HOME Essentials 2013

HOME Essentials
NCSHA 2013 HFA Institute
Monte Franke, Franke Consulting Group
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Agenda
Overview
• HOMEspeak
• Statute, rule, notices
Administration
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Allocations & deadlines
Partner roles
Documents
Financial management
Eligible Activities
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Homebuyer
Owner-occupied rehab
Rental
TBRA
CHDOs
• Qualification
• Eligible activities
• Assisstance
HOME Jargon
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The HOME Policy Pyramid
NAHA
Part 92
CPD Notices
PJ Policy
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The Rule: 24 CFR Part 92
• Key sections to read first!
• 92.252: key rental requirements
– 92.253: lease requirements & prohibitions
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92.254: key homeownership requirements
92.251: property standards
92.203: income methods & documentation
92.206/.214: eligible/ineligible costs
92.250: maximum HOME subsidy per unit
92.504: written agreement requirements
92.508: recordkeeping 6
FY 2012 Appropriation Act
• Activities that receive FY 2012 funds (IDIS set up / 2012 Annual Plan)
– Four‐year project completion deadline
– Project underwriting certification – Deadline for sale of homebuyer units
– CHDO development capacity
SDHDA Housing Conference
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Proposed Rule
• Major proposed updating of the rule
• Published 12/16/11; comment period thru 2/14/12
• Final rule changes: soon
• This presentation will focus on existing requirements • But will “link” to key changes proposed 8
The Big Picture
• HOME provides “capital funds” for LI housing
• Projects & investment terms locally decided
• Units designated as HOME‐assisted
• Allows mixed income & mixed use
• HAUs: income limits, price limits, prop stds
• Minimum affordability period: 5 – 20 yrs
• You get credit for completed & occupied units
• If units don’t fulfill aff. period, $ repaid
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HOME Web Site
• www.hud.gov/homeprogram/
• “Must see” links:
– Library (“HOME Policy Guidance”)
– Program limits ( “HOME Reports & Limits”) – Training (“HOME Policy Guidance”)
– Cross‐Cutting Federal Requirements (“HOME Resources”)
– Mailing list (“Contact Us”)
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Access to HOME Help
• HUD TA Assistance
• OneCPD TA thru state HUD CPD office
• HUD guides & other materials
• HOME Program: www.hud.gov/offices/cpd/affordablehousing/programs
/home/index.cfm
• www.hometa.info
• Building HOME: basic training course online
• Community Connections Clearinghouse: – 1‐800‐998‐9999 or www.comcon.org
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Administration
Allocating HOME Funds
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Formula allocation
State & local PJs
ConPlan
Applicants: anyone
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PJ Annual HOME Allocation Admin (AD)
Max.
10%
Admin
Projects (EN)
Max.
5%
CHDO
op exp (opt.)
CHDO (CR)
All projects (CHDO & non‐CHDO)
• Homeowner rehab
• Homebuyer
• TBRA
• Rental
HOME Funds
Minimum 15%
CHDO set‐aside
10%
pre‐dev. (opt)
PJs and subrecipients only
Need CHDO project or expect in 24 mos.
Must result in HOME
units
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HOME Expenditure Rules
• Reimbursement for expenses only
• Outlays or invoices
• PJ deadlines:
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24 months to commit 60 months from HUD award 2012 & proposed: 48 months from commitment
12 months from set‐up to begin draw
Since 2002, 8 years from appropriation to expend
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SNAPSHOT & Dashboard
• Monthly production reports continue
• Commitments & expenditures are not outcomes
• But deadlines remain
• SNAPSHOT reflects HOME PART ratings • Reflects cumulative performance since beginning
• Stresses rental & CHDO completed & occupied
• See red flags page
• Dashboard: version for elected officials
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Partner Roles
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PJ
Subrecipients (& State Recipients)
Developer
Contractor
Beneficiaries
Subrecipients v. Developers
Subrecipients
• Not‐profit or public agencies
• Program administrator
• Cannot assist own property
• Full responsibility for rules*
Owner/Developers
• Any entity
• “Project” implementer
• Typically develops own property
• Only responsible for written agreement
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Required Documents
Written agreement:
• Loan agreement between PJ & developer/owner
• Executed prior to IDIS setup
• Governs pre‐closing activities • Defines developer & PJ roles & responsibilities
• Delineates compliance tasks (planning & implementation)
Recorded documents: • Note/mortgage, deed covenant, other?
