42 U.S.C. § 1485 — Housing and related facilities for elderly persons and families or other persons and families of low income

(a) Direct loans. The Secretary^* may lend to private nonprofit corporations, consumer cooperatives, and Indian tribes for rental or cooperative housing and related facilities for elderly or handicapped persons or families^* of low or moderate income^*, or other persons and families of low income, in rural areas. The terms must generally match section 1472, except: (1) the loan cannot exceed the lesser of development cost or security value; (2) its term may be up to 30 years; and (3) a cooperative tenant admitted as eligible cannot later lose membership or tenancy merely because the tenant no longer meets the Secretary’s income rules. Up to $50,000,000 may be appropriated as a revolving fund. (b) Insurance. The Secretary may insure, or commit to insure, loans to individuals, corporations, associations, trusts, Indian tribes, or partnerships for similar housing for elderly or handicapped persons or families, or other persons and families of moderate income in rural areas. The same cost and 30-year limits apply; payments may use a 50-year amortization schedule with the balance due at the end. The Agricultural Credit Insurance Fund must be used under the cited title 7 provisions, but the Secretary’s undisposed loans may not exceed $10,000,000 outstanding. The Secretary may take liens running to the United States even if another lender holds the notes. Cooperative tenants receive the protection in subsection (a)(3). Eligible owners may buy and convert single-family residences into two or more rental dwellings. The Secretary may make a new loan to the current borrower for up to 20 additional years to pay the original loan’s final payment if the Secretary finds that keeping the property is more cost-effective or serves tenants better than rebuilding, or that the property is well maintained and can continue providing decent, safe, affordable units, and also finds that current studies show continued local need and other Secretary criteria are met. (c) Equity and nonprofit loans. For a qualifying pre-December 15, 1989 loan, the Secretary may make or insure a supplemental equity loan to extend affordability for low- and very-low-income people for at least 20 years, up to 90 percent of project^* equity; transfer and reamortize the existing loan; and make or insure a loan enabling a nonprofit or public agency^* to make the purchase described in section 1472(c)(5). (d) Construction. The Secretary must find that construction is economical and not elaborate or extravagant. Equipment specifically needed by elderly or handicapped people is not treated as elaborate or extravagant. Detached units, including scattered-site units, may be financed for cooperatives. (e) Definitions. “Housing” means eligible new or existing dwellings, manufactured-home rental parks where eligible occupants may use the lots or lots and homes, and congregate facilities for elderly or handicapped people needing some supervision and central services but able to care for themselves; handicapped housing may be used with educational or training facilities. “Related facilities” includes cafeterias or dining halls, community rooms or buildings, recreation facilities, and other essential service facilities. “Congregate housing” has some units without kitchens and a central dining facility providing wholesome, economical meals. “Development cost” includes construction, purchase, improvement, alteration, repair^*, necessary land, approved fees and charges, approved initial operating expenses up to 2 percent, impact fees, infrastructure charges, and local assessments, including certain nonprofit consultants’ payments; it excludes initial operating expenses for a nonprofit or cooperative receiving a section 26 U.S.C. § 42 low-income housing tax credit. (f) Administrative expenses. Amounts under section 1483 may pay administrative expenses under this section. (g) Cooperative membership transfers. The Secretary may make and insure loans to cooperatives to finance affordable membership transfers, but terms may not be more favorable than section 1490a(a) allows and total cooperative loans may not exceed property value. (h) Project transfers. After August 6, 1996, ownership or control may transfer only if the Secretary finds the transfer furthers housing for low-income people and is in residents’ and the Federal Government’s best interests. The Secretary must facilitate timely approval of rehabilitation^* or preservation transfers involving tax credits or tax-exempt bonds; consult the IRS Commissioner to simplify coordinated rules, forms, and approvals; preserve existing protections, including income targeting, rent, fair housing, environmental, and wage requirements; and seek recommendations from owners, sponsors, investors, housing agencies, tenant advocates, and other stakeholders. (i) Cost increases and nonprofit transfers. After project approval, cost increases are limited to those the Secretary approves, and approval is limited to unforeseen factors beyond the owner’s control, required design changes, or approved financing changes. A nonprofit or public-body purchaser, including a qualifying limited partnership, may buy an appraised property without addressing rehabilitation at purchase if it commits to address rehabilitation during ownership and accepts long-term use restrictions. (j) Contract preference. To achieve the lowest cost for newly built units, the Secretary must prefer projects on suitable land provided by a State^*, local government, or another provider when the preference is cost-effective. (k) Management fees. The Secretary must ensure that developer or affiliate management fees are not excessive. (l) Market feasibility. For an applicant seeking section 1490a rental assistance, the Secretary must consider that assistance and require proof of a market for eligible people. For similar State or local assistance, the applicant must show a market, assistance for at least five years plus either a reasonable extension or renewal expectation or an adequate unsubsidized market for the remaining loan term, and annual availability of required assistance funds. (m) Rehabilitation standards and alarms. The Secretary must set standards for repaired or rehabilitated housing. Except for substantial rehabilitation, repaired items or systems must meet quality or performance levels comparable to HUD rehabilitation standards, but the property need not meet new-construction standards. Housing must be decent, safe, and sanitary. It must have carbon-monoxide alarms meeting the 2018 International Fire Code chapters 9 and 11 or other standards adopted by the Secretary with HUD collaboration and Federal Register notice. It must also have qualifying smoke alarms, installed under applicable ICC or NFPA codes and NFPA Standard 72, on every level, in or near each sleeping area including basements but not crawl spaces or unfinished attics, and in each common area. For this paragraph, “smoke alarm” has the meaning of “smoke detector” in 15 U.S.C. § 2225(d). A qualifying alarm in a pre-December 29, 2022 unit not substantially rehabilitated after that date must be hardwired, or use sealed, tamper-resistant, nonrechargeable, nonreplaceable 10-year batteries with silencing means, and must notify people with hearing loss as required by NFPA 72 or its successor. In a unit built or substantially rehabilitated after that date, it must be hardwired. (n) Multiple sites. Assistance may not be denied because a project will be on more than one site. (o) Rental assistance. Assistance may not be denied merely because section 1490a payments may be needed unless authority for them is unavailable, and no regulation may deny eligible occupancy because a person needs those payments. (p) Occupancy by low-income persons and families other than very-low-income persons and families. (1) To the extent assistance is available under section 1490a(a)(2), no more than 25 percent of the dwelling units that were available for occupancy under this section before November 30, 1983, and that will be leased on or after that date may be leased to low-income persons and families other than very-low-income persons and families. (2) To the extent assistance is available under section 1490a(a)(2), no more than 5 percent of the dwelling units that become available for occupancy under this section on or after November 30, 1983, may be leased to low-income persons and families other than very-low-income persons and families. (3) Units in projects financed under this section that become available for occupancy after November 30, 1983, may not be occupied by persons and families other than very-low-income persons and families if the authority to provide assistance for those persons is available. (4) In projects financed under this section, units that a housing credit agency has allocated a low-income housing tax credit under section 42 of title 26 may not be occupied by persons or families whose incomes exceed the qualifying income that applies to those units under section 42(g)(1)(A) or (B) of title 26. (5) The Secretary must coordinate, economically and efficiently, the processing of an application for a loan under this section for a project with the processing of an application for assistance under section 1490a(a)(2) for housing units in the same project. When the Secretary commits to make or insure a loan under this section, the Secretary must obligate available amounts for assistance payments under section 1490a(a)(2) for the project to the extent necessary for the project to be market-feasible, as determined by the Secretary.

