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CLTs, CHDOs and the HOME Program

CLTs, CHDOs and the HOME Program. Sources of Public Funding. Local Housing Trust Funds State Housing Finance Agencies Tax Increment Financing Low Income Housing Tax Credits Donated Public Land (Inclusionary Housing) CDBG HOME. What is the HOME Program?.

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CLTs, CHDOs and the HOME Program

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  1. CLTs, CHDOs and the HOME Program

  2. Sources of Public Funding • Local Housing Trust Funds • State Housing Finance Agencies • Tax Increment Financing • Low Income Housing Tax Credits • Donated Public Land • (Inclusionary Housing) • CDBG • HOME

  3. What is the HOME Program? • $2 billion per year in HUD budget • “Formula Grants” to states and localities • 4 kinds of Projects • Owner Rehab • Homeownership • Rental Development • Tenant Based Rental Assistance • Operating support and Technical Assistance for CHDOs

  4. Form of Subsidy • Lots of choices • Loans • Interest or no interest • Payments or no payments • No payments for a while, then payments • Forgiven over time • Grants • Interest Subsidies • Equity Investments • Loan Guarantees

  5. Eligible Costs • New Construction • Rehabilitation • Acquisition • Vacant Land • Improved Land • Site Improvements • Demolition • Relocation • Refinancing • Project Soft Costs

  6. Affordability • Homeownership: all units affordable to and occupied by households below 80% of median income • Rental: below 60% of median • If 5 or more units: 20% of units below 50% of median • HUD publishes rent limits

  7. Affordability / Compliance

  8. Resale Provisions (ownership) Insure compliance through resale restrictions or recapture of funds With resale, when home is sold: • House must be affordable to new buyer • New buyer must be low income • New buyer must occupy house as principal residence • Original buyer must receive a “fair return” • Remaining resale restrictions apply to new buyer

  9. All projects • Homeowner rehab • Homebuyer • Rental Dev. • TBRA Max. 10% Admin Max. 5% CHDO op. Min. 15% CHDO set-aside 10% pre-dev. Allocation of Funds • Up to 10% for admin • Up to 5% for CHDO operating • At least 15% for CHDO development project activities • including 10% for predevelopment loans • All the rest for other project activities

  10. The ConsolidatedPlan • The Consolidated Plan • Up to 5 year plan for use of HOME, CDBG, ESG and HOPWA • Describes community and its needs • Describes priorities and resources • Action Plan • Annual update to Con Plan • Application for HOME (and other funds)

  11. What is a CHDO? • A Tax exempt 501(c) 3 organization • Not controlled by local government • Has provision of affordable housing as one of its purposes • Has demonstrated capacity for housing development • Has a history of serving the community • Maintains accountability to low-income people • Low-income representatives, and • Low-income input

  12. Low-Income Representation • 1/3 of governing board must be: • Residents of low-income neighborhoods in the community • Low-income residents of the community or • Elected representatives of low-income neighborhood organizations

  13. Low-Income Input • CHDO must also provide formal process for low-income beneficiaries to provide input • Must be described in writing • Must be in by-laws or resolution • Ways to achieve this: • Special committees or neighborhood advisory councils • Open town meetings

  14. Public-Sector Representatives • No more than 1/3 of board • Public sector representatives include: • Elected officials • Appointed officials • Public employees • Persons appointed by a public official • Low-income public officials count against the 1/3 public sector max

  15. Capacity and Experience • Organization must: • Have at least ONE YEAR of experience serving the community • Demonstrate staff capacity to carry out planned activities • Have financial accountability standards • Capacity must be relevant to type of CHDO activity to be undertaken

  16. CHDO Set-Aside • Eligible uses of CHDO set-aside funds: • Acquisition and/or rehab of rental or homebuyer housing • New construction (rental or homebuyer) • Direct financial assistance to: • buyers of HOME-assisted units • sponsored/developed by CHDO

  17. CHDO Roles • To count towards the CHDO set-aside, CHDO must act as: • Owner • Developer OR • Sponsor

  18. Special Assistance • PJs may provide special forms of assistance to CHDOs • Project pre-development loans • Operating assistance • Use of HOME project proceeds • Capacity-building assistance

  19. Types of Pre-Development Loans • Technical assistance and site control loans • Used to establish preliminary feasibility prior to site control • Do not require environmental clearance • Seed money loans • Cover pre-construction costs • Must have site control

  20. Restrictions on Pre-Development Loans • Funds must be provided as a loan • CHDO must repay from construction loan proceeds or other income • PJ may waive repayment if: • There are impediments to project development beyond the CHDO’s control • Project deemed infeasible

  21. CHDO Operating Assistance • Up to 5% of PJ's HOME allocation may be used for CHDO operating • Eligible uses: • Organizational support • Housing education • Admin expenses • Operating expenses

  22. Limitations on Operating Assistance • Assistance may NOT exceed: • $50,000 each fiscal year OR • 50% of CHDO’s total annual operating expenses for that year WHICHEVER IS GREATER!

  23. CLTs and the HOME Program • Qualifying as a CHDO • Advantages of being a CLT • Special Issues for CLTs

  24. Federal CLT Definition • Acquires Land to be held in perpetuity with long term ground leases • Transfers ownership to improvements • Retains an option to purchase at affordable price • Membership open to residents of a specified geographic area • 3 part board structure

  25. Advantages of Being a CLT • There aren’t many! • CLT not required to meet the capacity and history of local service tests – Become a CHDO faster • Might be able to acquire projects that exceed 95% of median cost?

  26. Qualifying as a CHDO • CLTs generally qualify as CHDOs • CLT not required to meet the capacity and history of local service tests • CLT must play active role in development (“own, develop or sponsor”) to receive CHDO set aside funds • 3 part board structure may not guarantee 1/3 of board meet the CHDO standard • Model Bylaws provide “overlay” board requirement

  27. CHDO “Overlay” • Model Bylaws: Article 3 section 6 In their actions regarding nomination and election the Board and Membership shall insure that at least 1/3 of the board is maintained for “residents of low-income neighborhoods, other low-income community residents, or elected representatives of low-income neighborhood organizations.”

  28. Issues for CLTs using HOME $ • Conflict of interest due to leaseholders on board • 92.356 (f)(1) exempts homeowners • Option to request exemption • Fair return • Initial investment plus value of capital improvements • Land Banking not allowed • “feasible and immediate plans for development” • Consolidated Plan recognition of CLT model • Resale vs Recapture

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