A Section 202 owner must escrow one-half of one percent of the capital advance as its Minimum Capital Investment, capped at $10,000 or $25,000 with a National Sponsor

s202prac.financial.minimum_capital_investment_escrow_of_one_half_of_one_percent · v1.0.0

As a Minimum Capital Investment the owner must deposit into a special escrow account one-half of one percent (0.5%) of the HUD-approved capital advance, to assure the owner's commitment to the housing. The cap is $10,000, except that under the Section 202 programme an owner with a National Sponsor or National Co-Sponsor escrows 0.5% capped at $25,000. A National Sponsor is defined in 24 CFR 891.105 as a Sponsor with one or more Section 202 or Section 811 projects under reservation, construction or management in two or more different HUD geographical regions, so the higher cap turns on the sponsor's national footprint rather than on the size of this project. The statute at 12 U.S.C. 1701q(j)(3) sets the outer bound at $25,000 and restricts the use of the deposit: it may be used ONLY to cover operating deficits during the first 3 years of operations, and NOT to cover construction shortfalls or inadequate initial project rental assistance amounts. The Secretary may reduce or waive it for an applicant that demonstrates capacity, and SHALL reduce or waive it for a nonprofit applicant not affiliated with a national sponsor.

Confidence

high

Effective from

1996-03-22

Consequence model

contract remedy

Last reviewed

2026-08-22