What Types of Multifamily Subsidized Housing Programs Are There?

Multifamily subsidized housing is owned and operated by private owners. If you are a tenant in multifamily housing, you cannot take the subsidy someplace else. It stays with the development.

The ownership may be for-profit or nonprofit. Owners receive subsidies from the government to lower the cost of their mortgages or to rehabilitate existing housing or build new apartments. In exchange, they are required to set aside a certain percentage of apartments as affordable for low- and moderate-income people.

Most multifamily developments are mixed income housing. This means that some apartments are subsidized and some are market-rate apartments. Sometimes, however, all of the apartments are subsidized. Multifamily housing may also be subsidized by more than one program. For example, there may be a mix of subsidies, such as a deep subsidy, in which rent is set at roughly 30% of your income, and a shallow subsidy,in which the rent is below market level, but is not based on a percentage of your income. The best way to figure out the rent of an apartment is to contact the owner or manager and ask what programs subsidize the housing and what type of subsidy is involved (deep or shallow). You can also check your lease, your annual recertification papers, and any other papers the landlord gave you when you first moved in. Sometimes this will help you figure out what kind of subsidy you have.

There are many different types of multifamily housing programs in Massachusetts, each with its own rules, income limits, and affordability restrictions. What follows is a summary of the major multifamily programs.

Federal multifamily subsidized housing

In federal multifamily housing, the owner has a contract directly with the U.S. Department of Housing and Urban Development (HUD). HUD provides rental subsidies, below-market interest financing, mortgage insurance, or other forms of assistance. In exchange, the owner agrees that during the term of such assistance, the property is subject to low-income use restrictions. There are approximately 71,000 affordable apartments in Massachusetts funded through federal multifamily programs. You can contact HUD's Boston regional office at 617-994-8200 to get a complete list of multifamily developments with contact information for each development. HUD can also send you a booklet containing a lot of this information.

• Visit HUD's Multifamily Data for data on multifamily housing developments
• Visit HUD's Multifamily Inventory for an inventory of multifamily housing for elderly or disabled families

If an owner is not complying with HUD requirements, HUD can be contacted but it usually provides only limited oversight. HUD handbooks describe the form of the lease and detail a lot of the procedures to be followed in admitting applicants and determining rents.¹ All HUD multifamily developments follow similar eviction requirements, and the owner must have good cause for eviction based on a breach of the lease.² HUD also has tenant participation requirements, providing tenants and tenant organizations with certain rights and protections.³ The primary federal multifamily housing programs are:

Section 221(d)(3) and (d)(4) (BMIR) multifamily housing

HUD subsidizes an owner's mortgage by lowering the mortgage interest rate. Properties subsidized under this program are sometimes referred to as Below Market Interest Rate (BMIR) property. Rents are not based on a percentage of a tenant's income, but are a flat amount that HUD approves.⁴ However, in a number of these developments, there may be other rental assistance under the rent supplement or Section 8 project-based assistance programs for some or all apartments that will change these rent rules.

• Visit HUD's Mortgage Insurance for more information
• View HUD's Below Market Interest Rate PDF Fact Sheet on how rents are calculated for the below-market interest rate properties

Section 236 multifamily housing

HUD subsidizes the interest on an owner's mortgage. HUD sets a basic rent and you must pay at least either the basic rent or 30% of income, whichever is higher.⁵ However, the development may get other forms of rent subsidy under the rent supplement, Section 236 RAP, or Section 8 project-based assistance programs.

