PROGRAM HIGHLIGHTS

SUMMARY OF BUDGET ESTIMATES

1. SUMMARY OF BUDGET REQUEST

An appropriation of $989 million is proposed for the Housing for Special Populations program for fiscal year 2001. This consists of $779 million for the elderly and $210 million for housing for persons with disabilities. Of the funding proposed for the elderly, $50 million will be for a new initiative�Development of Assisted Living�to address the growing needs (as discussed below) of the Nation's seniors. Also, $50 million of the funds proposed will be used to continue conversion of existing elderly projects to assisted living facilities and $50 million for an expanded Service Coordinator/Congregate Services program. Of the total funding proposed for the disabled, up to 50 percent is available for tenant-based assistance to provide for program flexibility and more choice in housing for the low-income disabled.

Major elements of the Administration's Housing Security Plan for Older Americans initiative were enacted as part of HUD's fiscal year 2000 Budget. In the fiscal year 2001 Budget, the Administration proposes to build on this foundation by seeking funding for the remaining portions of the Housing Security Plan, and adding a major new element to the Plan: development of new assisted living facilities that will serve low-income seniors.

In order to implement all elements of a comprehensive Housing Security Plan, the following initiatives proposed in the President's fiscal year 2000 Budget request are included again this year:

1. Allow greater use of public and private financing sources to leverage Section 202 Capital Advances. Mixed-financing can be achieved through legislative changes such as allowing non-profit controlled limited partnerships that are eligible for Low-Income Housing Tax Credits (LIHTC) to apply for Section 202 funding;
2. Allow Service Coordinators on an exception basis to serve eligible elderly families residing in HUD-assisted developments or private homes and apartments in the neighborhood surrounding the HUD-assisted development where they are located. This change will improve economies of scale in the Service Coordinator program and help many more seniors age in place;
3. Earmark up to $5 million for Intergenerational Learning Centers from the $50 million for conversion of Section 202 properties to Assisted Living.

In addition to completing the full implementation of the Housing Security Plan as proposed last year, the Administration continues to develop new tools in the Continuum of Care for lower-income seniors. This budget therefore proposes an initiative to combine the tools of FHA mortgage insurance under Section 232 with rental subsidies to encourage the development of assisted living facilities that are affordable to low-income elderly. While a substantial market for higher-priced assisted living facilities have been developed in response to demand for an alternative to nursing homes and other institutional forms of care, recent studies show little construction of assisted living for the moderate and low-income market. The result of this is that seniors are either forced to live in housing that does not meet their service needs or move to more expensive alternatives that are currently eligible for subsidy.

Under the proposal, operating subsidies would be available at market rent levels up to 150 percent of fair market rent. The funding for these subsidies would be on a 5-year basis, renewable at HUD option up to the term of the FHA-insured mortgage, as much as 40 years. Funding of $50 million would support 1,500 units. The operating subsidy would be limited to 20 percent of the units in a property to accomplish income mixing, limit management disincentives, and diversify underwriting risk. Because there is almost no assisted living currently affordable to low-income elderly, incomes would be limited to low-income (80 percent of median) rather than a deeper targeting. To encourage the investment of private capital, Section 232 insurance would be used to finance the projects, subject to normal underwriting standards.

Because this program is intended to catalyze new construction in a market for affordable assisted living facilities which is currently quite limited, the operating subsidies will initially be project-based. The project-based subsidy establishes a foundation for the provision of assisted living services, ensuring that developers will be willing to commit the resources necessary to establish and maintain the services, and that low-income seniors will have access to the services. However, the Administration recognizes that making housing subsidies tenant-based cannot only provide residents more choice in where they live, but also increase market incentives for good property management. To increase tenant choice and strengthen incentives for good management, HUD will convert the operating subsidies to tenant-based vouchers in cases of poor management, inadequate services or other circumstances defined by regulation. Furthermore, within 3 years after enactment of this program, HUD will submit a report to Congress that analyzes the development of the market for affordable assisted living, details the programmatic changes that would be needed to convert all of the operating subsidies provided by the program to portable, tenant-based vouchers, and recommends whether such changes should be adopted. With the recent enactment of the Administration's proposal to allow use of Section 8 vouchers in assisted living facilities, the Administration expects that a precedent will be established and a successful conversion to portable subsidies would be possible shortly.

