42 U.S.C. § 12802 — Rental housing production

(a) Repayable advances: (1) In general: The Secretary must offer a model program giving repayable advances to public and private project sponsors, to build, buy, or substantially rehabilitate affordable rental housing — including limited equity cooperatives and mutual housing. (2) Maximum amount of advance: An advance cannot exceed 50% of the total cost of building, buying, or rehabilitating the project, as decided by the jurisdiction. (3) Terms of repayment: (A) Interest payments: (i) In general — Advances are repaid with interest, at a rate the jurisdiction sets, up to 3% a year. Interest starts building up one year after the project is finished, and is paid in yearly installments. (ii) Exception — Interest is only paid out of the project's surplus cash flow, after a minimum return on equity the jurisdiction decides is appropriate. "Surplus cash flow" means the project's cash flow left after paying the first mortgage, operating expenses, and required replacement reserves. (B) Additional interest payments: In any year where surplus cash flow plus the return on equity is more than the interest owed under (A), half of that extra surplus cash flow must be paid to the jurisdiction's HOME Investment Trust Fund as additional interest. (C) Principal and unpaid interest: The advance's principal, and any interest still unpaid under (A)(ii), must be repaid once the housing stops qualifying as affordable housing under section 12749(b). (b) Selection guidelines: (1) In general: The Secretary must set guidelines for jurisdictions to select projects for this model program, aimed at picking projects in areas with the greatest need for more affordable rental housing. (2) Specific requirements: These guidelines may consider: (A) how short the area's supply of rental housing for low-income families is; (B) how much the project serves large families with children; (C) whether the project has shared facilities and support services letting frail elderly or disabled residents keep living there; (D) how far the project's share of very low- and low-income tenants exceeds the minimum required by section 12744; (E) how much equity the sponsor is committing (except this does not apply to public housing agencies or nonprofits); (F) how the sponsor's equity commitment compares to the total public assistance for the project, including other federal, state, and local aid (again excluding public housing agencies and nonprofits); (G) how much non-federal public or private assistance the project gets; (H) how much the project supports people with disabilities; and (I) any other factor the Secretary decides is appropriate. (c) Guidelines: The Secretary had to publish guidelines for this model program within 180 days after November 28, 1990.