Sections 202 and 811 Capital Advance Programs: Revised Development Cost Limits

AGENCY:

Office of the Assistant Secretary for Housing-Federal Housing Commissioner, HUD.

ACTION:

Notice.

SUMMARY:

This notice announces changes to the development cost limits for the Sections 202 and 811 Capital Advance Programs. The development cost limits were established in 1989 for the Section 811 group homes and in Fiscal Year (FY) 1999 were increased by 20 percent. Also in FY 1999 the cost limits for elderly projects and independent living projects for persons with disabilities were replaced with the Section 221(d)(3) per unit limits authorized by Congress in 1992.

Even with last year's increase in the development cost limits, a number of nonprofit owners still need additional sources of funding to construct their projects. In an attempt to alleviate this problem, the base development limits from 1989 and 1992 respectively have been adjusted to 2000 using the Federal Reserve Bank of Minneapolis' Consumer Price Index (CPI) calculator which may be found on the internet at http://minneapolisfed.org/economy/calc/cpihome.html.

EFFECTIVE DATE:

January 22, 2001.

FOR FURTHER INFORMATION CONTACT:

Willie Spearmon, Director, Office of Housing Assistance and Grant Administration, Department of Housing and Urban Development, 451 7th St. SW, Washington, DC 20410, 202-708-3000. (This is not a toll-free number.) For hearing and speech-impaired persons, this number may be accessed via TTY by calling the Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

Section 202 (12 U.S.C. 1701q), Supportive Housing for the Elderly, of the National Housing Act of 1959, requires the Secretary to periodically establish development cost limitations by market area for various types and sizes of supportive housing for the elderly by publishing a notice in the Federal Register. The statute also requires that the Secretary adjust the cost limitation not less than once annually to reflect changes in the general level of construction, reconstruction or rehabilitation costs.

Section 811 (42 U.S.C. 8013), Supportive Housing for Persons with Disabilities, of the Cranston-Gonzales National Affordable Housing Act contains similar language.

HUD has determined the best way to comply with this requirement is to adjust the base limits annually by changes in the CPI. We found the CPI not only easy to use but meeting Congressional intention.

Therefore, the total development cost of the property or project attributable to dwelling use, adjusted by locality as described below, (less the incremental development cost and the capitalized operating costs associated with any excess amenities and design features the borrower must pay for) may not exceed:

(1) For the elderly.

For non-elevator structures:

$41,238 per family unit without a bedroom;

$47,548 per family unit with one bedroom;

$57,344 per family unit with two bedrooms.

For elevator structures:

$43,398 per family unit without a bedroom;

$49,748 per family unit with one bedroom;

$60,493 per family unit with two bedrooms.

(2) For persons with disabilities.

(a) For independent living projects and dwelling units in multifamily developments, condominium and cooperative housing.

For non-elevator structures:

$41,238 per family unit without a bedroom;

$47,548 per family unit with one bedroom;

$57,344 per family unit with two bedrooms;

$73,400 per family unit with three bedrooms;

$81,770 per family unit with four or more bedrooms.

For elevator structures:

$43,398 per family unit without a bedroom;

$49,748 per family unit with one bedroom;

$60,493 per family unit with two bedrooms;

$78,257 per family unit with three bedrooms;

$85,902 per family unit with four or more bedrooms.

(b) For group homes only.

These cost limits reflect those costs reasonable and necessary to develop a project of modest design that complies with HUD minimum property standards; the accessibility requirements of § 891.120(b); and the project design and cost standards of § 891.120 and § 891.210.

Increased development cost limits.

(1) HUD may increase the development cost limits by up to 140 percent in any geographic area where the cost levels require, and may increase the development cost limits by up to 160 percent on a project-by-project basis. This increase may include covering additional costs to make dwelling units accessible through rehabilitation.

(2) If HUD finds that high construction costs in Alaska, Guam, the Virgin Islands, or Hawaii make it infeasible to construct dwellings, without the sacrifice of sound standards of construction, design, and livability, within the development cost limits provided above, the amount of the capital advances may be increased to compensate for such costs. The increase may not exceed the limits established above (including any high cost area adjustment) by more than 50 percent.

HUD expects to publish its next notice of change in the development cost limits in October 2001.