• View HUD's Section 236 PDF Fact Sheet on how rents are calculated for the regular Section 236 program

Section 236 Rental Assistance Program (RAP)

This is an early form of rental subsidy that was used for up to 20% of the units in Section 236 developments prior to the Section 8 program. Some developments still have Section 236 RAP assistance. With this subsidy, your rent is set at 30% of income.⁶

• View a HUD's Rental Assistance Payments PDF Fact Sheet on how rents are calculated for the Section 236 RAP program

Rent supplement program

This is an early form of rental subsidy that was used in Section 221(d)(3) and Section 236 developments prior to the Section 8 program. Some developments still have rent supplement assistance. Your rent is the higher of either 30% of income or 30% of the gross rent.⁷

• View a HUD's Rental Supplement PDF Fact Sheet on how rents are calculated for the rent supplement program

Project-based Section 8 assistance for multifamily housing

Starting in the mid-1970s, HUD made project-based Section 8 assistance available for multifamily housing—for new construction, for substantial rehabilitation of existing buildings, for additional assistance for Section 221(d)(3) and Section 236 developments that were having financial difficulty (also called loan management set-aside), and for sale of multifamily developments (property disposition) that HUD had acquired when the owners went into default. The term of these Section 8 subsidy contracts can vary from 5 to 40 years. Rent is set at 30% of your income.⁸ This is a very large and important resource.

Note

This program is different from the Section 8 Project-Based Voucher (PBV) discussed above. It is easy to mix up the programs due to the similarity in names. This Section 8 assistance, however, does not come from a housing agency's regular Section 8 voucher inventory, but is from the owner's direct Section 8 contract with HUD.

• View HUD's Project-Based Section 8 PDF on how rents are calculated for the Section 8 project-based assistance programs

Section 202 housing for seniors and people with disabilities

HUD provides grants or loans to nonprofits to construct or rehabilitate housing for seniors and people with disabilities. The Section 202 program evolved into a program that was renamed Supportive Housing for Elderly, which was only for seniors where one or more people in the household were 62 or older. Usually there is a form of Section 8 project-based assistance tied to the development, and rent is set at 30% of income.⁹ There are currently 9,650 apartments in Section 202 developments.

• Visit HUD's Section 202 for more information

Section 811 housing for people with disabilities

This program provides supportive housing for people with disabilities who are very low-income. Here again, usually there is a form of Section 8 project-based assistance tied to the development, and rent is set at 30% of income.¹⁰

• Visit HUD's Section 811 for more information

Expiring use

Many multifamily developments are facing what is called an expiring use problem. These developments received mortgage insurance or financing or signed project-based subsidy contracts that required owners to keep rents affordable for up to 40 years. In some cases, owners could pay off the subsidized mortgage earlier (pre-pay). In other cases, the owner and HUD might not agree to renew the subsidy contract. If either of these happens, the restrictions that keep rents affordable may be lost and rents can be raised to market rate. A number of owners in Massachusetts have pre-paid or attempted to pre-pay. Other developments are coming to the end of their use restriction period or subsidy contracts.

Expiring use not only can result in displacement of tenants, but can result in the loss of affordable housing opportunities for applicants. You are not powerless in this situation. A combination of legal strategies and organizing efforts may be successful.¹¹ If you are facing this problem, you should contact your local Legal Services program.

• Visit the Expiring Use Database from the Citizen's Housing and Planning Association website to get a list of expiring use properties in Massachusetts

Enhanced (sticky) vouchers

If a federal multifamily development has had its mortgage pre-paid or if an owner has refused to renew the project-based subsidy contract, there is also a program called the Enhanced Voucher program. It is designed to help protect tenants already in the development from displacement. (Sometimes these are also called "sticky vouchers," because they are intended to help tenants remain or "stick" in their housing.) The voucher looks a lot like a regular Section 8 tenant-based voucher and is administered by a housing agency. However, it can pay a higher rent than would ordinarily be the case if it is used at the development. While you are at the development with your Enhanced Voucher, the owner must always have good cause to evict you or to not renew your lease. If you move out, the voucher's value changes to that for a regular Section 8 voucher, and regular Section 8 eviction rules apply. Some special rent rules apply to Enhanced Vouchers so that tenants' rents are generally similar to those previously in effect. Tenants at the development will be notified of the need to apply for the vouchers in order to qualify for continued assistance.¹²

