oversight

Elderly Housing: Project Funding and Other Factors Delay Assistance to Needy Households

Published by the Government Accountability Office on 2003-05-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to the Special Committee on
             Aging, U.S. Senate



May 2003
             ELDERLY HOUSING
             Project Funding and
             Other Factors Delay
             Assistance to Needy
             Households




GAO-03-512
             a
                                                May 2003


                                                ELDERLY HOUSING

                                                Project Funding and Other Factors Delay
Highlights of GAO-03-512, a report to           Assistance to Needy Households
Special Committee on Aging, U.S. Senate




According to the Department of                  HUD’s Section 202 program provides a valuable housing resource for very
Housing and Urban Development                   low income elderly households. Although they represent a small share of all
(HUD), the most widespread and                  elderly households, very low income elderly renters have acute housing
urgent housing problem facing                   affordability problems because of their limited income and the need for
elderly households is affordability.            supportive services. The Section 202 program, which offers about 260,000
About 3.3 million elderly renter
households in the United States
                                                rental units nationwide and ensures that residents receive rental assistance
have very low incomes (50 percent               and access to services that promote independent living, is the only federal
or less of area median income).                 program devoted exclusively to providing this type of housing. However,
The Section 202 Supportive                      even with the program’s exclusive focus, Section 202 has reached only about
Housing for the Elderly Program                 an estimated 8 percent of very low income elderly households.
provides capital advances (grants)
to nonprofit organizations to                   About three-quarters of Section 202 projects in GAO’s analysis did not meet
develop affordable rental housing               HUD’s time guideline for gaining approval to start construction. These
exclusively for these households.               delays held up the delivery of housing assistance to needy elderly
GAO was asked to determine the                  households by nearly a year compared with projects that met HUD’s
role of the Section 202 program in              guideline. Several factors contributed to these delays, in particular capital
addressing the need for affordable
elderly housing and the factors
                                                advances that were not sufficient to cover development costs. Project
affecting the timeliness of                     sponsors reported that insufficient capital advances often forced them to
approving and constructing new                  spend time seeking additional funds from HUD and other sources. Although
projects.                                       HUD’s policy is to provide sufficient funding to cover the cost of
                                                constructing a modestly designed project, HUD has acknowledged that its
                                                capital advances for the Section 202 program sometimes fall short. Other
                                                factors affecting the timeliness of the approval process included inadequate
GAO is making recommendations                   training and guidance for field staff responsible for the approval process,
to reduce the time required for
                                                inexperienced project sponsors, and local zoning and permit requirements.
projects to receive approval from
HUD to start construction.
Specifically, GAO is recommending               Housing Cost Burdens of Very Low Income Elderly Renter Households in 2001
that HUD assess the effectiveness
of the methods it uses to calculate
the size of the Section 202 capital
advances and make any
appropriate changes to them. GAO
is also making other
recommendations to improve
HUD’s administration and
oversight of the 202 program’s
performance.

GAO provided a draft of this report
to HUD for comment. HUD agreed
with the report’s conclusions and
recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-03-512.

To view the full product, including the scope
and methodology, click on the link above.
For more information, contact David G. Wood
at (202) 512-8678 or WoodD@gao.gov.
Contents



Letter                                                                                                   1
                              Results in Brief                                                           3
                              Background                                                                 5
                              Section 202 Is an Important Source of Housing for Elderly
                                Households with Very Low Incomes                                         8
                              Section 202 Projects Reviewed Generally Did Not Meet Guidelines
                                for Timeliness                                                          13
                              Various Factors Can Impede the Timely Processing of Projects              18
                              Conclusions                                                               25
                              Recommendations                                                           25
                              Agency Comments and Our Evaluation                                        26


Appendixes
               Appendix I:    Scope and Methodology                                                     28
               Appendix II:   Budget Information for the Section 202 Program                            30
                              Section 202 Appropriations                                                30
                              Section 202 Unexpended Balances                                           31
              Appendix III:   Data Issues Concerning the American Housing Survey                        33
              Appendix IV:    Federal Housing Programs and the Elderly                                  41
                              Housing Production Programs That Develop Elderly Housing                  41
                              Target Households                                                         43
                              Annual Housing Production Levels                                          44
               Appendix V:    Section 202 Program Data                                                  46
              Appendix VI:    Survey of HUD Field Office Representatives                                56
             Appendix VII:    Survey of Section 202 Sponsors and Consultants                            64
             Appendix VIII:   Comments from the Department of Housing and Urban
                              Development                                                               70


Tables                        Table 1: HUD Income Categories                                             7
                              Table 2: Field Office Performance in Approving Projects for
                                       Construction within 18 and 24 Months                             16
                              Table 3: Field Office Performance and Problems with Funding
                                       Issues                                                           21
                              Table 4: Annual Appropriations for the Housing for Special
                                       Populations Account in Fiscal Years 1998-2002                    31
                              Table 5: Annual Balances of Unexpended Appropriations for
                                       Section 202 in Fiscal Years 1998-2002                            32



                              Page i                                 GAO-03-512 Section 202 Elderly Housing
Contents




Table 6: Housing Units Occupied by Homeowner and Renter
          Elderly Households in 2001                                        35
Table 7: Income Categories for Elderly Homeowner and Renter
          Households in 2001                                                36
Table 8: Elderly Renter Households with Very Low Incomes by
          Subsidy Status and Rent Burden in 2001                            37
Table 9: Moderate or Severe Rent Burden of Unassisted Very Low
          Income Elderly Renter Households by Region in 2001                37
Table 10: Number of Elderly Renter Households with Very Low
          Incomes by Subsidy Status and Rent Burden in
          Metropolitan Areas in 2001                                        38
Table 11: Proportion of Elderly Renter Households with Very Low
          Incomes by Subsidy Status and Rent Burden in
          Metropolitan Areas in 2001                                        39
Table 12: Number of Elderly Renter Households with Very Low
          Incomes by Subsidy Status and Rent Burden in
          Nonmetropolitan Areas in 2001                                     39
Table 13: Proportion of Elderly Renter Households with Very Low
          Incomes by Subsidy Status and Rent Burden in
          Nonmetropolitan Areas in 2001                                     40
Table 14: Active Federal Rental Housing Production and Insurance
          Programs by Household Type Served and Program Rent
          Levels                                                            43
Table 15: Approximate Volume of New Production of Housing Units
          by Active Federal Rental Housing Programs                         45
Table 16: Distribution of Section 202 Projects, Capital Advance
          Funds, and PRAC Funds, by Fiscal Year and Construction
          Approval Status                                                   46
Table 17: Status of Metropolitan and Nonmetropolitan Projects in
          Gaining Construction Start Approval, Projects Funded in
          Fiscal Years 1998 to 2000                                         47
Table 18: Field Office Performance in Approving Projects to Start
          Construction, All Projects Funded in Fiscal Years 1998 to
          2000                                                              48
Table 19: Field Office Performance in Approving Metropolitan
          Projects to Start Construction, All Metropolitan Projects
          Funded in Fiscal Years 1998 to 2000                               50
Table 20: Field Office Performance in Approving Nonmetropolitan
          Projects to Start Construction, All Nonmetropolitan
          Projects Funded in Fiscal Years 1998 to 2000                      52




Page ii                                  GAO-03-512 Section 202 Elderly Housing
          Contents




          Table 21: Average Duration of Stages of Section 202 Project
                    Development, Projects Funded Fiscal Years 1998 to 2000
                    That Were Approved to Start Construction                         54
          Table 22: Factors Cited by HUD in Approved Time Extensions for
                    Section 202 Projects Funded in Fiscal Years 1998 to
                    2000                                                             55


Figures   Figure 1: U.S. Homeowners and Renters in 2001                               5
          Figure 2: Housing Cost Burdens of Very Low Income Elderly
                    Renter Households in 2001                                         9
          Figure 3: Units Developed under Section 202 Compared with All
                    Units Occupied by Very Low Income Elderly Renter
                    Households, 1985 to 2001                                         12
          Figure 4: Section 202 Project Processing                                   14
          Figure 5: Average Elapsed Time for Completed Section 202
                    Projects Funded in Fiscal Years 1998 and 1999                    17
          Figure 6: Section 202 Unexpended Fund Balances as of End of
                    Fiscal Year End 2002                                             18
          Figure 7: Survey Responses—Insufficient Capital Advances and
                    Other Project Funding Issues                                     20
          Figure 8: Survey Responses—Field Office Staff Issues                       22
          Figure 9: Survey Responses—HUD Program Administration
                    Issues                                                           23




          Page iii                                GAO-03-512 Section 202 Elderly Housing
Contents




Abbreviations

AHS          American Housing Survey
AMI          area median income
BMIR         below-market interest rate
DAP          Development Application Processing System
FHA          Federal Housing Administration
HFA          housing finance agencies
HUD          Department of Housing and Urban Development
PRAC         project rental assistance contract
REMS         Real Estate Management System



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Page iv                                           GAO-03-512 Section 202 Elderly Housing
A
United States General Accounting Office
Washington, D.C. 20548



                                    May 30, 2003                                                                                 Lert




                                    The Honorable Larry Craig
                                    Chairman
                                    The Honorable John Breaux
                                    Ranking Minority Member
                                    Special Committee on Aging
                                    United States Senate

                                    According to the Department of Housing and Urban Development (HUD),
                                    the most widespread and urgent housing problem facing elderly
                                    households is affordability—that is, finding housing that is not too
                                    expensive relative to household income.1 In 2001, there were about 26
                                    million households nationwide in which the householder or householder’s
                                    spouse was 62 years or older.2 Of these elderly households, about 3.3
                                    million were renters with very low incomes, which HUD defines as 50
                                    percent or less of area median income. The Section 202 Supportive Housing
                                    for the Elderly Program (the Section 202 program) provides funds to
                                    nonprofit organizations to develop affordable rental housing exclusively
                                    for very low income elderly households that are not receiving other forms
                                    of housing assistance. In fiscal year 2002, the Section 202 program received
                                    about $783 million in appropriations to fund, among other things, the
                                    construction of over 6,000 rental units.

                                    The Section 202 program provides two types of financial support to
                                    nonprofit sponsors that develop and operate projects. First, project
                                    sponsors receive a capital advance, or a grant, to cover land and
                                    construction costs for projects of modest design that comply with HUD’s
                                    minimum property standards. HUD determines the amounts of capital
                                    advances using its published development cost limits, adjusted for areas
                                    with high construction costs. HUD’s policy is to have the capital advance
                                    cover total development costs without the need for sponsors to obtain
                                    additional funding from other sources. Second, after the project is
                                    completed and elderly tenants move in, the sponsor receives monthly


                                    1
                                     U.S. Department of Housing and Urban Development. Housing Our Elders. (Washington,
                                    D.C.: 1999). Also see Commission on Affordable Housing and Health Facility Needs for
                                    Seniors in the 21st Century. A Quiet Crisis in America: A Report to Congress. (Washington,
                                    D.C.: 2003).
                                    2
                                     A householder is the person whose name is on the lease, deed, or mortgage. We chose 62
                                    years to be consistent with HUD’s definition of elderly.




                                    Page 1                                             GAO-03-512 Section 202 Elderly Housing
rental assistance payments to defray some of the operating expenses. The
combination of a debt-free project and rental assistance payments enables
project sponsors to offer units at rents that are generally equal to 30
percent of the renter’s income. Section 202 also has requirements to ensure
that sponsors make the appropriate supportive services, such as
housekeeping and transportation, available to elderly tenants.

Each year HUD announces the availability of Section 202 funds. Potential
project sponsors submit their applications for these funds to HUD’s field
offices. An application includes the description of the sponsor’s nonprofit
status, past experiences in providing housing and supportive services, and
the housing needs of the elderly in the market area to be served. Once the
applications are ranked according to criteria published in the Federal
Register, field offices make their selection recommendations to HUD
headquarters. If HUD headquarters approves these recommendations, HUD
reserves funds for these proposed projects and sends notification letters to
project sponsors. Between the time HUD sends notification letters and
approves the start of construction, the sponsors’ must complete, and HUD
must approve, design plans and other documentation. These actions are
referred to as project processing. Generally, 45 of HUD’s 81 field offices are
responsible for processing Section 202 projects.

HUD’s guidelines stipulate that HUD field offices and project sponsors
should complete project processing within 18 months of the date the
funding is awarded.3 However, the field offices may grant extensions of up
to 6 months. Delays in processing hold up the distribution of funds and
contribute to the program’s annual unexpended balances.4 Between fiscal
years 1998 and 2002, for example, the program’s unexpended balances
increased from about $4.8 billion to $5.2 billion. Delays in processing also
hinder efforts to provide much-needed housing to very low income elderly
renter households.

This report addresses the role of the Section 202 program in responding to
the housing affordability needs of elderly renter households with very low
incomes and the program’s timeliness in processing projects for
construction and expending appropriated funds. As agreed with your

3
These guidelines are based on HUD regulation (24 C.F.R. 891.165).
4
 Unexpended balances include cumulative budget authority that has not been spent
(outlayed) and that may be carried over from one year to the next. These balances may
include either obligated or unobligated funds.




Page 2                                            GAO-03-512 Section 202 Elderly Housing
                   offices, our report discusses: (1) the role of the Section 202 program in
                   meeting the housing needs of elderly renter households with very low
                   incomes, (2) the extent to which Section 202 projects meet HUD’s time
                   guideline for project processing, and (3) the factors that keep Section 202
                   projects from meeting HUD’s time guideline for project processing.

                   To address these objectives, we analyzed data from the American Housing
                   Survey and other sources on the affordability of rental housing for very low
                   income elderly households and the levels of assistance the Section 202
                   program provides.5 In addition, we reviewed HUD program and budget
                   data, surveyed all HUD field offices that process Section 202 projects,
                   conducted site visits at selected offices, surveyed and interviewed project
                   sponsors and consultants experienced in working with the Section 202
                   program, and observed a HUD training program on processing Section 202
                   projects. Unless stated otherwise, our analysis focused on Section 202
                   projects funded between fiscal years 1998 and 2000. Lack of reliable
                   program data prevented us from reviewing all Section 202 projects funded
                   before fiscal year 1998. Appendix I provides detailed information on our
                   scope and methodology.

                   We conducted our work primarily in Washington, D.C., between May 2002
                   and March 2003, in accordance with generally accepted government
                   auditing standards.



Results in Brief   As the only federal housing program that targets all of its rental units to
                   very low income elderly households, Section 202 is an important source of
                   affordable housing for these households. Because very low income elderly
                   households often have difficulty affording market rents, program funding is
                   directed to localities based in part on their proportions of elderly renter
                   households that have a housing affordability problem—that is, that pay
                   over 30 percent of their income for rent. Nationwide, about half of the 3.3
                   million elderly renter households with very low incomes have a housing
                   affordability problem and do not receive government housing assistance.


                   5
                    The survey, which the Bureau of the Census conducts for HUD, collects data on the nation’s
                   housing in odd-numbered years. The national sample covers approximately 55,700 housing
                   units. All numerical estimates derived from the American Housing Survey have sampling
                   errors of ±10 percent or less of the value of those numerical estimates, unless otherwise
                   noted. All percentage estimates have sampling errors of ±6 percentage points or less, unless
                   otherwise noted.




                   Page 3                                             GAO-03-512 Section 202 Elderly Housing
Section 202 insulates tenants in housing units subsidized by the program
from increases in housing costs by limiting rents to 30 percent of household
income. Section 202 provided housing for an estimated one-fifth of the 1.3
million renter households that received government housing assistance.
Even with the program’s exclusive focus on these households, Section 202
has reached less than 8 percent of eligible households. And though some
other federal programs provide more rental housing for the elderly, they do
not focus exclusively on the very low income group.

More than 70 percent of Section 202 projects funded between 1998 and
2000 were delayed—that is, these projects took longer than the 18 months
set out in HUD’s guidelines to proceed from the date of the funding award
to the date of HUD’s approval to start construction. However, a majority of
projects were approved for construction within 24 months, or 18 months
plus the 6-month discretionary extension. Projects located in metropolitan
areas were more than twice as likely as projects in nonmetropolitan areas
to exceed the 18-month guideline. Further, projects that exceeded the 18-
month guideline ultimately took an average of 11 months longer to finish
than projects that met the time guideline, and these delayed projects
contributed to the program’s unexpended fund balances. At the end of
fiscal year 2002, 14 percent of the Section 202 program’s $5.2 billion in
unexpended funds was associated with projects that had not yet been
approved for start of construction after 18 months.

Several factors impeded the timely processing of projects, according to
project sponsors, consultants, and HUD field office staff. First, despite
HUD’s development cost policy, the capital advances that HUD awards do
not always cover the cost of developing projects. Field offices, sponsors,
and consultants reported that this factor often prolonged processing time,
in part because sponsors needed to seek additional funding. We found that
field offices that cited capital advance shortfalls and the need for sponsors
to seek outside funding were less likely to have met the 18-month
processing time guideline, compared with field offices that did not report
these problems. Second, field offices, sponsors, and consultants reported
that inconsistent implementation of procedures HUD adopted to
streamline processing by field office staff, as well as limited training and
out-of-date guidance on processing policies and procedures, impeded
timely processing. Third, prolonged response times from HUD
headquarters on requests for additional funds or time have affected
processing times, according to project sponsors and consultants and HUD
field offices. Fourth, HUD’s project monitoring system has limitations that
may impede HUD’s ability to oversee project timeliness. Finally, field



Page 4                                     GAO-03-512 Section 202 Elderly Housing
             offices, sponsors, and consultants reported that other factors—including
             inexperienced sponsors and local requirements in areas such as permitting
             and zoning—negatively affected processing time for some projects.