One of the most substantial barriers to the establishment of a market for low- and moderately priced assisted living is the need to combine Medicaid and other health-related funding streams with housing subsidies. In order to break down this barrier, HUD would award these subsidies through a competition to providers based on an approved plan of the State or political subdivision to supplement the subsidies with appropriate supportive services for the frail elderly occupying the assisted living units. This would encourage providers to find innovative ways to utilize their funding in conjunction with the housing subsidies made available through the competition, and would set precedents for other providers to follow.

Summary Of Program Strategic Objectives

The Housing for Special Populations account funds the targeted Section 202 program for low-income elderly families and the Section 811 housing program for persons with disabilities, both of which are necessary to achieve HUD's objective 1.2-making affordable rental housing available to low-income households.

2. CHANGES FROM 1999 ESTIMATES INCLUDED IN THE 2000 BUDGET

Estimates for 1999 in the 2000 Budget assumed that $957.9 million would be used to support approximately 11,300 capital grants and rental assistance units for the elderly and disabled in 1999. Actual activity totaled $897.1 million supporting 8,943 units.

3. CHANGES FROM 2000 ESTIMATES INCLUDED IN THE 2000 BUDGET

The fiscal year 2000 Budget requested a total of $854 million for the elderly and disabled programs. However, the 2000 Appropriations Act provided $911 million for these programs. As a result of the increased funding, estimates have been revised accordingly.

EXPLANATION OF INCREASES AND DECREASES

For the 2001 Budget, a total of $989 million is requested to fund elderly and disabled activities for 11,711 units under the Housing for Special Populations program. Within this request is $150 million for Development of Assisted Living, Conversion to Assisted Living Grants, and Service Coordinators for the Elderly.

PROGRAM DESCRIPTION

The Supportive Housing Programs. The Supportive Housing programs were authorized by Section 801 and Section 811 of the Cranston-Gonzalez National Affordable Housing Act to provide eligible private non-profit organizations with capital grants and rental assistance to provide housing for very low-income elderly or disabled individuals. The capital grants will be used to finance the acquisition, acquisition and moderate rehabilitation, construction, reconstruction, or rehabilitation of housing intended for use as supportive housing for elderly people or people with disabilities. Supportive housing is designed to meet the special physical needs of elderly or disabled individuals and to accommodate the provision of supportive services.

Development of Assisted Living. Development of Assisted Living combines the tools of FHA mortgage insurance under Section 232 with operating subsidies to provide assisted living that is affordable to the low-income elderly. The operating subsidies would be available at market rent levels up to 150 percent of fair market rent. The funding for these subsidies would be on 5-year basis, renewable at HUD option up to the term of the FHA-insured mortgage. Funding of $50 million would support 1,500 units.

Under the proposal, the operating subsidy would be limited to 20 percent of the units in a property to accomplish income mixing, limit management disincentives, and diversify underwriting risk. Because there is almost no assisted living currently affordable to low-income elderly, incomes would be limited to low-income (80 percent of median) rather than a deeper targeting. To encourage the investment of private capital, Section 232 insurance would be used to finance the projects, subject to normal underwriting standards.

One of the most substantial barriers to the establishment of a market for low and moderately priced assisted living is the need to combine Medicaid and other health-related funding streams with housing subsidies. In order to break down this barrier, HUD would award these subsidies to providers based on an approved plan of each State or political subdivision to supplement the subsidies with appropriate supportive services for the frail elderly occupying the assisted living units. This would encourage providers to find innovative ways to utilize their funding in conjunction with the housing subsidies made available through the competition, and would set precedents for other providers to follow.

Capital Grants for Conversion to Assisted Living. These funds will be available to existing HUD elderly subsidized projects that convert some or all units to assisted living. These competitive grants would be available to current project owners who agree to several specified conditions. These conditions would include: (1) a tight cap on operating expenses and HUD subsidy; (2) Medicaid home and community-based services or personal care services for Medicaid-eligible residents, and accessible services for non-Medicaid eligible residents through local and community service providers; (3) two meals per day; and (4) 24-hour staff. (A portion of these funds may be used to provide space within elderly housing projects for Intergenerational Learning Centers where the skills and experience of seniors will be harnessed to meet the need for affordable child care and allow seniors and children to learn new skills together.) Preference will be given to grant applicants who demonstrate a strong commitment to: (l) serve extremely low-income frail, disabled elderly residents; and (2) promote resident autonomy, independence, choice and control. Grant funds are also available for elderly facilities that require repairs.

