CLTs, CHDOs and the HOME Program

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
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 Consolidated Plan

• 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 CHDOs 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 CHDOs 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 arent 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