             This report contains recommendations to the Secretary of HUD designed to
             improve both the timeliness of project processing and program oversight.



Background   Elderly households occupied about 25 percent (26 million) of the
             approximately 106 million housing units in the U.S. in 2001, according to
             the Housing Survey. A large majority of these elderly households were
             homeowners. The homeownership rate was considerably higher for elderly
             households than for nonelderly households (fig.1). A smaller share of
             elderly households (19 percent) rented their homes. These elderly renter
             households comprised about 15 percent of all renter households
             nationwide.



             Figure 1: U.S. Homeowners and Renters in 2001

                                   Overall                                  Nonelderly              Elderly
                                (106 million)                               (80 million)          (26 million)




                                                 32%

                                                                                      36%
                          68%
                                                                          64%                             19%

                                                                                                    81%

                      Renters

                      Homeowners

             Source: GAO analysis of the American Housing Survey, 2001.




             Page 5                                                        GAO-03-512 Section 202 Elderly Housing
The Housing Act of 1959 (P.L. 86-372) established the Section 202 program,
which began as a direct loan program that provided below-market interest
rate loans to private nonprofit developers, among others, to build rental
housing for the elderly and people with disabilities. In 1990, the Cranston-
Gonzalez National Affordable Housing Act (P.L. 101-625) modified Section
202 by converting it from a direct loan program into a capital advance
program. In addition, the 1990 act created Section 811, another capital
advance program, to produce housing specifically for people with
disabilities and limited Section 202 to housing for the elderly.

In its current form, Section 202 provides capital advances—effectively
grants—to private nonprofit organizations (usually referred to as sponsors
or owners) to pay for the costs of developing elderly rental housing. As
long as rents on the units remain within the program’s guidelines for at
least 40 years, the sponsor does not have to pay back the capital advance.
HUD calculates capital advances in accordance with development cost
limits that it determines annually. These limits must account for several
factors, including the costs of construction, reconstruction, or
rehabilitation of supportive housing for the elderly that meets applicable
state and local housing and building codes. HUD must, by statute, use
current data that reflect these costs for each market area.6 HUD’s policy is
that these limits should cover the reasonable and necessary costs of
developing a project of modest design that complies with HUD’s minimum
property standards, accessibility requirements, and project design and cost
standards. Once HUD calculates a capital advance, the amount is placed on
reserve, and the funds are made available to the sponsor.7

To be eligible to receive Section 202 housing assistance, tenants must have
(1) one household member who is at least 62 years old and (2) household
income that does not exceed the program’s income limits. HUD has
established general income categories that it and other federal agencies use
to determine eligibility for many federal rental housing assistance
programs (table 1).8 These amounts are subject to adjustments in areas


6
12 U.S.C. 1701q(h)(1).
7
 In addition, HUD requires a minimum capital investment (generally not to exceed $10,000)
to assure the sponsor’s commitment to the housing.
8
 These other agencies include the Internal Revenue Service within the Department of the
Treasury and Rural Housing Service within the Department of Agriculture. Both of these
agencies administer affordable rental housing programs.




Page 6                                            GAO-03-512 Section 202 Elderly Housing
with unusually high or low incomes or housing costs and are published.
Only very low income households—those with incomes below 50 percent
of the area’s median income—are eligible for the Section 202 program.



Table 1: HUD Income Categories

Income category                                             Percent of area median income
Low income                                                                                 80%
Very low income                                                                            50%
Extremely low income                                                                       30%
Source: HUD.

Note: HUD does not officially refer to this category as “extremely low income,” but the term is
commonly used by housing experts to describe households that have incomes that do not exceed 30
percent of area median income.


Very low income households in Section 202 projects generally pay 30
percent of their income for rent. Because tenants’ rent payments are not
sufficient to cover the property’s operating costs, the project sponsor
receives an operating subsidy from HUD, called a project rental assistance
contract. Under the project rental assistance contract, HUD pays the
difference between the property’s operating expenses (as approved by
HUD) and total tenant rental receipts.9 Section 202 rental assistance is a
project-based subsidy and, as such, is tied to rental units. The households
receiving assistance can benefit from a project-based subsidy only while
living in Section 202 units.

For fiscal year 2002, Congress appropriated about $783 million for the
Section 202 program to fund the construction of over 6,000 new units as
well as new multiyear rental assistance contracts, service coordinators,
renewals of expiring rental assistance contracts, and other activities as
authorized by Section 202. From year to year, the Section 202 program has
carried balances of unexpended appropriated dollars. According to HUD,
in fiscal year 2002, the unexpended balance for Section 202 was
approximately $5.2 billion. About 41 percent of this balance was for capital
advance funds and 59 percent for rental assistance funds. Generally, some
of the program’s unexpended funds have not yet been awarded to projects,

9
 The term on rental assistance contracts is 5 years, although HUD has authorized these
contracts for as long as 20 years. After these contracts expire, HUD renews them for 5 years,
subject to the availability of funds.




Page 7                                               GAO-03-512 Section 202 Elderly Housing
                           and others are attributable to projects that have not begun construction.
                           Once construction begins, funds are expended over several years during
                           the construction phase and during the term of the project rental assistance
                           contract. See appendix II for additional budgetary data for the Section 202
                           program.



Section 202 Is an          Section 202 is the only federal housing program that targets all of its rental
                           units to very low income elderly households. Because these households
Important Source of        often have difficulty affording market rents, program funding is directed to
Housing for Elderly        localities based in part on their proportions of elderly renter households
                           that have a housing affordability problem—that is, that pay over 30 percent
Households with Very       of their income for rent and do not receive housing assistance. Nationwide,
Low Incomes                about 1.7 of the 3.3 million elderly renter households with very low
                           incomes have a housing affordability problem. Section 202 insulates
                           tenants in housing units subsidized by the program from increases in
                           housing costs by limiting rents to 30 percent of household income. The
                           program is a significant source of new and affordable housing for very low
                           income elderly households: in 2001, 1.3 million such households received
                           government housing assistance (about 40 percent of the total), and Section
                           202 provided housing for roughly one-fifth of them. Even with the
                           program’s exclusive focus on the very low income elderly, Section 202 has
                           reached only a small share of eligible households. Though some other
                           federal programs provide more housing for the elderly, they do not focus
                           exclusively on these renter households.



Section 202 Targets Very   Congress specifically intended the Section 202 program to serve very low
Low Income Elderly         income elderly households and to expand the supply of affordable housing
                           that can accommodate the special needs of this group.10 HUD takes into
Households and Makes       account the level of need for the kind of housing Section 202 provides when
Supportive Services        allocating program funds to the field offices. Thus, the criteria for
Available                  allocating funds to the offices include, among other things, the total
                           number of very low income elderly renters in the area and the number in
                           this group that pay more than 30 percent of their incomes for rent.

                           HUD’s allocation formula takes into account the amount of rent households
                           pay in relation to their income. According to the American Housing Survey,


                           10
                                12 U.S.C. 1701q(a).




                           Page 8                                     GAO-03-512 Section 202 Elderly Housing
in 2001 about 1.7 million households paid over 30 percent of their income
for rent.11 HUD classified the “rent burden” these households face as either
“moderate”—between 31 and 50 percent of household income—or
“severe”—more than 50 percent of household income. As figure 2
illustrates, about 35 percent (over 1 million) of all elderly renter
households with very low incomes had severe rent burdens, and about 15
percent (about 500,000) had moderate rent burdens.12 For detailed data on
housing needs of these households, including data for metropolitan and
nonmetropolitan areas, see appendix III.



Figure 2: Housing Cost Burdens of Very Low Income Elderly Renter Households in
2001




                                                             35% Severe rent burden
          40%
                                      50%                                                     Rent
                                                                                              burdened
                                                                                              households
                                                                                              (1.7 million)

                 10%                                         15% Moderate rent burden



                                                             Other
         Unassisted
                                      Total: 3.3 million households
         Assisted (subsidized)

Source: GAO analysis of the American Housing Survey, 2001.


Note: Other includes households that reported zero or negative income or no rent burden.




11
   As in other surveys, estimates from the American Housing Survey are subject to both
sampling and nonsampling errors. Appendix III provides the sampling error for all estimates
presented in this report and discusses the types of nonsampling errors that may affect the
estimates.
12
 The sampling error for these half a million households with moderate rent burden was
about ±78,410.




Page 9                                                                GAO-03-512 Section 202 Elderly Housing
                             Since Section 202 provides projects with rental assistance payments that
                             cover a portion of the rent for each unit, the tenants themselves pay rents
                             that equal a percentage of their household incomes—generally 30 percent.
                             This percentage remains constant, so the amount of rent tenants pay
                             increases only when household income rises, protecting them from rent
                             increases that might be imposed in the private housing market when, for
                             example, market conditions change. In contrast, low income elderly renter
                             households that do not receive this type of assistance—especially those
                             with very low incomes—are vulnerable to high rent burdens and increases
                             in housing costs. Most of these households have few or no financial
                             resources, such as cash savings and other investments, and rely primarily
                             on fixed incomes that may not increase at the same rate as housing costs.

                             Section 202 serves another important function, potentially allowing
                             households to live independently longer by offering tenants a range of
                             services that support independent living—for example, meal services,
                             housekeeping, personal assistance, and transportation. HUD ensures that
                             sponsors have the managerial capacity to assess residents’ needs,
                             coordinate the provision of supportive services, and seek new sources of
                             assistance to ensure long-term support. HUD pays a small portion of the
                             costs of providing these services through its rental assistance payments.13



Section 202 Provides an      Section 202 is an important source of housing for elderly households with
Estimated One-fifth of All   very low incomes.14 Between 1998 and 2001, Section 202 approved the
                             construction of from 3,890 to 7,350 assisted units annually, for an average
Government-subsidized        of about 5,690 units. According to the American Housing Survey, in 2001
Housing for Very Low         about 1.3 million, or 40 percent, of elderly renter households with very low
Income Elderly Renters       incomes received some form of rental assistance in 2001 from a
                             government housing program, including Section 202, public housing, or
                             housing vouchers (fig. 2).15 According to our analysis of HUD program data,
                             about 260,000 Section 202 units with rental assistance contracts (assisted
                             units) generally served very low income elderly households through 2001.
                             Taken together, these two sources of data suggest that around one-fifth of


                             13
                                  Tenants can also make co-payments to defray some of the services expenses.
                             14
                               The exact share of elderly units provided through the Section 202 program in relation to all
                             federal housing programs cannot be calculated because many of these programs are used in
                             combination with each other.
                             15
                                  These programs are described in appendix IV.




                             Page 10                                              GAO-03-512 Section 202 Elderly Housing
the 1.3 million assisted households identified in the American Housing
Survey received assistance from Section 202.16

Although Section 202 is an important source of affordable elderly housing,
the program reached a relatively small fraction of very low income elderly
renter households. Between 1985 and 2001 the number of units assisted
under the Section 202 program grew by about 4 percent annually, while the
number of very low income elderly renter households declined by almost 1
percent annually. Yet at any given point in this period, Section 202 had
reached no more than about 8 percent of these households that were
eligible for assistance under the program (fig. 3). Also, during this period,
many of these elderly renter households with very low incomes—ranging
from about 45 to 50 percent—had housing affordability problems.




16
 Since this estimate is derived from two different sources, we cannot give a precise
percentage, and thus, this estimate is intended to be illustrative. Appendixes I and III
contain discussions of the data limitations in both of these sources.




Page 11                                              GAO-03-512 Section 202 Elderly Housing
Figure 3: Units Developed under Section 202 Compared with All Units Occupied by
Very Low Income Elderly Renter Households, 1985 to 2001
4.0 Units in millions


3.5


3.0


2.5


2.0


1.5


1.0


0.5


0.0
          1985         1987        1989         1991         1993         1995         1997          1999         2001

                 Units occupied by elderly renters with very low income

                 Cumulative Section 202 units

                 Gap between eligible households and Section 202 units


Sources: GAO analysis of HUD Real Estate Management System and HUD tabulation of the American Housing Survey, 1985-2001.



Other federal programs that develop rental housing generally target
different income levels, serve other populations in addition to the elderly
(including families with children and people with disabilities) and do not
require housing providers to offer supportive services for the elderly. For
example, the Low-Income Housing Tax Credit Program, the largest of all
current production programs, subsidizes the construction of about 86,000
units annually. However, according to one source, only around 13,200 of
these units are intended for the elderly—and, unlike Section 202, not all of
these units serve very low income elderly renter households.17 In addition,
these programs also do not have specific requirements ensuring that
supportive services be available to elderly tenants. Appendix IV provides
additional information on other federal housing programs.



17
     Seniors Commission 2002, 53.




Page 12                                                             GAO-03-512 Section 202 Elderly Housing
Section 202 Projects         According to HUD policy, Section 202 projects should complete project
                             processing and be approved to start construction within 18 months after
Reviewed Generally           they are funded. Overall, 73 percent of Section 202 projects funded
Did Not Meet                 between fiscal years 1998 and 2000 did not meet this processing time
                             guideline. However, about 55 percent of the projects were approved within
Guidelines for               24 months. Projects located in metropolitan areas were about twice as
Timeliness                   likely as projects in nonmetropolitan areas to take more than 18 months to
                             be approved. The percentage of projects approved within the specified
                             time frame differed widely across HUD’s field offices, with field offices
                             located in the northeast and west approving the lowest percentages. As
                             well as taking longer to complete than other projects—thus delaying
                             benefits to very low income elderly tenants—projects that were not
                             approved for construction after the 18-month time frame accounted for 14
                             percent of the Section 202 program’s balance of unexpended
                             appropriations.



HUD Expects Projects to Be   Once HUD has made a funding award for a Section 202 project, HUD field
Approved to Start            office staff and project sponsors must complete various tasks, meetings,
                             and paperwork before construction can commence (fig. 4). In this report,
Construction within 18       we refer to the tasks that take place between (1) the date when HUD sends
Months                       a funding award letter to the sponsor and (2) the date that HUD authorizes
                             the sponsor both to begin construction and to start drawing down the
                             capital advance amount (initial closing) as project processing. The
                             duration of the project processing period depends, in part, on project
                             sponsors’ timeliness in submitting the required documentation to HUD’s
                             field office reviewers. For example, sponsors must create owner
                             corporations, hire consultants, obtain local permits and zoning approval,
                             and design architectural and cost plans, among other things. HUD field
                             offices must review all documentation before projects can be approved for
                             construction.




                             Page 13                                  GAO-03-512 Section 202 Elderly Housing
Figure 4: Section 202 Project Processing

                                                                                 18-month guideline




                                                                                                                          Approval for
    Application                                 Funding                                 Firm
                                                                                                                          construction                Construction
      review                                     award                              commitment
                                                                                                                             (initial                   begins
   and selection                                 letter                              application
                                                                    Sponsor                              Sponsor            closing)
                                                                    prepares                             obtains
                                                                    and HUD                           · Contractor
                                                                     reviews                          · Building permit
                                                               ·Architectural                          HUD reviews
                                                                plans
                                                               ·Cost estimates                        · Legal and
                                                               ·Other required                         other required
                                                                documentation                          documentation

Source: GAO presentation based on flowchart provided by HUD.




                                                               As figure 4 illustrates, HUD’s current time guideline for project processing
                                                               is 18 months. Individual field offices have the discretion to extend
                                                               processing for up to 6 more months without approval from HUD
                                                               headquarters, but all extensions beyond those additional 6 months (that is,
                                                               24 months after the funding award) require approval from headquarters.
                                                               After construction is authorized to begin, HUD gradually expends capital
                                                               advance funds to cover development costs incurred by the sponsor. When
                                                               construction is completed, HUD approves the final costs, and sponsors can
                                                               begin leasing to eligible tenants. Over time, sponsors draw down funds
                                                               from the reserved rental assistance amounts to support operating costs.

                                                               To help assure that field office staff and project sponsors could complete
                                                               project processing requirements within the 18-month time guideline, HUD
                                                               adopted changes in 1996 that were intended to streamline procedures.18
                                                               One of the key changes included requiring field office staff to accept
                                                               sponsor-provided certifications of architectural plans, cost estimates, and
                                                               land appraisals. Previously, field office staff performed detailed technical
                                                               reviews of these items. According to HUD policy, these streamlined
                                                               procedures should have been used to process all projects in our analysis,
                                                               which were funded between fiscal years 1998 and 2000.




