How should States establish maximum per-unit development subsidy amounts for Housing Trust Fund (HTF) projects?

Date Published: May 2016

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Pursuant to 24 CFR 93.300(a), all HTF grantees must establish maximum limitations on the total amount of HTF funds that the grantee may invest per-unit for development of non-luxury housing. The limits must be “reasonable” and based on actual costs of developing non-luxury housing in any given geographical area. Each grantee must submit maximum per-unit development subsidy amounts and accompanying justification with its HTF Allocation Plan on an annual basis.

There are a number of factors grantees should consider when developing maximum per-unit development subsidy amounts.

First, maximum per-unit development subsidy amounts must be adjusted for number of bedrooms and for the geographic location of the project. Because actual construction and land costs vary by areas, Grantees will establish multiple limits for the State. If a Grantee determines that a single limit is appropriate for the entire State, it must submit documentation supporting its determination that there is not a significant variation in construction or land costs across the State.

Second, maximum per-unit development subsidy amounts must be based upon actual total development costs, including costs that are not eligible to be paid with HTF and costs funded from sources other than HTF. The subsidy limits should take into account the cost of meeting applicable codes and standards for rehabilitation or new construction in the area.

Finally, maximum per-unit development subsidy amounts must reflect the costs associated with meeting all applicable HTF program requirements and other federal requirements. Specifically, the limits should account for all costs associated with producing housing units for extremely low-income families and costs associated with meeting priority housing needs of the State (e.g., green building standards, accessibility for special needs populations, etc.).

If a grantee chooses to provide HTF funds as operating cost assistance or operating cost assistance reserves to an HTF-assisted rental project, that assistance does not count towards the maximum per-unit development subsidy amount. However, the operating cost subsidies are still capped at 30 percent of each annual grant.

Grantees may choose to establish new maximum per-unit development subsidy amounts for projects funded with HTF, or they may choose to use existing limits developed for other federal programs such as the Low Income Housing Tax Credit (LIHTC) per unit cost limits, HOME’s maximum per-unit subsidy amounts, and/or Public Housing Development Cost Limits (TDCs). As part of its HTF Allocation Plan, each grantee must submit a description of how the HTF maximum per-unit development subsidy amounts were established or a description of how existing limits developed for another program and being adopted for HTF meet the HTF requirements. Also, grantees must maintain program files for each annual HTF grant that include documentation of how the limits were established, and reflect actual costs that are reasonable for developing non-luxury housing.

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