• Recorded at closing
• Governs disbursements & occupancy or disposition
• References compliance obligations (implementation & post‐occupancy)
• Basis for enforcement
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Recordkeeping
• Program & project records: 92.508
• Five years after closeout
• Rental occupancy: 5 year rolling base
• Legal docs: 5 years after completion of aff period
• Proposed: add. eligible cost, underwriting, property standards
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Monitoring
• Recipients reviewed at least annually
• Proposed: risk‐based monitoring plan
• Ongoing rental monitoring: • 92.252(f)(2): owners must provide info annually to PJ
• 92.504(d) on‐site sample of files & prop inspections:
– every 1 ‐ 3 yrs depending on total units
– Proposed: 12 mos & every 3 yrs
• Ongoing homebuyer monitoring: • Principal residency & resale
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Cost Effective Use of Funds
• OMB A‐87 cost principles
• Eligible, allocable, necessary, reasonable,documentable
• Subsidy layering
• Combining HOME with any other public funds
• Repayment
• If the project fails to meet the affordability requirements (including the affordability period)
• Proposed: underwriting standards 23
Match
• PJs must match 25% of HOME funds drawn down for project costs:
• Program requirement, not each project
• Must be a permanent non‐Federal contribution
• No match: admin, CHDO OpExp/Pre‐Dev forgiven • Sources: 92.220 & CPD‐97‐03
• Match can be recorded for HOME‐assisted & HOME‐
eligible projects (see CPD‐97‐03 p. 5)
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Eligible Match Sources
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Cash/“cash equivalents”
Waived taxes, fees
Donated land/property
Infrastructure
% of housing bonds
Donated materials & labor
Sweat equity
Services/counseling
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Program Income & Other Funds
Program income – local account, 10% admin
Recapture – local account, no admin
Repayment – US Treasury account, no admin
CHDO proceeds – CHDO keeps PI, 1st reuse for HOME or other LI housing
• See CPD‐97‐09
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Eligible Activities
Eligible Activity Categories Homebuyer
Owner‐occupied
rehab
Rental
TBRA
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Eligible/Ineligible Uses
Eligible
– Capital costs
• Acquisition/Site Improvements
• Rehab/New Constr. • Project Soft Costs – TBRA – Homeless: permanent, transitional, SRO
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Ineligible
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Commercial (non‐housing)
Non‐low‐income housing
Shelters Project reserves • Exc. Initial Op Deficits
– Project‐based assistance
– Public housing (92.213)
Form of Subsidy
• Lots of choices
• Loans: interest or no interest, payments or deferred, forgivable over affordability period
• Grants
• Interest subsidies
• Equity investments & loan guarantees
• Construction & permanent financing
• Subsidy limits: Max HOME investment
• Proposed: underwriting all development projects
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HOME Assisted Units
Aff. Period
Affordability
HOME assisted unit
Cost Allocation
Property
Eligible
Household
Standards
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Cost Allocation
• Determine the minimum number of HOME assisted units or maximum HOME funds
– For mixed income & mixed use projects
– Allocate eligible costs to units
• See CPD‐98‐02
Income Eligibility
Technical
Guide
• All HAUs occupied by LI (80% AMI)
• Deeper 50%/60% targeting for rental • Income definition: Part 5 or IRS 1040
• Technical Guide for Determining Income
• Online Income Calculator – OneCPD.info • Income eligibility determination:
• Homebuyer & OOR: Only at time of assistance
• TBRA & Rental: annual during compliance period
• Certification w/in 6 mos. of assistance/occupancy
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Property Standards
• All applicable state/local codes
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Existing: local codes or Section 8 HQS (UPCS)
Rehab: written rehab standard (min useful life)