                                                               18
                                                                    HUD Notice H 96-102.




                                                               Page 14                                                          GAO-03-512 Section 202 Elderly Housing
HUD Took Longer Than 18      Most Section 202 projects that received funding awards did not receive
Months to Approve Most       approval to begin construction within the 18-month guideline set out by
                             HUD. Altogether, 73 percent of projects funded from fiscal years 1998
Projects for Construction    through 2000 did not meet the 18-month guideline. These projects
                             accounted for 79 percent of the nearly $1.9 billion in funding awarded to
                             projects during this period. The percentage of projects exceeding the
                             guideline remained relatively stable over the years at around 72 percent
                             (fiscal year 1998) to 75 percent (fiscal year 2000). During this period, the
                             projects located in metropolitan areas (72 percent of all projects) were
                             about twice as likely as projects in nonmetropolitan areas to exceed the 18-
                             month guideline (see app. V for more detail).19

                             HUD field offices may grant up to 6-month extensions after the 18-month
                             guideline for projects needing more time to gain approval to start
                             construction, and many projects were approved within that 6-month time
                             frame. HUD approved 55 percent of the projects funded from fiscal years
                             1998 through 2000 for construction within 24 months of the funding
                             award—27 percent within 18 months and 28 percent within 19 to 24
                             months. The remaining 45 percent of projects took more than 24 months to
                             be approved. In addition, metropolitan projects were about twice as likely
                             as nonmetropolitan projects to take more than 24 months to gain approval
                             to start construction.



Field Offices’ Performance   We looked at the performance of the 45 individual HUD field offices that
in Meeting the Time          process Section 202 projects and found that they had varying degrees of
                             success in meeting the 18-month guideline. We evaluated their performance
Guideline Varied             by estimating the percentage of projects approved for construction (project
                             approval rate) within 18 months for each field office. Among these offices,
                             the median project approval rate for construction within 18 months was 22
                             percent (table 2), but field offices’ performance varied widely. Eight field
                             offices had no projects that met the 18-month guideline, while more than 90
                             percent of projects at one office did (see app. V for a breakdown of
                             approval rates by field office). Field offices’ performance varied by region,
                             with those located in the northeast and west being least likely to approve


                             19
                              HUD allocates Section 202 funding among field offices using a formula that targets funds
                             based on the unmet needs of elderly renter households with housing problems. Also, the
                             program allocates 85 percent of funding to metropolitan areas and 15 percent to
                             nonmetropolitan areas.




                             Page 15                                           GAO-03-512 Section 202 Elderly Housing
                              projects within 18 months of the funding award. Table 2 also shows the rate
                              of projects approved within 24 months.



                              Table 2: Field Office Performance in Approving Projects for Construction within 18
                              and 24 Months


                              Median project approval rate for field offices
                                                                                            Within 18 months                  Within 24 months
                              All field offices                                                                 22%                       60%
                                Offices in northeast                                                             9%                       36%
                                Offices in west                                                                 15%                       41%
                                Offices in south                                                                34%                       71%
                                Offices in midwest                                                              29%                       71%
                              Source: GAO analysis of HUD’s Development Application Processing (DAP) System, December 2002.

                              Note: The Puerto Rico field office is included in the median calculation for all field offices, but it is not
                              part of any region, according to the Bureau of the Census definition.




Delayed Projects Affect the   Meeting processing time guidelines is important because most of the delays
Program’s Production Times    in total production time—that is, the time between funding award and
                              construction completion—stem from the project processing phase. When
and Expenditures
                              we compared the average total production times for completed projects
                              that did not meet HUD’s 18-month processing guideline and those that did,
                              the delayed projects took 11 months longer than other projects to proceed
                              from funding award to construction completion (fig. 5). Since the average
                              time taken for the construction phase was very similar for all projects,
                              most of the 11-month difference in total production time was attributable
                              to the extra 10 months that delayed projects took to complete the
                              processing phase.




                              Page 16                                                              GAO-03-512 Section 202 Elderly Housing
Figure 5: Average Elapsed Time for Completed Section 202 Projects Funded in
Fiscal Years 1998 and 1999


Delayed projects                                              24 months                  12 months Total time:
                                                                                                   36 months



  Other projects                          14 months             11 months Total time:
                                                                          25 months


                   0           5           10            15   20          25        30          35        40
                   Months

                            Processing phase

                            Construction phase

Source: GAO analysis of HUD DAP system, December 2002.

Note: Projects funded in fiscal year 2000 are excluded from this analysis because no delayed projects
had completed construction.


Delayed processing of Section 202 projects also affected the Section 202
program’s overall balances of unexpended appropriations. At the end of
fiscal year 2002, for example, HUD had a total of $5.2 billion in unexpended
Section 202 funds (fig. 6). A relatively small part of these unexpended
funds—about 14 percent—was attributable to projects that had not yet
been approved to start construction, even though they had exceeded HUD’s
18-month processing time guideline. Consequently, none of the funds
reserved for these projects had been expended. By contrast, the remaining
86 percent of unexpended funds were associated with projects for which
HUD was in the process of expending funds for construction or rental
assistance. For example, almost half of the unexpended balances—about
48 percent—resulted from projects that had already been completed but
were still drawing down their rental assistance funds as intended under the
multiyear project rental assistance contract between HUD and the project
sponsor. (For additional details on unexpended fund balances, see app. II.)




Page 17                                                       GAO-03-512 Section 202 Elderly Housing
                         Figure 6: Section 202 Unexpended Fund Balances as of End of Fiscal Year 2002



                                                         14%                        Projects not approved for
                                                                                    construction after more than 18 months



                                                                 14%                Other
                                  48%


                                                          24%                       Projects not approved for
                                                                                    construction after less than 18 months



                                                                                    Completed projects
                                         Total: $5.2 billion
                         Source: GAO analysis of HUD DAP system and budget data as of September 30, 2002.


                         Note: Other includes projects under construction and funding for other program purposes.




Various Factors Can      Our review of projects funded from fiscal years 1998 through 2000 shows
                         that several factors can prevent Section 202 projects from meeting the 18-
Impede the Timely        month processing time guideline, including: issues related to capital
Processing of Projects   advances, field office practices and the training and guidance that HUD has
                         provided to field office staff, and HUD’s program administration and
                         oversight. First, despite HUD’s intent, capital advances were not always
                         sufficient to meet development costs. According to some sponsors and
                         consultants, this factor often led sponsors to seek funding from other
                         sources, including other HUD programs, which takes time. Second, some
                         field offices, sponsors, and consultants reported that some field office staff
                         had not fully implemented HUD’s streamlined processing procedures and
                         that HUD had offered only limited training and guidance to field office staff
                         on processing policies and procedures. Third, additional time was needed
                         for cases in which HUD headquarters responded to project sponsors’
                         requests for additional funds or processing time. Fourth, limitations in
                         HUD’s project monitoring system impeded its ability to oversee project
                         processing. Finally, factors external to HUD, such as sponsors’ level of
                         development experience and requirements established by local
                         governments, also hindered processing.



                         Page 18                                                              GAO-03-512 Section 202 Elderly Housing
Insufficient Capital     Although HUD policy intends for capital advances to fund the cost of
Advances Caused Some     constructing a modestly designed project, capital advances have not
                         always been sufficient to cover these expenses.20 HUD field staff, project
Sponsors to Seek Other   sponsors, and consultants reported that program limits on capital advances
Funding                  often kept projects from meeting HUD’s time guideline for approving
                         projects for construction. Most field offices, and every sponsor and
                         consultant that we surveyed, reported that insufficient capital advances
                         negatively affected project processing time, and a substantial majority of
                         respondents indicated that this problem occurred frequently (fig. 7). Many
                         respondents also reported that securing secondary financing to supplement
                         the capital advance amount often added to processing time. According to
                         some sponsors and consultants, the capital advance amounts set by HUD
                         were often inadequate to cover land, labor, and construction costs as well
                         as fees imposed by local government. As a result, sponsors had to seek
                         secondary financing from other federal, state, and local resources—
                         including other HUD programs—or redesign projects to cut costs, or both.
                         Some sponsors and consultants said that the search for secondary
                         financing could add months to the construction approval process because
                         funding application and award cycles for other programs varied and
                         because sponsors had to meet HUD’s documentation requirements for
                         every additional funding source before the agency could authorize
                         construction.




                         20
                              See 66 Fed. Reg. 6647 (22 Jan. 2001).




                         Page 19                                      GAO-03-512 Section 202 Elderly Housing
Figure 7: Survey Responses—Insufficient Capital Advances and Other Project
Funding Issues

                                                     Percent of respondents who said that factor:
     Factor that affects                             Has moderate to
     timely project processing                       significant impact                    Occurs often to always

     Capital advance                                                                89                  64
     insufficient to fund projects                                                   100                       90

     Sponsor has difficulty designing                                               91                    70
     project within capital advance amount                                          90                  62

                                                                           77                         57
     Securing secondary financing
                                                                          71                         52


           Field office representatives

           Sponsors and consultants

Source: GAO survey of HUD field offices and Section 202 sponsors and consultants.




HUD has recognized that the development cost limits it uses to calculate
capital advances have sometimes been inadequate and that, as a result, a
number of sponsors have had to seek additional funding to construct their
projects. According to a HUD official, the agency is currently considering
initiating a study to determine how to calculate capital advances that can
cover project development costs.

Our survey and program data showed that field offices that reported
problems with insufficient capital advances and sponsors securing
secondary financing had a lower percentage of projects that met the 18-
month time guideline than other offices (table 3).21 The median percentage
of projects meeting the 18-month guideline was much lower for field offices
that reported these problems than those that did not. In addition, field
offices in the northeast and west—the regions with the lowest percentage
of projects meeting the processing time guideline (see table 2 above)—
were more likely than those in the south and midwest to report having
problems with these factors.


21
 We considered a field office to have a problem with insufficient capital advances and
securing secondary financing if it reported that both of these factors occurred often to
always. We considered a field office not to have a problem with these two factors if it
reported that both of them occurred seldom or sometimes.




Page 20                                                                   GAO-03-512 Section 202 Elderly Housing
                              Table 3: Field Office Performance and Problems with Funding Issues

                                                                                                                    Median rate of projects
                                                                                                                          approved within
                                                                                                                                18 months
                              All field offices                                                                                        22%
                              Field offices that reported insufficient capital advances
                              and problems with sponsors obtaining secondary financing
                                Both factors are problems                                                                              18%
                                Neither factor is a problem                                                                            40%
                              Source: GAO survey of HUD field offices and Section 202 sponsors and consultants.

                              Note: Of the 44 field offices that responded to the survey, 25 reported having problems with both
                              factors and 15 reported having problems with neither factor. Three field offices reported problems with
                              only one of the factors, and one field office did not respond to the questions.




Varying Field Office          Differences in the procedures field offices use to approve projects for
Practices and Inadequate      construction and the extent of staff training and experience affected
                              project processing time. For example, most consultants and sponsors in
Staff Training and Guidance   our survey responded that the unwillingness of field office staff to
Affected Timely Processing    implement policy changes that HUD had adopted to streamline processing
                              caused delays, as did insufficient training for and inexperience of field
                              office staff (fig. 8). About 40 percent of them also reported that these
                              problems occurred frequently. In addition, some consultants and sponsors
                              whom we interviewed told us that some field offices continued to conduct
                              much more detailed and time-consuming technical reviews of project plans
                              than HUD’s current policies require. These sponsors and consultants said
                              that field staff departing from program guidelines caused confusion for
                              sponsors about the type of information HUD required and delayed the
                              process of obtaining HUD’s approval to begin construction. A majority of
                              HUD field office representatives also reported that a lack of staff training
                              and experience can have a negative effect on processing time. However,
                              HUD field office staff regarded these problems, as well as staff
                              unwillingness to implement policy changes, as infrequent problems. HUD
                              officials at headquarters acknowledged that some field staff were
                              performing technical reviews contrary to program guidelines, but the
                              officials did not know how many staff were doing so.




                              Page 21                                                                 GAO-03-512 Section 202 Elderly Housing
Figure 8: Survey Responses—Field Office Staff Issues

                                                     Percent of respondents who said that factor:
     Factor that affects                             Has moderate to
     timely project processing                       significant impact                  Occurs often to always

                                                                     55                  11
     Staff lack Section 202 training
                                                                                    90            38

                                                                   52                         7
     Staff lack Section 202 experience
                                                                                    90            38

     Some staff unwilling to fully                        25                              2
     implement streamlining procedures                                      76                         48


           Field office representatives

           Sponsors and consultants

Source: GAO survey of HUD field offices and Section 202 sponsors and consultants.



HUD has provided limited guidance for field office staff on processing
policies and procedures, which would ensure that all staff are up to date on
the most current guidelines and requirements. In 1999, HUD headquarters
issued a memorandum that reminded field office staff to process projects
in accordance with streamlined procedures that had been adopted in 1996,
such as replacing detailed technical review of project plans by field office
staff with sponsor-provided certifications. Yet at the time of our review,
most field office staff had not received any formal training on Section 202
project processing. According to HUD, in 2002, the agency required
representatives from each field office to attend the first formal training on
project processing for field office staff since at least 1992. Although HUD
headquarters expected those who attended to relay what they had learned
to other staff members in their own offices, our survey showed that by
November 2002 no on-site training had occurred at about a quarter of the
field offices. Also, only two field offices (5 percent) reported that training
was relayed in a formal setting.

We also found that HUD’s field office staff was relying on out-of-date
program handbooks that did not reflect the streamlined processing
procedures.22 Although HUD stated that the agency intended to issue


22
 Handbook No. 4571.5 was issued on July 21, 1992. Handbook No. 4571.3 REV-1 was issued
on April 9, 1993.




Page 22                                                                   GAO-03-512 Section 202 Elderly Housing
                          revised handbooks in order to ensure that all field offices follow current
                          procedures, it had not yet done so at the time of our review. Based on
                          written comments in our survey, some field office staff felt that an updated
                          handbook would aid in the timely processing of Section 202 projects.



Administrative and        The time that HUD headquarters took to make certain administrative
Oversight Weaknesses at   decisions also added to the time taken to process Section 202 projects.
                          HUD headquarters must approve all requests for additional time to
HUD Headquarters
                          complete processing beyond 24 months after funding award and for
Contributed to Delays     additional capital advance funds. A HUD official noted that projects must
                          already have exceeded the 18-month time guideline, and the discretionary
                          6-month extension, before HUD headquarters would be called on to
                          approve a request for a time extension beyond 24 months. However, most
                          of the field office representatives and project sponsors and consultants in
                          our survey agreed that the time HUD headquarters took to make these
                          decisions further prolonged processing time, with many respondents
                          reporting that this issue was a frequent problem (fig. 9).



                          Figure 9: Survey Responses—HUD Program Administration Issues

                                                                               Percent of respondents who said that factor:
                           Factor that affects                                 Has moderate to
                           timely project processing                           significant impact                  Occurs often to always

                           Time spent by HUD headquarters                                            73                         59
                           considering waiver requests                                                        90           43


                                   Field office representatives

                                   Sponsors and consultants

                          Source: GAO survey of HUD field offices and Section 202 sponsors and consultants.




                          Further, HUD’s project monitoring system was not as effective as it could
                          have been and may have impeded HUD’s oversight of project processing.
                          HUD officials stated that, to monitor project processing, headquarters has
                          periodically used its Development Application Processing (DAP) system to
                          identify projects that exceeded the 18-month processing time guideline. In
                          addition, the officials stated that headquarters contacted field offices on a




                          Page 23                                                                  GAO-03-512 Section 202 Elderly Housing
                         quarterly basis to discuss the status of these delayed projects.23
                         Nevertheless, HUD headquarters officials have acknowledged that there
                         are data inaccuracies in the DAP system, and the agency has instituted
                         efforts to improve the system’s reliability in identifying delayed projects.
                         Furthermore, according to HUD, the DAP system does not collect data that
                         would allow both headquarters and field office staff to follow a project
                         through every stage of development and, as a result, many field offices
                         maintain their own tracking systems to monitor projects through these
                         stages. The lack of reliable, centralized data on the processing of Section
                         202 projects has limited HUD headquarters’ ability to oversee projects’
                         status, determine problematic processing stages, and identify field offices
                         that might need additional assistance. HUD officials stated that enhancing
                         the DAP system is a priority, but that a lack of funding has hindered such
                         efforts.



Issues External to HUD   Finally, other factors outside of HUD’s direct control kept some projects
Caused Some Delays       from meeting time guidelines. Ninety-five percent of field office
                         representatives and 90 percent of sponsors and consultants surveyed
                         reported that project processing time was negatively affected when project
                         sponsors were inexperienced. Nearly 60 percent of field offices, and almost
                         40 percent of sponsors and consultants, indicated that this problem
                         occurred frequently. Local government requirements also negatively
                         affected project processing, according to about 60 percent of field offices
                         and about 85 percent of sponsors and consultants. About 35 percent of field
                         offices and about 60 percent of sponsors and consultants reported that
                         these requirements were frequently a problem. Also about 70 percent of
                         field offices, sponsors, and consultants reported that, specifically, the local
                         zoning process had a negative effect on project processing time, with about
                         40 percent of field offices and about 50 percent of sponsors and consultants
                         indicating that this problem was frequent.

