---
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"
date: "2026-07-12"
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/42/12704.md?p=16) shall make available a model program under which repayable advances may be made to public and private [project](/usc/42/13641.md?p=2) sponsors in constructing, acquiring, or substantially rehabilitating [projects](/usc/42/13641.md?p=2) to be used as affordable rental [housing](/usc/42/12704.md?p=8), including limited equity cooperatives and mutual [housing](/usc/42/12704.md?p=8).
  - (2) **Maximum amount of advance—** An advance under this model program shall not exceed 50 percent of the total costs associated with the [construction](/usc/42/300s–3.md?p=7), acquisition, or [substantial rehabilitation](/usc/42/12704.md?p=17) of the [project](/usc/42/13641.md?p=2), 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, 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/42/300s–3.md?p=7), acquisition, or [substantial rehabilitation](/usc/42/12704.md?p=17) of the [project](/usc/42/13641.md?p=2) 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/42/13641.md?p=2), 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/42/13641.md?p=2) 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, for any year in which the sum of the surplus cash flow of a [project](/usc/42/13641.md?p=2) and the return on equity exceeds all interest payments due under [subparagraph (A)](#a-3-A), 50 percent of the excess surplus cash flow shall be paid to the [participating jurisdiction](/usc/42/12704.md?p=4)’s HOME Investment Trust Fund as additional interest.
    - (C) **Principal and unpaid interest—** The principal amount of an advance under the model program, and any interest remaining unpaid pursuant to [subparagraph (A)(ii)](#a-3-A-ii) shall be repayable when the [housing](/usc/42/12704.md?p=8) no longer qualifies as affordable [housing](/usc/42/12704.md?p=8) in accordance with [section 12749(b) of this title](/usc/42/12749.md?p=b).
- (b) **Selection guidelines—**
  - (1) **In general—** The [Secretary](/usc/42/12704.md?p=16) shall establish guidelines for the selection of [projects](/usc/42/13641.md?p=2) by [participating jurisdictions](/usc/42/12704.md?p=4) for assistance under the model program. Such guidelines shall be designed to select [projects](/usc/42/13641.md?p=2) in areas and for markets demonstrating the greatest need for the production of affordable rental [housing](/usc/42/12704.md?p=8).
  - (2) **Specific requirements—** The selection guidelines may include—
    - (A) the extent of the shortage of rental [housing](/usc/42/12704.md?p=8) in the area that is available to [low-income families](/usc/42/12704.md?p=10);
    - (B) the extent large [families](/usc/42/12704.md?p=11) with children will be served by the [project](/usc/42/13641.md?p=2);
    - (C) the extent to which the [project](/usc/42/13641.md?p=2) provides congregate facilities and has available supportive services 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/42/13641.md?p=2);
    - (D) the extent of very low-income and low-income occupancy in excess of the income targeting requirements in [section 12744 of this title](/usc/42/12744.md);
    - (E) the extent of the [project](/usc/42/13641.md?p=2) sponsor’s commitment of equity to the [project](/usc/42/13641.md?p=2) (except that this criterion shall not apply to or affect the selection of applications submitted by [public housing agencies](/usc/42/12704.md?p=18) and [nonprofit](/usc/42/300s–3.md?p=3) entities);
    - (F) the extent of the [project](/usc/42/13641.md?p=2) sponsor’s commitment of equity to the [project](/usc/42/13641.md?p=2) in comparison to the value of all public assistance for the [project](/usc/42/13641.md?p=2), including assistance under this subchapter, other Federal assistance and financing, and [State](/usc/42/12704.md?p=2) and local government contributions (except that this criterion shall not apply to or affect the selection of applications submitted by [public housing agencies](/usc/42/12704.md?p=18) and [nonprofit](/usc/42/300s–3.md?p=3) entities);
    - (G) the extent of non-Federal public or private assistance to the [project](/usc/42/13641.md?p=2);
    - (H) the extent to which the [project](/usc/42/13641.md?p=2) provides supportive services for persons with disabilities; and
    - (I) any other factor determined by the [Secretary](/usc/42/12704.md?p=16) to be appropriate.
- (c) **Guidelines—** The [Secretary](/usc/42/12704.md?p=16) shall publish guidelines for the model program 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.)