Memo concludes a summary of comments submitted by 84 organizations, agencies, and individuals regarding the proposed rule implementing the National Housing Trust Fund (see Memo, 3/4, 3/11, 3/18).

Allocation Plan. The NHTF statute requires state grantees and any subgrantees to prepare an annual Allocation Plan showing how they will distribute funds based on priority housing needs. The proposed regulation merely requires states to submit a Consolidated Plan (ConPlan), but it would also amend the ConPlan regulations by adding NHTF-specific Allocation Plan requirements to the ConPlan’s Annual Plan rule. NLIHC recommends that the NHTF rule itself (not just a modified, separate ConPlan rule) more directly articulate the requirement that states and any subgrantees must have an NHTF Allocation Plan.

In addition, the statue requires the Allocation Plan to describe the application requirements for recipients and the criteria that will be used to select applications for funding. Allocation Plans must provide priority for funding applications based on six features listed in the statute, including geographic diversity, extent to which extremely low income households benefit, the duration of a unit’s affordability, and merit. The proposed rule offered examples of “merit,” such as housing that serves people with special needs, green building and sustainable development, and housing accessible to transit and employment centers.

Three disability advocacy organizations recommended that HUD add as priority factors activities that address “affirmatively furthering fair housing” and universal design and visitability. One commenter suggested that the rule should require states to demonstrate the extent to which units would meet national standards for healthy, green, and sustainable development. Another urged the regulation to require priority be given to transit access, especially transit connecting people to employment centers.

Property standards. In addition to the energy efficiency standards summarized previously (see Memo, 3/18), the proposed regulations contain many other property standards. Eight entities wrote that the environmental standards are too prescriptive, and that the NHTF rule should instead mirror HOME’s environmental rules consistent with the National Environmental Protection Act. Eight business associations objected to the definition of wetlands, urging use of the current Army Corps of Engineers definition.

Eligible uses. The proposed regulation echoes the HOME program rule, prohibiting the use of additional NHTF resources at a project one year after completion. NLIHC wrote that this may restrict access to critical rehabilitation funds, jeopardizing a project’s long-term viability. NLIHC recommended allowing HUD to waive this limitation in exchange for a proportionate extension of the affordability period. Four comments mirrored this suggestion, but did not mention a waiver; two of them suggested specific time triggers of either 15 or 20 years after completion. Four state entities also want to be able to provide additional NHTF dollars, but did not suggest proportionately extending the affordability period.

Definition of “committed” funds. The statute requires NHTF money to be used or committed within 24 months. The proposed rule generally defines “committed” as having a legally binding written agreement with an eligible recipient for a specific project for which construction or rehabilitation can reasonably be expected to start within 12 months. (For transit oriented development this can stretch to 54 months.)

Four comments from California urged at least 24 months to commit funds. Two of these thought 42 months necessary when providing in-home supportive services for people with disabilities. 

Maximum subsidy. Although the statute is silent, the proposed rule would require grantees to establish maximum NHTF amounts that could be invested per unit, with adjustments for size and geographic location. The limits must be in the ConPlan and adjusted annually. 

Three of five commenters opposed a locally established maximum per unit subsidy, fearing a large figure would lead to political opposition while an artificially small figure would undermine a project’s long term viability. They suggested setting the maximum on a project basis tied to the percentage of total program costs. A fourth comment simply opposed any maximum, while another supported one but thought it should be based on the total development cost.

The proposed regulation would also require grantees to establish subsidy layering guidelines to review all forms of government assistance going into a project in order to ensure that no more government assistance is provided than necessary and to ensure no undue return to owners.   

One letter recommended a schedule of subsidy layering indexed for high cost areas that reflects the combined cost of housing plus transportation. Another preferred applying a subsidy layering standard used by some existing program, while a third counseled against a detailed standard.

Resale and repayment. To ensure continuing affordability when a homeowner unit is sold during the affordability period, the statute requires the NHTF program to have the same resale and recapture provisions as the HOME program. The proposed rule does require grantees to use the HOME resale restrictions, which oblige them to ensure that subsequent buyers are NHTF-eligible and that the housing will remain affordable to a reasonable range of income-eligible households. However, the proposed rule does not have detailed recapture provisions; it merely states that repayment is required if the unit no longer meets affordability requirements during the affordability period.

NLIHC urged the NHTF rule to have recapture provisions as rigorous as those in the HOME program. Two state entities suggested that there be a recapture provision for homeowner activities. For any NHTF-assisted housing, rental or homeowner, two organizations suggested grantees be allowed to repay a prorated amount, not the entire NHTF investment. Another thought that recapture should be waived if rental assistance tied to the unit was no longer available.

Embedding the NHTF rule in the HOME regulations. HUD proposes to insert the core (non-ConPlan) provisions of the NHTF implementation regulations in the existing HOME program rule as subpart N of part 92 in the Code of Federal Regulations (CFR). While NLIHC understands HUD’s reasoning, the NHTF has a different statutory basis, different purposes, and different funding sources from HOME and was created by Congress as a standalone program. Therefore, NHTF implementation regulations should be structured in a manner that protects the integrity of the NHTF as separate program. However, as proposed the regulations will not adequately identify the NHTF as a distinct program. NLIHC observed numerous instances in part 92 at which reference to the NHTF was absent. NLIHC offered simple solutions to correct for the omissions and add clarity that the NHTF is an independent program.

Four letters echoed NLIHC’s comment, while three endorsed having the NHTF rule codified within the HOME regulations.

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.