(q) Determining the income of occupants. When determining the income of a person or family occupying housing financed under this section, the Secretary must consider the value of that person’s or family’s assets in the same way that the Secretary of Housing and Urban Development considers asset value for purposes of the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.).

(r) Operating reserves and equity contributions; regulations through negotiated rulemaking. (1) The Secretary may require that the initial operating reserve under this section be in the form of an irrevocable letter of credit. Except as provided in paragraph (2), the Secretary may require an equity contribution of no more than 3 percent. The Secretary must require a 5-percent equity contribution for a project that receives a low-income housing tax credit under section 42 of title 26. (2) The Secretary may adjust the equity contribution to ensure that the assistance provided is no more than necessary to provide affordable housing after considering assistance from all Federal, State, and local sources. (3) Not later than 60 days after August 6, 1996, the Secretary must issue regulations implementing paragraph (2) using the negotiated-rulemaking procedures in subchapter III of chapter 5 of title 5. If negotiated rulemaking is not completed within the designated time, the Secretary must proceed to issue regulations under the rulemaking authority in section 557 of title 5.

(s) Limitation on fees. No fee other than a late fee may be imposed by or for the Secretary or any other Federal agency on or concerning a loan made or insured under this section.

(t) Equity takeout loans. (1) Authority. The Secretary may guarantee an equity loan in the form of a supplemental loan to an owner^* of housing financed with a loan made or insured under subsection (b) only if, after considering local market conditions, the Secretary determines that the housing is reasonably likely to continue as decent, safe, and sanitary housing for the remaining life of the original subsection (b) loan on the project. The Secretary must also determine that the equity loan is: (A) necessary to provide a fair return on the owner’s investment in the housing; (B) the least costly alternative for the Federal Government that is consistent with this subsection’s purposes; and (C) not likely to impose an undue hardship on tenants or an unreasonable cost on the Federal Government. Appropriations Acts may set limits on the amount of loans guaranteed under this subsection. (2) Timing. The Secretary may guarantee an equity loan under this subsection only after 20 years have passed since an existing subsection (b) loan was made or insured. No more than one equity loan under this subsection may be provided for a project. (3) Amount of the takeout. The equity loan may not exceed the difference between the outstanding principal of debt secured by the project and 90 percent of the project’s appraised value. Two independent appraisers must determine the appraised value: the Secretary selects one and the owner selects one. If they do not agree, the Secretary and the owner must jointly select a third appraiser, whose appraisal binds both the Secretary and the owner. The equity loan also may not exceed 30 percent of the original appraised value of the project when the subsection (b) loan was made or insured. (4) Submission of plan. An owner asking for an equity loan must submit a plan acceptable to the Secretary that ensures that amortizing the equity loan will not displace very-low-income tenants or substantially change the project’s tenant income mix. (5) Regulations. The Secretary must issue final regulations within 180 days after December 15, 1989. (6) Effective date. This subsection applies to every loan obligated under this section on or after December 15, 1989. It does not require reserve-account payments retroactively for a loan obligated on or after December 15, 1989, and on or before June 16, 1990. Reserve-account payments for those loans must begin on November 28, 1990.

