NH&RA’s HOPE VI/Mixed-Finance Working Group, a council formed to find preservation solutions to a portfolio of severely distressed properties, submitted recommendations to HUD last week for criteria it should consider in determining whether a property is eligible for a Section 18 repositioning. This is an opportunity to leverage the program to address the operating and capital needs of HOPE VI and mixed-finance properties across the country.  

For background, HUD’s Section 18 is part of the U.S. Housing Act of 1937, allowing Public Housing Authorities (PHAs) to apply for the disposition or demolition of certain public housing properties. It’s used when a property is deemed obsolete, underutilized or too costly to maintain under current standards. Properties may qualify for Section 18 under specific criteria, allowing PHAs to either demolish or sell the property and reinvest the proceeds in affordable housing. 

Key Points About Eligible Properties and Criteria: 

1. Obsolescence: The property must be physically obsolete and not feasible to repair or maintain. This can include severe structural, mechanical or design deficiencies. 
2. Underutilization: Properties with low occupancy due to location, marketability or other factors can be eligible if continued operation isn’t viable. 
3. Cost Inefficiency: If maintaining the property is disproportionately costly, with costs exceeding HUD’s set threshold for viability, Section 18 can apply. 
4. Health and Safety: Properties posing a risk to resident health or safety and not feasible to upgrade to meet standards may also qualify. 

 Types of Properties Eligible: 

  • Public Housing Units: Specifically, this applies to properties operated by PHAs that are in HUD’s public housing portfolio. 
  • Mixed-Finance Developments: HUD sometimes allows Section 18 for these if the public housing component meets obsolescence or cost criteria. 

Properties approved for Section 18 disposition can be redeveloped, and PHAs may replace these units through project-based vouchers or other affordable housing options to retain affordability in the community. Section 18 as a long-term solution for preserving distressed mixed-finance properties is to be determined.