Service Coordinators. Section 808 of the Cranston-Gonzalez National Affordable Housing Act authorized the use of Service Coordinators within existing projects for the elderly or people with disabilities. Sections 674 and 676 of the Housing and Community Development Act of 1992 expanded the universe of projects eligible to receive service coordinator assistance by authorizing funding for service coordinators in Section 8 and Sections 221(d)(3) and 236 projects. The purpose of the Service Coordinators program is to enable residents who are elderly, especially those who are frail or disabled, or people with disabilities to live as independently as possible in their own homes.

Service Coordinators funds pay the salary and fringe benefits of a Service Coordinator and cover related program administrative costs. The primary responsibility of a Service Coordinator is to help link residents of eligible housing with supportive services provided by community agencies. The Service Coordinator may also perform such activities as providing case management, acting as a advocate or mediator, coordinating group programs, or training housing management staff.

Congregate Services. The Congregate Housing Services Program (CHSP) was authorized by the Housing and Community Development Amendments of 1978 to provide 3- to 5-year grants to fund services for eligible residents of Public Housing and Section 202 Housing for the Elderly or Handicapped. The intent was to avoid costly and premature or unnecessary institutionalization of individuals and to reduce Government outlays for institutional care. The program was revised in 1992 to add other assisted housing programs.

The CHSP grant from HUD, in conjunction with grantee match and participant fees, subsidizes the cost of supportive services that are provided on-site and in the participant's home. Such services may include congregate meals, housekeeping, personal assistance, transportation, personal emergency response systems, case management, and preventative health programs. HUD requires that each program include a Service Coordinator and that each makes at least one hot congregate meal available every day to participants. Eligible participants are residents of eligible housing who are frail (i.e., have difficulty performing three or more activities of daily living) or are people with disabilities age 18 or older.

CHSP funds allow residents of HUD subsidized housing to afford supportive services that enable them to continue living as independently as possible in their homes for as long as possible. Without this program, most of the low- and very low-income participants would have no choice but to relocate to a facility that provides a higher level of care, such as a nursing home, to meet their daily living needs.

Vouchers. Tenant-based assistance will be provided with up to 50 percent and no less than 25 percent of the funding made available for supportive housing for the disabled to increase program flexibility. The assistance will allow disabled renters to search for and rent a standard unit in the private market. This is known as "mainstreaming" recipients into the housing market.

The Direct Loan Program. The Housing for the Elderly or Handicapped Direct Loan program was authorized by Section 202 of the Housing Act of 1959, as amended. The program is no longer active, although projects developed under it continue to operate. The program provided direct loans to nonprofit organizations sponsoring the construction and management of rental housing for the elderly or handicapped. Projects originally developed under Section 202 also receive Section 8 subsidies to enable low-income households to afford the rents in these projects. The 1992 VA-HUD-Independent Agencies Appropriations Act (P.L. 102-139) provided language to enable the conversion of pipeline Section 202 direct loan projects to the Supportive Housing program starting January 1, 1992. All of the pipeline Section 202 projects were converted in fiscal year 1992.



PROGRAM ACTIVITY

Any remaining activity for the loan program includes amendments for projects reaching final endorsement, payment of interest and repayment of borrowings to Treasury, and management of the loan portfolio.

FISCAL YEAR 2001 PERFORMANCE MEASURES

Performance Indicators:

The number of households with worst case housing needs decreases by 3 percent by 2001 among families with children and elderly households.

The number of elderly households living in a public or assisted housing development that is served by a service coordinator for the elderly increases by 3 percent above fiscal year 1999 levels for private assisted housing.

The Section 202 program provides construction financing and rental subsidies for projects servicing elderly families which aids in meeting Outcome Indicator 1.2.1, reducing the number of worst case housing needs among families with children and elderly households. The Department has proposed expanding service coordinator support under this appropriation which will address Outcome Indicator 1.2.4, increasing the number of elderly households living in a public or assisted housing development that is served by a service coordinator for the elderly increases by 3 percent above fiscal year 1999 levels for private assisted housing. In addition to capital grants and project rental subsidies, the Section 811 program for persons with disabilities also includes funding for tenant-based rental vouchers to assist eligible low-income households secure affordable housing.