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U.S. Department of Housing and Urban Development Office of Policy Development and Research Section 202 Supportive Housing for the Elderly: Program Status and Performance Measurement
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BSection 202 Supportive Housing for the Elderly: BProgram Status and Performance Measurement Barbara A. Haley and Robert W. Gray With: Lydia B. Taghavi, Dianne T. Thompson, Deborah Devine, Abdollah H. Haghighi, and Seth R. Marcus U.S. Department of Housing and Urban Development Office of Policy Development and Research June, 2008
TABLE OF CONTENTS Executive Summary 5 Description of Section 202 Supportive Housing 5 Unique aspects of Section 202 Supportive Housing 6 BProgram costs of Section 202 versus Housing Choice Vouchers 6 Development processing delays 7 Development cost limits 7 Methods used to allocate program funds 8 Alternative to institutionalization 8 Achieving cost savings 9 Estimating cost savings attributable to Section 202 10 Proposed program reforms 11 Measuring program performance 11 Conclusion 11 BChapter One: Program Overview 13 Organization of the study 13 Methodology and data sources 13 Description of the Section 202 program 14 Historical phases of the program 17 Persons eligible to participate 21 BNumbers of properties and units in the Section 202 program 22 BProviding assistance to frail elderly persons 24 BDemand for Section 202 housing 29 Chapter Two: Housing Quality and Quality of Life 47 Traditional measures of housing quality 47 Quality of supportive housing features 51 Neighborhood characteristics 58 Quality of life 60 Chapter Three: Improving Program Efficiency 82 Costs and benefits of Housing Choice Vouchers and Section 202 housing 82 Subsidy costs for Section 202 and other programs 86 Section 202 development cost limits 89 Time for development of Section 202 housing 91 HUD practices on establishing allocation areas 96 Conclusions and recommendations 98 2
TABLE OF CONTENTS (Continued) BChapter Four: Cost of Institutionalization 102 BFederal assistance to programs offering community-based services 104 BFuture demand for long-term care 108 Risks of institutionalization 110 BAlternatives to nursing home care 115 �Reduction of institutionalization 117 �Comparison of the Costs of Institutionalization and the Costs of Providing Section 124 202 Housing with Supportive Services �Conclusions and recommendations 135 BChapter Five: Measuring Performance in the Section 202 Program 138 �Overview BOutput measures for the Section 202 program 139 BOutcome measures on quality of housing and services 141 BEfficiency measures: time and cost 142 BConclusion 146 Appendix A: NAHB Research Center Findings 147 : Performance Measurement 150 Appendix B Appendix C: Fiscal Year 2009 Annual Performance Plan 152 3
Acknowledgements BWe are grateful to many individuals for their comments, data, and other contributions. Many thanks to Mark Shroder, David A. Vandenbroucke, Carolyn Lynch, David Yao, David Chase, Mark Perdue, Dwight Jefferson, Brent Mast, and Mary Anthony Trujillo. We are also indebted to Willie Spearmon, Aretha Williams, Carissa Janis, Betty Park, Eric Axelrod, and Steve Martin. And, we very much appreciate insightful comments from Adam Hoffberg on an early draft of this report. 4
Executive Summary The Section 202 Supportive Housing for the Elderly program provides capital advances and project rental assistance under Section 202 of the Housing Act of 1959 (as amended), for housing projects serving elderly households. The Office of Policy Development and Research (PD&R) at the Department of Housing and Urban Development (HUD) has conducted a study to assess whether the program has been effective in meeting the needs of very low-income elderly Americans. BDescription of Section 202 Supportive Housing Since enactment of the program in 1959, Section 202 has provided direct loans or capital advances from the federal government to enable private, not-for-profit sponsors to produce secure, barrier-free, and supportive housing facilities for older persons. 1 Careful sponsor screening and rental subsidies have resulted in fewer defaults and greater financial stability in the Section 202 program than in most other federal housing programs. HUD’s administrative data show that, as of December 2006, over 6,000 Section 202 facilities housed approximately 263,000 households of older persons. Waiting lists for Section 202 facilities are long, especially when compared to the number of housing units becoming vacant each year. The relatively high demand for this housing means that applicants frequently must wait over two years for a unit. Persons are eligible to apply for assistance if their incomes are very low, which is generally equal to 50 percent of the area median family income, adjusted for household size. Residents are predominantly elderly women living alone with incomes between $5,000 and $15,000. The median 2006 income of about $10,000 is well below the income