HUD Announces Competition for $150M New Section 202 Funds

Regulation | January 12, 2021 | by Linda Couch

On January 11, HUD announced its competition for $150 million in new Section 202 Supportive Housing for the Elderly funds. The application deadline for these funds is May 26, 2021. LeadingAge’s top affordable housing priority is to expand the supply of affordable housing.

On January 11, HUD announced its competition for $150 million in new Section 202 Supportive Housing for the Elderly funds. The application deadline for these funds is May 26, 2021. LeadingAge’s top affordable housing priority is to expand the supply of affordable housing.

The NOFO is similar in many ways to the last HUD Section 202 NOFO issued in April 2019. That NOFO was for $51 million and ultimately provided Section 202 Capital Advance and Project Rental Assistance Contract (PRAC) funding for 575 units via 18 nonprofit-controlled communities when the awards were announced in February 2020.  

According to the January 11 NOFO, HUD seeks to fund Section 202 properties that advance housing for older adults as a platform for living independently and aging in community even as residents may require more assistance with activities of daily living over time. “Through this NOFA, HUD seeks sponsors that: will produce housing that is physically designed to promote the long-term wellness of Elderly Persons and allow them to age in place; can provide a robust package of services that support the health and social well-being of Elderly Persons; and leverage Capital Advance funds with other financing sources to maximize the number of units created per dollar of HUD funding,” according to the NOFO.

For the new $150 million in awards, HUD expects to make approximately 45 awards. In the 2018 NOFA, per-project awards were capped at $5 million. For these 2021 awards, per-project awards are capped at $20 million, per the NOFO.

In addition to the 2018’s NOFO’s threshold requirements for applications to be timely, be complete, and to demonstrate need, the 2021’s NOFO adds a threshold requirement that outstanding civil rights matters must be resolved to HUD’s satisfaction prior to grant award, provided that all applicable legal processes have been satisfied.

The 2021 NOFO retains the 2018 NOFO’s site and neighborhood standards as well as the same two exceptions for when construction of new Section 202 housing will be allowed in areas of “elderly minority concentration.” A project may be located in an area of minority elderly concentration only if: 1) sufficient, comparable opportunities exist for housing minority elderly households in the income range to be served by the proposed project, outside areas of minority concentration; or 2) the project is necessary to meet overriding housing needs that cannot be met in that housing market area. The 2021 NOFO is more explicit about how these exceptions could be achieved, including by showing the project is located within a designated Qualified Opportunity Zone. Further, the 2021 NOFO states, “In all cases, the site must be appropriate for residential use. An overriding housing need, however, may not serve as the basis for determining that a site is acceptable if the only reason the need cannot otherwise be feasibly met in another location is that discrimination on the basis of race, color, creed (religion), sex, or national origin renders sites outside areas of minority concentration unavailable. Further, overriding housing need may not serve as the basis for approval if the use of this exception in recent years has had the effect of circumventing the obligation to provide housing choice.”

Importantly for 2021, according to the NOFO, applicants may request HUD review their proposed justification for locating a project in an area of elderly minority concentration prior to the application deadline for submission of the NOFO. If HUD receives such a request, according to the NOFO, “HUD will determine whether to review such materials and will post its decision together with answers to other questions submitted pursuant to Section VII of this NOFA. If HUD determines, in its sole discretion at that time, to review proposed justifications, HUD will review materials submitted by any potential applicant pursuant to uniform procedures specified in the posted decision.”

The 2021 NOFO’s scoring rubric remains similar to that of 2018, but with some differences. For example, the “physical design” piece of the 2021 NOFO can garner up to 20 points (compared to 2018’s 10 points). And, achieve the 10 points in the 2021 NOFA, an applicant must commit, through one of the following four items: 1) to design features that prevent falls, 2) to incorporate universal design and visitability principles, 3) to leverage electronic communications, 4) to promote health and wellness.

As part of its announcement of the NOFA, HUD has also released a “Section 202 NOFA Toolkit,” which gives potential applicants the ability to self-score applications, using the scoring rubric in the NOFA: 41 points for capital, leverage, and committed funding, 10 points for land use and zoning, 14 points for market conditions, 33 points for physical design and supportive services, and 2 possible preference points for being in an Opportunity Zone.

This NOFO could have announced competition for about $190 million in new Section 202 funding. LeadingAge understands that HUD decided to hold back about $40 million for the next Section 202 NOFA to keep new 202 funds flowing at a somewhat regular pace and to give prospective nonprofit applicants time to prepare the extensive predevelopment necessary to garner the NOFO’s leveraging and capital advance ratio points. As part of its fiscal year 2021 HUD funding bill enacted on December 27, 2021, Congress provided another $52 million for new Section 202 homes. In total, HUD currently has $90 million for its next Section 202 NOFO.

LeadingAge has also come to understand some of the reasons for the delay of this NOFA. In the last two HUD appropriations bill, Congress has admonished HUD for not getting these new Section 202 dollars out more quickly. During the course of its development and approval, the NOFA hit significant time delays, including over new policy issues that were ultimately not included, a new level of Administration review of the NOFO, and a directive from the White House to hold all HUD NOFOs to comply with a September 2, 2020, White House Memorandum, “Memorandum on Reviewing Funding to State and Local Government Recipients That Are Permitting Anarchy, Violence, and Destruction in American Cities.”

This Memorandum was issued after a summer of protests. The Memorandum states, “The Federal Government provides States and localities with hundreds of billions of dollars every year, which fund a wide array of programs, such as housing, public transportation, job training, and social services. These funds have been collected from American taxpayers who entrusted their money to the Federal Government to serve our communities and our citizens. My Administration will not allow Federal tax dollars to fund cities that allow themselves to deteriorate into lawless zones. To ensure that Federal funds are neither unduly wasted nor spent in a manner that directly violates our Government’s promise to protect life, liberty, and property, it is imperative that the Federal Government review the use of Federal funds by jurisdictions that permit anarchy, violence, and destruction in America’s cities. It is also critical to ensure that Federal grants are used effectively, to safeguard taxpayer dollars entrusted to the Federal Government for the benefit of the American people.”

Ultimately, LeadingAge understands, the White House was convinced that Section 202 program recipients are not cities but rather nonprofits and the NOFO was allowed to proceed.

LeadingAge will host HUD officials on a February 2 call about the NOFO. And, HUD is expected to announce its own webinar about the new Section 202 NOFO soon.

Link to the HUD Section 202 NOFO page.