HUD Handbook 4350.3: Occupancy Requirements of Subsidized Multifamily Housing Programs
B. Direct Loans and Capital Advances
HUD Handbook 4350.3 REV-1 — Occupancy Requirements of Subsidized Multifamily Housing Programs · 2026 edition · updated 2026-07-29 · United States
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.
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.
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).
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
HUD Occupancy Handbook Chapter 1: Introduction
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4350.3 REV-1
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).
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▸ HUD Handbook 4350.3: Occupancy Requirements of Subsidized Mult…
Overview- 1. This Transmits
- 2. Implementation:
- 1. This Transmits
- H. Chapter 8. Termination
- L. Glossary
- 2. Implementation:
- C. Chapter 1, Introduction
- E. Chapter 3, Eligibility for Assistance and Occupancy
- F. Chapter 4, Waiting List and Tenant Selection
- G. Chapter 5, Determining Income and Calculating Rent
- H. Chapter 6, Lease Requirement and Leasing Activities
- I. Chapter 7, Recertification, Unit Transfers, and Gross Rent …
- K. Chapter 9, Required HUD-50059 and Subsidy Data Reporting
- L. Glossary
- M. Appendices
- N. Exhibits
- 4. Filing Instructions
- 1. This Transmits
- 2. Implementation
- 3. Explanation of Materials Transmitted
- C. Chapter 1, Introduction
- D. Chapter 2, Civil Rights and Nondiscrimination Requirements
- E. Chapter 3, Eligibility for Assistance and Occupancy
- F. Chapter 4, Waiting List and Tenant Selection
- I. Chapter 7, Recertification, Unit Transfers, and Gross Rent …
- J. Chapter 8, Termination
- K. Chapter 9, Required HUD-50059 and Subsidy Data Reporting
- L. Appendices:
- M.Glossary:
- 4. Filing Instructions
- Paperwork Reduction Act Certification Occupancy Requirements o…
- CHAPTER 1. INTRODUCTION
- CHAPTER 2. CIVIL RIGHTS AND NONDISCRIMINATION REQUIREMENTS
- SECTION 3: VERIFICATION OF ELIGIBILITY FACTORS................…
- CHAPTER 4. WAITING LIST AND TENANT SELECTION
- SECTION 3: WAITING LIST MANAGEMENT............................…
- CHAPTER 9. ENTERPRISE INCOME VERIFICATION (EIV)
- CHAPTER 1. INTRODUCTION
- 1-1 Purpose of This Handbook
- 1-2 Programs Subject to This Handbook
- State Agency Financed Properties
- Figure 1-1: Programs Subject to This Handbook
- C. How Applicability Varies
- A. Financing Subsidies: Mortgage Insurance and Mortgage Intere…
- B. Direct Loans and Capital Advances
- C. Project Rental Subsidies
- 1-4 Contract Administrators
- 1-5 Principles for Addressing Overlapping Federal, State, and …
- B. Statutory Program Eligibility Requirements
- C. Multiple Federal Laws
- D. Overlap Between Federal and State/Local Nondiscrimination L…
- A. Organization of Chapters
- B. Format
- Key Terms
- A. Relevant HUD Handbooks
- B. Other HUD Publications and Information
- HUDCLIPS Website.