                         Most field offices, sponsors, and consultants reported that other factors,
                         such as community opposition and environmental issues, affected
                         processing times but were not frequent problems for Section 202 projects.
                         Although about 50 percent of field offices, and about 60 percent of


                         23
                          The agency has made some progress in approving some of these projects for construction
                         or canceling them if they are no longer feasible. For example, 16 of the 169 projects that
                         were pending construction approval at the end of fiscal year 2002 were approved for
                         construction by December 2002, and 6 others had their funding awards canceled.




                         Page 24                                           GAO-03-512 Section 202 Elderly Housing
                  sponsors and consultants, reported that community opposition had a
                  negative effect on project processing time when it occurred, less than 10
                  percent of field offices, and about 30 percent of sponsors and consultants,
                  reported such opposition to be a frequent problem. Also, about 50 percent
                  of field offices, sponsors, and consultants indicated that environmental
                  problems negatively affect processing when they occur, but only about 20
                  percent of them considered environmental problems to occur frequently.
                  Appendixes VI and VII provides additional details on the results of our
                  survey of HUD field office staff, sponsors, and consultants.



Conclusions       The housing affordability problems of very low income elderly renter
                  households—although they represent a small share of all elderly
                  households—are particularly acute. These households represent one of the
                  more vulnerable populations in the nation given their small incomes and
                  need for supportive services. Considering the urgent housing needs of the
                  Section 202 program’s target population, ensuring that its projects are
                  completed as soon as possible is critical. Delays in timely Section 202
                  processing can prolong project completion, on average, by nearly a year
                  and result in higher balances of unexpended funds. Awarding capital
                  advances that are sufficient to cover project development costs can
                  alleviate delays by averting the need for sponsors to seek secondary
                  financing or request approval from HUD headquarters for additional
                  funding. While sufficient capital advance funding for projects, absent
                  additional appropriations, can result in fewer units funded annually, it can
                  also result in the prompt delivery of housing assistance to needy
                  households and in the reduction of unexpended balances attributable to
                  delayed projects. In addition, issuing an updated program handbook and
                  providing adequate formal training can help in timely project processing by
                  ensuring that staff are accountable for applying and interpreting HUD
                  policies and procedures in a consistent manner. Finally, HUD’s project
                  monitoring system, in its current form, is not as effective as it can be and
                  may hinder HUD’s oversight. Maintaining reliable, centralized data on the
                  processing of Section 202 projects is essential to overseeing projects’ status
                  as well as determining problematic processing stages.



Recommendations   To reduce the time required for projects to receive approval to start
                  construction, we recommend that the Secretary of Housing and Urban
                  Development direct the Assistant Secretary for Housing to (1) evaluate the
                  effectiveness of the current methods for calculating capital advances and



                  Page 25                                    GAO-03-512 Section 202 Elderly Housing
                      (2) make any necessary changes to these methods, based on this
                      evaluation, so that capital advances adequately cover the development
                      costs of Section 202 projects consistent with HUD’s project design and cost
                      standards. In addition, to improve the performance of HUD field office and
                      headquarters staff in processing projects in a timely manner, we
                      recommend that HUD

                      • provide regular training to ensure that all field office staff are
                        knowledgeable of and held accountable for following current
                        processing procedures,

                      • update its handbook to reflect current processing procedures, and

                      • improve the accuracy and completeness of information entered in the
                        DAP system by field office staff and expand the system’s capabilities to
                        track key project processing stages.



Agency Comments and   We provided a draft of this report to HUD for its review and comment. In a
                      letter from the Assistant Secretary for Housing (see app. VIII), HUD agreed
Our Evaluation        with the report’s conclusions, stating that the report demonstrated an
                      excellent understanding of the importance of the Section 202 program in
                      delivering affordable housing to very low income elderly households. HUD
                      also concurred with the recommendations and provided information on
                      how it intends to implement them. Regarding our recommendations
                      concerning HUD’s capital advance formula, the agency agreed that, in some
                      locations, capital advances may be insufficient to cover project
                      development costs and that delays can result when sponsors must seek
                      additional funds from other sources. However, HUD also noted that
                      increasing the per-unit development cost limits would result in fewer units
                      constructed. Our draft report reached the same conclusion, but also stated
                      that sufficient capital advances yield important benefits, such as the
                      prompt delivery of housing assistance to needy households.


                      As agreed with your offices, unless you publicly announce the contents of
                      this report earlier, we plan no further distribution until 30 days from the
                      report date. At that time, we will send copies of this report to interested
                      members of Congress and congressional committees. We also will send
                      copies to the HUD Secretary and make copies available to others upon




                      Page 26                                     GAO-03-512 Section 202 Elderly Housing
request. In addition, the report will be available at no charge on the GAO
Web site at http://www.gao.gov.

Please contact me at (202) 512-8678 or Paul Schmidt at (312) 220-7681, if
you or your staff have any questions concerning this report. Key
contributors to this report were Susan Campbell, Emily Chalmers,
Mark Egger, Daniel Garcia-Diaz, Curtis Groves, Ron La Due Lake,
Marc Molino, Melissa Roye, William Sparling, and Julianne Stephens.




David G. Wood
Director, Financial Markets and
 Community Investment




Page 27                                   GAO-03-512 Section 202 Elderly Housing
Appendix I

Scope and Methodology                                                                        A
                                                                                             A
                                                                                             ppep
                                                                                                nen
                                                                                                  d
                                                                                                  xIeis




             We conducted this review to address: (1) the role of the Section 202
             program in meeting the housing needs of elderly renter households with
             very low incomes, (2) the extent to which Section 202 projects meet the
             Department of Housing and Urban Development’s (HUD) time guidelines
             for project processing, and (3) the factors that keep Section 202 projects
             from meeting HUD’s time guidelines for project processing.

             To determine the role of the Section 202 program in meeting housing needs
             of elderly households, we analyzed household income and rental housing
             cost data from the American Housing Survey. The Bureau of the Census
             performs the survey for HUD every odd-numbered year. Appendix III
             provides a detailed discussion of the American Housing Survey. We also
             reviewed studies that involved the housing needs of elderly households.

             To determine the extent to which HUD’s Section 202 and other housing
             programs serve elderly households, we used data from HUD’s Real Estate
             Management System (REMS) as of the beginning of calendar year 2003.
             Specifically, we analyzed information on the overall number of properties
             and their associated units under Section 202 and other housing programs
             that serve the needs of elderly households. Although we did not
             independently verify the accuracy of the program data, we did perform
             internal checks to determine (1) the extent to which the data fields were
             populated, (2) the reasonableness of the values contained in the data fields,
             and (3) if any aberrations existed in the data we used. We concluded that
             the REMS data was reliable for purposes of this report. We also reviewed
             relevant regulations, policies, and procedures for Section 202 and other
             active federal programs.

             To explore the issue of timeliness in processing and some of the factors
             that may impede timely processing, we reviewed HUD program and budget
             data from HUD’s Development Application Processing (DAP) System as of
             the end of calendar year 2002. Because HUD headquarters officials told us
             that program data from this system was not reliable for Section 202
             projects funded before fiscal year 1998, we limited our review of Section
             202 projects to those funded from fiscal years 1998 to 2000. While we did
             not independently verify the accuracy of the program data from this
             system, we periodically discussed the accuracy and interpretation of the
             data we used with HUD officials. In addition, we compared file records for
             projects funded since fiscal year 1998 with the data entered in the system
             for those projects by three HUD field offices that process Section 202
             projects and generally found the data to be accurate. Also, we performed
             internal checks to determine the extent to which the data fields in DAP



             Page 28                                    GAO-03-512 Section 202 Elderly Housing
Appendix I
Scope and Methodology




were populated and the reasonableness of the values contained in these
fields. In cases where the data were not reasonable or questions arose, we
contacted a HUD official to identify and correct errors. To determine the
reasons why HUD awarded time extensions for certain projects listed in
the system, we compiled and analyzed HUD’s published notices of these
extensions in the Federal Register.

We also used a questionnaire to survey of all HUD field offices that process
Section 202 projects. About 98 percent (44 out of 45) of the field offices that
process Section 202 projects completed the questionnaire. We also
conducted site visits at the Greensboro and Richmond field offices to
obtain field office staff perceptions on factors that may impede timely
processing. In addition, to gain a fuller perspective on these issues, we
surveyed sponsors and consultants, identified by HUD and others, that
were experienced in working with Section 202 projects. Collectively, these
sponsors and consultants worked on approximately 260 projects since
fiscal year 1998 representing approximately 40 percent of Section 202 units
funded. In addition, we observed a HUD training session on processing
Section 202 projects in August 2002.

We conducted our work primarily in Washington, D.C., between May 2002
and March 2003, in accordance with generally accepted government
auditing standards.




Page 29                                     GAO-03-512 Section 202 Elderly Housing
Appendix II

Budget Information for the Section 202
Program                                                                                                              AppenIx
                                                                                                                           di




                 This appendix provides information on the Housing for Special Populations
                 appropriations account, which provides funding for the Section 202 and
                 Section 811 programs.1 In fiscal year 2002, Congress appropriated over $1
                 billion for the Housing for Special Populations account—of which $783
                 million was earmarked for the Section 202 program. From year to year, the
                 Section 202 program carries significant balances of unexpended
                 appropriated funds. In fiscal year 2002, the unexpended balance for the
                 Section 202 program was $5.2 billion.



Section 202      In fiscal year 2002, Congress appropriated over $1 billion for the Housing
                 for Special Populations appropriations account, which provides funding for
Appropriations   both the Section 202 Supportive Housing for the Elderly and the Section
                 811 Supportive Housing for Persons with Disabilities Programs.2 Since
                 fiscal year 1998, a total of $4.6 billion in appropriations were made
                 available for both programs (table 4). In fiscal year 2002, the lion’s share of
                 the appropriations for the Housing for Special Populations account, about
                 $783 million or 76 percent, went to the Section 202 program to fund, among
                 other things, capital advances and project rental assistance contracts
                 (PRACs) for new projects and PRAC renewals for existing projects.3 Since
                 fiscal year 1998, about $3.6 billion have been appropriated for the Section
                 202 program. Appropriations for the Section 202 program in nominal
                 dollars (that is, unadjusted for inflation) have increased since fiscal year
                 1998 at an average annual rate of about 5 percent. However, appropriations
                 for Section 202 in constant 1998 dollars have increased by an average rate
                 of about 2 percent annually.



                 1
                  For fiscal year 2004, HUD proposed to separate the Housing for Special Populations
                 account into two accounts—Housing for the Elderly and Housing for Persons with
                 Disabilities.
                 2
                  The period of availability for obligating Section 202 funds has been limited in recent years.
                 The fiscal year 2003 appropriations act, for example, requires HUD to obligate fiscal year
                 2003 funds for the Section 202 program by the end of fiscal year 2006. Under 31 U.S.C. 1552,
                 HUD is required to disburse, and the project owner to expend, all obligated Section 202
                 funds by the end of the fifth fiscal year after the period of availability for obligation ends—in
                 the case of Section 202 funds for fiscal year 2003, no later than the end of fiscal year 2011.
                 Any remaining balance (whether obligated or unobligated) in the account after the fifth year
                 is to be canceled and is not available for obligation or expenditure.
                 3
                  PRACs provide rental assistance payments to a property to pay the difference between the
                 units’ approved operating costs and the tenant rental contributions (generally 30 percent of
                 adjusted income).




                 Page 30                                               GAO-03-512 Section 202 Elderly Housing
                      Appendix II
                      Budget Information for the Section 202
                      Program




                      Table 4: Annual Appropriations for the Housing for Special Populations Account in
                      Fiscal Years 1998-2002


                      Nominal dollars in millions
                                                                          Section 202    Section 811 Supportive
                                              Housing for Special Supportive Housing       Housing for Persons
                      Fiscal year                   Populations        for the Elderly          with Disabilities
                      1998                                  $839                 $645                       $194
                      1999                                   854                  660                        194
                      2000                                   911                  710                        201
                      2001                                   994                  777                        217
                      2002                                 1,024                  783                        241
                      Total                                4,622                3,575                      1,047
                      Source: GAO analysis of HUD data.




Section 202           The Section 202 program carries significant balances of unexpended
                      appropriations from year to year. Unexpended balances include the
Unexpended Balances   cumulative amount of budget authority that has not been spent (outlayed)
                      and may consist of either obligated or unobligated funds. Some of the
                      unexpended balances are expected to be carried over annually for various
                      programmatic reasons, including the time required for project sponsors to
                      prepare their application for program funds and finalize plans as well as the
                      time required for HUD’s field offices to review and process them. However,
                      some unexpended funds can also result from problems in the timeliness of
                      project processing. Between fiscal years 1998 and 2002, the program’s
                      unexpended balance increased from about $4.8 billion to $5.2 billion. In
                      nominal dollars, this balance has increased by an average annual rate of
                      about 2 percent between fiscal years 1998 and 2002. In constant 1998
                      dollars, unexpended balances for Section 202 actually decreased by an
                      average rate of less than 1 percent annually. Table 5 shows the annual
                      balances of unexpended appropriations for the Section 202 program since
                      fiscal year 1998.




                      Page 31                                              GAO-03-512 Section 202 Elderly Housing
                                         Appendix II
                                         Budget Information for the Section 202
                                         Program




Table 5: Annual Balances of Unexpended Appropriations for Section 202 in Fiscal Years 1998-2002

Nominal dollars in millions
                                                                             Fiscal year
                                                    1998             1999              2000               2001              2002
Section 202 Supportive Housing for the
Elderly                                            $4,839          $4,998            $5,048             $5,138            $5,219
  Capital advance                                   1,774           1,789             1,949              2,041             2,164
  PRAC (rental assistance)                          3,065           3,209             3,099              3,097             3,055
Housing for Special Populations                     6,343           6,547             6,701              6,899             7,074
Source: GAO analysis of HUD data.


                                         As table 5 shows, unexpended PRAC funds account for a large share of the
                                         total unexpended balances for the Section 202 program as well as for the
                                         overall Housing for Special Populations account. Before fiscal year 1997,
                                         HUD provided individual projects with PRAC amounts that covered rental
                                         assistance payments generally for 20 years. Since fiscal year 1997, HUD
                                         provided PRAC amounts that covered rental assistance payments for 5
                                         years. In both cases, PRAC funds are obligated, but remain unexpended, for
                                         multiple years after project occupancy—unlike capital advance funds,
                                         which are fully expended by project completion. With the reduction of the
                                         PRAC term from 20 to 5 years, HUD expects PRAC funds to comprise a
                                         declining share of the overall unexpended balance for the Section 202
                                         program.




                                         Page 32                                           GAO-03-512 Section 202 Elderly Housing
Appendix III

Data Issues Concerning the American Housing
Survey                                                                                                     Appen
                                                                                                               Ix
                                                                                                                di




               In reporting on the housing affordability problems of elderly renter
               households with very low incomes, this report relies on data from the 2001
               American Housing Survey (AHS). We assessed the reliability of the data by
               reviewing AHS documentation, performing electronic testing of the data
               files to check for completeness of data files, and replicating published
               tables.1 We determined that the data are reliable enough for the purposes of
               this report.

               AHS is a probability sample of about 55,700 housing units interviewed
               between August and November 2001.2 Because this sample is based on
               random selections, the specific sample selected is only one of a large
               number of samples that might have been drawn. Since each sample could
               have provided different estimates, we express our confidence in the
               precision of this sample’s results as 95 percent confidence intervals (for
               example, +7 percentage points). This is the interval that would contain the
               actual population value for 95 percent of the samples that could have been
               drawn. As a result, we are 95 percent confident that each of the confidence
               intervals in this report will include the true values in the study population.
               In the following section, we provide 95 percent confidence intervals for the
               estimates used in this report. We calculated these confidence intervals by
               adding and subtracting the sampling error for each estimate to or from the
               estimate itself.3

               Estimates from the survey are also subject to certain nonsampling errors,
               such as incomplete data and wrong answers. According to the survey
               documentation, errors due to incomplete data and wrong answers can be
               greater than sampling errors for some survey questions.4 Of the survey
               questions we rely upon for our analysis (age, tenure, income, housing costs,
               rent subsidies, and location), the survey question on income was subject to


               1
                U.S. Census Bureau, Current Housing Reports – Series H150/01, American Housing
               Survey for the United States: 2001. This report can be found at
               http://ww.huduser.org/datasets/ahs.html.
               2
                For a description of the sample design, refer to Appendix B of U.S. Census Bureau, Current
               Housing Reports – Series H150/01, American Housing Survey for the United States: 2001.
               3
                The formulas and methodology for computing these sampling errors are provided in
               Appendix D of U.S. Census Bureau, Current Housing Reports – Series H150/01, American
               Housing Survey for the United States: 2001.
               4
                A more complete discussion of these sources of error (including response inconsistencies
               for various questions) can be found in Appendix D of the Census’ Current Housing Reports
               for 2001.