Section 8 Moderate Rehabilitation Program

A number of apartments are subsidized under the Section 8 Moderate Rehabilitation (or "mod rehab") program. In exchange for providing a moderate level of rehabilitation to a property, the owner is provided a rent subsidy for a number of years by the local housing authority or a regional nonprofit housing agency.¹³ Some Section 8 mod rehab funds are part of the McKinney program and are targeted for single room occupancy (SRO) units for the homeless.¹⁴

You must apply through the local housing authority or a regional nonprofit housing agency, and you must regularly report to that agency regarding your income and household composition. Your rent is limited to 30% of income and cannot be higher, as it can with the regular Section 8 voucher program. The owner can evict (or not renew your lease) only for good cause. The housing agency can, however, terminate your subsidy if you have violated Section 8 program rules (such as not properly reporting your income or family composition or engaging in fraud).¹⁵

As with the multifamily housing program, this subsidy is tied to the building, and cannot be used by the tenant to relocate to another location. If the tenant moves out or is evicted, she loses the subsidy. If the property can no longer be subsidized under these programs because it is not up to code or the owner or HUD or DHCD decides not to renew or extend the subsidy, the tenant will be eligible for a regular tenant-based voucher.

HOME Program (other than tenant-based rental assistance)

The state or a city or town that gets HOME assistance may choose to use it to help create or preserve affordable housing developments, rather than for tenant-based rental assistance. This funding may be linked with other sources, such as tax credits or project-based Section 8 vouchers. There are maximum rents for HOME housing, and they may not exceed 30% of what 65% of the area median income would be. In rental projects with five or more HOME-assisted units, 20% of the HOME units must be occupied by families with incomes at or below 50% of area median income, with rents set either at 30% of the tenant's actual income or at 30% of 50% of the area median income. There are special applicant and tenant protections for HOME assistance, including use of written tenant selection criteria, requiring a lease with a term of at least one year, good cause eviction protections, and the requirement for a 30-day notice to terminate the tenancy.¹⁶

MassHousing multifamily subsidized housing

Through MassHousing, a state housing agency (formerly known as Massachusetts Housing Finance Agency, or MHFA), private owners get money to develop affordable housing. These funds can come from the state or the federal government, or sometimes both.

MassHousing developments are often subsidized under the federal multifamily programs discussed above. In addition, there are three primary state programs that fund multifamily housing through MassHousing:

Section 13A Interest Subsidy

A mortgage interest subsidy provided to about 60 privately owned developments that reduced rents for about 6,000 apartments. The number of 13A apartments has decreased in recent years because some owners have chosen to prepay their 30- to 40-year mortgages after 20 years and end the subsidy and the restrictions that keep apartments affordable.¹⁷

State Housing Assistance for Rental Production (SHARP)

A subsidy program to private developers that provided 30-year subsidized mortgages and loans to bring financing costs down in order to create mixed-income rental housing. Eighty-two projects with about 3,300 apartments for low-income households were created by SHARP.¹⁸ Owners have to keep at least 25% of the apartments affordable to low-income households in perpetuity, although they can sell the developments at the end of the 15-year loan period to either the state or another buyer willing to keep the affordability restrictions. The 15-year loans began expiring in 2000, and the last contracts will expire in 2007.

Rental Development Action Loan Program (RDAL)

A program that provided subsidized loans to develop or preserve 21 developments with about 1,300 affordable apartments. Most of these developments are subsidized by other programs as well. Subsidy contracts will begin to expire between 2005 and 2010, at which point other programs must be considered to ensure continued affordability.¹⁹

MassHousing provides oversight for developments financed through these programs. To figure out whether the housing is financed through MassHousing, you can check their website or ask that MassHousing send you a book listing all of its developments. Unfortunately, this information does not necessarily tell you much about the types of subsidies involved and how rents are set for different apartments. You may be able to get additional information about a particular development by contacting a management analyst at MassHousing. If you have a dispute with the development owner, you may be able to get MassHousing to intervene in resolving it.²⁰