eligibility limit for the program. Housing made available under the Section 202 program is of good quality, and performs better during on-site physical inspections than other HUD-assisted housing programs. Available information on resident satisfaction suggests that residents of Section 202 facilities are more satisfied with their home and immediate surroundings than participants in the Housing Choice Voucher program or unassisted very low-income elderly persons. In 2006, the median age of Section 202 residents was 74 years, and 31 percent were age 80 or older. For elderly persons admitted to Section 202 housing that year, the median age was 70 years, and about 19 percent of all persons admitted to Section 202 housing were age 80 or older. Residents of Section 202 projects in 2006 had a median tenure of 4 years. Eighteen percent of all households had lived in the project for more than ten years. On average, elderly persons admitted to Section 202 projects generally resided for longer periods of time in this kind of housing than elders admitted to public housing, other multifamily assisted housing, or using Housing Choice Vouchers. 1 Elderly households are those with a head, spouse or co-head age 62 or older. 5
Unique Aspects of Section 202 Supportive Housing A critical aspect of Section 202 housing is that it can accommodate residents with supportive services as they become more frail. A majority of facilities (73.9 percent) have grab rails, and 91.1 percent have a ramp or a level entrance. In the newer projects (built since 1990), nearly 100 percent of projects have at least one accessible unit, and 43 percent of all units are wheelchair-accessible. A majority of Section 202 projects have the capacity to provide an array of communal services for their residents. Community space for social and recreational facilities is available and used in 90.2 percent of projects. Spaces for congregate dinin g and supportive service providers are used in about half of projects. Costs of formal services are generally not paid by HUD, but instead are paid through a variety of other sources, principally through Medicaid. Examples of formal services are meals, housekeeping, assistance with medications, bathing, etc. A service coordinator is a person trained to work with residents and their families when supportive services are needed. In 2006, 38 percent of all Section 202 properties reported having a service coordinator on staff. Almost half of all facilities built before 1984 reported having one on staff, while the smallest service coordinator presence (26.9 percent) was reported at newer Section 202 projects developed after 1990. Older facilities tend to be larger than newer projects, which permits greater economies of scale in staffing than in the newer, smaller facilities. BProgram Costs of Section 202 Versus Housing Choice Vouchers An important source of information on the comparative costs of Federal housing assistance programs is a 2002 study by the Government Accountability Office (GAO). 2 The GAO study compared the total per-unit costs of six active programs: Housing Choice Vouchers, Low-Income Housing Tax Credits, Hope VI, Section 202, Section 811, and Section 515. The GAO estimated the per-unit, thirty-year cost of the Section 202 program was 12 percent more than for Housing Choice Vouchers in metropolitan areas, and 39 percent more than for vouchers in non-metropolitan areas. A key issue is whether a twelve percent higher cost of a Section 202 project in a metropolitan area is offset by greater benefits, particularly since Section 202 housing can provide features and services that are not generally available in private-market housing available to very low-income persons using vouchers. The quality of Section 202 housing is uniformly good, regardless of where the project is built, while the quality of housing occupied by elderly voucher participants varies by geographic region of the country. When an elderly person moves into a newly developed Section 202 project, he/she is likely to occupy good quality housing with accessibility 2 Government Accountability Office (2002) Federal Housing Assistance: Comparing the Characteristics and Costs of Housing Programs. GA0-02-76. Available at: www.gao.gov. 6
features, congregate dining (i.e. meals served to residents who sit together in a building’s dining area), and services, regardless of location. An elderly person using a voucher is likely to occupy much older housing, possibly without all needed accessibility features, and probably without access to congregate dining or service coordinators. The needs of the elderly are quite diverse, and the voucher program has been found in prior research to be well suited to the needs of many low-income elderly persons who can live independently. But, vouchers should not be viewed as a panacea. Vouchers may not be the best choice for people who are unable to shop for food, cook meals, or perform housekeeping tasks. Nor are they necessarily the best choice for persons who are frail, need supportive personal services, or are at risk of institutionalization. Development Processing Delays The Government Accountability Office (GAO) and others have criticized HUD for Section 202 development processing delays. 