Background
Many units of affordable housing are at risk for conversion to market rate or more expensive options. Rising property values, especially in areas with proximity to community amenities, give landlords incentive to opt out of the affordable housing market. As contracts expire, landlords often charge the highest market rents or sell their buildings. People with low incomes, however, still need affordable housing options in those same areas close to transit, shopping, and other community resources.
Federal programs—the declining availability and affordability of private-market housing and the rising cost-to-income ratios for housing have increased the importance of federally-subsidized housing for older renters with low incomes who earn no more than 80 percent of the area median income (AMI). This is especially important for renters with very low incomes (those who earn between 30 and 50 percent of AMI) and extremely low incomes (those who earn no more than 30 percent of AMI). A range of programs exists to address the lack of affordable housing. They are not nearly enough to meet the demand from those who are housing cost-burdened. These programs encourage the preservation of existing subsidized housing units, as well as creating new subsidized housing units. A key challenge is a lack of coordination among the various programs.
The federal programs include:
- public housing units, built decades ago, which the Department of Housing and Urban Development (HUD) owns. A key focus has been to preserve these units or to ensure one-to-one replacement of affordable units when public housing is torn down.
- Housing Choice Vouchers, also known as Section 8 Vouchers, which people with low incomes use to subsidize the cost of market-rate housing. Demand for these vouchers greatly outstrips their supply. And even among those who receive vouchers, securing appropriate housing that will accept the voucher can prove challenging.
- the Low-Income Housing Tax Credit, which provides tax incentives for developers to offer affordable rental housing units at below-market rates.
- Section 202, Supportive Housing for the Elderly Program, which provides capital advances and rental subsidies for rental housing with supportive services for people age 62 and older with very low incomes.
- Section 811, Supportive Housing for People with Disabilities Program, which is similar to Section 202 but targets people with disabilities of all ages.
- the National Housing Trust Fund, which provides funding to build or preserve rental housing for people with extremely low incomes.
- the HOME Investment Partnerships Program, which is a flexible block grant for states and localities, which can be used to address affordable housing shortages.
- the Community Development Block Grant (CDBG) program, which provides funding flexibility and can be used for a number of community development needs. Although it cannot generally be used for new construction, it can be used to rehabilitate housing or develop infrastructure in low-income neighborhoods. In some cases, CDBG funds can be combined with the HOME program to support affordable housing units.
- Section 515, run by the Department of Agriculture’s Rural Housing Service, which provides low-interest loans to fund the construction of apartments for renters with extremely low incomes in rural areas.
Additional information on some of these programs is included here.
Section 202—Section 202 has been the principal federally-funded construction program for people age 62 and older with very low incomes. Resident households must have at least one person who is 62 years or older and must have an income at or below 50 percent of the area median income.
The program provides capital grants to nonprofit sponsors for the construction of multifamily housing units. The grants do not have to be repaid as long as the project remains affordable for at least 40 years. This funding covers the construction of new units or the acquisition or rehabilitation of existing units.
The program also provides project rental-assistance contracts (PRACs) to ensure the ongoing operations of these properties. PRACs cover the difference between the monthly rent charged and the resident’s contribution, which is limited to 30 percent of their income. PRACs are available on a three-year term and are renewed on a yearly basis as funds are available.
Waiting lists for Section 202 properties on average exceed one year. Long wait lists reflect the immense need for affordable housing with supportive services among older adults with low incomes.
Section 202 properties provide an important source of housing for older adults with low incomes across a wide range of abilities and needs, simultaneously serving both frail and non-frail populations in an integrated community. Despite considerable progress in adding HUD-funded service coordinators, many projects lack the staff and supportive features needed to serve the growing number of frail residents who reside in Section 202 housing. Since fiscal year 2000, Congress has addressed this problem by providing funds to convert some of the Section 202 inventory to assisted living residences (see Chapter 8, Long-Term Services and Supports—Assisted Living and Residential Care). However, this further erodes the stock of affordable housing for older adults who do not need that level of support.
