Last week, Memo to Members summarized comments submitted by 84 organizations, agencies, and individuals regarding the proposed rule implementing the National Housing Trust Fund (NHTF), with a focus on the top four concerns of the National Housing Trust Fund Campaign (see Memo, 3/4). This week, Memo summarizes comments pertaining to five other concerns expressed by the NHTF Campaign. Additional comments will be presented in a subsequent issue of Memo to Members.
Rural areas. The NHTF statute requires each state to prepare an Allocation Plan annually, showing how it will distribute the funds based on priority housing needs. In addition, the statute requires the Allocation Plan to describe the state’s process for selecting applications for NHTF money; the process must be based on six features listed in the statute, including ‘geographic diversity.’
In a November 2008 letter to HUD, the NHTF Campaign requested that HUD require states to allocate NHTF dollars based on the relative need in rural areas and urban areas, but this attention to rural needs is not explicitly included in the proposed rule.
One portion of the proposed rule would require states to distribute NHTF resources throughout the state according to its assessment of priority housing needs as identified in the Consolidated Plan, while another portion echoes the statute’s requirement that geographic diversity be consider as one of six priorities when awarding NHTF money to applicants.
Of the 13 comments regarding this topic, 11 urged the final rule to require allocation based on the relative need in rural and urban areas. The Housing Assistance Council refined this concept by suggesting the rule require NHTF money be distributed according to need, with need measured on a proportionate basis, rather than on an absolute basis. For example, if NHTF is used in an urban neighborhood where 5% of the extremely low income (ELI) renters (those with incomes at or below 30% of the area median income or AMI) have worst case housing needs, NHTF dollars should also be available to a rural county where 5% of the ELI renters also have worst case needs, even though the rural 5% might be relatively few households.
Two recommended that HUD establish and use the U.S. Department of Agriculture’s definition of ‘rural.’
Transitional housing. Although the statute is silent, the proposed rule would allow NHTF dollars to be used for transitional housing.
Nine of ten letters agreed with the NHTF Campaign that NHTF resources should not be used for transitional housing. A transitional housing organization endorsed the proposed regulation.
Public housing. The statute defines a ‘recipient’ as an organization, agency, or other entity (including nonprofits and for-profits) that receives NHTF dollars from a grantee to carry out a NHTF-assisted project as an owner or developer.
The NHTF Campaign, in its November 2008 letter to HUD, requested that public housing agencies (PHAs) be explicitly listed as potential recipients. The proposed rule does not.
Twelve of 16 responses urged that PHAs be explicitly listed as eligible recipients, and the other four implicitly agreed.
The proposed regulation also prohibits use of NHTF money for the construction or rehabilitation of public housing. The NHTF Campaign and five others endorsed this provision because use of NHTF dollars for public housing would not increase housing opportunities for ELI households, and could result in an overall loss of resources for affordable housing if Congress chose to reduce appropriations for public housing due to the availability of the NHTF. Six entities, primarily associated with public housing, objected to this prohibition. The rule would allow a project to contain both NHTF-assisted units and public housing units.
Subgrantees. The statute is silent regarding the distribution of NHTF to ‘subgrantees.’
The proposed regulation would give states the option of passing funds to subgrantees, which in turn would provide funds to ‘recipients’ to carry out projects. A subgrantee is defined as a unit of local government or state agency selected by the state to administer all or a portion of its NHTF program. Any subgrantee must have a ConPlan that includes a NHTF Allocation Plan that is consistent with the state’s NHTF requirements. Subgrantees must select projects according to their NHTF Allocation Plan.
All 13 comments supported the concept of subgrantees. Six, led by the NHTF Campaign, recommended that a state’s Allocation Plan be required to explain any decisions to use subgrantees, the means for determining which subgrantees to use, and how NHTF money will be distributed among subgrantees. Two respondents suggested expanding the roster of potential subgrantees to include nonprofit organizations and housing and redevelopment authorities, relying on the state’s ConPlan to adequately address local concerns.
Transit-oriented development. Although the statute makes no reference to transit-oriented development (TOD), the proposed regulation would allow NHTF dollars to be used by a local government to purchase land to be used for NHTF-assisted units as part of a TOD project. The proposed rule requires title to the land to be transferred to the local government within six months and then be held by it. Within 36 months from the date of transfer, the local government must commit additional NHTF money or other resources to a specific housing new construction or rehabilitation project that can reasonably be expected to start within 12 months. If there is no commitment to a specific NHTF project within 36 months, the local government must repay the NHTF amount or the current value of the property, whichever is greater.
All 16 comments supported the use of NHTF money with TOD. However, six agreed with the NHTF Campaign’s concern that, as drafted, NHTF resources could be tied up for 4.5 years without providing one ELI home. Therefore, the Campaign and others recommended reducing the 36-month holding period. By contrast, one letter preferred extending the time for committing the funds to 48 months, while another suggested stretching it to 60 months. One thought that requiring a local government to hold the property was too restrictive.
The NHTF Campaign and others also urged the final regulations to provide safeguards to ensure that affordable ELI homes are created in a timely manner. One letter, on the other hand, objected to the definition of TOD requiring that mixed-income or mixed-use projects be involved
The Center for Transit Oriented Development provided a number of ways to avoid funds being tied up without producing ELI units, including:
· Allowing property acquisition only if it can be shown that the local government has an adopted plan (such as a station area plan) that identifies the parcel as an important component.
· Requiring the local government or title holder to issue a request for proposals indicating that the property will be developed within a TOD for ELI and VLI households.
· Prohibiting grantees from using NHTF dollars to serially purchase land, hold it, convert it to non-ELI housing, and then return the funds to repeat the process.
The proposed rule cites TOD as one among other considerations that a grantee could use to judge the ‘merits’ of an application for NHTF dollars. Merit is one of six priority factors that must be in an Allocation Plan to guide how NHTF dollars will be awarded to applicants. To the extent a state gives TOD preference, one respondent thought that equal priority should be given to the state’s rural housing needs. Another letter suggested that a minimum percentage of a state’s NHTF allocation ought to be devoted to TOD. Several comments misunderstood this reference to TOD to mean that it is a required preference, and they objected to the mistaken preference.
The comments submitted by the National Housing Trust Fund Campaign are available at http://www.nlihc.org/doc/NHTF_Comments_NHTF_Regs_12_28.pdf
The comments submitted by NLIHC are available at http://www.nlihc.org/doc/NLIHC_Comments_NHTF_Proposed_Rule.pdf
Copies of all comments are available at www.regulations.gov. The docket number is HUD-2010-0101.