(u) Reuse of loan authority. Loan authority obligated under this section but not spent because an action removes the original borrower may be reallocated to a different borrower during the same fiscal year in which it was obligated. Loan authority appropriated or made available under limits in appropriations Acts remains available until it is spent.

(v) Assumption of loans. In a default or foreclosure involving the original borrower, the Secretary may allow a person or entity qualified to receive a loan or loan obligation under this section to assume or receive a transfer of the loan or loan obligation. Each assumption or transfer under this subsection must provide for assumption of the rights, obligations, and interests under the loan or loan obligation’s terms, or under other terms the Secretary determines appropriate.

(w) Set-aside of rural rental housing funds. (1) Authority. Except as provided in paragraph (2), the Secretary must set aside for each State, from the amounts available for loans under this section, at least 25 percent of the amounts available in each fiscal year. Set-aside amounts may be used only by nonprofit entities in the State that are not wholly or partly owned or controlled by a for-profit entity. A partnership whose general partner is a nonprofit entity or that entity’s for-profit subsidiary may receive set-aside funds to sponsor a project receiving low-income housing tax credits under section 42 of title 26. For this subsection, a “nonprofit entity” is an organization that: (A) will own an interest in a project financed under this section and will materially participate in developing and operating it; (B) is a private organization with nonprofit, tax-exempt status under section 501(c)(3) or (c)(4) of title 26; (C) has planning, developing, or managing low-income housing or community-development projects among its purposes; and (D) is not affiliated with or controlled by a for-profit organization. (2) Minimum State set-aside. If a State’s set-aside is less than $750,000 in a fiscal year, the Secretary must pool it with set-aside amounts from other States whose set-asides are less than $750,000 and make the pooled amounts available to eligible entities described in paragraph (1) in those States. The Secretary must establish a procedure under which pooled amounts from a State’s allocation that are not obligated during a reasonable period in that fiscal year become available to eligible entities described in paragraph (1) in that State. The Secretary may provide a State with amounts available for reallocation under this subsection above $750,000 when necessary to finance a project under this section. (3) Unused amounts. (A) Equitable distribution. Set-aside amounts from a State’s allocation that are not obligated within 9 months after the allocation must first be pooled and made available to any other eligible nonprofit entity in any State as defined in this subsection. The Secretary must make reasonable efforts to distribute pooled funds equitably under this subparagraph. (B) Return to the States. After funds have been pooled and obligated for 30 days, the Secretary must return any remaining funds to the States on a proportional basis for use by another eligible entity defined in this section.

(x) The Secretary must establish uniform State-office guidelines for allowable development costs, require coordination with State housing strategies and tax-credit allocation plans, and develop procedures with housing credit agencies to identify and share project costs, builder profit, identity-of-interest relationships, and other appropriate information for tax-credit projects and compliance with section 3545(d). (y) Service coordinators. The Secretary may grant money for one or more service coordinators at a project with enough frail elderly residents. A coordinator must assess residents’ support needs; work with providers to design services considering residents’ needs, wishes, and ability and willingness to pay; obtain public and private funding; monitor and evaluate services; coordinate with public and private agencies; and perform other appropriate duties that help frail elderly residents in federally assisted housing^* live with dignity and independence. Coordinators must meet the qualifications under section 8011(d)(4). The Secretary sets grant applications and selection. “Frail elderly” has the meaning in section 8011(k). (z) Accounting and records. Borrowers must keep generally accepted accounting-principles records for every project receiving section loans or guarantees. They must keep those records and other records identified by regulation for at least six years and make them available as the Secretary directs. (aa) Double damages for unauthorized use. (1) The Secretary may ask the Attorney General to sue in U.S. district court to recover project assets or income used in violation of a Secretary loan, guarantee, statute, or regulation. Such use includes spending for which books do not show a reasonable operating expense or necessary repair, or for which required records were not kept in reasonable audit-ready condition. “Person” means a borrower, an individual or entity holding at least 25 percent of a borrowing entity, or an officer, director^*, or partner of a borrowing entity. (2) If the United States wins, the Attorney General may recover twice the value of the improperly used assets and income plus action costs, including reasonable attorney and audit fees. The Secretary may use recovered money for section activities until it is spent. (3) The action may begin within six years after the Secretary discovered or should have discovered the violation. (4) This remedy supplements, and does not replace, other remedies available to the Secretary or United States.