- C. Ordering Publications
- Handbook Waivers, Key Statutes, and Regulations
- CHAPTER 2. CIVIL RIGHTS AND NONDISCRIMINATION REQUIREMENTS
- 2-1 Introduction
- 2-2 Key Terms
- Section 1: Applicable Laws
- 2-3 Key Regulations and Statute
- General Provisions
- 2-5 Fair Housing Act, Title VIII of the Civil Rights Act of l968
- Obligation to Affirmatively Further Fair Housing
- E. Fair Housing Poster
- Title VI of the Civil Rights Act of 1964
- 2-7 Age Discrimination Act of 1975
- 2-8 Section 504 of the Rehabilitation Act of 1973
- 2-9 Civil Rights Related Program Requirements
- 2-10 Title VI, Subtitle D of the Housing and Community Develop…
- 2-11 Required Data and Record-Keeping
- 2-12 Principles for Addressing Overlapping Federal, State, and…
- Section 2: Nondiscrimination Requirements Under the Fair Housi…
- 2-13 Key Regulation
- 2-14 General
- 2-15 Unlawful Refusal to Rent or Negotiate for Rental
- 2-16 Other Prohibited Rental Activities
- 2-17 Discrimination in the Representation of Available Dwellings
- 2-18 Discrimination in Terms, Conditions, Privileges, Services…
- 2-19 Discrimination in Marketing, Statements, and Notices
- 2-20 Retaliatory Occupancy Practices, Coercion, Intimidation, …
- Section 3: Additional Nondiscrimination and Accessibility Requ…
- 2-21 Key Regulations
- 2-22 Introduction
- 2-23 Definition of Persons with Disabilities for Civil Rights …
- Definitions for Program Eligibility Purposes
- 2-24 Applicability
- 2-25 Overview of Key Requirements
- B. Projects with Multiple Contracts
- C. Allowable Methods of Compliance
- D. Prioritizing Methods
- Accessible Unit Requirements
- 2-26 Technical Resources
- 2-27 Nondiscrimination in Owner Policies
- Example – Discriminatory Policies and Practices
- Example – Neutral Discrimination Policies
- 2-28 Coordinating Efforts to Comply with Section 504 Requireme…
- 2-29 Communications with Persons with Disabilities
- B. Providing Auxiliary Aids to Ensure Effective Communication …
- Example - Reasonable Requests for Auxiliary Aids
- Example - Auxiliary Aids that Owners Are Not Required to Provide
- C. Written Communications
- Example - Communicating Accessibility Features
- Telecommunications
- 2-30 Information about Availability of Accessible Units
- 2-31 Determining Eligibility of Applicants for Admission and A…
- Example – What Owners May Ask or Must Not Ask Applicants Apply…
- A. Applicability
- Eligibility for Accessible Units
- 2-33 Moving Tenants Who Require Special Features into Accessib…
- Example – When Owners Should Move Tenants to Accessible Units
- 2-34 Owner Self-Evaluation
- A. General
- B. Federally Assisted Multifamily Properties Built after July …
- Accessible Routes
- D. Common Use Facilities
- E. Physical Alterations to Existing Housing
- 2-36 Building Standards
- 2-37 Limitations on Owners’ Obligations to Make Their Housing …
- 2-38 General
- 2-39 What Are Reasonable Accommodations?
- 2-40 Key Principles Regarding Reasonable Accommodations
- 2-41 Reasonable Accommodations – Property Operations
- 2-42 Reasonable Accommodations – Physical Alterations
- Example – When Owners Must Make Reasonable Accommodations
- Example – Requests for Reasonable Accommodations or Housing Ad…
- 2-43 Limits on Obligations to Provide Reasonable Accommodations
- Example – Reasonable Accommodation that Creates an Undue Finan…
- Example – Reasonable Accommodation that Does Not Create an Und…
- 2-44 Assistance Animals as a Reasonable Accommodation
- 2-45 Fair Housing Act Basic Accessibility Requirements
- 2-46 Additional Fair Housing Act Requirement to Allow Tenant M…
- 2-47 Owner and Tenant Responsibilities When Tenant Modifies Un…
- Example – Owners Requiring Tenants to Restore Units to Their O…
- Section 4: Housing Discrimination Complaints and Compliance Re…
- 2-48 Housing Discrimination Complaints
- 2-49 Compliance Reviews
- Chapter 2 Exhibits
- Exhibit 2-1: Distribution of Accessible Units
- OR
- OR
- NOTES:
- Exhibit 2-3: Sample Notification of Nondiscrimination on the B…
- INSTRUCTIONS:
- Exhibit 2-4: Suggested Checklist to Determine Whether a Commun…
- Exhibit 2-5: Examples of Fundamental Alterations
- EXHIBIT 2-6: EXAMPLES OF UNDUE FINANCIAL AND ADMINISTRATIVE BU…
- CHAPTER 3. ELIGIBILITY FOR ASSISTANCE AND OCCUPANCY
- 3-1 Introduction
- 3-2 Key Terms
- Section 1: Program Eligibility
- 3-3 Key Regulations
- 3-4 Eligibility Determinations – General
- 3-5 Key Program Eligibility Requirements
- Income Limits
- A. Income Eligibility
- B. Establishing Income Limits
- Timing of Income Eligibility Determinations
- Program Income Limits
- Figure 3-2: Income Limits
- Figure 3-3: Income Limits by Program
- E. Income Limits and Family Size
- A. Post-1981 Universe
- B. Pre-1981 Universe
- C. Eligible In-Place Tenants (Exceptions to the income limits …
- D. Exceptions to the Income Limits for Post-1981 Properties Re…
- E. Procedures for Requesting and Using Exceptions to the Very …
- F. Exceptions to Section 8 Income Targeting Requirements
- 3-8 Admitting Over-Income Applicants
- A. Section 8, Section 202/8, Section 202 PAC, Section 202 PRAC…
- B. BMIR Units
- C. Section 236, Rent Supplement, and RAP Units
- Example – Admission of Market Rent Applicants
- D. Admission of Police Officers or Security Personnel in Secti…
- 3-9 Disclosure of Social Security Numbers
- B. Required Documentation
- C. Provisions for Applicants Disclosure and/or Documentation o…
- b. Under the Age of Six Without an Assigned SSN.
