Can a PJ provide CHDO set-aside funds to a CHDO that has the capacity to own and manage rental housing, but does not have the capacity to develop a project?

Date Published: November 2013

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Yes. The 2013 Rule codifies the definition of “owner” of rental housing to clarify that a CHDO may own and manage affordable housing in this way. The change to the definition of CHDO in 92.2 requires the PJ to determine and certify that the CHDO has the capacity to own and manage the rental housing. As an owner, a CHDO without development capacity can acquire an existing property that meets the HOME property standards (see §92.251) and then own and manage that property. Prior to the 2013 amendment, a CHDO could use set-aside funds to purchase a developed property that did not require rehabilitation however, that CHDO was nevertheless required to have capacity to develop affordable housing.

Alternately, in a sponsorship situation, a CHDO (or any other nonprofit) could be the ultimate owner and manager of a property that is developed by another CHDO that serves as “sponsor” of the project. The CHDO sponsor develops the property, and once development is completed, conveys the property to a pre-determined nonprofit entity that will own and manage the property during the affordability period. In this situation, the entity that develops the property as the project sponsor must be a qualified CHDO with development capacity: however, the entity that ultimately owns and manages the property could be any nonprofit, including another CHDO that has the capacity to own and manage the project. Project sponsorship in this form has been a permissible use of CHDO set-aside funds and this has not changed with the 2013 Rule. 

Tags: HOME CHDO - Set-Aside Funds