Since 2012, no funds have been appropriated for the capital construction grants. HUD currently funds only rental-assistance contracts, support-service coordinators (who help connect residents with health providers), assisted living conversion projects, and emergency rehabilitation for a small fraction of existing properties. The lack of construction investment for new units severely limits efforts to house a growing population of older adults with low incomes who need affordable and adequate housing.
Section 8 and other rental-assistance contracts—renewals of rental-assistance contracts make up a growing share of HUD’s budget. Residents in housing funded under Section 8 rental-assistance contracts and other programs that support families with low incomes are at risk of losing their homes as contracts expire or subsidized mortgages are paid in full. Landlords are then not obligated to accept below-market rents, and households with low incomes lose affordable housing options. Forty-six percent of the families living in these Section 8 assisted units and buildings are headed by people age 62 and older. The Section 8 program’s viability is further limited by insufficient federal funding.
Choice Neighborhoods Initiative (CNI)—CNI, which is a successor to the HOPE VI program eliminated in 2012, is designed to create housing and livable communities in distressed neighborhoods. CNI requires a one-for-one replacement of units. Each community receiving a CNI grant must submit a comprehensive plan to detail how it will redesign its community according to the program’s primary goals.
Low-Income Housing Tax Credit (LIHTC)—enacted in 1986, provides tax benefits for investing in the production of low-income rental units. Since 2012 (when the federal government stopped funding Section 202 new construction), LIHTC has accounted for 90 percent of all affordable rental units produced nationwide. LIHTC provides housing for many households with low incomes (earning no more than 60 percent of the area median income). Older adults and people with disabilities are among those households that have benefited from this program.
Projects that provide services are eligible for LIHTC, but payment for those mandatory services must be included in gross rent. As with other forms of subsidized rental housing, a landlord can charge residents no more than 30 percent of their monthly income. With program eligibility limited to those with incomes no more than 60 percent of the area median, rents would easily be pushed beyond the allowable ceiling by including the cost of services.
Tax credits may be used only for residential rental properties. The Internal Revenue Service (IRS) ruled in 1998 that assisted living residences may be treated as residential rental property under certain conditions. In order to qualify, these residences cannot provide continual or frequent nursing services to residents. But the ruling did not consider whether nursing services were optional or required. The IRS also did not establish a threshold for “frequent,” and as a result, some states have been more flexible than others in interpreting the federal guidelines.
Housing providers have recommended several ways to make the credit more useful in developing housing for older adults. These include:
- exempting assisted living residences from the 30-percent-of-income rent cap. Reductions in congressional appropriations have led to challenges in providing federally assisted affordable housing. This is particularly evident in markets where housing costs rise faster than inflation. Decreased federal appropriations can reduce the number of affordable units or shift assistance away from renters with the lowest incomes.
- adjusting the credit calculation to make projects or units for single-person households more feasible by allowing individual determinations of qualifying income and rent payments for shared-living arrangements, allowing greater flexibility in the definition of “residential rental property” so that projects with supportive services may more readily qualify for credits.
State and local governments also play essential roles in expanding affordable housing options for older adults and protecting their rights. They coordinate policy and administer federal housing programs. In addition, all states and the District of Columbia have housing finance agencies. These agencies help fund the construction of affordable single-family and multifamily housing. A number of housing finance agencies and state units on aging have special programs to develop congregate housing and assisted living residences. They provide home-repair services and reverse mortgages for older homeowners. Almost all states and over a half-million localities have housing trust funds. These trusts support new construction, home repair, and rental rehabilitation.
Section 515 program—Much of the existing affordable Section 515 stock is also at risk of being lost. As assistance contracts expire, owners convert their units to market-rate rentals. Displacement can have serious consequences for existing residents. Although they are given priority on the waiting list for Section 515 housing elsewhere, they may find that alternative units are unavailable. The RHS Section 504 program provides home-repair assistance to homeowners in rural areas. It has had four times as many eligible applicants as it has available funds.
Rent control—rent control laws limit how much property owners may charge for renting out real estate. Studies show that rent control increases disparities in rent burdens over time and does not offer a long-term solution to affordable housing. Rent control does not effectively solve the affordable housing problem in many parts of the country. But in some cases, it may be desirable for state and local governments to retain existing rent control ordinances for a limited time. This is an appropriate strategy for areas with severe housing shortages. It is also suitable for areas where development pressures result in the significant loss of affordable units.