               Page 33                                           GAO-03-512 Section 202 Elderly Housing
Appendix III
Data Issues Concerning the American
Housing Survey




a high level of inconsistency in survey responses. Also relevant to this
report, AHS is known to underreport income when compared to the
Current Population Survey and other independent sources. However, our
analysis concentrates on elderly renters with very low income, for which
this should be less of an issue. According to a Census study based on
relatively older data (from the early 1980s), much of the underreporting of
income in the survey seems to derive from interest and dividend income as
well as wages and salary.5 Consequently, the underreporting of income may
be less of a problem among very low income elderly households who do
not tend to rely on these sources of income. Generally, HUD’s own internal
analysis suggests that very low income renters in AHS tend to report their
income more accurately than other groups. For example, in an unpublished
analysis, HUD found that the income reported by very low income renters
in the 1989 AHS was about 2 percent greater than the income reported in
the 1990 Decennial Census. Nonetheless, current information on the extent
of underreporting, especially among elderly renter households with very
low incomes, is not available.

The survey also collects data on the type of government housing assistance
the household receives. For example, it asks if the household lives in a unit
owned by a public housing authority or receives vouchers. However,
households surveyed may misreport their specific programs. As a result,
the survey does not provide sufficient and reliable detail on the specific
housing assistance program that is serving the household. According to the
survey documentation, units requiring income verification are usually
subsidized.

Table 6 shows the distribution of units that are occupied by homeowners
and renters in 2001. A great majority of elderly households were
homeowners. About 21 million (± 460,000) of 26 million (± 498,000) elderly
households owned their homes. Elderly renter households consisted of
about 5 million (± 242,000) households.




5
 U.S. Census Bureau, Current Housing Reports – Series H121/95-01, American Housing
Survey: A Quality Profile, July 1996.




Page 34                                         GAO-03-512 Section 202 Elderly Housing
Appendix III
Data Issues Concerning the American
Housing Survey




Table 6: Housing Units Occupied by Homeowner and Renter Elderly Households in
2001


Units in thousands
                                                                              95 percent confidence
                                                                                     interval
                                                                   Sampling
                                                    Estimate          error          From              To
Elderly
Owner occupied                                         21,324           460        20,864          21,784
Renter occupied                                          5,028          242          4,787          5,270
   Cash rent                                             4,528          230          4,299          4,758
   No cash rent                                              500         78           422             578
Total                                                  26,353           498        25,855          26,850


Nonelderly
Owner occupied                                         50,941           591        50,350          51,532
Renter occupied                                        28,968           514        28,454          29,483
 Cash rent                                             27,520           505        27,015          28,026
 No cash rent                                            1,448          132          1,316          1,580
Total                                                  79,909           555        79,354          80,463


All
Owner occupied                                         72,265           579        71,686          72,844
Renter occupied                                        33,996           541        33,455          34,537
 Cash rent                                             32,049           532        31,517          32,580
 No cash rent                                            1,948          152          1,795          2,100
Total                                                106,261            345       105,917         106,606
Source: GAO analysis of the American Housing Survey, 2001.


Table 7 provides details on the estimated number of households who
owned or rented their homes by income category (very low income and low
income) in 2001. About 3.7 million (± 208,000) elderly renter households
have very low incomes. About 4.3 million (± 223,000) elderly renter
households have low incomes. These figures include households that do
not pay cash rent. Based on the data from tables 6 and 7, over four-fifths (85
± 2 percent) of elderly renter households have low incomes and
approximately three-quarters (73 ± 3 percent) have very low incomes.




Page 35                                                             GAO-03-512 Section 202 Elderly Housing
Appendix III
Data Issues Concerning the American
Housing Survey




Table 7: Income Categories for Elderly Homeowner and Renter Households in 2001

Units in thousands
                                                                              95 percent confidence
                                                                                     interval
                                                                   Sampling
Very low income                                     Estimate          error          From              To
Owner occupied                                           9,394          324          9,070          9,718
Renter occupied                                          3,668          208          3,460          3,875
 Cash rent                                               3,287          197          3,090          3,484
 No cash rent                                                381         68           313             449
Total                                                  13,061           375        12,686          13,437


Low Income
Owner occupied                                         13,351           379        12,972          13,729
Renter occupied                                          4,262          223          4,038          4,485
 Cash rent                                               3,806          211          3,595          4,017
 No cash rent                                                456         74           381             530
Total                                                  17,612           426        17,186          18,038
Source: GAO analysis of the American Housing Survey, 2001.


Table 8 shows the number of units occupied by elderly renter households
with very low incomes by subsidy status and rent burden. About 1.7 million
(± 141,000) elderly renter households with very low incomes have
moderate or severe rent burdens. The majority of these actually have
severe rent burdens. About 1.3 million (± 125,000) renter households with
very low incomes receive some form of government assistance.
Households that do not pay cash rent appear in the tables above in this
appendix for informational purposes. However, since they do not pay cash
rents, we exclude these households from our estimates of rent burdens in
this report.




Page 36                                                             GAO-03-512 Section 202 Elderly Housing
Appendix III
Data Issues Concerning the American
Housing Survey




Table 8: Elderly Renter Households with Very Low Incomes by Subsidy Status and
Rent Burden in 2001


Units in thousands
                                                                              95 percent confidence
                                                                                     interval
                                                                   Sampling
Renter households                                   Estimate          error          From              To
Subsidized                                               1,307          125          1,182          1,432
Unassisted                                               1,980          154          1,826          2,133
 Zero income                                                 125         39             86            163
 No rent burden                                              201         49           152             250
 Rent burden                                             1,654          141          1,513          1,795
   Moderate rent burden                                      509         78           430             587
   Severe rent burden                                    1,145          117          1,028          1,263
Total                                                    3,287          197          3,090          3,484
Source: GAO analysis of the American Housing Survey, 2001.


Table 9 looks at unassisted elderly renter households with rent burdens. Of
the 1.7 million (± 141,000) households with rent burdens, about 60 percent
are located either in the northeast or the south regions. The northeast and
south contained about 542,000 (± 81,000) and 477,000 (± 76,000),
respectively, of the nation’s rent burdened elderly renter households with
very low incomes.



Table 9: Moderate or Severe Rent Burden of Unassisted Very Low Income Elderly
Renter Households by Region in 2001

Units in thousands
                                                                              95 percent confidence
                                                                                     interval
                                                                   Sampling
Renter households                                   Estimate          error          From              To
Northeast                                                    542         81           461             623
Midwest                                                      284         59           226             343
South                                                        477         76           401             553
West                                                         350         65           285             415
Total                                                    1,654          141          1,513          1,795
Source: GAO analysis of the American Housing Survey, 2001.




Page 37                                                             GAO-03-512 Section 202 Elderly Housing
Appendix III
Data Issues Concerning the American
Housing Survey




The following four tables show the number and proportion of units
occupied by elderly renter households with very low incomes by subsidy
status and rent burden in metropolitan areas (tables 10 and 11) and
nonmetropolitan areas (tables 12 and 13). About 1.4 million (± 131,000)
elderly renter households with very low incomes in metropolitan areas and
234,000 (± 53,000) in nonmetropolitan areas have moderate or severe rent
burden (tables 10 and 12). The proportion of households with rent burdens
was generally higher in metropolitan areas than in nonmetropolitan areas
(tables 11 and 13). In addition, households in nonmetropolitan areas were
less likely than those in metropolitan areas to have severe rent burdens.



Table 10: Number of Elderly Renter Households with Very Low Incomes by Subsidy
Status and Rent Burden in Metropolitan Areas in 2001

Units in thousands
                                                                               95 percent confidence
                                                                                      interval
                                                                    Sampling
Renter households                                  Estimate            error          From              To
Subsidized                                                  1,048        112           936           1,160
Unassisted                                                  1,696        142          1,553          1,838
 Zero income                                                 109          36             72            145
 No rent burden                                              167          45           122             212
 Rent burden                                                1,420        131          1,290          1,551
   Moderate rent burden                                      395          69           326             464
   Severe rent burden                                       1,025        111           914           1,137
Total                                                       2,744        180          2,564          2,924
Source: GAO analysis of the American Housing Survey, 2001




Page 38                                                              GAO-03-512 Section 202 Elderly Housing
Appendix III
Data Issues Concerning the American
Housing Survey




Table 11: Proportion of Elderly Renter Households with Very Low Incomes by
Subsidy Status and Rent Burden in Metropolitan Areas in 2001

                                                                              95 percent confidence
                                                                                     interval
                                                                   Sampling
Renter households                                   Estimate          error          From              To
Subsidized                                                   38%        3%            35%             41%
Unassisted                                                   62%        3%            59%             65%
 Zero income                                                 4%         1%             3%             5%
 No rent burden                                              6%         2%             4%             8%
 Rent burden                                                 52%        3%            48%             55%
   Moderate rent burden                                      14%        2%            12%             17%
   Severe rent burden                                        37%        3%            34%             41%
Source: GAO analysis of the American Housing Survey, 2001




Table 12: Number of Elderly Renter Households with Very Low Incomes by Subsidy
Status and Rent Burden in Nonmetropolitan Areas in 2001

Units in thousands
                                                                              95 percent confidence
                                                                                     interval
                                                                   Sampling
Renter households                                   Estimate          error          From              To
Subsidized                                                   259         56           203             315
Unassisted                                                   284         59           225             343
 Zero income                                                  16         14              2             30
 No rent burden                                               34         20             14             55
 Rent burden                                                 234         53           181             287
   Moderate rent burden                                      114         37             77            151
   Severe rent burden                                        120         38             82            158
Total                                                        543         81           462             624
Source: GAO analysis of the American Housing Survey, 2001.




Page 39                                                             GAO-03-512 Section 202 Elderly Housing
Appendix III
Data Issues Concerning the American
Housing Survey




Table 13: Proportion of Elderly Renter Households with Very Low Incomes by
Subsidy Status and Rent Burden in Nonmetropolitan Areas in 2001

                                                                             95 percent confidence
                                                                                    interval
                                                                  Sampling
Renter households                                  Estimate          error          From              To
Subsidized                                                  48%        7%            40%             55%
Unassisted                                                  52%        7%            45%             60%
 Zero income                                                3%         3%             0%             5%
 No rent burden                                             6%         4%             3%             10%
 Rent burden                                                43%        7%            36%             50%
   Moderate rent burden                                     21%        6%            15%             27%
   Severe rent burden                                       22%        6%            16%             28%
Source: GAO analysis of the American Housing Survey, 2001


Excluded from these estimates are the housing affordability needs of very
low income homeowners. Although homeowners can experience housing
affordability problems, homeowners and renters face different challenges
in affording their homes. Unlike renters, homeowners have equity in their
homes—about 68 percent (± 1 percent) of elderly homeowners own their
homes free and clear. In addition, elderly homeowners face certain
challenges in maintaining their housing, such as paying for property
maintenance and accessibility modification.6 As a result, rental programs,
such as Section 202, do not directly address the problems homeowners
experience.




6
 In the absence of additional income, an elderly homeowner can, among other things,
downsize to a more affordable home, seek property tax relief, or access the home’s equity
through a home equity conversion mortgage (“reverse mortgage”).




Page 40                                                            GAO-03-512 Section 202 Elderly Housing
Appendix IV

Federal Housing Programs and the Elderly                                                                                 Appen
                                                                                                                             V
                                                                                                                             Id
                                                                                                                              xi




                            The federal government has multiple housing programs that subsidize the
                            development of rental properties. Many of these programs also subsidize
                            the development of properties that are intended to serve primarily elderly
                            households. Unlike Section 202, most federal housing programs do not
                            target a single type of household. Rather, they serve many different types
                            of households, such as families with children, people with disabilities, and
                            the elderly, and they produce units with rents that are affordable to
                            households at different income levels.



Housing Production          In addition to Section 202, the federal government has multiple active
                            housing production programs that continue to expand the number of
Programs That               assisted households by subsidizing the development of new rental housing.
Develop Elderly             These federal programs, described below, can also subsidize individual
                            rental properties that are intended primarily to serve elderly households.
Housing

Active Housing Production   • Low-Income Housing Tax Credits and Tax-Exempt Multifamily
Programs                      Housing Bonds provide federal tax incentives for private investment
                              and are often used in conjunction with other federal and state subsidies
                              in the production of new and rehabilitated rental housing.

                            • HOME Investment Partnerships provides formula-based grants to
                              states and localities to build, acquire, or rehabilitate affordable rental
                              housing or provide tenant-based rental assistance.1

                            • Section 515/521 Rural Rental Assistance provides below-market loans
                              and rental assistance to support the development of rental housing in
                              rural areas.

                            • Multifamily mortgage insurance programs provide mortgage
                              insurance for the development of rental housing without federally-
                              funded interest rate subsidies or project-based rental assistance.2


                            1
                            HOME also provides homeownership assistance.
                            2
                             Although properties with FHA-insured multifamily mortgages today are often termed
                            unassisted because they do not receive project-based rental assistance, projects may
                            receive grants, tax concessions, subsidies, and other subsidies from federal, state, and local
                            governments.




                            Page 41                                             GAO-03-512 Section 202 Elderly Housing
                      Appendix IV
                      Federal Housing Programs and the Elderly




                      The Housing Choice Voucher program (housing vouchers) is another
                      important source of assistance for elderly households. The program
                      supplements tenants’ rental payments in privately owned, moderately
                      priced apartments chosen by the tenants. Currently, about 260,000 of the
                      approximately 1.5 million voucher households are elderly. However, unlike
                      the Section 202 or other programs discussed, housing vouchers is not a
                      production program and does not directly subsidize the development of
                      new or rehabilitated housing.

                      In addition to the active housing production programs, the federal
                      government also has programs that no longer subsidize the development of
                      rental properties but, in some cases, continue to provide operating
                      subsidies, rental assistance payments, or other subsidies for rental
                      properties that were developed under these programs in the past. Over the
                      years, these inactive housing production programs, described in the next
                      section, subsidized many rental properties that were intended primarily to
                      serve elderly households.



Inactive Housing      • Public Housing financed the development and operation of properties
Production Programs     managed and owned by local housing authorities.3

                      • Section 236 and Section 221(d)(3) Below Market Interest Rate
                        provided mortgage insurance for the development of rental housing
                        with federally funded interest rate subsidies.

                      • Section 8 project-based rental assistance programs provided project-
                        based rental assistance to properties that were financed with
                        Department of Housing and Urban Development (HUD) mortgage
                        insurance, tax exempt bonds, and below-market interest rate loans.4




                      3
                       Since 1994, public housing has not received new appropriations to fund incremental units.
                      HUD funds the replacement of existing public housing units through the HOPE VI program.
                      This program, however, does not increase the supply of affordable housing.
                      4
                       These programs included Section 8 New Construction/Substantial Rehabilitation, Section 8
                      Loan Management Set Aside, Section 8 Property Disposition, and Section 8 Moderate
                      Rehabilitation. Some of these programs overlapped with other mortgage subsidy programs.




                      Page 42                                           GAO-03-512 Section 202 Elderly Housing
                                            Appendix IV
                                            Federal Housing Programs and the Elderly




Target Households                           Unlike Section 202, most active federal housing programs do not target a
                                            single type of household. Rather, they serve many different types of
                                            households, such as families with children, persons with disabilities, and
                                            the elderly. Furthermore, most federal housing programs target
                                            households at different income levels, not just households with very low
                                            incomes (50 percent or less of area media income) as does Section 202.
                                            Table 14 provides information on targeted household types and rent levels
                                            of the active housing production and insurance programs.



Table 14: Active Federal Rental Housing Production and Insurance Programs by Household Type Served and Program Rent
Levels

                                                      Household type
Rental housing production program                     served                     Program rent levels affordable to households with:
Section 202 Supportive Housing                        Elderly                    50% or less of area median income (AMI) for all units


Low-Income Housing Tax Credits                        Multiple household         50% of AMI for 20% of units or
                                                      types                      60% of AMI for 40% of units
Tax-Exempt Multifamily Housing Bonds                  Multiple household         50% of AMI for 20% of units or
                                                      types                      60% of AMI for 40% of units
HOME Investment Partnerships                          Multiple household         65% of AMI for all units and
                                                      types                      50% of AMI for 20% of units
Section 811 Supportive Housing                        Persons with               50% or less of AMI for all units
                                                      disabilities
Section 515 Rural Rental Housing with Section 521     Primarily families and     80% of AMI or less for all 515 units with rental
rental assistance                                     the elderly                assistance
FHA multifamily mortgage insurancea                   Multiple household         No income requirements/market rate rents
                                                      types
Source: GAO.
                                            a
                                             These mortgage insurance programs are Section 221(d)(4), Section 221(d)(3), and Rental Housing
                                            for the Elderly (Section 231). In recent years, few mortgages have been insured with Section 231
                                            because borrowers who intend to develop elderly rental properties rely on Section 221(d)(4) or Section
                                            221(d)(3).


                                            Low-Income Housing Tax Credits (tax credits), Tax-Exempt Multifamily
                                            Housing Bonds (tax-exempt bonds), and HOME set aside some of their
                                            units for very low-income households and can provide housing for the
                                            elderly (table 14). Congress has granted considerable latitude to state and
                                            local agencies that administer these programs in deciding who will be




                                            Page 43                                                  GAO-03-512 Section 202 Elderly Housing
                    Appendix IV
                    Federal Housing Programs and the Elderly




                    served with federal housing resources.5 In addition, mortgage insurance
                    programs for multifamily rental properties under HUD’s Federal Housing
                    Administration (FHA) currently do not have any specific age or income
                    requirements for tenants. However, since rents for newly developed FHA-
                    insured properties are often set at market levels, these programs may not
                    be able to reach very low-income households without the use of other
                    subsidies.



