HUD Proposed Rule: Mixed-Finance Development for Supportive Housing for the Elderly or Persons with Disabilities and other Changes (24 C.F.R. ? 891)
On Monday, December 1, 2003, the Department of Housing and Urban Development (HUD) published an interim rule to implement statutory changes that enable the use of mixed-finance and for-profit participation in the Section 202 supportive housing programs for the elderly and the Section 811 supportive housing program for persons with disabilities. The overall purpose of the proposed rule is to create more supportive, integrated housing for elderly and persons with disabilities. The proposed rule modifies 24 C.F.R. ? 891 et. seq. The interim rule takes effect on December 31,
2003 and comments on the proposed rule are due January 30, 2004
The rule uses the mixed-finance development model to leverage the capital and expertise of the private developer community to create attractive and affordable supportive housing developments for the elderly or persons with disabilities. The rule, HUD states, "is structured so that tax credits can be used to provide additional units as well as supplement capital advance funds for the Section 202 or 811 project." The rule, according to HUD, sets standards for the participation of limited partner investors (who may be for-profit entities) in partnership with a sole-purpose nonprofit general partner; development proposals and supporting documents; eligible fees and expenses; the use of capital advances in the mixed-finance context; and other matters relevant to mixed-finance development of these types of projects.
The rule adds a subpart F to 24 C.F.R. ? 891 entitled "For-Profit Limited Partnerships and Mixed-Finance Development for Supportive Housing for the Elderly or Persons with Disabilities." This section establishes a mixed-finance program under which partnerships with for-profit limited partners could participate as mixed-finance owners in the development and management of supportive housing provided they partner with a non-profit general partner. HUD seeks to use this program to bring in for-profit entities in partnership with non-profit general partners to leverage private capital for development additional, non-assisted living specific units. Such an allowance will encourage developers to create projects in which elderly persons and persons with disabilities are integrated into the community. Such developments will be permitted to use Low-Income Housing Tax Credits (LIHTC) if they meet the IRS rules for the tax credits. (See, 26 U.S.C. ? 42 (2000).)
To qualify as a "mixed-finance owner" under subpart 891, a for-profit limited partnership must, in the case of supportive housing for the elderly, have a Single-Purpose Private Nonprofit Organization or, in the case of supportive housing for the disabled, a Single-Purpose Nonprofit Organization with a 42 U.S.C. ? 501(c)(3) tax exemption as the sole general partner. (24 C.F.R. ? 891.805, as proposed at 68 FR 67321.) The definitions
of Single-Purpose Private Nonprofit Organization and Single-Purpose Nonprofit Organization remain unchanged and are still located at 24 C.F.R. ?? 891.205, 891.305
respectively. In order for either Nonprofit Organization to qualify as a general partner of a for-profit partnership, they must meet the definitions in these C.F.R. provisions and own at least one-hundredth of one percent of the partnership assets. Such an organization could qualify if it is a nonprofit corporation wholly owned and controlled by a nonprofit that meets the aforementioned C.F.R. provisions defining Single-Purpose organizations. (24 C.F.R. ? 891.805, as proposed at 68 FR 67321.)
Certain regulations must be met for a proposal to qualify as a mixed-finance program. While developments built with the mixed-finance funds may combine assisted supportive housing units with market rate units, the number of Section 202 or 811 units in the development funded through the capital advance must not be less than the number of units that could have been funded without the use of mixed funding sources. Section 811 projects that contain additional units cannot cause the project to exceed the applicable section 811 project size limits if they will also house persons with disabilities.
The proposal must also contain restrictive covenants running with the land that guarantee the assisted units will remain available to very-low income elderly persons or very-low income persons with disabilities for a 40 year period. Such is important for they assure that developers will not use the program to fund commercial developments that are only available to the targeted populations for a single rental cycle.
The rule also permits the development of commercial facilities for the benefit of residents in supportive housing developments as long as the commercial facilities are not funded with the supportive housing program funds. (24 C.F.R. ? 891.120, as proposed at
68 FR 67317.) The proposed rule amends 24 C.F.R. ? 891.120 by adding a section (e) that permits commercial facilities that benefit residents in the supportive housing developments. Such facilities, however, cannot be funded with the supportive housing program funds. Should amenities be provided in the housing complex, they must be provided equally to all assisted and unassisted residents and cannot be made mandatory for particular assisted residents. (24 C.F.R ? 813, as proposed at 68 FR 67322.)
Project rental assistance, finally, is covered in section 891.810 and is essentially the same as for the 202 and 811 programs generally. Project rental assistance can only be paid for 202 and 811 units. Any necessary funds for the non-202 or non-811 units must be obtained from another source.
The result of these rules will allow developers to construct communities that integrate elderly persons and persons with disabilities into the larger community. Such communities could provided attractive commercial centers which attract persons from all walks of life and lead to greater community involvement by elderly persons and persons with disabilities. Such commercial centers would be integrated with affordable, accessible housing options for elderly persons and persons with disabilities.
For more information the proposed rule can be found at:
bin/waisgate.cgi?WAISdocID=480677277397+0+0+0&WAISaction=retrieve . The
affected sections of the Code of Federal Regulations can be found at:
http://www.access.gpo.gov/nara/cfr/waisidx_03/24cfr891_03.html. The HUD website is
accessible at: http://www.hud.gov .