SUBSIDIZED HOUSING: Policy
Protecting and expanding the availability of affordable, accessible, and safe housing
Policies should be enacted to protect and expand the availability of affordable, accessible, safe housing, particularly for those with the most severe cost burdens. This can be accomplished through:
- one-to-one replacement of public housing units that are torn down;
- increased availability of housing vouchers, housing trust funds, tax credits, and other mechanisms to promote subsidized housing;
- policies to preserve existing subsidized housing units; and
- public and private incentives to preserve and create more affordable, accessible units.
Policymakers should coordinate and consolidate existing housing programs.
State and local governments should encourage the development of housing for people with low incomes through the use of tax credits, bond proceeds, and redevelopment funds (see also Financing Livable Communities section of this chapter).
Policymakers should engage in foreclosure mitigation efforts. They should ensure that renters living in foreclosed properties have adequate time to find new housing that they can afford. Local policymakers should establish early-warning systems designed to track and identify housing developments with expiring mortgages, and rental-assistance contracts.
State and local policymakers should develop acquisition funds or transit-oriented development and tax credit programs to preserve affordable housing, particularly in areas near transit, services, or amenities.
Congress should authorize a capital grant or loan program to meet the rehabilitation needs of older rent-assisted housing projects and preserve the availability of prepayment-eligible units for households with low incomes.
Supporting accessibility and choice: Policymakers should create incentives for developing affordable housing that promotes successful aging in place.
Improving coordination of federal housing policies: Congress should work closely with the secretary of the Department of Housing and Urban Development (HUD) and all affected parties to consolidate programs, enabling the agency to improve service delivery, safeguard assets, and control program costs. Any reorganization of HUD and its programs should include sufficient departmental funding and staff resources.
HUD should:
- establish a high-level office or a designated senior departmental staff officer to develop and coordinate policy on housing and services for older adults;
- establish a high-level office or a designated senior departmental staff officer to develop and coordinate policy on housing and services for people with lower incomes;
- develop and maintain a publicly available national database of federally subsidized housing and promote the use of this information by other agencies and local partners as appropriate;
- develop multiyear strategic plans, annual performance plans, and annual performance reports (consistent with the Government Performance and Results Act of 1993);
- continue to develop and award points in its competitive bidding process for projects that incorporate services and features (e.g., universal design, visitability, inclusive design, green buildings, and transit-oriented development) that permit aging in place and full access to the community; and
- adopt and implement a measure of housing affordability that includes housing costs and transportation costs.
Community Development Block Grants (CDBG) and Home Investment Partnerships Program (HOME): Congress should ensure that money is set aside from the CDBG program or other sources and made available to fund service coordinators and supportive housing arrangements that are affordable to frail older adults with low and moderate incomes.
Block grants established under reinvention and housing reform proposals should comply with HUD’s consolidated planning requirements. HUD should invalidate the certification of any consolidated plan that fails to address the needs of disadvantaged groups or that denies citizens reasonable opportunities to participate in plan development.
Congress should require HUD to withhold CDBG or HOME program funds from jurisdictions that fail to affirmatively further fair housing or remove regulatory barriers (such as inappropriate zoning) cited in the consolidated plan.
Voucher programs: Congress should refrain from converting the Section 202 or Section 8 housing choice voucher programs into a block grant. Policymakers should increase the production of specialized supportive housing.
Congress should pass the Section 8 Voucher Reform Act, which would stabilize the funding formula and help ensure that the number of available vouchers is not decreased each year.
Policymakers should support programs that help voucher recipients secure appropriate housing, such as housing mobility counseling and incentive programs.
Federally subsidized housing: Modernization legislation should support the development of housing that allows people to age in their communities through the use of universal design, visitability, inclusive design, green buildings, and transit-oriented development.
Public housing: Congress should provide operating subsidies and modernization funds for public housing sufficient to maintain units that can be operated in a high-quality and cost-effective manner. Long-term housing affordability should also be maintained. Mandated rent increases should consider the impact on all residents, including those with very low and extremely low incomes.
