preferences for properties intended for the elderly, but such a preference is not a federal requirement. Annually, IRS allocates tax credits to each state. For 2005, the credit is equal to $1.85 per state resident. Investors that provided financing may take the tax credits annually for 10 years to offset federal taxes. At a minimum, the owner must agree to make (1) 20 percent of the property units affordable to households with incomes at or below 50 percent of the area median income or (2) 40 percent of the units affordable to households with incomes at or below 60 percent of the area median.

Comments from the Department of Housing and Urban Development

GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

In addition to those named above, Emily Chalmers, Natasha Ewing, Alison Martin, John McGrail, Marc Molino, Lisa Moore, John Mingus, and Julianne Stephens made key contributions to this report.