The National Housing Trust Fund Proposed Regulations

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The National Housing Trust Fund Proposed
Regulations

• Housing Trust Fund Project
• Center for Community Change
• 661-245-0318
• mbrooks_at_communitychange.org
• www.communitychange.org/our-projects/htf

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The National Housing Trust Fund

• The National Housing Trust Fund (NHTFund) was
  created as part of the Housing and Economic
  Recovery Act of 2008.
• This is the first new federal housing production
  program since the HOME program was created in
  1990.
• This is the first new production program
  specifically targeted to extremely low income
  households since the Section 8 program was
  created in 1974.

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Funding for the NHTFund

• The Act provides for the NHTFund to be funded
  with proceeds from Fannie Mae and Freddie
  Macwhich were subsequently placed into
  conservatorship.
• A campaign is currently underway to capitalize
  the NHTFund with 1 billion and 65 million for
  accompanying project-based vouchers.
• On May 28, the U.S. House of Representatives
  passed legislation that includes the requested
  1.065 billion.
• The 1.065 billion request is included in the
  tax extender bill before the Senate and, if
  passed, will then return to the House for
  approval.

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NHTFund Implementation

• The National Housing Trust Fund is administered
  by the US Department of HUD.
• Although not funded, HUD is proceeding to ensure
  the program is ready for implementation.
• HUD issued a proposed rule on December 4, 2009
  establishing the formula for distribution of NHTF
  dollars.
• The comment period for these rules closed on
  February 2, 2010.
• Estimated amounts for each state can be found on
  the NHTF sections of our website, and on the
  NLIHC website.

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NHTFund Program Rules

• On October 29, 2010, HUD issued proposed rules to
  define and implement the NHTFund.
• Comments are due by December 28, 2010.
• HUD has proposed to codify the HTF regulations
  within the HOME regulations in a new subpart N to
  24CFR part 92 to simplify and streamline program
  requirements.

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The Structure of the NHTFund

• The NHTFund operates as a block grant program,
  with broad flexibility provided to states to
  determine how best to spend the funds within a
  core set of federal requirements.
• States must elect to participate.
• The Governor of a state (or territory and the
  Mayor of DC) is to designate an entity to receive
  NHTF funds, the grantee, including
• The state housing authority or state housing
  finance agency
• Housing or community development agencies
• Tribally designated housing entities or
• Any other qualified state entity.
• The state may also identify sub-grantees which
  must be a state agency or local government.
  Grantees must annually review the performance of
  sub-grantees.
• Funds must be used or committed within 2 years of
  the formula allocation.
• For Transit-Oriented Design projects, additional
  funds must be committed to an affordable housing
  project within 36 months from the acquisition of
  property.

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Distribution of National Housing Trust Fund
Dollars

• Funds are allocated to states to distribute.
• The proposed rule would amend the regulations
  governing Consolidated Plans by adding specific
  Allocation Plan requirements to the rules
  relating to Annual, Strategic, and Action Plans
  that are specific to the NHTFund.
• Any sub-grantee must also have an approved
  ConPlan and must distribute funds according to an
  assessment of priority housing needs.
• The Allocation Plan must detail
• How NHTFund dollars will be distributed to meet
  priority housing needs
• Application requirements
• Criteria for awarding applications and
• The maximum per unit subsidy limit.

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• Priority factors for distributing the funds must
  include
• Geographic diversity
• Obligating funds in a timely manner
• For rental housing, the extent to which rents are
  affordable to ELI families
• For rental projects, the duration of
  affordability
• Merits of meeting priority housing needs
• Extent to which the applicant makes use of
  non-federal funding sources.
• The Action Plan must require applicants to
  describe the eligible activities to be undertaken
  with NHTF dollars and provide for performance
  goals and benchmarks.
• Grantees must include a projection of the number
  of units they expect to support.
• The regulations direct states to follow the
  citizen participation requirements in the Con
  Plan rules.

9
Use of Funds

• Funds must be used for the production,
  preservation, rehabilitation of affordable rental
  housing and affordable housing for first-time
  homebuyers, including
• Acquisition
• Relocation
• Construction, rehabilitation and demolition
• Onsite community facilities, utility connections,
  and improvements
• Refinancing of debt on rental rehab projects
• Related soft costs (including those incurred
  before NHTFund dollars are committed to the
  project)
• Operating assistance (not to exceed 20 of the
  annual grant)
• NHTF-assisted housing must be permanent or
  transitional housing.