Annual Housing      Although Section 202’s annual production levels are small when compared
                    to the total production levels of other housing programs, such as tax
Production Levels   credits—the largest of all current production programs—Section 202,
                    nonetheless, is a relatively important source of subsidized rental housing
                    units for the elderly. Table 15 presents the volume of new production by
                    rental housing production program. The volume of housing production
                    illustrates individual program activity but, due to limitations in the data, it
                    is not possible to accurately estimate what percentage of elderly units
                    produced through federal housing programs is from Section 202 because
                    units produced through these programs can overlap with each other. For
                    example, HOME funding can be used in conjunction with programs such as
                    tax credits, tax-exempt bonds, or HUD mortgage insurance programs to
                    finance new production. As a result, adding units together for any of the
                    programs in table 15 will likely result in double counting.




                    5
                     For example, every year the Internal Revenue Service requires that the state agencies
                    responsible for awarding tax credits under the tax credit program submit updated plans that
                    outline how they will distribute their allocations of tax credits. See HUD’s 2002 report
                    Analysis of State-Qualified Allocation Plans for the Low-Income Housing Tax Credit
                    Program.




                    Page 44                                            GAO-03-512 Section 202 Elderly Housing
Appendix IV
Federal Housing Programs and the Elderly




Table 15: Approximate Volume of New Production of Housing Units by Active
Federal Rental Housing Programs

                                                         Approximate number of new or
                                                            rehabilitated per annum
Production program                                            Elderly units                Total units
Section 202 Supportive Housing                                         5,700                      5,700
    Percent of total                                                   100%


Low-Income Housing Tax Credits                                       13,200                     86,000
    Percent of total                                                    15%


Tax-Exempt Multifamily Housing Bonds                                   5,600                    33,300
    Percent of total                                                    17%


HOME Investment Partnerships                                           4,000                    17,000
    Percent of total                                                    24%


Section 515 Rural Rental Housing                                         800                      1,800
    Percent of total                                                    44%


Section 811 Supportive Housing                                            NA                      1,300
    Percent of total                                                      NA


FHA multifamily mortgage insurance                                       900                    26,400
    Percent of total                                                      3%
Source: GAO.

Notes: For Section 202, Section 811, and the FHA multifamily mortgage insurance programs, we
estimated the average number of total and elderly units endorsed annually from 1998 to 2001 based
on HUD program data. We reported the number of elderly units for tax credits based on the 2002
report from the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st
Century and for tax-exempt bonds based on the National Council of State Housing Agencies’ State
HFA Factbook: 2001 NCSHA Annual Survey Results. In addition, for tax credits, we estimated the
average number of units placed in service annually from 1998 to 2000 based on HUD’s Low-Income
Housing Tax Credit Database. Finally, we relied on estimates from program officials for HOME and
Section 515.
Due to differing sources of data and, in some cases, lack of official data, these estimates are rough
approximations of actual production activity and are intended to be illustrative. Many of these
programs overlap with each other. As a result, adding units together for any of the programs will likely
result in double counting.




Page 45                                                   GAO-03-512 Section 202 Elderly Housing
Appendix V

Section 202 Program Data                                                                                                      Appen
                                                                                                                                  V
                                                                                                                                  di
                                                                                                                                  x




                                           This appendix provides additional information on the extent to which
                                           Section 202 projects meet the Department of Housing and Urban
                                           Development’s (HUD’s) 18-month processing time guideline. In particular,
                                           we present data on projects’ status in meeting the guideline, HUD field
                                           offices’ rate of success in meeting the guideline, and the factors cited by
                                           HUD in its approvals of processing time extensions. Table 16 profiles the
                                           projects funded in fiscal years 1998 through 2000 according to the projects’
                                           status in gaining HUD’s approval to start construction.



Table 16: Distribution of Section 202 Projects, Capital Advance Funds, and PRAC Funds, by Fiscal Year and Construction
Approval Status

                                                                                   Exceeded 18-month guideline
                                                                             Approved for                             Funding
Fiscal                                                  Met 18-month     construction after   Pending approval          award
year                                                        guideline           18 months      for construction      cancelled
1998      Number of projects                                       47                  108                   11              0
          Percent of projects                                    28%                  65%                   7%                -
          Capital advance funds                           $113 million         $337 million          $43 million              -
          PRAC funds (rental assistance)                   $23 million          $68 million           $9 million              -
          Total funds                                    $136 million         $406 million          $52 million               -
          Percent of total funds                                 23%                  68%                   9%                -
1999      Number of projects                                       44                   84                   34              3
          Percent of projects                                    27%                  51%                  21%             2%
          Capital advance funds                           $108 million         $284 million         $127 million    $15 million
          PRAC funds                                       $22 million          $57 million          $28 million     $3 million
          Total funds                                    $130 million         $341 million         $155 million    $18 million
          Percent of total funds                                 20%                  53%                  24%             3%
2000      Number of projects                                       41                   40                   82              0
          Percent of projects                                    25%                  25%                  50%                -
          Capital advance funds                           $109 million         $124 million         $283 million              -
          PRAC funds                                       $21 million          $27 million          $58 million              -
          Total funds                                    $131 million         $150 million         $341 million               -
          Percent of total funds                                 21%                  24%                  55%                -
Total     Number of projects                                      132                  232                  127              3
          Percent of projects                                    27%                  47%                  26%             1%
          Capital advance funds                           $330 million         $746 million         $453 million    $15 million
          PRAC funds                                       $66 million         $152 million          $94 million     $3 million




                                           Page 46                                       GAO-03-512 Section 202 Elderly Housing
                                                               Appendix V
                                                               Section 202 Program Data




(Continued From Previous Page)
                                                                                                                  Exceeded 18-month guideline
                                                                                                            Approved for                                Funding
Fiscal                                                                              Met 18-month        construction after    Pending approval            award
year                                                                                    guideline              18 months       for construction        cancelled
                Total funds                                                             $396 million         $897 million          $547 million      $18 million
                Percent of total funds                                                          21%                    48%                29%                  1%
Source: GAO analysis of HUD Development Application Processing (DAP) System, December 2002.

                                                               Note: Percentages do not always add to 100 because of rounding. Total funds do not always equal the
                                                               sum of capital advance and project rental assistance contract (PRAC) funds because of rounding.


                                                               Table 17 compares the status of projects located in metropolitan and
                                                               nonmetropolitan areas in gaining approval to start construction within
                                                               either 18 or 24 months. In both cases, metropolitan projects were about
                                                               twice as likely as projects in nonmetropolitan areas to take more than
                                                               either 18 or 24 months to be approved. That is, the odds of a metropolitan
                                                               project taking more than 18 or 24 months to be approved for construction
                                                               were about twice the odds of a nonmetropolitan project taking more than
                                                               18 or 24 months, respectively.



Table 17: Status of Metropolitan and Nonmetropolitan Projects in Gaining Construction Start Approval, Projects Funded in
Fiscal Years 1998 to 2000

Construction start approval status
                                                                                                           Nonmetropolitan
                                                                      Metropolitan projects                   projects                     All projects
                                                                           Number             Percent       Number           Percent      Number          Percent
Approved within 18 months                                                          78            22%              54            39%           132            27%
Not approved within 18 months                                                    278             78%              84            61%           362            73%


Approved within 24 months                                                        180             51%              92            67%           272            55%
Not approved within 24 months                                                    176             49%              46            33%           222            45%
Source: GAO analysis of HUD DAP system, December 2002.


                                                               Tables 18, 19, and 20 present the rate of project approvals within either 18
                                                               or 24 months for all field offices that have responsibility for processing
                                                               Section 202 projects. Table 18 shows the results for all projects, table 19
                                                               shows the results only for projects located in metropolitan areas, and table
                                                               20 shows the results for projects located in nonmetropolitan areas. The
                                                               rate of project approvals for each field office is the percentage of projects,




                                                               Page 47                                                   GAO-03-512 Section 202 Elderly Housing
Appendix V
Section 202 Program Data




funded between fiscal years 1998 and 2000, that HUD approved for
construction within the 18-month processing time guideline or within the
24-month period after the funding award—that is, 18 months plus the 6-
month discretionary extension.



Table 18: Field Office Performance in Approving Projects to Start Construction, All
Projects Funded in Fiscal Years 1998 to 2000

                               Project approval rate (%)
Field office               Within 18 months    Within 24 months Number of projects
Atlanta                                  11                    67                     9
Baltimore                                18                    36                   11
Birmingham                               80                    80                     5
Boston                                     0                   15                   20
Buffalo                                  29                    64                   14
Caribbean                                  0                    0                     2
Charleston                                 0                    0                     3
Chicago                                  21                    57                   14
Cleveland                                  8                   58                   12
Columbia                                 78                    89                     9
Columbus                                 50                    56                   16
Denver                                   33                    58                   12
Des Moines                               29                    71                     7
Detroit                                  50                    70                   10
Fort Worth                               43                    71                   14
Greensboro                               93                    93                   14
Hartford                                   0                   10                   10
Houston                                  14                    71                     7
Indianapolis                             67                    83                     6
Jackson                                  25                    75                     4
Jacksonville                             13                    50                   16
Kansas City                              29                    71                     7
Knoxville                                50                  100                      6
Little Rock                              83                  100                    18
Los Angeles                                0                   30                   20
Louisville                               67                    92                   12
Manchester                                 9                   64                   11
Milwaukee                                  6                   39                   18




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Appendix V
Section 202 Program Data




(Continued From Previous Page)
                                         Project approval rate (%)
Field office                      Within 18 months            Within 24 months Number of projects
Minneapolis                                              45                  91                   11
Nashville                                                40                  80                   10
New Orleans                                              27                  45                   11
New York                                                  0                  36                   22
Newark                                                    0                  22                    9
Oklahoma City                                            67                  67                    3
Omaha                                                    50                100                     6
Philadelphia                                             18                  41                   17
Phoenix                                                   0                  22                    9
Pittsburgh                                               11                  33                    9
Portland                                                 27                  64                   11
Providence                                               40                  40                    5
Richmond                                                  8                  17                   12
San Antonio                                              20                  60                    5
San Francisco                                             7                  38                   29
Seattle                                                  22                  44                    9
St Louis                                                 22                  89                    9
Total (all offices)                                      27                  55                  494
Source: GAO analysis of HUD DAP system, December 2002.




Page 49                                                        GAO-03-512 Section 202 Elderly Housing
Appendix V
Section 202 Program Data




Table 19: Field Office Performance in Approving Metropolitan Projects to Start
Construction, All Metropolitan Projects Funded in Fiscal Years 1998 to 2000

                               Project approval rate (%)
                                                                          Number of
                                                                         metropolitan
Field office               Within 18 months    Within 24 months              projects
Atlanta                                    0                   67                    6
Baltimore                                22                    44                    9
Birmingham                               67                    67                    3
Boston                                     0                   19                   16
Buffalo                                  18                    55                   11
Caribbean                                  0                    0                    2
Charleston                                 0                    0                    1
Chicago                                  25                    50                   12
Cleveland                                10                    60                   10
Columbia                                100                  100                     4
Columbus                                 54                    62                   13
Denver                                   14                    29                    7
Des Moines                               40                    80                    5
Detroit                                  56                    67                    9
Fort Worth                               46                    69                   13
Greensboro                               86                    86                    7
Hartford                                   0                   10                   10
Houston                                  14                    71                    7
Indianapolis                             60                    80                    5
Jackson                                    -                    -                    0
Jacksonville                             13                    50                   16
Kansas City                              33                    67                    6
Knoxville                                33                  100                     3
Little Rock                              75                  100                     4
Los Angeles                                0                   30                   20
Louisville                               80                  100                     5
Manchester                               25                    50                    4
Milwaukee                                  0                   27                   11
Minneapolis                              33                    83                    6
Nashville                                40                    80                    5
New Orleans                              25                    75                    4
New York                                   0                   36                   22




Page 50                                          GAO-03-512 Section 202 Elderly Housing
Appendix V
Section 202 Program Data




(Continued From Previous Page)
                                         Project approval rate (%)
                                                                                        Number of
                                                                                       metropolitan
Field office                      Within 18 months            Within 24 months             projects
Newark                                                    0                  22                    9
Oklahoma City                                            67                  67                    3
Omaha                                                    50                100                     4
Philadelphia                                             21                  43                   14
Phoenix                                                   0                  40                    5
Pittsburgh                                               14                  43                    7
Portland                                                 17                  33                    6
Providence                                               40                  40                    5
Richmond                                                 13                  25                    8
San Antonio                                              25                  75                    4
San Francisco                                             0                  43                   21
Seattle                                                  13                  38                    8
St Louis                                                 17                  83                    6
Total (all offices)                                      22                  51                  356
Source: GAO analysis of HUD DAP system, December 2002.




Page 51                                                        GAO-03-512 Section 202 Elderly Housing
Appendix V
Section 202 Program Data




Table 20: Field Office Performance in Approving Nonmetropolitan Projects to Start
Construction, All Nonmetropolitan Projects Funded in Fiscal Years 1998 to 2000

                               Project approval rate (%)
                                                                          Number of
                                                                      nonmetropolitan
Field office               Within 18 months    Within 24 months              projects
Atlanta                                  33                    67                    3
Baltimore                                  0                    0                    2
Birmingham                              100                  100                     2
Boston                                     0                    0                    4
Buffalo                                  67                  100                     3
Caribbean                                  -                    -                    0
Charleston                                 0                    0                    2
Chicago                                    0                 100                     2
Cleveland                                  0                   50                    2
Columbia                                 60                    80                    5
Columbus                                 33                    33                    3
Denver                                   60                  100                     5
Des Moines                                 0                   50                    2
Detroit                                    0                 100                     1
Fort Worth                                 0                 100                     1
Greensboro                              100                  100                     7
Hartford                                   -                    -                    0
Houston                                    -                    -                    0
Indianapolis                            100                  100                     1
Jackson                                  25                    75                    4
Jacksonville                               -                    -                    0
Kansas City                                0                 100                     1
Knoxville                                67                  100                     3
Little Rock                              86                  100                    14
Los Angeles                                -                    -                    0
Louisville                               57                    86                    7
Manchester                                 0                   71                    7
Milwaukee                                14                    57                    7
Minneapolis                              60                  100                     5
Nashville                                40                    80                    5
New Orleans                              29                    29                    7
New York                                   -                    -                    0




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Appendix V
Section 202 Program Data




(Continued From Previous Page)
                                         Project approval rate (%)
                                                                                         Number of
                                                                                     nonmetropolitan
Field office                      Within 18 months             Within 24 months             projects
Newark                                                     -                   -                    0
Oklahoma City                                              -                   -                    0
Omaha                                                    50                 100                     2
Philadelphia                                               0                  33                    3
Phoenix                                                    0                   0                    4
Pittsburgh                                                 0                   0                    2
Portland                                                 40                 100                     5
Providence                                                 -                   -                    0
Richmond                                                  0                    0                    4
San Antonio                                               0                    0                    1
San Francisco                                            25                   25                    8
Seattle                                                  100                100                     1
St Louis                                                 33                 100                     3
Total (all offices)                                      39                   67                  138
Source: GAO analysis of HUD DAP system, December 2002.


Table 21 shows the average number of months that projects took to
complete various stages of the development process between Congress’s
appropriation of funds for the Section 202 program and completion of
construction. For projects funded between fiscal years 1998 and 2000 that
had been approved to start construction at the time of our analysis, the
average time taken from appropriation to approval to start construction
was 36 months. Projects that had also completed construction took
another 11 months, on average, from beginning to end of construction.
From appropriation to end of construction, the average time taken was 47
months or almost 4 years.




Page 53                                                         GAO-03-512 Section 202 Elderly Housing
Appendix V
Section 202 Program Data




Table 21: Average Duration of Stages of Section 202 Project Development, Projects
Funded Fiscal Years 1998 to 2000 That Were Approved to Start Construction


Average months
                                                                         Fiscal year
Stage of development                                          1998      1999      2000     1998-2000
Appropriation to notice of funding availability                   6          4         4              5
Notice of funding availability to funding award                   7        10        10               9
Funding award to firm commitment                                 21        19        15             19
Firm commitment to approval to start construction                 3          2         2              3
Approval to start construction to construction
completiona                                                      12        11          9            11
Total time from appropriation to approval to start
construction                                                     37        35        31             36
Total time from appropriation to construction
completion                                                       49        46        40             47


Number of projectsb                                            155        128        81            364
Source: GAO analysis of HUD DAP system, December 2002.
a
 The average time for construction is based on a total of 193 projects that completed construction: 110
from 1998, 69 from 1999, and 114 from 2000.
b
 The number of projects includes only projects that were approved to start construction. An additional
11 projects from 1998, 37 projects from 1999, and 82 projects from 2000 were not approved for
construction at the time of our analysis.


