SECTION 101 RENT SUPPLEMENT PROGRAM (HOUSING

AND URBAN DEVELOPMENT ACT OF 1965)

BASIC PROGRAM INFORMATION

LEGISLATIVE OBJECTIVE. To make good quality rental housing available to lower-income families at a cost they can afford.

TYPE OF ASSISTANCE.-Rent supplement payments are made to owners of approved private housing projects on behalf of eligible lowincome families.

DATE ENACTED.-1965.

FINANCING.-Funds are provided from a close-end appropriation from general revenues.

Fiscal year

1973

1974

Estimated 1975_

Costs and caseloads

TYPE OF HOUSING.-Projects eligible for rent supplements must be (1) five or more units of detached, semidetached, row, walkup, or elevator structures which are: (2) new units or existing units which will undergo extensive rehabilitation; (3) modest in design, suitable for the market and location; (4) built in conformity with FHA minimum property standards; and (5) regulated by FHA established maximum rents, rates of return, and methods of operation.

LOCATION OF HOUSING.-Section 101 projects may be located wherever the HUD Secretary determines that certain factors relating to need for assisted housing are satisfied. See the section on lower income housing assistance for an explanation of these factors.

ELIGIBLE SPONSORS.-Housing owners of above projects eligible for rent supplement projects are: (1) nonprofit organizations; (2) cooperative corporations; (3) builder-seller or investor-sponsor arrangements; and (4) limited distribution corporations. Public bodies do not qualify. Housing must be financed under certain HUD programs or under State or local programs that provide loans, loan insurance, or tax abatements. Most construction is under the section 221 (d) (3) market interest rate program.

FAMILY ELIGIBILITY.-To be eligible for rent supplements, tenants must be aged 62 or over or handicapped; displaced by governmental action or natural disaster; occupants of substandard housing; or military personnel serving on active duty, or their spouses.

INCOME LIMITS.-Generally, the same as for admission to public housing in the locality. Income for purposes of determining eligibility and

amount of rent is gross family income excluding earnings of minors and temporary and unusual income reduced by $300 for each minor child in the family.

ASSET LIMITATIONS.-$2,000 for nonelderly families; $5,000 for elderly families. Assets include real property, savings, and other liquid personal property except personal effects and household furnishings. ACCOUNTING PERIOD AND PROCEDURES.-Tenants apply directly to the owner of the housing project and supply information regarding their current income and other eligibility conditions which is submitted to the HUD area or FHA insuring office for review and approval. Annual recertification is required, except for the elderly, who are recertified every 2 years. In addition, tenants are required to report any substantial changes in income (any increase resulting in a monthly income four or more times the full monthly rental for the unit) to the housing owner as it occurs. The housing owner must report change to administering agency. Amounts of rent charged to the tenant and rent supplement are changed as changes in income are reported or as indicated at the time of the annual recertification.

BENEFITS

Rent supplement payments are equal to the difference between the fair market rental established for the unit occupied and 25 percent of adjusted family income except that the supplement cannot exceed 70 percent or be less than 10 percent of the market rent. When family income increases to the point that it is no longer eligible for a supplement, it may continue living in the same unit and pay the market rent. Since the minimum supplement is 10 percent of the market rent, it is possible for a small increase in income above the amount which permits the minimum supplement to result in a loss of benefits equal to 100 percent or more of the increased income.

SECTION 236 INTEREST REDUCTION PAYMENTS-RENTAL AND COOPERATIVE HOUSING FOR LOWER INCOME FAMILIES 1

BASIC PROGRAM INFORMATION

LEGISLATIVE OBJECTIVE. To provide good quality rental and cooperative housing at reduced rents for lower-income families.

TYPE OF ASSISTANCE.-Interest reduction payments to a mortgagee on behalf of the mortgagor which reduce the debt service requirements of a market rate mortgage. Mortgages may be insured by the FHA or projects may be financed through a State or local program of loans, loan insurance, or tax abatement. Benefits are passed on to tenants in the form of lowered rents. Up to 20 percent of tenants may also receive rent supplement assistance, although this percentage may be increased or decreased by the Secretary of HUD to assure the economic viability of the project, to assure, insofar as is practicable, a reasonable range in income levels of tenants, or to meet the housing needs of elderly or handicapped families.

