B. Direct Loans and Capital Advances

The Section 202 program has historically developed housing for the elderly and persons with disabilities. Project sponsors apply directly to HUD for development loans or capital advances. The program began in the 1960s. Since then, it has evolved from a loan program to a capital advance program and has been combined with other forms of assistance to make the rents affordable. Although the Section 202 program originally developed housing to serve the elderly and persons with disabilities, properties developed through the current Section 202 Capital Advance program serve only elderly families/persons. The Section 811 Capital Advance program now serves persons with disabilities. The descriptions below summarize the Section 202 program over the years and the addition of the Section 811 program.

1. Section 202 Direct, Low-Interest Loans. This program provided Section 202 low-interest, direct loans to develop housing for the elderly or disabled. Some of these Section 202 properties received tenant subsidies in the form of Rent Supplement or Section 8 Loan Management Set-Aside contracts (see subparagraph C below). The program was discontinued after 1976; however, many of these properties are still in service.

2. Section 202 Direct, Formula Interest Rate Loans. This program replaced the Section 202 direct, low-interest loan program. It also provided longterm, direct loans to finance housing for the elderly or persons with disabilities. However, these loans carried an interest rate based on the average yield on 30 year marketable obligations of the United States and properties were developed with 100% Section 8 assistance to help keep units affordable to low-income families. The program, commonly referred to as Section 202/8, stopped making loans in 1991, but there are many Section 202/8 properties in service. The Section 162 program was created in 1988 as a program for persons with disabilities. (See Project Assistance Contracts (PACs) in subparagraph C below).

3. Section 202 and Section 811 Capital Advances. Since October 1991, HUD has provided capital advances, rather than loans, to finance the

development of rental housing for the elderly and persons with disabilities. The Section 202 Capital Advance Program provides housing for the elderly, and the Section 811 Capital Advance Program does the same for persons with disabilities. These programs replaced the Section 202 direct, formula interest rate loan program. In both the Section 202

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and Section 811 programs, the development of rental housing with supportive services is subsidized with an interest-free capital advance, and repayment is not required as long as the housing remains available to very low-income elderly or very low-income persons with disabilities. The capital advances are provided together with tenant rental subsidies in the form of Project Rental Assistance Contracts (PRACS) (see subparagraph C below).