Congress should prevent the loss of housing assistance to older adults living in public housing that is to be demolished or disposed of, including under the Choice Neighborhoods Initiative program, through a one-for-one replacement requirement. The “right of return” allowing current residents to return to new or remodeled units should be maximized.
Congress should provide funding for and lift the cap on the number of units eligible for rental assistance demonstration and other innovative methods of financing affordable housing.
Rental vouchers: Congress should increase the number of vouchers available to assist renters who have severe rent burdens, with the goal of keeping assistance available to all older households with extremely low incomes. Assistance also should be available for payment of security deposits and the first and last months’ rent. The use of vouchers should be allowed in shared housing.
Aging in place: Congress and states should authorize the use of funds for modifications to enhance service delivery, accessibility, and safety from both accidents and crime for older tenants who are aging in place.
Housing Trust Funds: Congress should continue dedicated ongoing funding for the National Housing Trust Fund, created by the Housing and Economic Recovery Act of 2008 and any secondary market agency it creates to replace Fannie Mae and Freddie Mac. Such funding should come from ending the suspension on contributions from Fannie Mae and Freddie Mac or other sources, and not come at the expense of other housing programs.
HUD should ensure that states use these funds to promote housing opportunities for people of all ages, including older adults, and should prioritize projects that support livable communities.
States and local jurisdictions should establish their own housing trust funds.
Restructuring federally-assisted housing: Congress and HUD should restructure the existing portfolio of federally assisted housing in ways that are least disruptive to tenants and that exhibit a long-term commitment to improving the portfolio’s quality and viability and maintaining long-term affordability.
Expiring mortgages and assistance contracts: Congress should provide sufficient funding to fulfill and extend Section 8 project-based rental-assistance contracts, particularly those in areas near accessible, safe, and useful transit.
Congress should provide matching grants to encourage state and local governments to preserve their HUD-insured or HUD-assisted housing.
Congress should provide adequate funding to renew all expiring Housing Choice voucher rental-assistance contracts.
Congress should provide adequate funding for enhanced vouchers or other assistance to maintain housing affordability for existing residents with low incomes living in properties with expiring affordability restrictions, including federally subsidized mortgages and rental-assistance contracts.
Capital funding: Congress should restore capital funding as part of the Section 202 housing production program for older adults.
Increasing and improving Section 202 properties: Congress should provide funds and allow innovative financing methods to increase production levels under the Section 202 program and to assist in the rehabilitation of existing units. This includes the continuation of capital grants for the production of new units.
HUD should encourage the development of Section 202 units in proximity to transit and in areas with services and amenities. New nonfederal funding methods and requirements should not reduce federal funding.
Congress should modify the Section 202 program to encourage the development of service-intensive housing, the development of mixed-use and mixed-income projects, and the adaptive reuse of abandoned, military surplus, donated, or historic properties for assisted living and congregate housing.
In addition to much needed direct federal funding, Congress should provide for matching grants to state and local governments that use nonfederal funds to improve and upgrade Section 202 properties.
HUD should adopt strategies to reduce the development time for Section 202 housing, including streamlined procedures and improved field-staff training.
In addressing the renewal of Section 8 rental-assistance contracts associated with Section 202 projects, HUD and Congress should take into account the need to recapitalize existing projects for basic modernization and to serve older adults with low incomes. Income requirements should be relaxed only for projects that can demonstrate either that they are meeting a need for service-enriched housing or that there is no need for housing targeted to people with low incomes.
Operating assistance for Section 202 projects: Congress should establish an operating assistance fund to allow Section 202 projects built after 1974 to continue to serve older adults with low incomes after the expiration of Section 8 contracts.
Refinancing options should address the need to retrofit projects to accommodate aging residents and to provide operating subsidies sufficient to serve households with very low incomes.
Program priorities: Funding should be prioritized for projects that preserve affordable housing for longer periods of time, rehabilitate existing properties to create more affordable units, or renew rental-assistance contracts.
Incentivize federal, state, and local partnerships to increase housing services and supports for older adults to age in place: HUD should enhance the Section 202 program by working with state and local governments to develop greater capacity to serve frail older adults and people with disabilities. These efforts can be accomplished through Federal Housing Administration credit enhancement, existing block grants, matching grants, and improved local planning, while also maintaining the program’s ability to provide housing for older adults across the spectrum of ability and need for supports.
