The § 221(d) program provides low-interest, fixed-rate mortgage insurance to housing developers for either construction or rehabilitation of rental units occupied by low-income families. Certain requirements must be met regarding the size and type of units, and only certain individuals and families are eligible to live in units developed under § 231.

How Is Assistance Is Provided And What Are The Terms Of Assistance?

Under § 221(d), the Department of Housing and Urban Development (HUD) provides mortgage insurance to enable developers to renovate or construct housing with five or more units for low-income families. Lenders approved by HUD make the loans, and HUD insures the loans at a fixed rate of three percent. There are limits on the amounts of the mortgages that depend upon the size of the units involved, the type of structure, and the location of the structure.

In exchange for the governmental mortgage insurance, the rent for § 221(d) housing must not exceed 75 to 80 percent of the fair market rental value. Additionally, the standards for lease terminations are set by administrative rule.

There is an extensive application process that sponsors must follow, starting with working with the lender in the pre-application stage, approval of a full underwriting package, and feasibility studies. Some of the considerations are the need of the market for the proposed housing, the developer's ability to repay the loan, the availability of community resources, and the zoning of the property.

Who Is Eligible To Live In § 221(d) Housing And What Is The Rent?

The only requirement for tenants in § 221(d) housing is that the applicant's income not exceed 80 percent of the geographical area's median income. Owners of § 221(d) housing may choose to give preference to elderly applicants or handicapped applicants, as well.

The rent for § 221(d) housing is based not on the tenant's income but on the value of the rental unit. Additionally, rent may be subsidized by the federal government under § 8 of the U.S. Housing Act of 1937. If a tenant is approved for such a subsidy, the rent charged must be the lesser of the following three amounts: (1) 30 percent of the household's adjusted income; (2) 10 percent of the household's monthly income; or (3) the entire amount of welfare payments designated for housing costs.

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