Section 202 Supportive Housing for the Elderly

How It Works

Section 202 Supportive Housing for the Elderly pays for apartment buildings designed for older adults and connected to services that help them keep living independently. Only private nonprofit organizations and consumer cooperatives are eligible sponsors. A nonprofit may own the property through a limited partnership that it controls, which allows a project to use tax credits.

Under a law passed in 1990, new Section 202 projects receive two kinds of HUD funding:

• Capital advance. HUD pays for construction, rehabilitation or acquisition. The advance carries no interest and does not have to be repaid as long as the housing stays available to very low-income older adults for at least 40 years.
• Project Rental Assistance Contract (PRAC). Residents pay rent based on income, generally 30% of adjusted income. The PRAC pays the difference between that rent and the HUD-approved cost of operating the building.

Sponsors often combine a capital advance with other sources, such as the Low-Income Housing Tax Credit, HOME or the National Housing Trust Fund, as gap financing.

Many properties employ a service coordinator, a staff member who assesses residents’ needs and connects them with outside services such as meals, transportation or health care. NLIHC reports that almost half of Section 202 properties have one.

Buildings developed before 1990 usually receive their operating subsidy through Section 8 Project-Based Rental Assistance instead of a PRAC. NLIHC’s 2026 guide counts roughly 7,000 Section 202 communities. Just under two-thirds are subsidized through Project-Based Rental Assistance and the rest through PRACs.

Who It Serves

Section 202 serves very low-income households, those at or below 50% of area median income, in which at least one person is 62 or older at move-in. Some pre-1990 buildings also have units for younger people with disabilities.

Residents are among the poorest older renters. NLIHC reports that in 2023 the average Section 202 household had an annual income of $16,262. Its 2026 guide adds that 16% of residents are 85 or older.

How to Access It

There is no central application. Older adults apply to the management office of each property and join its waiting list. NLIHC’s 2026 guide reports that waits are often two to seven years or longer.

Nonprofit sponsors compete for new capital advances when HUD publishes a funding notice. HUD’s February 2024 notice offered $115 million and anticipated about 20 awards of up to $20 million each, according to LeadingAge, a trade association of nonprofit aging-services providers.

History

Congress created Section 202 in the Housing Act of 1959. At first it made low-interest loans, at about 3%, to nonprofits to house moderate-income older adults: people with too much income for public housing but too little for market-rate apartments.

The Housing and Community Development Act of 1974 paired Section 202 loans with Section 8 rental assistance, and a 1981 law targeted assisted units mainly to very low-income households. The Cranston-Gonzalez National Affordable Housing Act of 1990 replaced loans with capital advances and PRACs. It also moved housing for people with disabilities into the new Section 811 program.

NLIHC reports that more than 400,000 Section 202 units have been built since 1959. New construction has been uneven in recent years. Congress stopped funding new units after FY2011, and LeadingAge dates the pause from 2011 to 2018. Funding for new homes then returned at levels well below earlier decades. HUD’s February 2024 competition was its fourth consecutive annual round, according to LeadingAge. NLIHC’s 2026 guide reports that funding for new homes was zeroed out again beginning in FY2025.

Limitations

• Supply is small compared with need. NLIHC, citing HUD’s 2023 worst-case housing needs report, counts more than 2.35 million very low-income older renter households with worst-case housing needs. NLIHC describes these as renters with incomes below 50% of area median income who spend more than half of their income on rent.
• Strained operating budgets. NLIHC says PRAC funding needs to keep pace with rising insurance and staffing costs. In 2023, HUD began moving PRAC properties onto five-year contracts that can receive annual rent adjustments.
• Aging buildings. Older properties need capital repairs, and NLIHC notes that PRAC rules limit an owner’s ability to borrow for them. Since FY2018, Congress has allowed PRAC properties to convert to Section 8 contracts through the Rental Assistance Demonstration, a preservation tool.
• Funding uncertainty. The President’s FY2026 budget proposed replacing HUD’s rental assistance programs with a state block grant. Congress did not adopt that plan. It provided about $1.03 billion for the Section 202 account in FY2026, up from $931 million in FY2025, according to CRS. That account also pays to renew rental assistance at existing properties, so a larger total does not by itself mean new construction.
• Open policy questions. The 21st Century ROAD to Housing Act, enacted in July 2026, directs the Government Accountability Office to study ways to improve housing for older adults and people with disabilities, including the potential effects of providing capital advances under Sections 202 and 811. The report is due within one year of enactment.

See Who Qualifies for Affordable Housing for how income limits and age rules work across programs.