HUD, Industry Experts Share Senior Housing Preservation Strategies
Regulation | June 11, 2021 | by Juliana Bilowich
During an event hosted by LeadingAge, a HUD recapitalization official and experts from the consulting firm Hampden Park shared strategies for preserving pre-1974 HUD Section 202 direct loan properties, many of which are coming up on loan maturity.
On June 10, LeadingAge hosted a conversation on the preservation of pre-1974 HUD Section 202 direct loan properties. The Section 202 direct loan program was the first phase of HUD's Section 202 program and were aimed at helping seniors with low incomes age in community.
Speakers on the June 10 call included John Ardovini, HUD Office of Recapitalization, who discussed preservation options, and Naren Dhamodharan and Mark Oswanski, Hampden Park, who discussed the process for nonprofits to preserve this housing.
These first type of Section 202 properties were developed with a low-interest direct loan from HUD between 1959 and 1974, and many of the 50 year loan terms are quickly reaching maturity. HUD has made two preservation options available:
- At the Maturity of Your Pre-1974 Section 202 Direct Loan
- At the Prepayment and Refinance of Your Pre-1974 Section 202 Direct Loan
HUD's preservation options include tools for the property to receive project-based rental assistance through the Project-Based Voucher (PBV) program. Utilizing PBV assistance can help the Section 202 property improve project revenue, ensure ongoing affordability, and allow owners to leverage debt and equity to recapitalize the property. The preservation process can also utilize SPRACs (Senior Preservation Rental Assistance Contracts) for units that can't be covered by a project-based voucher or Tenant Protection Vouchers (TPVs) for properties where the loans have already matured.
Regardless of the preservation path utilized, HUD and industry experts recommended that housing providers get started early and prepare for a 9-12 month preservation process. Upon completion, the property can retain affordability and housing assistance under elderly-designated contracts for up to 20 years.
The speakers also discussed the process of working with a Public Housing Authority (PHA), which acts as a contract administrator for the project-based Vouchers and handles much of the bureaucratic processes previously left to the property, including waitlist management. Speakers also discussed the impact of preservation on current tenants.
The speaker slides are available here. A HUD resource on pre-1974 Section 202 preservation is available here.