New construction: state/local codes + IECC
Other Federal stds: LBP (pre‐78) & 504/FHAA
• Inspections
• Prior to close out (progress inspections added)
• Ongoing rental inspections (12 mos + ev 3 yrs)
• Inspector must have program relationship
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Minimum Affordability Period
H O M E In vestm en t
p er U n it
less than $15,000
L en g th o f
A ffo rd ab ility
5 yrs
$15,000 - $40,000
1 0 yrs
m ore than $40,000
1 5 yrs
refinancing of rental
housing
new construction of rental
housing
1 5 yrs
2 0 yrs
+ local extended use restrictions
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Cross‐Cutting Requirements
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Federal $ administration: Parts 85 & 84
Environmental review: pre‐commitment reviews New construction rental: site & nghd standards
Relocation: URA & HCDA 1974 S. 104(d) Davis Bacon (if 12+ HAUs)
Procurement EEO, M/WBE, Section 3
Accessibility: Section 504 & FHAA
Affirmative marketing (rental/buyer 5+ un) )
• www.hud.gov/offices/cpd/affordablehousing/lawsandregs/fe
dreq/index.cfm
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Homebuyer & Owner‐Occupied Rehab
HOMEbuyer Assistance
• Eligible activities
• Acquisition assistance (not CHDO)
• Acquisition & rehab
• New construction
• Forms of assistance
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Development subsidies
Grants, Loans
DPA/CCA Loan guarantees & other approved by HUD
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Statutory Cornerstones
Properties
Buyers
Prop Standards
Resale
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Compliance Cornerstones
1. Eligible buyers: less than 80% AMI
• Principal residency
2. Eligible properties:
• Single/family, 2 ‐ 4 unit, coop, condo
• Price/value less than 95% of area median value limit *
– Price or after rehab/construction value
– Phasing out 203(b); see web site for limits
• Lease‐purchase: complete w/in 3 yrs.
• Sell within 6 months of completion
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Compliance Cornerstones, cont.
3. Property Standards:
• No health/safety violations on occupancy
• Home must pass local codes/HQS w/in 2 yrs • LBP: Subpart K or J (if rehab)
4. Resale requirements:
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Compliance period: minimum 5 ‐ 15 years
principal residency
resale to low income or recapture $ no ongoing HQS or income certification
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Resale/Recapture Options
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Resale to Low Income Buyer
Full recapture
Declining balance recapture
Shared net proceeds
Owner investment returned first
Models approved by HUD (ConPlan)
See CPD‐12‐003
Proposed: recapture notes assumable 42
Types of Subsidies
1. Development Subsidies • If recapture & costs > value
2. Homebuyer Subsidies
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Deferred/soft loans (2nd mortgages)
Downpayment/closing cost assistance
Others (e.g., insurance)
Amount of assistance: fixed v. variable
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Owner‐Occ. Rehab Differences
• HOME‐eligible, but not CHDO‐eligible
• Not a “development” activity
• Same 80% AMI & principal residency
• Proposed: inherited, life estate, living trust
• Properties: same 95% AMV limit after‐rehab
• Property standards: wr. rehab standards
• No minimum affordability period
• Determined by PJ
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Rental Housing
HOME Rental Housing
• Can acquire, rehab, or construct
• Four “cornerstone” compliance issues:
Occupants
Rents
Prop Standards
Compliance
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Compliance Cornerstone 1
1. Occupancy:
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all assisted units at 80% AMI (LI)
(if 5+ units) 20% @ 50% of AMI (VLI)
90% of initial occupants at 60% AMI –
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program requirement annually (IDIS/CAPER)
Does not apply to recertifications & turnovers
getting the unit mix right…and maintaining it
HUD considering on lease‐up deadlines
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A HOME Rental Project...
