HUD restores longstanding policy on eligible 232/223 (f) program repairs: Very good news!
Our national affiliate, American Health Care Association/National Center for Assisted Living, has reported that after several months of intense lobbying on the part of a coalition of 232 program provider associations, the federal Department of Housing and Urban Development (HUD) through its Federal Housing Administration (FHA), restored a longstanding policy allowing both critical and non-critical repairs costs to be covered in Section 232/223 (f) transactions. In November 2024, HUD announced a narrow interpretation limiting allowable repair costs to “critical repairs” related solely to the life, health and safety of occupants. More detail from an AHCA/NCAL memorandum issued on April 30, 2025 is set forth below:
“In the November 14, 2024 HUD email blast, they announced a narrow interpretation of the Section 223(f)(4) statutory phrase “necessary costs of refinancing” as that phrase applies to repair costs in a 232/223(f) transaction. HUD stated that, to be compliant with this statutory language, Lenders could only include:
the cost of repairs that are necessary to comply with requirements related to life, health, and safety of occupants (e.g., installation of smoke detectors and radon mitigation measures), environmental requirements, associated issuance of permits, and/or federal, state and local regulatory requirements.
At that time, HUD stated that it was working on further guidance. HUD did subsequently include more detailed guidance as draft edits to the Section 232 Handbook—draft edits that drew industry comments expressing strong concern. Should that legal opinion stood, LTC operators would not be able to fully fund certain capital projects and would leave them with no choice but to delay or reconsider much needed facility upgrades. We made sure to make this message and concern loud and clear to HUD.
HUD, through FHA, announced today (April 30, 2025), that effective immediately, HUD shall return to its longstanding practice (from over 30 years) regarding repairs (both critical and noncritical) in Section 232/223(f) transactions, consistent with the currently effective Section 232 Handbook and controlling documents.”
