Section 40. The following provisions shall be applicable to housing for elderly persons of low income and handicapped persons of low income:

(a) There shall be no requirement that the occupants of such housing constitute families, and housing may be provided in separate dwelling units for elderly persons and handicapped persons living alone or with such other persons who are either eligible under the provisions of sections thirty-eight to forty-one, inclusive, or necessary to the physical welfare of the elderly occupant; provided, that such other necessary person is eligible for low-rent housing or is a live-in staff member of a cooperative apartment, community residence or other such form of congregate housing. Single handicapped persons or families of one or more persons, one of whom is handicapped, shall be eligible for admission to such housing, regardless of their age, provided that such persons or families satisfy the eligibility standards required for admission under section thirty-two.

(b) Projects for such housing may and shall, when practicable, be established near the neighborhoods where the elderly persons reside.

(c) Housing for elderly persons of low income and handicapped persons of low income shall conform to standards established by the department after consultation with the department of public health, the department of public welfare, the secretary of elder affairs and the board of standards and shall be designed so as to alleviate the infirmities characteristic of the elderly or the handicapped; provided that nothing in this paragraph shall be construed to prevent the occupancy of an elderly person in a unit designed for the handicapped or a handicapped person in a unit designed for the elderly.

(d) In all housing for elderly persons of low income and handicapped persons of low income there shall be a preference in admission for eligible and qualified applicants who are veterans.

(e) Rents for dwelling units in projects or parts of projects constructed for elderly persons of low income shall be computed as provided in section thirty-two; provided that in the case of persons receiving old age assistance under chapter one hundred and eighteen A, directly or indirectly in whole or in part, from the commonwealth, dwelling units in projects or parts of projects constructed under section thirty-nine shall be deemed to be adequate housing for elderly persons and shall qualify for and rent at the maximum rental allowance under the old age assistance laws, regulations, and policies. Notwithstanding any provision of law to the contrary no elderly person of low income or handicapped person of low income shall be required to pay more than twenty-five per cent of his or her income without utilities or thirty percent with utilities for rent for dwelling units in projects or parts of projects constructed or leased or purchased under this chapter. For purposes of calculating the rent of elderly tenants in state-aided public housing, local housing authorities shall treat pharmacy costs reimbursed pursuant to section 16B of chapter 118E as deductible medical expenses. Any deficiency in the budget of a housing authority caused by such reduced rental shall be paid by the commonwealth and paid to the housing authority in an amount equal to the difference between the tenant's rent and the prorated cost of operating that unit. The commonwealth, acting through the department, may make payments in advance on account of such deficiency at such times and in such amounts as it deems proper. The prorated cost of operations shall be computed by the department with provision for a full operating reserve.

(f) The department shall, after consultation with the secretary of elder affairs, promulgate rules and regulations relative to uniform standards for tenant selection which shall establish the order of priority governing the selection of tenants, and a housing authority thereafter shall be bound by such standards in its selection of tenants. Such rules and regulations shall provide that handicapped persons and their families, who are eligible under the provisions of paragraph (a), shall receive priority in placement in not less that five per cent of all dwelling units provided under any authorization for housing of elderly persons of low income approved after January first, nineteen hundred and seventy-seven.

(g) following receipt of project plans and descriptions submitted to the department and the department of elder affairs, the department shall consult with the department of elder affairs in all phases of the development and approval of said plans and submissions. No contracts between the department and a housing authority for state financial assistance under sections thirty-eight to forty-one, inclusive, shall be entered into without prior review and comment of the secretary of elder affairs.

(h) A housing authority shall not provide such housing to any person who is a current illegal user of one or more controlled substances as defined in section one of chapter ninety-four C. A person's illegal use of a controlled substance within the preceding twelve months shall create a presumption that such person is a current illegal user of a controlled substance, but the presumption may be overcome by a convincing showing that the person has permanently ceased all illegal use of controlled substances. The prohibition of the provision of housing contained in this subsection shall not apply to housing provided through residential treatment programs for illegal users of controlled substances.