LI
VLI
LI
LI
LI
LI
LI
VLI
LI
LI
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Compliance Cornerstone 2
2. Rent limits:
• VLI units: 30% at 50% or FMR
– project based rental assistance exception
• LI units: 30% at 65% or FMR
• All rents adjusted for tenant‐paid utilities
– use local PHA Section 8 schedule
• Adjusted annually by HUD
– link on HOME web page
• Proposed: limits on additional rent charges
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Compliance Cornerstone 3
3. Property Standards
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Ongoing: local codes or Section 8 HQS (UPCS)
Lead‐based paint & accessibility HAUs must pass inspection prior to occupancy Apply the full compliance period
– owners “shall maintain” (certify)
– PJ requirement to inspect (12 mos + ev 3 yrs)
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Compliance Cornerstone 4
4. Compliance:
• Deed restriction
• Minimum affordability period
»
»
»
»
less than $15,000 HOME/un 5 yrs
$15,000 ‐ $40,000 10 yrs
greater than $40,000 (or refi)
15 yrs
new construction 20 yrs
• During compliance period:
» income certs, rent limits,report (prop stds cert)
» file review/unit inspections 1‐3 yrs (12 mos + 3 yrs)
» Proposed: distressed project workout guidelines 51
Other Rental Compliance
• New construction: site & nghd stds
• Environmental review: NEPA review more likely
• Accessibility: Section 504 & FHAA • Davis‐Bacon: 12+ assisted units
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Occupancy Changes
LI
OI
VLI >LI
LI
LI
LI
LI
V
LI
LI
VLI
LI >VLI
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Tenant‐Based Rental Assistance
Eligible TBRA Activities
Eligible
• Assist w rent, utilities, security & utility deposits
• Contracts up to 24 mos
Ineligible
• Tying to specific project
• Coop or mutual housing units (unless rental)
– May be renewed subject to • $ for overnight/temporary availability of HOME $
shelter
• May be administered by PJ, • Duplicating rental assistance or under contract to PHA or programs that already other subrecipient
reduce rent to 30% of income
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Program Design Options
• Section 8 or locally designed
• Rent or security deposit
• Community‐wide or targeted
• Must address an unmet need in PJs’ Con Plan
• Subject to fair housing limitations
• Other possible design aspects: self‐
sufficiency, homebuyer, anti‐displacement
• Proposed: special pops including professions
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The Details
• Eligible households: < 80%, but really 60%
• Eligible units: • Public/private; no other rental subsidy
• Reasonable rent
• Property standards (Section 8 HQS)
• Assistance amount (up to 2 yrs): • Diff between payment std & 30% of income
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CHDOs
CHDO
15%
The CHDO Set‐Aside
• 15% of PJ annual allocation for CHDO development projects:
Other HOME
85%
• Rental Housing & Homebuyer • Proposed: no reservations; own/develop/sponsor ∆
• Nonprofit must qualify as CHDO
• CHDO definition in 92.2; CPD Notice 97‐11
• Proposed: capacity (staff), independence
• Not all nonprofit developers will be CHDOs
• Non‐CHDO funds (e.g., subrecipient) 59
CHDO Qualifications
Board requirements:
• At least 1/3 low income
• low income
• resident of LI neighborhood
• represent LI organization
Other requirements:
• 501(c)(3) or (c)(4) status
• Capability & experience:
• < 1/3 “public officials”
• Elected, appointed, or employee of jurisdiction
• Appointed by a public official
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• Sponsorship limitations
• Gov’t may not appoint > 1/3 • < 1/3 for‐profit developers
• 1 year experience serving community
• Development experience/capacity (staff)
• Financial mgt stds (84.21)
L/I advisory process
• Rental projects: tenant participation plan
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Eligible Activities
• Project must involve development activity
• New construction, rehab, acquisition by CHDO
• Rental & homebuyer, not OOR or TBRA
• CHDO has “effective project control”?
• Safe harbor: control development, financing & management decisions • Tax Credit projects: CHDO or subsidiary must be managing general partner [92.300(a)(1)]
• Proposed: owner, developer, sponsor ∆
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Other CHDO Assistance
• In addition to CHDO set‐aside, optional:
• Operating assistance funds • Pre‐development loan (forgivable)
– PJ option; up to 10% of CHDO $
• CHDO proceeds
• CHDO Intermediaries & PJ TA & capacity building resources
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CHDO Guides
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Parting Thoughts
Learn
Website & mailing list
Attend training
Watch for Final Rule
Manage
Underwrite everything
Written agreements everyone
Monitor everybody
Perform
Deadlines
Metrics: completed & occupied units
IDIS
Wrap Up
• Evaluation
• Questions:
– now?
– Ask me any time during the Institute
– Or [email protected]
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