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Mortgage Insurance for Rental Housing for the Elderly: Section 231

The Section 231 insures mortgage loans to facilitate the construction and substantial rehabilitation of multifamily rental housing for elderly persons (62 or older) and/or persons with disabilities.

Section 231 insures lenders against loss on mortgages. Section 231 was designed to increase the supply of rental housing specifically for the use and occupancy of elderly persons, and/or persons with disabilities. However, few projects have been insured under Section 231 in recent years;developers have opted to use Section 221(d)(4).

Type of Assistance:
FHA mortgage insurance for HUD-approved lenders.

Eligible Activities:
Insured mortgages may be used to finance the construction and substantial rehabilitation of detached, semidetached, walk-up, or elevator type rental housing designed specifically for elderly or handicapped individuals consisting of eight or more dwelling units. For nonprofit sponsors, the maximum loan amount is 100 percent of the estimated replacement cost of the building (or 100 percent of project value for rehabilitation projects). For all other sponsors, the maximum loan is 90 percent of the replacement cost (or 90 percent of project value for rehabilitation projects). Contractors for new construction or substantial rehabilitation projects are required to comply with prevailing wage standards under the Davis-Bacon Act.

Eligible Borrowers:
Mortgagors include private profit-motivated developers, and non-profit sponsors.

Eligible Customers:
All elderly or persons with disabilities are eligible to occupy apartments in a project whose mortgage is insured under the program.

The sponsor has a preapplication conference with the local HUD Multifamily Region to determine the feasibility of the project. The sponsor must then submit a site appraisal and market analysis (SAMA) application (new construction projects), or a feasibility application (substantial rehabilitation projects). Following HUD's issuance of a SAMA or feasibility letter, the sponsor submits a firm commitment application through a HUD-approved lender for processing. Considerations include market need, zoning, architectural merits, capabilities of the borrower, and availability of community resources. If the project meets program requirements, the local Multifamily Region issues a commitment to the lender for mortgage insurance.

Technical Guidance:
This program is authorized by Section 231 of the National Housing Act, as amended, Public Law 86-372 (73 U.S.C. 654 and 12 U.S.C. 1715 (V))). Program regulations are found in 24 CFR 231. The basic program instructions are in HUD Handbook 4570.1 - Housing for the Elderly for Project Mortgage on available on HUDclips. The program is administered by the Office of Multifamily Housing Programs, Office of Production, Program Administration Division.

Program Accomplishments:
In FY2023, the Department insured mortgages for 1 project with 37 units, totaling $2.7 million.

If you have questions regarding local projects/ properties proposals, financing or housing assistance, please click this link to find your closest local HUD Office and their Multifamily Production contacts.

If you have questions about HUD programs, policies and guidance in the MAP Guide, please click this link to use the HUD Exchange, "Ask A Question" form.

Last Updated: 10/11/2023