- 3-10 Residence Criteria
- Sole Residence Requirement
- Prohibition Against Double Subsidies
- 3-11 Consent and Verification Forms
- B. Who Must Sign Consent and Verification Forms
- Provisions for Refusal to Sign
- 3-12 Restriction on Assistance to Noncitizens
- Key Requirements
- C. Administration of Restriction on Assistance to Noncitizen
- Protection from Liability for Project Owners
- Reviewing a Family’s Citizenship/Immigration Status
- Applicability
- Notification to Applicants
- H. Owner Preparation to Collect Documentation of Citizenship/I…
- Required Documentation of Citizenship/Immigration Status
- J. Timeframes for Submitting Evidence of Citizenship/Immigrati…
- Example – DHS Verification Process Delayed
- L. Verifying Information on Immigration Status
- Appealing Determinations of Ineligibility
- Mixed Families
- O. Continued Assistance
- Prorated Assistance
- Example – Section 8 or Rent Supplement Prorated Rent
- Example – Section 8 Prorated Rent (with utility allowance)
- Example – Project-Based Subsidy (Section 236) Programs
- Q. Temporary Deferral of Termination of Assistance
- Example – Project-Based and Individual Tenant Subsidy Programs…
- R. Prohibition of Assistance to Noncitizen Students
- 3-13 Determining Eligibility of Students for Assistance
- Example:
- B. Eligibility of Students for Other Assistance Programs
- Section 2: Project Eligibility
- 3-14 Key Regulations
- B. Eligibility for Admission to Individual Section 202, Sectio…
- Occupancy Standards
- 3-15 Program versus Project Eligibility
- 3-16 Determining the Eligibility of a Remaining Member of a Te…
- 3-17 Definitions of Elderly and Disability Used to Determine P…
- Figure 3-5: Applicable Definitions for Elderly and Disability …
- Figure 3-5: Applicable Definitions for Elderly and Disability …
- Figure 3-6: Applicable Definitions of Elderly and Disability -…
- Definition A – Elderly Family. [24 CFR 5.403]
- Definition B – Elderly Family. [24 CFR 891.505] Elderly famili…
- Disability Definitions
- Figure 3-6: Applicable Definitions of Elderly and Disability -…
- Figure 3-6: Applicable Definitions of Elderly and Disability -…
- Definition E – Person with Disabilities (continued)
- (Continued)
- Figure 3-6: Applicable Definitions of Elderly and Disability -…
- Figure 3-6: Applicable Definitions of Elderly and Disability -…
- 3-18 Eligibility Requirements for Admission to Elderly Project…
- A. Owner-Adopted Preferences for Elderly, Disabled, Nonelderly…
- Sources in conflict.
- Example – Establishing the Number of Units for Nonelderly Pers…
- B. Owner-Adopted Elderly Restrictions in Certain Federally Ass…
- Sources in conflict
- 3-19 Eligibility Requirements for Admission to Elderly Project…
- Section 221(d)(3) with a Rent Supplement Contract;
- C. Prepaid Projects with Formerly HUD-Insured Mortgages Under …
- 3-20 Eligibility for Admission to Individual Section 202, Sect…
- Examples – Eligible Applicants with Disabilities
- 3-21 Applicants with Housing Choice Vouchers
- Partially Assisted Properties
- C. Section 236, Section 221(d)(3) BMIR, and Section 202 Units …
- D. Previously HUD-Owned Projects
- 3-22 Eligibility of Single Persons
- 3-23 Occupancy Standards
- Key Requirements
- C. Timeframe for Applying Occupancy Standards
- Prohibition of Occupancy Standards that Exclude Children
- F. Assigning a Smaller Unit Than Required
- Assigning Units Larger Than Required
- H. Change in Family Size After Initial Occupancy
- Example - Change in Family Size
- b. Subsidized housing cooperatives.
