We have targeted low/mod families to purchase our completely renovated homes; however, we have not been successful in locating eligible families to qualify for a mortgage. What would you recommend we do in order to complete the national objective and close these activities? Should we consider lease purchase, rent, or market all social economic classes for purchase if able to qualify for a mortgage?
Date Published: May 2015
The CDBG regulation at 24 CFR 570.208(a)(3) requires that each of the homes must be occupied by households that earn less than 80 percent of area median income adjusted for household size, unless the housing is located within a designated Neighborhood Revitalization Strategy Area, where pursuant to 24 CFR 570.208(d)(5)(ii), the homes may be considered to be a single structure for purposes of determining whether or not at least 51 percent of the homes are occupied by low- and moderate-income households.
If you are not able to meet a National Objective, you would be required to repay the CDBG investment in the property as it would not have qualified as a CDBG-funded project. Some suggestions to increase the number of households who may qualify for primary financing include:
To increase the number of interested buyers, also consider some of the disposition strategies that have been successful in the Neighborhood Stabilization Program such as partnering with community members and institutions to assist in marketing the homes more broadly and potentially reaching buyers who would not ordinarily learn of these opportunities to buy. Some of these strategies include:
Since your objective is to complete these open activities as soon as possible, conversion to rental is also an option provided that the homes are similarly occupied by low- and moderate-income households and the rents are affordable. Note that a grantee must first adopt and make public its standards for determining "affordable rents" for this purpose. If the city does not wish to be in an ownership and property management role, it may consider transferring ownership and/or management to a qualified non-profit housing organization.
Lease-purchase is also a viable option, but it may take several years before the households are able to accumulate funds for a down-payment and qualify for primary financing. If you decide to convert these homeownership activities to rental or lease-purchase, we encourage you to review your Citizen Participation Plan and to consult with your assigned CPD Representative in the local Field Office before doing so. This will ensure that you comply with the Citizen Participation requirements of 24 CFR Part 91 in the event that you change the nature or beneficiaries of these CDBG activities.