Low-Income Housing Tax Credit (LIHTC) qualified allocation plan priorities: Policymakers should encourage or award higher points for affordable housing proposals seeking LIHTC allocation that include rental housing for older adults located in places with transit access, universal design features (including visitability and inclusive design), energy-efficient designs, and access to other amenities.
States should create incentives in their allocation plans for LIHTC properties that encourage the creation of affordable housing in neighborhoods that meet the needs of older adults, including locations near transit, services, or amenities, and the inclusion of universal design features.
Allocations and modifications to LIHTC: Congress should increase the annual allocation to meet the need for affordable rental housing. The appropriation should be sufficiently increased to create a net growth in affordable housing units from LIHTC and preservation efforts.
Congress should modify the LIHTC to enable greater flexibility in the development of housing projects for older adults.
Congress should change the definition of the income rent cap under the LIHTC program for service-enhanced housing (such as assisted living). It should either raise the 30-percent-of-income rent cap, which is inappropriate for housing models that include basic services in the monthly rent. Or it should modify the definition of rent so that it does not include the cost of basic services.
Housing trust funds: State and local governments should establish or expand existing housing trust funds and development banks for low-income housing services (such as home repair, rehabilitation, rental assistance, and new construction of affordable housing), and they should prohibit the use of such funds for other purposes. The funds should promote housing options in livable communities, including locations near transit, and the use of universal design, visitability, and inclusive design features.
Use of affordable housing funds for other purposes: Funding from trust funds, legal awards, settlements, or new federal programs that is dedicated for the creation or preservation of affordable housing should not be used to replace existing funding sources and should be used only for their intended purposes.
Surplus government properties: Local governments—through public housing authorities, other agencies, or partnerships with nonprofit entities—should convert or develop suitable surplus public properties into housing for the above-mentioned vulnerable populations as part of a strategy to protect and preserve housing options for them in the long term.
Surplus state, county, municipal, school district, and military properties should be prioritized for development or conversion into housing
Section 515 program: Congress should fund tenant-based housing assistance for those residents who face displacement from Section 515 housing due to expiring assistance contracts or prepayments. Tenants who are displaced should be offered relocation assistance. The RHS should target assistance under the Section 515 and Section 504 programs to underserved groups, particularly older farm workers and older people from historically disadvantaged racial and ethnic groups.
The RHS should drop its prohibition against staff models of providing personal care (including medication management).
Rent control: If state and local governments enact legislation to end rent controls, they should provide a transition period during which rent increases would be limited and should continue rent protections for households with low incomes.
Existing rent controls should frequently be reviewed to evaluate their effectiveness, including the extent to which they create disincentives to affordable housing and maintenance. Such controls should also permit a reasonable return to owners, minimize disparities in rent burdens among households, and prevent exploitation of such controls by those who do not need this assistance.
Utility allowances: HUD and local public housing authorities should maintain utility allowances and ensure that these allowances keep pace with rising utility costs.
Foreclosure prevention: State and local governments should convene foreclosure prevention task forces—composed of representatives from government, the housing industry, and groups advocating for the rights of consumers—to establish proper forms of assistance.
State and local governments should establish one-stop homeowner assistance hotlines.
States should establish assistance programs for renters who live in foreclosed properties.
States should ensure that new landlords of foreclosed properties continue to pay for utilities and maintenance.
Federal and state policymakers should ensure that in the event of foreclosure, renters are provided sufficient time to seek and find new, affordable, appropriate housing, with eviction allowed only for just cause.
Impact of foreclosures and neighborhood stabilization: State and local government agencies should mitigate the negative impacts on renters, homeowners, and neighborhoods. Foreclosure mitigation strategies should consider the needs of older adults; they should provide safety, ensure service delivery, and prevent isolation.
New programs should provide for the purchase and rehabilitation of foreclosed homes both to stabilize the neighborhoods around them and as a source of additional affordable housing.
Policymakers should consider expanding access to counsel in eviction cases (see also Chapter 12, Personal and Legal Rights—Legal Services).