3 GAO’s May 2003 study of delays found that inadequate development cost limits appear to be a significant factor contributing to lengthy development times, negatively affecting project processing time. Research completed in 2005 confirmed the 2003 finding by the GAO that capital advances provided in HUD awards do not always cover the cost of developing projects, contributing to development processing delays. Processing of Section 202 program applications has been a priority for HUD Field staff. By mid-2003, a backlog of 118 Section 202 projects had been essentially eliminated. HUD provided t raining in the processing of Section 202 applications to Field staff, and initiated the study on development cost limits. HUD also conducted a data clean-up of its Development Application Processing (DAP) system, to help support more effective monitoring. The average number of days from time of funding award to time of initial closing clearly has fallen in the past few years. Another improvement that has occurred since the release of the GAO study is the implementation of the Section 202 Demonstration Pre-Development Grant Program. This program may have some impact on the ability of some sponsors to expedite the development processing of projects from fund reservation to initial closing within HUD’s required 18-month timeframe. HUD’s goal for Fiscal Year 2009 is to bring 90 projects containing a total of 3,600 units to initial closing. 4 BDevelopment Cost Limits The National Association of Homebuilders (NAHB) Research Center, under contract with HUD, conducted a cost evaluation of the Section 202 and Section 811 Supportive 3 Government Accountability Office (2003) Elderly Housing: Project Funding and Other Factors Delay Assistance to Needy Households. GAO-03-512. Available at: www.gao.gov U.S. Department of Housing and Urban Development (2008) Fiscal Year 2009 Annual Performance Plan. Available at: http://www.hud.gov/offices/cfo/reports/pdfs/app2009.pdf. 7 4
Housing Programs. The primary purpose of this study was to determine the accuracy and reasonableness of the project development cost limits used in the programs. The NAHB Research Center study found that actual average costs for Section 202/811 projects were reasonable in that they generally were below R.S. Means estimated per square foot costs. Further, the maximum, HUD-allowed Section 202 costs per unit are, on average, approximately equal to R.S. Means estimated Total Construction and Development Costs, exclusive of land. 5 BMethods Used to Allocate Program Funds Section 202 capital advance funds are allocated by formula to HUD Field Offices. They are announced through a Notice of Fund Availability (NOFA), and are competitively awarded to nonprofit sponsors. HUD’s current practice of making formula allocations to geographic areas as small as the jurisdiction of a HUD Field Office has adversely impacted program’s capacity to develop economically viable projects that are cost effective in addressing the needs of frail elderly persons. In recent years, funds for the Section 202 program have not been increasing, while costs increase with inflation each year. As a result, the number of units that can be approved within new developments is shrinking. Each year, as Section 202 properties complete construction and are ready for initial occupancy, these properties require Project Rental Assistance Contract (PRAC) funds, and this shrinks available funds even further. In order to be considered responsive to a NOFA, an applicant must not request a larger number of units for a geographic area (metro or non-metro) than has been allocated to that area. For many allocation areas, this effectively puts the maximum project size at less than 50 units in metropolitan areas and less than 20 units in non-metropolitan areas. Eliminating a requirement to allocate 15 percent of funds to non-metropolitan areas would cause more funds to be allocated to areas of greater need, where cost efficiencies are also greater. Collapsing the boundaries of some allocation areas would also help to provide larger projects offering housing that is better suited to the needs of frail elderly. Research is needed to establish a minimum size that allows cost effective congregate dining and other services. BAlternative to Institutionalization The elderly overwhelmingly prefer living in their own homes to other options. They see nursing homes as the least attractive option for people who are dependent. 6 It is therefore 5 National Association of Homebuilders Research Center, Inc. and Columbia enterprises, Inc. Construction Cost Indices: HUD Section 202 and 811 Supportive Housing Programs, March 2005. Available at www.HUDUSER.org 6 O'Keeffe, Janet, Christine O'Keeffe, and Shulamit Bernard (2003) Using Medicaid to Cover Services for Elderly Persons in Residential Care Settings: State Policy Maker and Stakeholder Views in Six States. Report was prepared under contract #HHS-100-97-0014 between the U.S. 8
