HUD Section 202 Supportive Housing

The Department of Housing and Urban Development’s Section 202 program, established in 1959, supports the creation and operation of supportive housing for seniors classified as “very low income” category capped at 50% of AMI, or area median income.

The program had effectively ceased operations in 2012 when funding dried up, but Congress revived the program in 2017 with the allocation of a quarter-billion dollars to address the worsening senior housing crisis. Those funds’ allocation subsequently began in 2020.

The program has two methods of increasing the availability of supportive senior housing. The first is a financing mechanism which provides private, nonprofit organizations with capital advances to build, acquire, or rehabilitate housing. The second component involves rental assistance to cover the difference between operating costs and rents which are fixed as a percentage of income.

Capital advances

HUD provides interest-free advances to nonprofit organizations to create supportive housing. The capital does not need to be repaid, provided the property continues to serve very low income seniors for a term of 40 years. While funding typically does not cover a project’s full cost, financing is often supplemented with LIHTC and other debt or equity.

Operating assistance

HUD also provides what are known as project rental assistance contracts, or PRACs, to subsidize eligible properties’ operations. Rents at Section 202 supportive housing properties typically are prohibited from exceeding 30% of a resident’s adjusted gross income. As this may not cover the costs associated with operating a property, PRACs make up the difference to ensure a property owner does not take a loss.

Who can apply?

Only private, nonprofit organizations are eligible for Section 202 support. Any entity associated with federal, state, or local government is excluded, as are any for-profit institutions. To apply for Section 202 financing, eligible organizations must submit an application once a Notice of Funding Availability, or NOFA, is posted on the Grants.gov website.