Pre-1974 Section 202 Direct Loan Preservation
On April 26, 2018, HUD announced the publication of two Housing Notices published this year (described below) there are now comprehensive options for owners of properties with pre-1974 Section 202 Direct Loans to preserve the affordability of these properties by entering into long-term rental assistance contracts. HUD has also developed a 2-page flyer, “Key Concepts for Preservation of Pre-1974 Section 202 Direct Loan Properties,” to assist owners with understanding the preservation options. HUD is also developing a webinar on this topic, which will be announced at a future date.
Summary of Housing Notices
- Notice H 2018-02: “Refinancing of Pre-1974 Section 202 Direct Loans and Subsequent Issuance of Tenant Protection Vouchers (TPVs) or Senior Preservation Rental Assistance Contracts (SPRACs),” which supplements Notice H 2013-17 ("Updated Requirements for Prepayment and Refinance of Section 202 Direct Loans"), provides additional guidance to owners of pre-1974 Section 202 Direct Loan properties that have the option of refinancing the Section 202 Direct Loan for the purposes of reducing the interest rate and/or making capital improvements. Following the refinancing of a pre-1974 Section 202 Direct Loan, the Notice clarifies that the vouchers that are issued following the refinancing may be project-based (i.e., Project Based Vouchers or "PBV") without the need for a PHA to competitively select the property and without having to first offer the voucher to the affected families in the form of tenant-based assistance. The Notice also provides for the issuance of Senior Preservation Rental Assistance Contracts (SPRACs) for units that could not be covered by a PBV contract.
- PIH 2018-02 / H 2018-01: “Funding Availability for Set-Aside Tenant-Protection Vouchers – Fiscal Year 2017 Funding” explains the eligibility, application, and procedural requirements for Tenant Protection Voucher (TPV) "set-aside" funding for properties with maturing Section 202 Direct Loans and other HUD-held or insured mortgages. This TPV funding helps to ensure that certain at-risk households in low-vacancy areas can be protected with ongoing rental assistance and properties can be preserved as affordable housing. As is the case with refinancing, the vouchers that are issued as a result of a maturing loan may be project-based without the need for a PHA to competitively select the property and without having to first offer the voucher to the affected families in the form of tenant-based assistance.
Together, these Notices provide comprehensive options to preserve this important stock of affordable housing for the elderly.