Changes to the HOME program regulations were published in final form on July 24. Proposed changes were published on December 16, 2011 (see Memo, 12/16/11). NLIHC submitted a number of comments (see Memo, 2/17/12). None of the differences between the proposed and final rule are substantial; most are technical. A selection of provisions is presented here.
Community Housing Development Organizations (CHDOs)
The proposed rule would have prohibited CHDO staff from occupying office space owned by a government entity or a for-profit parent organization, in order to prevent undue influence. However, HUD removed this prohibition in response to advocates’ comments that many CHDOs, particularly in rural areas, lack adequate resources to rent separate space.
The proposed rule would require CHDOs to have a “demonstrated capacity” by having paid staff with housing development experience. Demonstrated capacity cannot be met through volunteers or staff donated by another organization. Despite advocates’ comments, this provision remains in the final rule.
The preamble to the final rule provides additional guidance not found in the final text of the regulation:
- Paid staff do not have to be full time, but their hours must be appropriate for their role.
- Demonstrated capacity may be met through the use of independent contractors who have experience.
- Volunteers, board members, and donated staff may help the CHDO, but they cannot count toward the requirement of demonstrated capacity.
The final rule, however, is changed to allow new CHDOs to use consultants to demonstrate capacity and to train staff during the first year of operation.
The final rule will allow CHDOs that do not have development capacity to be “owners” of rental housing they do not develop if they have demonstrated capacity to own and operate rental housing.
- Such a CHDO would be required to own the project throughout the affordability period and during development if rehabilitation or construction is entailed.
- For property newly built or rehabilitated, the CHDO would have to hire a project manager or have a contract with a development contractor to oversee the development.
The final rule adds that CHDO ownership may be met through a long-term ground lease, a provision intended to accommodate land trusts.
The proposed rule would require manufactured homes to be on permanent foundations. In response to concerns raised in comments about potential difficulties securing existing manufactured housing to permanent foundations, the final rule clarifies that foundation systems for existing manufactured homes rehabilitated with HOME funds must be inspected and meet state or local codes, or in the absence of state or local codes, HUD’s Model Manufactured Home Installation Standards regulations.
The final rule clarifies the definition of homeownership by explicitly including manufactured housing with a ground lease that extends for a period at least equal to the affordability period.
The Definition of “Homeownership”
The final rule clarifies the definition of homeownership by also explicitly including Community Land Trusts with a ground lease of 50 years or more.
Eligible Project Cost
The final rule adds a provision allowing jurisdictions’ costs for unit inspection and income determination for tenant-based rental assistance (TBRA) to be eligible project-related soft costs. The existing rule only allows such costs to be eligible as general management and oversight, a category capped at 10% of a jurisdiction’s HOME allocation. Jurisdictions commented that the existing rule was a disincentive to using HOME for TBRA.
Conversion of Unsold Homeownership Units to Rental Housing
The proposed rule would require converting homebuyer housing to rental housing if not sold within six months after completion of construction or rehabilitation. Many commenters, including NLIHC, stated that six months was unrelated to market conditions and that a sale might legitimately require more time. In a partial accommodation to comments, the final rule extends the timeframe to nine months.
NLIHC endorsed most of the provisions in the proposed rule. However, NLIHC raised concerns about 15 provisions. Only three were favorably addressed in the final rule. Examples of NLIHC comments not reflected in the final rule include:
HUD proposed reducing on-site inspections to every three years, regardless of the number of units in a development. In addition, if deficiencies are detected during an inspection, the proposed rule allowed a jurisdiction to postpone re-inspection for up to one year. NLIHC objected to both provisions, stating that too many deficiencies can accumulate during a three-year time-span, and that re-inspections should take place within three to six months, depending on the type of deficiency. The preamble to the final rule states that the three-year inspection cycle comports with that of the Low Income Housing Tax Credit program.
Preferences For Police, Teachers, and Artists
The final rule kept a proposed provision specifically identifying police, firefighters, teachers, or artists as examples of occupations for which jurisdictions may give preference to, as long as they meet the HOME income limits. NLIHC and others opposed highlighting specific professions, urging HOME funds to be targeted to those with the greatest needs, extremely low income households.
NLIHC opposed proposed provisions allowing:
- Use of HOME Tenant-Based Rental Assistance (TBRA) to create and administer a self-sufficiency program requiring a family to participate as a condition of selection for TBRA.
- A tenant’s failure to follow a transitional housing services plan to be the basis for terminating a tenancy or refusing to renew a lease.
Such provisions unduly jeopardize housing stability and are contrary to optimal practices for addressing homelessness. In the preamble to the final rule, HUD indicated that it understands these concerns, but did not delete the provisions because self-sufficiency programs and transitional housing programs are not intended to be a source of permanent housing assistance.
NLIHC will provide a more comprehensive summary of the differences between the proposed and final rule in next week’s Memo to Members.
View the final HOME regulations at: http://1.usa.gov/12jr8yk
In addition, HUD has various summaries of the final rule at the OneCPD Mailing site: http://1.usa.gov/12jr8yk
View NLIHC’s HOME program webpage with a summary of key provisions of the proposed rule at: http://nlihc.org/issues/other/HOME
View NLIHC’s formal comments regarding the proposed rule at: http://bit.ly/13nD4dj