HUD Section 811 State Demonstration Program
Background:
For the past two decades, Section 811 has been HUD’s primary program for developing new affordable housing for people with disabilities. Heretofore, the program has been exclusively targeted to nonprofit developers and has provided capital grants and project rental assistance contract (PRAC) subsidies for all units in mainly small congregate, group home-type developments. Program subsidies have been allocated and administered directly by HUD.
In recent years, this program has lost favor for both policy and fiscal reasons. Many people with disabilities no longer want to live in segregated disability-only housing and want greater ability to access rental units in “mainstream”housing developments. In addition, HUD no longer has adequate program funding to cover capital costs or adequate administrative resources to continue directly administering the program.
In late 2010, Congress reformed the Section 811 program to enable HUD to “leverage” Section 811 subsidies with private financing and to integrate Section 811 subsidy units into mainstream housing developments. Congress also authorized HUD to delegate subsidy administration to other entities (e.g., state housing agencies), and to develop partnerships with the federal Center for Medicaid Services (CMS) to coordinate use of Medicaid waiver funds to cover disability support service costs.
New State Demonstration Program:
Recently, HUD issued a notice of funding availability (NOFA) for a state demonstration program to implement the Section 811 reforms. This competitive demonstration is intended to enable between 9 and 16 states—on an initial pilot basis—to test using Section 811 project-based rent subsidies to provide a set-aside of units for extremely low-income (30% of AMI) non-elderly*people with disabilities in developments receiving capital funding through LIHTCs and/or other state-administered housing programs. The program is being opened to for-profit properties as well as nonprofit developments, and to existing rental housing as well as to newly developed housing. No direct capital funding will be provided by HUD.
[*A companion Section 202 State Senior Housing State Demonstration is planned for FY13 pending Congressional appropriations.]
Eligible Applicants: State housing agencies in partnership with state Medicaid and disability services agencies.
Funding: Funding for approximately 2,800 rental assistance units nationally. $85 million in funding is being provided nationally for five-year project-based subsidy contracts. The maximum state rent subsidy grant will be $12 million ($2.4 million per year for five years). The minimum state rent subsidy grant will be $2 million ($0.6 million per year for five years).
States must be prepared to fully commit rent subsidy funds to specific qualifying rental developments within 24 months of receiving a grant.
Rent subsidy contracts will be for five-years and will be renewable over the 30-year life of the program. The first five-year contract is fully funded by current appropriations. Subsequent contract renewals will be funded subject to annual appropriations.
State Housing Agency Responsibilities:
- Administration of Section 811 project rental assistance contracts. States will set rent levels and annual adjustment factors. Generally, rents cannot exceed small area FMRs.
- Development of a formal partnership agreement with state Medicaid agency (DMAS) and state disability service agencies to coordinate delivery of housing and support services and ensure adequate tenant referrals over the 30-year life of the program
- Leverage Section 811 project-based rent subsidies with state and local administered housing capital and subsidies (e.g., LIHTCs, HOME, mortgage loans, etc.)
Eligible Rental Properties:
- Both existing and newly developed rental housing with five or more units
- No more than 25% of units in any housing development can receive Section 811 rent subsidies
- No more than 25% of units can be restricted to occupancy by people with disabilities (however, non-restricted units can be leased by people with disabilities)
- Developments must have been funded through state or local administered capital programs (e.g., LIHTCS, HOME, revenue bond financing, state or local housing trust funds, etc.)
- Existing units receiving Section 811 subsidy assistance cannot currently be contractually restricted to disability occupancy or currently receive rent or operating subsidies.
Required Owner Commitments:
- Participating owners must commit to holding Section 811 units for occupancy by eligible extremely low-income (30% AMI) non-elderly people with disabilities for 30 years.
[Note: We are still awaiting clarification from HUD as to whether the 30-year use restriction will terminate in the event that Congress fails to appropriate funds for rent subsidy contract renewals. We are also awaiting clarification regarding whether owners can employ a “next available unit” policy if a unit remains vacant following a 60-day marketing period.]
- Tenant rent cannot exceed 30% of income
- Section 811 units cannot be segregated in one portion of a development.
Timing: State applications are due to HUD no later than July 31, 2012. Grant awards will be announced in October, and cooperative agreement between HUD and participating states will be executed by the end of January 2013.
HUD will not publish regulations governing the demonstration program until the fall. As noted above, we are still awaiting guidance from HUD on a number of key questions regarding the specific commitments that the state and participating property owners will be expected to make.
1June 8, 2012