DATE ENACTED.-1968.

FINANCING.-Loan insurance is provided through the special risk insurance fund. The amount of outstanding contracts is limited by appropriation legislation. Interest reduction payments are financed through an appropriation from general revenues. Rents collected in excess of basic rental costs are deposited in a fund used for additional rent supplement assistance payments.

TYPE OF HOUSING.-Projects consist of (1) five or more units of detached housing (not necessarily contiguous), semidetached housing, row housing, walkup housing, or elevator structures which are (2) new structures or existing structures undergoing extensive rehabilitation and (3) primarily residential (but may include nondwelling commercial units).

LOCATION OF HOUSING.-Section 236 projects may be located whereever the HUD Secretary determines that certain factors relating to need for assisted housing are satisfied. See the section on lower income

1 The secs. 235 and 236 subsidized mortgage programs were suspended Jan. 5, 1973. Since that time no new commitments have been made. The Housing and Community Development Act of 1974, however, extends the authorization for both of these programs, and increases the amount of contract authority available to the 236 program.

housing assistance for an explanation of these factors. In addition, the Secretary is expected to approve commitment of available funds for new 236 projects when the community has identified its special housing needs and shown that these needs cannot be met through the leased housing program.

ELIGIBILITY OF SPONSORS.-Eligible mortgagor or sponsor must be (1) a private, nonprofit organization; (2) limited distribution corporation; (3) cooperative housing corporation; or (4) a builder who has made a prior agreement to sell to a nonprofit or cooperative organization. Public bodies do not qualify as mortgagors under this program. FAMILY ELIGIBILITY

Family composition.-Eligible rental and cooperative tenants who pay less than the fair market rental must meet one of the following conditions: (1) Be a family (two or more persons related by blood, marriage, or operation of law); (2) be single and at least 62 years of age; (3) be single and under 62 years of age (but no more than 10 percent of the eligible units may be occupied by this class of people); or (4) be handicapped (no age requirement). At least 20 percent of the total amount of contracts for assistance payments after June 30, 1974, must be in whole or in part for use by the elderly or handicapped. INCOME LIMITS.-Tenant incomes cannot exceed 80 percent of the median family income for the area. The HUD Secretary determines eligible income levels with adjustments for smaller or larger families, and may make further adjustments above or below the 80-percent level on the basis of prevailing levels of construction costs, unusually high or low median family incomes, or other factors.

DEFINITION OF INCOME.-Adjusted income is 95 percent of gross family income (90 percent in the case of elderly families), excluding the income of minors and full-time students, the first $300 of income of a secondary wage earner who is the spouse of the head of the household, nonrecurring income, extraordinary medical expenses, and $300 for each minor child in the family.

ASSETS TEST.-Tenants who receive rent supplement assistance must meet the assets test for that program ($5,000 limit for elderly families and $2,000 for nonelderly families). There is no asset limit for market rate tenants.

ACCOUNTING PERIOD AND PROCEDURES.-Income is reported to the owner of the project and is verified by a written certification from the employer. For self-employed persons, the latest Federal income tax return or other acceptable verification is subject to review by FHA. Recertification is required at 2-year intervals for tenants not in the rent supplement program. Tenants receiving rent supplements are recertified annually. Rents are adjusted according to income changes at the time of recertification.

BENEFITS

RENTAL CHARGES.-A basic monthly rental charge is established for each unit which is determined by the costs of operating the project with the debt service requirements of a mortgage bearing a 1-percent interest rate. A fair market monthly rental charge is established for

each unit based on costs of operation plus meeting the full debt service requirements of a market rate mortgage.

The tenant family pays the amount of the basic rental charge or an amount equal to 25 percent of adjusted family income, whichever is greater.

Families eligible for rent supplement assistance pay 25 percent of adjusted income and a rent supplement assistance payment is made by HUD to the project owner which is equal to the difference between the tenant's payment and the basic rent charge.

Amounts paid by tenants, and rent supplement to tenants receiving this assistance, are adjusted appropriately when income is recertified. Families may continue to live in the project when their income allows payment of the fair market rental.

Rents paid by tenants in excess of the basic rental charge are returned to HUD by the project owner.

Additional assistance payments may also be authorized by the Secretary of HUD to reflect increased property taxes and utility outlays, from a predetermined initial operating expense level.