- I. Change in Need for Accessible Features
- Section 3: Verification of Eligibility Factors
- 3-24 Key Regulations
- 3-25 Introduction
- 3-26 Key Requirements
- 3-27 Verification of Family Composition
- 3-28 Verification of Family Type and Individual Status
- B. Disability
- C. Age
- 3-29 Verification of the Need for an Assistance Animal
- 3-30 Verification of Income Eligibility
- 3-31 Verification of Social Security Numbers
- 3-32 Verification of Citizenship and Immigration Status
- 3-33 Verifying Eligibility of a Student for Assistance
- B. Verification of Eligibility of Students for Other Assistanc…
- Chapter 3 Exhibits
- Exhibit 3-1: Request for Exception to Limitations on Admission…
- Signed by:
- SITUATION 1: Displaced Tenant
- SITUATION 2: Project Financed Under Section 11(b) or Section 103
- SITUATION 3: Project Supervised by a State Agency
- SITUATION 4: Project Approved Based on Agreement to Comply wit…
- SITUATION 5: Units Designed for a Specific Occupant Group
- SITUATION 6: Insufficient Number of Very Low-Income Applicants
- Financial and Vacancy Data Required for Exceptions Under Situa…
- Month-End Accounts
- Month-End Accounts
- ==============================================================…
- Part IV
- Fair Housing Enforcement— Occupancy Standards Notice of Statem…
- FOR FURTHER INFORMATION CONTACT:
- Statutory and Regulatory Background
- This Notice
- Eva M. Plaza,
- Size of bedrooms and unit
- Age of children
- Configuration of unit
- Other physical limitations of housing
- State and local law
- Other relevant factors
- Exhibit 3-3: Sample Owners Notice No. 1
- Exhibit 3-5: Sample Citizenship Declaration
- DECLARATION
- AND
- Exhibit 3-6: Sample Verification Consent Form
- CONSENT
- NOTIFICATION TO FAMILY:
- Exhibit 3-7: Sample Owner’s Summary of Family
- Exhibit 3-8: Sample Owner’s Notice No. 2 for a Tenant Family
- Prorated assistance
- Temporary deferral of termination of assistance
- OPTION SHEET
- Exhibit 3-9: Sample Owner’s Notice No. 2 for an Applicant Family
- OPTION SHEET
- Exhibit 3-10: Sample Owner’s Notice No. 3 for a Tenant Family …
- [USE THE FOLLOWING FOR AN ELIGIBLE TENANT FAMILY]
- [USE THE FOLLOWING FOR A MIXED TENANT FAMILY]
- Prorated Assistance
- Temporary deferral of termination of assistance
- [USE THE FOLLOWING FOR AN INELIGIBLE TENANT FAMILY]
- Exhibit 3-11: Sample Owner’s Notice No. 3 for an Applicant Fam…
- [USE THE FOLLOWING FOR AN ELIGIBLE APPLICANT FAMILY]
- [USE THE FOLLOWING FOR A MIXED APPLICANT FAMILY]
- [USE THE FOLLOWING FOR AN INELIGIBLE APPLICANT FAMILY]
- Exhibit 3-12: Section 8, RAP, and Rent Supplement Programs – S…
- Exhibit 3-13: Section 236 Without Additional Assistance – Spec…
- Exhibit 3-14: Section 236 With Benefit of Additional Assistanc…
- Document Package for Applicant's/Tenant's Consent to the Relea…
- Exhibit 7-2: Sample Annual Recertification First Reminder Notice
- Exhibit 7-4: Sample Annual Recertification Third Reminder Noti…
- SAMPLE TENANT CONSENT TO DISCLOSE EIV INCOME INFORMATION
- Applying the Model Lease for Subsidized Programs to Individual…
- Applying the Model Leases for Section 202 PRAC and Section 811…
- Sample Move-In/Move-Out Inspection Form
- Memorandum February 5, 2002: Fact Sheets for Project-Based Ass…