• Visit Mass Housing for more information

Project-Based Mass. Rental Voucher Program (non-mobile)

Both MassHousing developments and some other housing developments may rely on the use of project-based MRVP assistance. Project-based MRVP assistance can include developments with moderate rehabilitation (mod rehab). Project-based vouchers stay with a particular housing development and are not tenant-based or mobile. In particular, there are designated Low-Income Set-Aside units in certain developments where Project-based MRVP is used. The Section 13A, SHARP, and RDAL programs (see above), as well as tax-related programs (see below) and a number of smaller programs all have used this assistance.²¹

Applicants apply to a project-based MRVP waiting list which a housing agency has established. MassHousing also gives a transfer preference for existing tenants in its developments who must relocate due to excessive rent burden or other good cause and who need a more affordable apartment. Low-Income Set-Aside units are to be marketed to individuals and families who have mobile Section 8 or MRVP vouchers. If sufficient applicants can not be found that way, the housing agency can request that DHCD and MassHousing approve the assignment of a project-based MRVP voucher to the development.²²

If you have a tenant-based MRVP and move into a Low-Income Set-Aside unit, you can either keep the tenant-based MRVP or can give it up for a project-based voucher. If you give up the voucher, you lose mobility, but there may be advantages on your rent level. Rent is set at 35% of income for the project-based MRVP program if you do not pay for utilities, and 30% of income if you pay for some or all utilities.²³

You can be evicted from a project-based MRVP apartment only for good cause, and the owner must show good cause to not renew your lease.²⁴

Tax-related programs for affordable housing

Several tax-related programs have been developed to help create or preserve affordable housing:

• The federal Low-Income Housing Tax Credit program,
• A similar state Low-Income Housing Tax Credit program, and
• The TELLER Program.

These programs have been used in many different types of housing, including redevelopment of public housing, rehabilitation or preservation of multifamily housing, and development of new affordable housing. You need to know what other programs and subsidy rules apply in order to know your rights.

Federal Low-Income Housing Tax Credit Program (LIHTC)

The federal Low-Income Housing Tax Credit program is a federal program created in 1986 that has funded about 23,555 affordable apartments in Massachusetts.²⁵ Under the program, private owners raise money to develop and operate affordable rental housing by selling federal tax credits to investors. These tax benefits are distributed through state housing agencies, such as DHCD and MassHousing. In return for tax credits, participating developers agree to reserve a percentage of the apartments for low-income families. There are two alternative types of rent restrictions: 40% of the apartments must be affordable to those with incomes at or below 60% of the area median income; or 20% of the units must be affordable to those with incomes at or below 50% of area median. The apartments generally must remain affordable for at least 30 years.

Unlike public housing or vouchers, tax credit rents do not change based on changes to family income unless some other subsidy rules apply to the program. These flat rents are often not affordable to those with lower incomes. However, an owner of a federal tax credit development has an affirmative duty to accept Section 8 tenant-based vouchers for available apartments.²⁶ Applications are taken at each privately owned development or building. There are some special tax credit rules about eligibility for students, but many low-income individuals who are students may fit into exceptions so that they are eligible.²⁷ You can be evicted only for good cause from these developments.²⁸

State Low-Income Tax Credit Program

In 1999, Massachusetts passed a state low-income tax credit program. The state program is run by DHCD and has features that are similar to the federal low-income housing tax credit program.²⁹

Tax-Exempt Local Loans to Encourage Rental Housing (TELLER)

As opposed to an older state program that allowed housing agencies the option of issuing tax-exempt bonds to finance privately owned mixed-income rental housing, developments financed with TELLER bonds must have a minimum of 20% of the apartments set aside for households earning less than 50% of area median income. If 40% of the apartments are set aside, the household income level can be at 60% of area median income. While apartments are not being newly created through this program, there are still a few TELLER developments in Massachusetts.³⁰