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• Acquisition of vacant land or demolition is
  eligible only with respect to a particular
  housing project intended to provide affordable
  housing.
• Local government may purchase improved or
  unimproved land for use for NHTF-assisted units
  to be part of a transit-oriented development.
• Funds may be used to purchase and/or rehabilitate
  a manufactured housing unit, or purchase the land
  upon which the housing is located.
• Funds may be used to assist one or more housing
  units in a multi-unit project, but only to assist
  the NHTF-eligible costs.

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Operating Costs

• Operating costs include insurance, utilities,
  taxes, maintenance or a reserve fund.
• Operating assistance is the difference between a
  per unit share of operating costs and the monthly
  rent.
• Operating cost assistance may be provided to a
  project for up to 2 years from one NHTFund grant
  and may be renewed over the affordability term.
• An operating cost assistance reserve may be
  established for what is needed over a 5 year
  period.

12
Eligible Recipients

• Nonprofit and for-profit organizations and
  agencies are eligible to receive funds from
  grantees.
• To be eligible to receive NHTFund funds, a
  recipient must also
• Assure that it will comply with program
  requirements during the entire affordability
  period
• Demonstrate the ability and financial capacity to
  carry out the project
• Demonstrate its familiarity with requirements of
  other federal, state or local programs that are
  accessed for assistance and
• Have the experience and capacity to
• Own, construct, or rehabilitate and manage and
  operate the development,
• Design, construct or rehabilitate and market
  housing for homeownership,
• Provide forms of assistance, including down
  payments, closing costs, or interest rate
  buy-downs for purchasers.

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Restrictions on Funds

• Funds must be used for the production,
  preservation, rehabilitation of affordable rental
  housing and affordable housing for first-time
  homebuyers.
• Not more than 10 of the annual grant can be used
  for homeownership activities.
• Not more than 10 of the annual allocation (plus
  up to 10 of the income generated by the program)
  may be used by the State administering agency for
  administrative costs, including counseling.
• Not more than 20 may be used for operating cost
  assistance of NHTF-assisted rental housing.
• NHTF-assisted housing must be permanent or
  transitional housing.

• NHTF funds may not be used for public housing.

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Income Targeting

• At least 75 of the grant amount provided to
  rental housing must be used to benefit ELI
  families (defined as 30 of the area median
  income) or households with incomes below the
  federal poverty line.
• The 75 requirement will also apply to
  homeownership projects.
• For the first year of NHTFund implementation,
  100 of NHTFund assisted units both rental and
  homeownership -- are to benefit ELI families.

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Permitted Rent Levels

• Maximum rents (including utilities) are set at
  the greater of 30 of area median income or 30
  of the poverty line (as determined by HUD
  annually).
• The Brooke amendment does not apply (i.e.
  providing that a household pay no more than 30
  of its income for housing costs).
• However, if the unit receives a federal or state
  project-based rental subsidy, the maximum rent is
  the rent allowable under the program.
• Grantees must annually review and approve rents
  proposed by owners of the units.

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Homeowner Restrictions

• Homes must be purchased by income-eligible first
  time homebuyers who have received homeownership
  counseling (cannot have owned a home within the
  last 3 years and must maintain the home as
  his/her primary residence).
• Grantees must define resale restrictions (HOME or
  newly-adopted) that provide a fair return in the
  ConPlan.
• A grantee may use the right of first refusal or
  other purchase options to maintain affordability.
• The total amount of assistance may not exceed the
  per unit subsidy (although some costs may be
  charged to administrative costs).

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Affordability Periods

• The minimum term of affordability for both rental
  and homeownership units is 30 years.
• Longer affordability periods may be established
  by grantees.
• Affordability must be imposed by deed
  restriction, covenants or other use restrictions,
  and recorded.
• A grantee cannot provide NHTFund funds to a
  project that has already received assistance
  during the affordability term after one year from
  the time the project is completed. The cumulative
  amount provided cannot exceed the maximum subsidy
  amount.