not surprising that non-financial factors become more important for demand for Section 202 housing as the ages of applicants increase. In particular, needs for supportive services and improved security are more important to older applicants than to those in their 60s. When reporting the types of needs influencing a decision to move to Section 202 housing, 20.3 percent of applicants over age 80 reported needing supportive services because of frailty, which was twice the rate for other applicants. 7 �Achieving Cost Savings HUD’s Congregate Housing Services Program (CHSP), authorized under Title IV of the Housing and Community Development Act of 1978, awarded funds to pay for the provision of community-based supportive services to Section 202 projects and other housing projects built and operated by local public housing authorities. An evaluation of the CHSP found that one impact of the program was a reduction in placement in nursing homes. Specifically, for every recipient of CHSP services who experienced an institutional placement, 1.5 vulnerable tenants in non-CHSP buildings experienced such a placement. The authors noted that even greater short-term positive effects of CHSP services could be expected if the program is used to deinstitutionalize elderly persons. 8 In 2005, 63 percent of total Medicaid expenditures for long-term care were for nursing homes. Of the $94.5 billion spent on long-term care, $59.3 billion went to these institutions. 9 An estimated 20 percent of nursing home residents do not need skilled nursing and could be deinstitutionalized if appropriate community supports were available. Reforms of Medicaid program restrictions on funding community-based services will not by themselves produce desired savings. In addition, a reduction in the institutionalization of very low-income nursing home patients depends on an adequate supply of affordable, accessible housing with supportive services. This point was established by the Centers for Medicare & Medicaid Services (CMS), in association with the Assistant Secretary of Planning and Evaluation (ASPE), at the US Department of Health and Human Services (HHS). It sponsored the Nursing Home Transition Demonstration Program, which was set up to assist States in providing Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and the Research Triangle Institute. Available at: http://aspe.hhs.gov/daltcp/reports/med4rcs.htm. 7 Heumann, Leonard, Karen Winter-Nelson, and James Anderson (2001) The 1999 Survey of Section 202 Housing for the Elderly. AARP Public Policy Report #2001-02. Washington DC: AARP. 8 Sherwood, Sylvia (1985) Evaluation of the Congregate Housing Services Program, HUD Contract # HC-5373. Boston, Mass: Hebrew Rehabilitation Center for Aged. Unpublished manuscript. 9 Health Policy Institute, Georgetown University (2007) “Fact Sheet: Medicaid and long-term care.” Available at: http://ltc.georgetown.edu/pdfs/medicaid2006.pdf; 9
transition options to nursing home residents who want to move back to the community. While special funding and other assistance enabled targeted nursing home residents to make the transition to community living, nearly all of the case studies in the Demonstration cited the lack of affordable, accessible housing as one of the major barriers facing residents seeking to return to the community. BEstimating Cost Savings Attributable to Secti on 202 BWhen estimating cost savings attributable to the Section 202 program, several scenarios are possible. Arkansas was one of the grantees of the Nursing Home Transition Demonstration Program, mentioned above. Arkansas’ experience with deinstitutionalizing nursing home patients provides the most optimistic scenario of savings that could be achieved by the Section 202 program. Arkansas explicitly identified cost-effectiveness as one of the criteria for choosing nursing home residents who would make good candidates for community living. Costs for community living were 39 percent of Medicaid costs for the same consumers in their last three months in a nursing home. However, achievement of this level of savings depends on the Section 202 program adopting reforms recommended in this report, with targeting of the program to low-income seniors who are at risk of institutionalization. Another scenario assumes that the program continues to serve very low-income seniors who are aging in place. We estimate that approximately 38 percent of Section 202 tenants are currently disabled enough to be considered at-risk for institutionalization. Of those, an estimated 90,000 persons lack spouses or other sources of informal supports who could prevent institutionalization. For a 340-day stay in a nursing home, the cost of institutionalization greatly exceeds the costs of other options. In 2004, a stay in a nursing home funded by Medicaid cost about $49,000 on average, while Section 202 housing plus the most-often provided services (food, transportation and housekeeping) is estimated to cost only about $13,000. Should a fuller set of personal services be provided for very frail elders, the cost of housing plus services is estimated at only approximately $25,000, still about half the cost of institutionalization. Residents who move into a Section 202 project between the ages of 75 and 79 typically reside in the project for 6.28 years. When measured over this period of time, the cost of institutionalization funded by Medicaid is estimated at approximately $90,000, including $63,000 for 1.2 years in a nursing home and $27,000 for housing vouchers without supportive services, at an average of $440 per month, when not residing in a nursing home. The cost of Section 202 housing plus assisted living services with high levels of personal care is about $171,000, almost twice the cost of institutionalization plus voucher. However, the cost of housing plus a more typical set of services - food, transportation and housekeeping services - is $88,000, which is about the same as the cost of 1.2 years of institutionalization plus a housing voucher. This lower-end estimate is likely to be closer to the actual cost. 10
The above estimates are very sensitive to the assumption on likely future use of nursing homes. If the alternative to provision of housing plus supportive services is to permanently live in a nursing home, then for the entire 6.28 years that a person would have stayed in Section 202 housing, the total cost of institutionalization would be an estimated $329,000. This amount is nearly twice as expensive as the cost of providing Section 202 housing with a full set of personal services, and is almost four times the cost of providing Section 202 housing with less intensive services. Proposed Program Reforms Proposed program reforms, discussed in Chapters Three and Four, are designed to improve efficiency of program delivery and help retarget the program to better address the needs of frail elderly persons as well as meet growing demand. These include: o revise boundaries of allocation areas and development cost limits, o allow for larger project sizes, o provide funding for service coordinators within all Section 202 projects, o produce 10,000 units per year over the next ten to fifteen year period, and o encourage owners and managers of Section 202 projects to conduct active outreach to nursing homes in their community. BMeasuring Program Performance This report provides the following recommendations (discussed in more detail in Chapter Five) for goals that could be set explicitly for the Section 202 program: o measure the presence of service coordinators, o continue assessments of physical inspections and of resident satisfaction in Section 202 properties, o track the percentage of new admissions entering directly from institutions or approved by Medicaid for admission to nursing homes o develop a methodology that measures frailty, o monitor per-unit development costs, o produce regular reports that identify the cost of completed projects and provide meaningful comparisons to reasonable cost standards, and o develop a performance measure that tracks the efficiency of the Section 202 program in helping to avoid premature or unnecessary institutionalization. Conclusion The Section 202 program produces good quality housing that is rated very highly by its residents. Recently completed research has shown that program costs are reasonable in relation to costs of other development programs as well as industry norms. As States begin planning to create comprehensive long-term care systems that will enable low- income elders with disabilities to live in the community instead of relying on institutions, the availability of affordable, accessible housing will need to be addressed. In recent 11
years, the historically low level of Section 202 annual appropriations provided by Congress, in combination with HUD practices regarding allocation of funds, has resulted in development of multiple, small projects - often proposed and developed by relatively inexperienced, small sponsors – that reduce program efficiency and significantly contribute to project processing delays. Results from decades of research suggest the potential of the Section 202 program to reduce Medicaid expenditures while providing a humane alternative to institutionalization. Program efficiency could be increased if the Section 202 program were to provide more assistance to persons who are either at risk of institutionalization or already institutionalized. Section 202 program rules could be altered to permit construction of buildings that are large enough to permit cost effective delivery of needed services. In this study, we provide estimates of the cost savings that are achieved under the program as it exists today. Further research is needed to estimate with greater precision the level of savings that can be expected now and in the future. 12