---
kind: "section"
citation: "42 U.S.C. § 12802"
title: "42"
title_heading: "The Public Health and Welfare"
number: "12802"
heading: "Rental housing production"
release: "119-102"
url: "https://uscodex.org/usc/42/12802"
units:
  - "Chapter 130 — National Affordable Housing"
  - "Subchapter II — Investment in Affordable Housing"
  - "Part D — Specified Model Programs"
---

# §12802. Rental housing production

- (a) **Repayable advances—**
  - (1) **In general—** The [Secretary](/usc/42/242q–4.md?p=2) shall make available a model [program](/usc/42/274l–1.md?p=4) under which repayable advances may be made to public and private [project](/usc/42/11360.md?p=20) sponsors in constructing, acquiring, or substantially rehabilitating [projects](/usc/42/11360.md?p=20) to be used as affordable rental [housing](/usc/42/1490p–2.md?p=r-3), including limited equity cooperatives and mutual [housing](/usc/42/1490p–2.md?p=r-3).
  - (2) **Maximum amount of advance—** An advance under this model [program](/usc/42/274l–1.md?p=4) shall not exceed 50 percent of the total costs associated with the [construction](/usc/42/7479.md?p=2-C), acquisition, or substantial rehabilitation of the [project](/usc/42/11360.md?p=20), as determined by the [participating jurisdiction](/usc/42/12704.md?p=4).
  - (3) **Terms of repayment—**
    - (A) **Interest payments—**
      - (i) **In general—** Under the model [program](/usc/42/274l–1.md?p=4), advances shall be repaid with interest calculated at a rate of not more than 3 percent per year, as determined by the [participating jurisdiction](/usc/42/12704.md?p=4) to be appropriate. Interest shall begin to accrue 1 year after the completion of the [construction](/usc/42/7479.md?p=2-C), acquisition, or substantial rehabilitation of the [project](/usc/42/11360.md?p=20) and shall be payable in annual installments.
      - (ii) **Exception—** Interest and any accrued interest shall be payable only from the surplus cash flow of the [project](/usc/42/11360.md?p=20), after a minimum return on equity determined by the [participating jurisdiction](/usc/42/12704.md?p=4) to be appropriate. As used in the previous sentence, the term “surplus cash flow” means the cash flow of the [project](/usc/42/11360.md?p=20) after the payment of all amounts due under the first mortgage, operating expenses, and required replacement reserves, as determined by the [participating jurisdiction](/usc/42/12704.md?p=4).
    - (B) **Additional interest payments—** Under the model [program](/usc/42/274l–1.md?p=4), for any year in which the sum of the [surplus cash flow](#a-3-A-ii) of a [project](/usc/42/11360.md?p=20) and the return on equity exceeds all interest payments due under [subparagraph (A)](#a-3-A), 50 percent of the excess [surplus cash flow](#a-3-A-ii) shall be paid to the [participating jurisdiction](/usc/42/12704.md?p=4)’s HOME Investment [Trust](/usc/42/12854.md?p=6) [Fund](/usc/42/12854.md?p=3) as additional interest.
    - (C) **Principal and unpaid interest—** The principal amount of an advance under the model [program](/usc/42/274l–1.md?p=4), and any interest remaining unpaid pursuant to [subparagraph (A)(ii)](#a-3-A-ii) shall be repayable when the [housing](/usc/42/1490p–2.md?p=r-3) no longer qualifies as affordable [housing](/usc/42/1490p–2.md?p=r-3) in accordance with [section 12749(b) of this title](/usc/42/12749.md?p=b).
- (b) **Selection guidelines—**
  - (1) **In general—** The [Secretary](/usc/42/242q–4.md?p=2) shall establish guidelines for the selection of [projects](/usc/42/11360.md?p=20) by [participating jurisdictions](/usc/42/12704.md?p=4) for assistance under the model [program](/usc/42/274l–1.md?p=4). Such guidelines shall be designed to select [projects](/usc/42/11360.md?p=20) in areas and for markets demonstrating the greatest need for the production of affordable rental [housing](/usc/42/1490p–2.md?p=r-3).
  - (2) **Specific requirements—** The selection guidelines may include—
    - (A) the extent of the shortage of rental [housing](/usc/42/1490p–2.md?p=r-3) in the area that is available to [low-income families](/usc/42/300a–4.md?p=c);
    - (B) the extent large [families](/usc/42/12704.md?p=11) with [children](/usc/42/256e.md?p=g-2) will be served by the [project](/usc/42/11360.md?p=20);
    - (C) the extent to which the [project](/usc/42/11360.md?p=20) provides congregate [facilities](/usc/42/11049.md?p=4) and has available [supportive services](/usc/42/3002.md?p=54) that will permit elderly or handicapped residents who become frail and are in need of assistance in living to continue to reside in the [project](/usc/42/11360.md?p=20);
    - (D) the extent of [very low-income](/usc/42/8013.md?p=k-9) and low-[income](/usc/42/292s.md?p=c-4) occupancy in excess of the [income](/usc/42/292s.md?p=c-4) targeting requirements in [section 12744 of this title](/usc/42/12744.md);
    - (E) the extent of the [project](/usc/42/11360.md?p=20) sponsor’s commitment of equity to the [project](/usc/42/11360.md?p=20) (except that this criterion shall not apply to or affect the selection of applications submitted by [public housing agencies](/usc/42/8012.md?p=g-5) and nonprofit entities);
    - (F) the extent of the [project](/usc/42/11360.md?p=20) sponsor’s commitment of equity to the [project](/usc/42/11360.md?p=20) in comparison to the value of all public assistance for the [project](/usc/42/11360.md?p=20), including assistance under this subchapter, other Federal assistance and financing, and [State](/usc/42/201.md?p=f) and [local government](/usc/42/8401a.md) contributions (except that this criterion shall not apply to or affect the selection of applications submitted by [public housing agencies](/usc/42/8012.md?p=g-5) and nonprofit entities);
    - (G) the extent of non-Federal public or private assistance to the [project](/usc/42/11360.md?p=20);
    - (H) the extent to which the [project](/usc/42/11360.md?p=20) provides [supportive services](/usc/42/3002.md?p=54) for [persons](/usc/42/1320a–7k.md?p=d-4-C-i) with disabilities; and
    - (I) any other factor determined by the [Secretary](/usc/42/242q–4.md?p=2) to be appropriate.
- (c) **Guidelines—** The [Secretary](/usc/42/242q–4.md?p=2) shall publish guidelines for the model [program](/usc/42/274l–1.md?p=4) under this section not later than 180 days after November 28, 1990.

## Source credit

(Pub. L. 101–625, title II, § 252, Nov. 28, 1990, 104 Stat. 4119.)