Table 22 summarizes the factors that HUD cited in extending the
processing time for projects beyond 24 months after the funding award.
This table draws on extension waivers approved between January 1998 and
June 2002 for projects funded between fiscal years 1998 and 2000, showing
the number and percentage of extended projects affected by each factor.




Page 54                                                  GAO-03-512 Section 202 Elderly Housing
Appendix V
Section 202 Program Data




Table 22: Factors Cited by HUD in Approved Time Extensions for Section 202
Projects Funded in Fiscal Years 1998 to 2000

                                                                    Number of
                                                                     extended         Percent of
                                                                      projects extended projects
Factor                                                                affected          affected
Financing and cost issues                                                     29                     35%
    Seeking additional funding                                                17                     20%
                               a
    Construction issues                                                       11                     13%
    Other financial issues                                                      5                     6%
State and local government issues                                             27                     32%
    Historic preservation                                                       1                     1%
    Local review, approval, or permits                                        17                     20%
    Zoning issues                                                             11                     13%
    Other state and local issues                                                3                     4%
Design/architect issues                                                       15                     18%
Site change                                                                   14                     17%
Environmental issues                                                            8                    10%
Site control                                                                    8                    10%
Community concerns/local opposition                                             8                    10%
Other site issues                                                               7                     8%
Legal challenges                                                                6                     7%
General delay in project processingb                                          19                     23%
Source: GAO analysis of HUD data.

Note: GAO analyzed HUD-approved project processing time extensions. 84 projects received a total of
103 extensions. Percentages do not total 100 because many projects received extensions for multiple
reasons.
a
 Construction issues include increased construction costs and difficulty finding a qualified contractor or
obtaining a bid within the capital advance amount.
b
 General delays in project processing include cases where HUD cited the need for time for sponsors to
submit or modify required paperwork and for HUD to review paperwork, without stating a more specific
reason.




Page 55                                                    GAO-03-512 Section 202 Elderly Housing
Appendix VI

Survey of HUD Field Office Representatives                                                                                                   AppenV
                                                                                                                                                  d
                                                                                                                                                  xiI




                                                     United States General Accounting Office

                                                     Section 202 Supportive Housing for the Elderly:
                                                     Development Process Survey

              Introduction
                                                                                     Instructions
              The United States General Accounting Office is
              contacting HUD officials responsible for the                           The official or officials in your office who are
              administration of the Section 202 Supportive Housing                   responsible for the day-to-day management of Section
              for the Elderly program. The Senate Special Committee                  202 processing should complete this survey.
              on Aging asked GAO to explore the issues involved in
              the processing of projects that have been awarded capital              Please complete this survey by November 18, 2002
              advances.                                                              and fax it to (202) 512-2502.

              We are interested in obtaining your valuable insights                  If you have any questions about this survey or have
              into the processing of Section 202 projects from fund                  problems submitting your response, please contact
              reservation to initial closing. We are especially                      Daniel Garcia-Diaz by phone at (202) 512-4529 or by
              interested in learning more about the implementation of                email at garciadiazd@gao.gov.
              HUD Notice H 96 - 102, which was designed to
              facilitate project processing.

              BACKGROUND INFORMATION

              1. In case we would like to clarify any of your responses, please provide the name, title, office/location, telephone
                 number, and e-mail address of the individual primarily responsible for gathering the information requested in this
                 survey.

                                       Name:

                                       Title:

                                       Name of Office/Location:

                                       Telephone number:

                                       E-mail address:


              FUND RESERVATION AND PROJECT MONITORING

              2. While HUD does not require systematic tracking of Section 202 project progress from fund reservation to initial
                 closing, we are interested in learning about any steps you may take to monitor project progress from fiscal year 1998
                 through the present.

                          a. Was every Section 202 Sponsor/Owner contacted to schedule a project planning conference within 30 to
                             45 days of the sponsor’s acceptance of fund reservation award letter? (N=44)

                              1.   ˆ Yes, for all Section 202 projects. (81.8%)
                              2.   ˆ Yes, but only for projects needing special attention (i.e., for new sponsors or projects facing major
                                   obstacles). (13.6%)
                              3.   ˆ No, project planning conferences were not scheduled for all projects within 30 to 45 days. (4.6%)



              Section 202 Supportive Housing for the Elderly: Development Process Survey                                          1




                           Page 56                                                                  GAO-03-512 Section 202 Elderly Housing
              Appendix VI
              Survey of HUD Field Office Representatives




            b. From fiscal year 1998 through the present, how frequently has your office monitored the progress of the
               project Sponsor/Owners between fund reservation and initial closing? For each category below, please
               indicate the frequency that best describes your contact. (Please check one box for each row) (N=44)

                                                          Office Contacts Sponsor/Owners to Monitor Project’s Progress:
                                                                    About            About
                                                      Monthly   Every 2 Months   Every 3 Months              Other
                                                        (1)          (2)                 (3)                     (4)

a. For all Section 202 projects?                                                                             9.1%
                                                                                                        (please specify)
                                                      45.5%         34.1%            11.4%
                                                                                                     __________________


b. For Section 202 Projects needing special                                                                 27.3%
    attention? (6.8% did not respond)                                                                   (please specify)
                                                      52.3%         13.6%             0.0%
                                                                                                     __________________




3. a. Does your office currently develop internal monitoring reports to track project progress of Section 202 fund
   reservations (other than the Aged Pipeline Report prepared at HUD Headquarters)? (N=44)

                        1.   ˆ Yes (86.4%)
                        2.   ˆ No € Please skip to question 4. (13.6%)

            b. How often are these reports prepared?                             c. Who receives these internal monitoring
            (check all that apply) (N=38)                                           reports in your office? (check all that
                                                                                    apply) (N=38)
                 1. ˆ    Weekly (31.6%)
                 2. ˆ    Biweekly (18.4%)                                           1. ˆ Hub Director (57.9%)
                 3. ˆ    Monthly (36.8%)                                            2. ˆ Program Center Director (73.7%)
                 4. ˆ    Quarterly (0.0%)                                           3. ˆ Project Manager(s) (81.6%)
                 5. ˆ    Semi-annually (0.0%)                                       4. ˆ Technical staff (71.1%)
                 6. ˆ    Annually (0.0%)                                            5. ˆ Program Center Assistant (39.5%)
                 7. ˆ    Other (Please specify) (18.4%)                             6. ˆ Other (Please specify title) (42.1%)
                      _______________________                                          ____________________
                                                                                    7. ˆ Other (Please specify title) (18.4%)
                                                                                          ____________________

4. HUD Notice H 96-102 revised the Section 202 Handbook to bypass the conditional commitment application stage. It
   also directed that HUD technical staff must (1) accept Sponsor/Owner certifications (i.e., architecture and engineering
   final plans) rather than conduct detailed technical reviews; and (2) conduct detailed reviews only under specified
   circumstances. (N=44)

            a. Does your office require submission of a conditional commitment application?

                        1.   ˆ Yes (0.0%)
                        2.   ˆ No (100.0%)

            b. Does your office have written standards for time spent by its technical staff on technical reviews?

                        1.   ˆ Yes (9.1%)
                        2.   ˆ No (86.4%)
                             (4.6% did not respond)

(Note: If ‘Yes’ for questions 3a. and 4b., we may be contacting you to obtain copies of internal monitoring reports and/or
any written standards.)

Section 202 Supportive Housing for the Elderly: Development Process Survey                                   2




              Page 57                                                             GAO-03-512 Section 202 Elderly Housing
              Appendix VI
              Survey of HUD Field Office Representatives




PROJECT PLANNING CONFERENCES

5. HUD Notice H 96-102 stresses the importance of conducting a comprehensive project planning conference and
   includes a suggested agenda to be used at the conference. The agenda includes items such as project development,
   legal considerations, project design/contractor/construction issues, and project development schedule.

    We are interested in obtaining the following information on project planning conferences held at your office for fund
    reservations from fiscal year 1998 through the present. (Please check one box for each row) (Unless otherwise
    noted, N=44)


                                                                                              About half    Almost
               Project Planning Conference Activities                Never   Occasionally      the time     always    Always
                                                                      (1)         (2)            (3)            (4)     (5)
    a. How frequently have planning conferences been held
       within 30 to 45 days of the sponsor’s acceptance of fund
       reservation award letter?                                     4.6%        6.8%           2.3%        56.8%     29.6%

    b. How frequently have all relevant agenda items identified
       in section 3-1 of HUD Notice H 96-102 been covered
       during each planning conference?                              0.0%        2.3%           0.0%        22.7%     75.0%

    c. How frequently have Sponsor/Owners, their consultant
       (if used), design architect, and attorney all participated
       in the project planning conferences?                          2.3%       20.5%          13.6%        47.7%     15.9%

    d. How frequently have all HUD technical experts (design
       architect, cost analyst, attorneys, etc.), responsible for
       reviewing project paperwork participated in each project      2.3%        6.8%           9.1%        36.4%     45.5%
       planning conference?

    e. Were there instances when specific HUD technical
       experts who were responsible for project paperwork did
       not participate in project planning conferences?
                           ˆ Yes € Continue to question 5f.
                           (50.0%)
                           ˆ No € Please read introduction
                           below, then answer question 6 on next
                           page. (47.7%)
                           (2.3% did not respond)

    f.   When they did not participate in the planning
         conference, how frequently did these technical experts
         contact Sponsor/Owners directly to offer technical          4.4%       17.4%          17.4%        30.4%     30.4%
         assistance? (N=23)




FACTORS IMPACTING TIMELY PROCESSING

We are interested in identifying factors that may contribute to the untimely processing of Section 202 projects from fund
reservation to initial closing. We understand that there are three basic factors that can add to project processing time.
These factors may include (1) the actions or characteristics of Project Sponsors/Owners; (2) HUD staff, funding, and
policies; and (3) State, local, and/or other requirements. Your responses to the following questions (6, 7, 8) will provide
valuable insight into the significance of these factors.

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6. Based on your experience with all projects receiving fund reservations in your office since fiscal year 1998:

    Part A: For each factor related to Sponsors or Owners, select a single box that most commonly describes the factor’s impact on the overall processing
    time.
    Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects in your office by selecting a single box that most
    commonly describes the frequency of the factor’s impact on the overall processing time. (For example, the factor ‘Seldom if ever’ prevents timely
    processing, ‘Sometimes’ prevents timely processing, etc.)

                       Sponsor / Owner Factors That May Negatively Influence Timely Processing of Section 202 Projects
                                                                  (N=44)
                                  A. Typical Impact of Factor on Processing         B. Frequency Of Factor Preventing Timely Processing
Sponsor/Owner Factors:                              Time
                                                 (check one box for each factor)                                (check one box for each factor)
                                                                                                                                                       Always or
                                         No       Minor       Moderate        Significant    Seldom if     Sometimes        Often         Very often    almost
                                       Impact     Impact       Impact           Impact         ever                                                     always
                                         (1)        (2)          (3)                (4)         (1)            (2)            (3)             (4)          (5)
a. Doesn’t attend pre-application
   workshop (2.3% did not
                                       11.4%      20.5%        22.7%               43.2%      50.0%           34.1%         2.3%            2.3%         6.8%
   respond in part A and 4.6%
   in part B)
b. Lacks experience in Section 202
   program/ multi-family project        0.0%      4.6%         31.8%               63.6%      4.6%            38.6%        27.3%           15.9%        13.6%
   development
c. Does not effectively manage
                                        0.0%      4.6%         22.7%               72.7%      0.0%            40.9%        22.7%           18.2%        18.2%
   project development process
d. Lacks effective consultant           0.0%      11.4%        0.0%                88.6%      6.8%            40.9%        13.6%           13.6%        25.0%
e. Has difficulty designing project
                                        0.0%      9.1%         27.3%               63.6%      4.6%            25.0%        13.6%           18.2%        38.6%
   within fund reservation amount
f. Lacks sufficient funds for pre-
   construction costs required
   before receipt of capital            9.1%      43.2%        15.9%               31.8%      40.9%           27.3%        11.4%           13.6%         6.8%
   advance (e.g., environmental
   reviews, site control, etc.)
g. Doesn’t fulfill requirements in a
   timely fashion (e.g., set up
                                        2.3%      13.6%        27.3%               56.8%      13.6%           27.3%        25.0%           22.7%        11.4%
   Owner corporation, submit
   complete required forms, etc.)
h. Other (Please specify) (84.1% did
                                        0.0%      0.0%         0.0%                15.9%      0.0%            2.3%          4.6%            4.6%         4.6%
    not respond in parts A/B)



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7. Based on your experience with all projects receiving fund reservations in your office since fiscal year 1998:

     Part A: For each factor related to HUD staff, funding, or policies, select a single box that most commonly describes the factor’s impact on the overall processing time.
     Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects in your office by selecting a single box that most commonly
     describes the frequency of the factor’s impact on the overall processing time. (For example, the factor ‘Seldom if ever’ prevents timely processing, ‘Sometimes’ prevents
     timely processing, etc.)
                                       HUD Factors That May Negatively Influence Timely Processing of Section 202 Projects
                                                                            (N=44)
                                            A. Typical Impact of Factor on Processing        B. Frequency Of Factor Preventing Timely Processing
HUD Factors:                                                  Time
                                                       (check one box for each factor)                                     (check one box for each factor)
                                                                                                                                                                      Always or
                                              No       Minor        Moderate        Significant       Seldom if      Sometimes          Often        Very often        almost
                                            Impact     Impact        Impact           Impact            ever                                                           always
                                              (1)        (2)           (3)                (4)            (1)              (2)            (3)             (4)             (5)
a.   Staff lack Section 202 experience
                                            18.2%      29.6%         27.3%               25.0%         52.3%             40.9%          2.3%            2.3%            2.3%
b.   Staff lack Section 202 training
                                            11.4%      34.1%         29.6%               25.0%         38.6%             50.0%          4.6%            4.6%            2.3%
c.   Section 202 workload (e.g.,
     simultaneously reviewing new
     applications and paperwork for         6.8%       29.6%         45.5%               18.2%         15.9%             59.1%         18.2%            4.6%            2.3%
     funded projects)
d.   FHA loan processing can be, at
     certain times, higher priority than    13.6%      18.2%         29.6%               38.6%         25.0%             34.1%         22.7%           13.6%            4.6%
     Section 202 project processing
e.   Some staff unwilling to fully
     implement HUD Notice H 96-102          59.1%      15.9%         11.4%               13.6%        79.6%%             18.2%          2.3%            0.0%            0.0%
f.   Insufficient project coordination
     (including turnover in project
     coordinator position) (2.3% did        36.4%      25.0%         29.6%               6.8%          63.6%             27.3%          4.6%            2.3%            0.0%
     not respond in parts A/B)
g.   Capital advance insufficient to
     fund projects (2.3% did not            6.8%        4.6%         27.3%               61.4%         11.4%             22.7%          9.1%           29.6%           25.0%
     respond in part B)
h.   Award letters not mailed during
     fiscal year of appropriation           20.5%      25.0%         29.6%               25.0%         31.8%             25.0%          2.3%           13.6%           27.3%
i.   Availability of HUD amendment
     funds (after other funding sources
     exhausted) (2.3% did not respond       9.1%       25.0%         29.6%               34.1%         25.0%             20.5%         15.9%           20.5%           15.9%
     in parts A/B)
j.   Time spent by HUD HQ
     considering waiver requests            6.8%       20.5%         27.3%               45.5%         15.9%             25.0%         20.5%           13.6%           25.0%
     (extensions, amendment funds)
k.   Other (Please specify) (90.9% did
     not respond in parts A/B)              0.0%        0.0%          2.3%               6.8%           0.0%             0.0%           2.3%            2.3%            4.6%
Section 202 Supportive Housing for the Elderly: Development Process Survey                                           5




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8. Based on your experience with all projects receiving fund reservations in your office since fiscal year 1998:

     Part A: For each factor related to State, Local, and/or Other requirements, select a single box that most commonly describes the factor’s impact on the
     overall processing time.
     Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects in your office by selecting a single box that most
     commonly describes the frequency of the factor’s impact on the overall processing time. (For example, the factor ‘Seldom if ever’ prevents timely
     processing, ‘Sometimes’ prevents timely processing, etc.)