18
Fixed and Floating Units

• The rule establishes a concept of fixed and
  floating NHTFund units. At the time the funds
  are committed to a project, the written agreement
  between the grantee and recipient must define how
  units are designated (and units must be so
  identified by the time the project is completed)
• Fixed units must remain the same throughout the
  affordability period.
• Floating units can be changed to ensure that the
  total number of affordable units remains the same
  and any substituted units must be comparable.

19
Tenant Protections

• NHTFund assistance must comply with laws relating
  to tenant protections and tenant rights to
  participate in decision making regarding their
  homes.
• The rule enumerates an extensive list of tenant
  protections, including (among others)
• A lease that does not include delineated
  prohibited items,
• Right to terminate with good cause,
• Articulated policy of tenant selection (allowing,
  if practical for preferences for those with
  disabilities), and
• Prohibitions on mandatory supportive services and
  discrimination based on source of income.
• The rules make applicable fair housing laws and
  laws regarding accessibility in federal assisted
  housing, among others.

20
Property Standards

• The rules require that assisted projects
  (including new construction, rehabilitation, gut
  rehabilitation and manufactured housing) meet
  applicable standards set forth in state and local
  codes, ordinances, and zoning requirements.
• Requirements are also established for
  NHTF-assisted units to comply with specified
  standards related to lead-based paint,
  accessibility, fair housing, energy and water
  efficiency, disaster mitigation, and
  environmental review, among others.

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Administrative Costs

• Reasonable administrative and planning costs of
  the NHTF program.
• General management, oversight, and coordination.
• Staff and overhead.
• Public information.
• Fair housing.
• Indirect costs.
• Preparation of the consolidated plan.
• Other Federal requirements.

Any administrative costs permitted by
sub-grantees count toward the state cap.
22
Reporting Requirements

• The NHTFund consists of the HTF Treasury account
  established for each grantee and a HTFund local
  account which includes deposits, program income,
  and any repayments. The local account must be
  interest-bearing.
• Grantees must report on the receipt and use of
  all funds in HUDs computerized disbursement and
  information system.
• Program income must be treated as HTF funds.
  Funds must be repaid for any housing that does
  not meet the affordability requirements.
• Grantees are responsible for managing the
  program, ensuring funds are used in accordance
  with all program requirements and written
  agreements, and taking appropriate action when
  performance problems arise.

23
Performance Reports

• Each grantee must develop and maintain a system
  to track the use of funds.
• Each grantee must submit annual performance and
  management reports. These reports must describe
• The programs accomplishments
• The extent to which the grantee complied with its
  allocation plan and requirements.
• HUD is to make these reports publicly available.

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The NHTFund and State/Local Housing Trust Funds

• There is no requirement or suggestion that a
  relationship should exist between the NHTFund and
  other htfunds.
• The designation of the state grantee is likely to
  be influenced by the NHTFund being inserted in
  the HOME regulations.
• The allowance for sub-grantees could support
  matching funds for local housing trust funds (if
  jurisdictions have an approved ConPlan).
• The emphasis on making use of non-federal sources
  of funds and the challenge of meeting the ELI
  goals could support an emphasis on combining an
  effective existing housing trust fund to
  supplement the NHTFund.
• State advocates should monitor and expose any
  supplantation of federal NHTFund funds for
  existing state housing trust fund revenues.

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Five Issues Critical to the HTFProject

• Viability of income targeting restrictions
• Restrictions on operating costs
• Rent levels
• Length of affordability
• Subgrantees

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Our Next Steps

• Send questions to Michael Anderson of the HTFund
  Project/CCC at manderson_at_communitychange.org --
  we will post a running QA on our website
• Submit any insight or perspective youd like to
  share to inform our comments to Michael.
• Depending on how much interest and feedback we
  receive on the issues, we will host an open
  discussion of key elements on a second call
• We are developing a list of questions to clarify
  with HUD as part of its webinar in early
  December, and are happy to include questions you
  identify
• We will post and send out a draft of our comments
  by Tuesday, Dec 7th feel free to use them as a
  model for your own comments.
• We will accept institutional/organizational
  sign-ons to our comments through Wednesday, Dec
  15th. Endorsements should be sent to
  manderson_at_communitychange.org

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The Housing Trust Fund Project

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