           Factors Related to State, Local, or Other Requirements That May Negatively Influence Timely Processing of Section 202 Projects
                                                                          (N=44)
                                       A. Typical Impact of Factor on Processing        B. Frequency Of Factor Preventing Timely Processing
Factors Related to State, Local, or                       Time
Other Requirements:                           (check one box for each factor)                       (check one box for each factor)
                                                                                                                                                        Always or
                                             No     Minor      Moderate       Significant     Seldom if      Sometimes       Often       Very often      almost
                                           Impact   Impact      Impact          Impact          ever                                                     always
                                            (1)      (2)          (3)             (4)            (1)             (2)          (3)            (4)            (5)
a.   Project is new construction (2.3%
     did not respond in part B)            36.4%    34.1%       13.6%           15.9%          50.0%            22.7%       13.6%           2.3%          9.1%
b.   Project involves rehabilitation
     (4.6% did not respond in parts        25.0%    22.7%       27.3%           20.5%          45.5%            31.8%        6.8%           6.8%          4.6%
     A/B)
c.   Project site zoning approval (2.3%
     did not respond in part A)            6.8%     22.7%       27.3%           40.9%          15.9%            43.2%       20.5%          13.6%          6.8%
d.   Local permits (i.e., obtaining
     and/or cost of permits)               9.1%     29.6%       29.6%           31.8%          25.0%            38.6%       15.9%          11.4%          9.1%
e.   State and local historic
     preservation approval                 13.6%    45.5%       31.8%           9.1%           45.5%            43.2%        9.1%           2.3%          0.0%
f.   Site contamination mitigation
     (2.3% did not respond in part A)      13.6%    31.8%       25.0%           27.3%          52.3%            27.3%       13.6%           2.3%          4.6%
g.   Securing secondary financing (e.g.,
     time needed to secure additional
     funding and obtain approval of        11.4%    11.4%       38.6%           38.6%          18.2%            25.0%       25.0%          25.0%          6.8%
     financing documents)
h.   Legal challenges
                                           11.4%    36.4%       27.3%           25.0%          22.7%            63.6%        9.1%           4.6%          0.0%
i.   General local opposition to project
                                           15.9%    31.8%       27.3%           25.0%          40.9%            50.0%        4.6%           2.3%          2.3%
j.   Other (Please specify) (86.4% did
     not respond in parts A/B)             0.0%     0.0%        4.6%            9.1%            0.0%            4.6%         6.8%           0.0%          2.3%




Section 202 Supportive Housing for the Elderly: Development Process Survey                                  6




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9. What are the three most important factors (from those listed in the tables above) that can negatively impact timely
   processing of Section 202 projects?
    a)


    b)


    c)




HUMAN CAPITAL RELATED QUESTIONS

10. a. Did any staff members from your office attend HUD’s Section 202/811 field office staff training titled “The
    Process Imperative: Moving Quickly from Fund Reservation to Initial Closing” held this past summer in St. Louis,
    Missouri or Washington, D.C.? (N=44)

                      1.   ˆ Yes (100.0%)
                      2.   ˆ No € Please skip to question 11 (0.0%)

            b. How many staff members attended from your office? (Mean = 1.9 persons)_

            c. How many staff members in your office process Section 202 projects (full time or part-time)? (Mean =
               6.8 persons)_

            d. Have those who attended shared the content of the training with staff who did not attend?

                      1.   ˆ Yes (75.0%)
                      2.   ˆ No € Please skip to question 11. (22.7%)
                           (2.3% did not respond)




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              e. How was the content of the training shared with staff members in your office who did not attend the
                 training?(Unless otherwise noted, N=34)


         Method of Instruction                                 Check one box for each   If ‘Yes’ is checked, enter
         Formal training                                               row               number of staff trained
                                                              1. ˆ Yes (5.9%) €
         a. Training session held (at least 1 full day)                                 Mean = 5.3 persons
                                                              2. ˆ No (79.4%)           (N=3)
                                                              (14.7% did not respond)
         Informal training
         b. Meeting or information session held (less than    1. ˆ Yes (64.7%)€
             1 full day)                                                                Mean = 5.4 persons
                                                              2. ˆ No (20.6%)           (N=19)
                                                              (14.7% did not respond)
         c. Trained staff answer project processing           1. ˆ Yes (82.4%)€
            questions and provide guidance to other staff                               Mean = 4.6 persons
            on an hoc basis                                   2. ˆ No (11.8%)           (N=18)
                                                              (5.9% did not respond)
         d. Trained staff provided a written summary of       1. ˆ Yes (17.7%)€
            training highlights                                                         Mean = 6.7 persons
                                                              2. ˆ No (55.9%)           (N=6)
                                                              (26.5% did not respond)
                                                              1. ˆ Yes (14.7%) €
         e. Other (please explain)                                                      Mean = 9 persons
                                                              2. ˆ No (0.0%)            (N=1)
                                                              (85.3% did not respond)
         f.                                                   1. ˆ Yes (2.9%)€
                                                                                        Mean = 5 persons
                                                              2. ˆ No (0.0%)            (N=1)
                                                              (97.1% did not respond)

CONCLUSIONS


11. Please identify up to three policy changes within HUD’s control that you believe would aid the timely processing of
    Section 202 projects from fund reservation to initial closing:

    a)


    b)


    c)




                  Page 63                                                      GAO-03-512 Section 202 Elderly Housing
Appendix VII

Survey of Section 202 Sponsors and
Consultants                                                                                                        AppenV
                                                                                                                        d
                                                                                                                        xiI




                                              United States General Accounting Office


                                              Section 202 Supportive Housing for the Elderly:


               Introduction

               The United States General Accounting Office is contacting sponsors and consultants who have
               significant experience with housing development under the Section 202 Supportive Housing
               for the Elderly program. The Senate Special Committee on Aging asked GAO to explore the
               issues involved in the processing of projects that have been awarded capital advances.

               We are interested in obtaining your valuable insights into the processing of Section 202
               projects from fund reservation to initial closing. As you complete the survey, please
               consider your experience since 1998 with the Section 202 program only.

               Instructions

               Please complete this survey by December 13, 2002 and fax it to (202) 512-2502.

               If you have any questions about this survey or have problems submitting your response, please
               contact Melissa A. Roye by phone at (202) 512-6426 or by email at royem@gao.gov.



               BACKGROUND INFORMATION

               1. In case we would like to clarify any of your responses, please provide your sponsor or
                  consultant name, respondent name and title, location, telephone number, and e-mail
                  address of the individual primarily responsible for gathering the information requested in
                  this survey.


                                Name of Sponsor or Consultant:

                                Respondent name:

                                Title:

                                Location:

                                Telephone number:

                                E-mail address:




                                                                                                               1




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       Appendix VII
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       Consultants




2. Based on your experience with all Section 202 projects (not Section 811) receiving fund
   reservations since 1998, please list the states in which you have sponsored or consulted
   on at least one project per year OR a total of at least three projects since 1998.

   _______________________________________________________________________________

   _______________________________________________________________________________

   _______________________________________________________________________________




3. Approximately how many Section 202 projects have you sponsored or consulted on in total
   since 1998 _Mean=12.3_ (N=21), since 1992 _Mean=25.6_ (N=21)?




FACTORS IMPACTING TIMELY PROCESSING

We are interested in identifying factors that may contribute to the untimely processing of only
Section 202 projects from fund reservation to initial closing. We understand that there are
three basic factors that can add to project processing time. These factors may include (1) the
actions or characteristics of Project Sponsors/Owners; (2) HUD staff, funding, and policies;
and (3) State, local, and/or other requirements. Your responses to the following questions (4,
5, 6, 7) will provide valuable insight into the significance of these factors.




                                                                                              2




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4. Based on your experience with all projects you have sponsored or consulted on that have received fund reservations since 1998:

     Part A: For each factor related to Sponsors or Owners, select a single box that most commonly describes the factor’s impact on the overall processing
     time.
     Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects by selecting a single box that most commonly
     describes the frequency of the factor’s impact on the overall processing time. (For example, the factor ‘Seldom if ever’ prevents timely processing,
     ‘Sometimes’ prevents timely processing, etc.)

                                   Sponsor / Owner Factors That May Negatively Influence Timely Processing of Section 202 Projects
                                                                                (N=21)
                                                    A. Typical Impact of Factor on Processing          B. Frequency Of Factor Preventing Timely Processing
Sponsor/Owner Factors:                                                Time
                                                          (check one box for each factor)                         (check one box for each factor)
                                                                                                                                                        Always or
                                                      No     Minor     Moderate    Significant   Seldom if   Sometimes       Often         Very often    almost
                                                    Impact   Impact     Impact       Impact        ever                                                  always
                                                      (1)      (2)        (3)          (4)          (1)          (2)          (3)             (4)          (5)
a.   Doesn’t attend pre-application workshop
     (9.5% did not respond for part B)              42.9%    38.1%       9.5%        9.5%         76.2%        14.3%         0.0%            0.0%         0.0%
b.   Lacks experience in Section 202 program/
     multi-family project development (9.5% did     28.6%    14.3%       9.5%        47.6%        28.6%        23.8%         0.0%           14.3%        23.8%
     not respond for part B)
c.   Does not effectively manage project
     development process (9.5% did not respond      28.6%    4.8%       14.3%        52.4%        23.8%        28.6%         4.8%            9.5%        23.8%
     for part B)
d.   Lacks effective consultant (4.8% did not
     respond for part A and 19.1% for part B)       23.8%    4.8%        4.8%        61.9%        23.8%        14.3%         4.8%            0.0%        38.1%
e.   Has difficulty designing project within fund
     reservation amount (9.5% did not respond       4.8%     4.8%       33.3%        57.1%        4.8%         23.8%         4.8%           28.6%        28.6%
     for part B)
f.   Lacks sufficient funds for pre-construction
     costs required before receipt of capital
     advance (e.g., environmental reviews, site     14.3%    23.8%      23.8%        38.1%        33.3%        19.1%        19.1%            9.5%         9.5%
     control, etc.) (9.5% did not respond for
     part B)
g.   Doesn’t fulfill requirements in a timely
     fashion (e.g., set up Owner corporation,
     submit complete required forms, etc.)          23.8%    28.6%      19.1%        28.6%        23.8%        33.3%         9.5%            4.8%        14.3%
     (14.3% did not respond to part B)
h.   Other (Please specify) (71.4% did not
     respond to parts A/B)                          0.0%     0.0%        4.8%        23.8%        0.0%         0.0%          9.5%            9.5%        9.5%




                                                                                                                                                                    3




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                        Appendix VII
                        Survey of Section 202 Sponsors and
                        Consultants




5. Based on your experience with all projects you have sponsored or consulted on that have received fund reservations since 1998:

     Part A: For each factor related to HUD staff, funding, or policies, select a single box that most commonly describes the factor’s impact on the overall
     processing time.
     Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects by selecting a single box that most commonly
     describes the frequency of the factor’s impact on the overall processing time. (For example, the factor ‘Seldom if ever’ prevents timely processing,
     ‘Sometimes’ prevents timely processing, etc.)

                                           HUD Factors That May Negatively Influence Timely Processing of Section 202 Projects
                                                                                 (N=21)
                                                   A. Typical Impact of Factor on Processing            B. Frequency Of Factor Preventing Timely Processing
HUD Factors:                                                         Time
                                                         (check one box for each factor)                            (check one box for each factor)
                                                                                                                                                        Always or
                                                    No      Minor     Moderate      Significant Seldom if       Sometimes       Often        Very often   almost
                                                  Impact Impact        Impact         Impact       ever                                                   always
                                                    (1)       (2)         (3)            (4)        (1)            (2)           (3)             (4)        (5)
a.   Staff lack Section 202 experience
                                                     4.8%    4.8%       47.6%        42.9%        19.1%         42.9%         14.3%        9.5%          14.3%
b.   Staff lack Section 202 training
                                                     4.8%    4.8%       38.1%        52.4%       14.3%%         47.6%         9.5%         19.1%          9.5%
c.   Section 202 workload (e.g., simultaneously
     reviewing new applications and paperwork
     for funded projects) (14.3% did not             4.8%    14.3%      33.3%        47.6%         4.8%         19.1%         33.3%        19.1%          9.5%
     respond for part B)
d.   FHA loan processing can be, at certain
     times, higher priority than Section 202
     project processing (14.3% did not respond       0.0%    9.5%       14.3%        61.9%         0.0%         23.8%         23.8%        19.1%         19.1%
     for parts A/B)
e.   Some staff unwilling to fully implement
     HUD Notice H 96-102 (4.8% did not               4.8%    14.3%      38.1%        38.1%        14.3%         38.1%         23.8%        4.8%          19.1%
     respond for part A)
f.   Insufficient project coordination (including
     turnover in project coordinator position)       4.8%    14.3%      42.9%        38.1%        23.8%         28.6%         19.1%        4.8%          23.8%
g.   Capital advance insufficient to fund projects
                                                     0.0%    0.0%       33.3%        66.7%         0.0%          9.5%         28.6%        33.3%         28.6%
h.   Award letters not mailed during fiscal year
     of appropriation                                14.3%   52.4%      9.5%         23.8%        33.3%         47.6%         4.8%         0.0%          14.3%
i.   Availability of HUD amendment funds
     (after other funding sources exhausted)
     (4.8% did not respond for part A and            14.3%   0.0%       19.1%        61.9%        14.3%         14.3%         14.3%        14.3%         23.8%
     19.1% for part B)
j.   Time spent by HUD HQ considering waiver
     requests (extensions, amendment funds)          4.8%    4.8%       38.1%        52.4%         4.8%         52.4%         14.3%        23.8%          4.8%
k.   Other (Please specify) (71.4% did not
                                                     0.0%    4.8%       0.0%         23.8%         0.0%          4.8%         0.0%         9.5%          14.3%
     respond for parts A/B)
                                                                                                                                                                    4




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                        Appendix VII
                        Survey of Section 202 Sponsors and
                        Consultants




6. Based on your experience with all projects you have sponsored or consulted on that have received fund reservations since 1998:

     Part A: For each factor related to State, Local, and/or Other requirements, select a single box that most commonly describes the factor’s impact on the
     overall processing time.
     Part B: Indicate the frequency of each factor’s influence on the timely processing of Section 202 projects by selecting a single box that most commonly
     describes the frequency of the factor’s impact on the overall processing time. (For example, the factor ‘Seldom if ever’ prevents timely processing,
     ‘Sometimes’ prevents timely processing, etc.)

             Factors Related to State, Local, or Other Requirements That May Negatively Influence Timely Processing of Section 202 Projects
                                                                         (N=21)
                                           A. Typical Impact of Factor on Processing Time           B. Frequency Of Factor Preventing Timely Processing
Factors Related to State, Local, or                 (check one box for each factor)
Other Requirements:                                                                                            (check one box for each factor)
                                                                                                                                                      Always or
                                             No     Minor      Moderate       Significant   Seldom if     Sometimes        Often         Very often    almost
                                           Impact   Impact      Impact          Impact        ever                                                     always
                                             (1)      (2)         (3)             (4)          (1)            (2)            (3)            (4)          (5)
a.   Project is new construction
                                           33.3%    38.1%        4.8%           23.8%        42.9%          33.3%          4.8%            9.5%           9.5%
b.   Project involves rehabilitation
     (14.3% did not respond in part A      38.1%    14.3%        33.3%           0.0%        33.3%          28.6%          14.3%           0.0%           4.8%
     and 19.1% in part B)
c.   Project site zoning approval (9.5%
     did not respond in part B)            19.1%     9.5%        19.1%          52.4%        14.3%          23.8%          14.3%          19.1%        19.1%
d.   Local permits (i.e., obtaining
     and/or cost of permits)               0.0%     14.3%        47.6%          38.1%        0.0%           38.1%          28.6%          23.8%           9.5%
e.   State and local historic
     preservation approval                 23.8%    42.9%        14.3%          19.1%        52.4%          28.6%          4.8%            0.0%        14.3%
f.   Site contamination mitigation
     (4.8% did not respond in part A       33.3%    14.3%        4.8%           42.9%        42.9%          23.8%          9.5%            4.8%           4.8%
     and 14.3% in part B)
g.   Securing secondary financing (e.g.,
     time needed to secure additional
     funding and obtain approval of
     financing documents) (4.8% did        19.1%     4.8%        23.8%          47.6%        9.5%           28.6%          9.5%           14.3%        28.6%
     not respond in part A and 9.5%
     in part B)
h.   Legal challenges (4.8% did not
     respond in part A and 14.3% in        23.8%    14.3%        14.3%          42.9%        42.9%          23.8%          0.0%            9.5%           9.5%
     part B)
i.   General local opposition to project
     (9.5% did not respond in part B)      14.3%    23.8%        9.5%           52.4%        14.3%          42.9%          14.3%           9.5%           9.5%
j.   Other (Please specify) (81.0% did
     not respond in parts A/B)             0.0%      0.0%        9.5%            9.5%        0.0%           0.0%           0.0%            9.5%           9.5%
                                                                                                                                                                  5




                        Page 68                                                                         GAO-03-512 Section 202 Elderly Housing
         Appendix VII
         Survey of Section 202 Sponsors and
         Consultants




7. What are the three most important factors (from those listed in the tables above) that can negatively impact
timely processing of Section 202 projects?

    a)



    b)



    c)




8. Please identify up to three policy changes within HUD’s control that you believe would aid the timely
processing of Section 202 projects from fund reservation to initial closing:

    a)




    b)




    c)




                                Thank you very much for your time.




                                                                                                              6




         Page 69                                                         GAO-03-512 Section 202 Elderly Housing
Appendix VIII

Comments from the Department of Housing
and Urban Development                                             AppenV
                                                                       diI
                                                                       x




                Page 70      GAO-03-512 Section 202 Elderly Housing
Appendix VIII
Comments from the Department of Housing
and Urban Development




Page 71                                   GAO-03-512 Section 202 Elderly Housing
           Appendix VIII
           Comments from the Department of Housing
           and Urban Development




(250083)   Page 72                                   GAO-03-512 Section 202 Elderly Housing
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