Section by Section Summary of the 2013 HOME Final Rule: Subpart E - Program Requirements

§92.201 Distribution of Assistance

The pre-2013 Rule codifies the HOME statutory requirement that prohibits a local PJ from investing HOME funds in projects outside its boundaries, except for projects located in a contiguous jurisdiction that are joint projects that serve the residents of both jurisdictions. Tahe 2013 Rule amends §92.201(a)(2) to provide guidance about what constitutes a “joint project.” It states that a joint project is one in which both jurisdictions make a financial contribution to the project. The contribution can be in the form of a grant, loan, or relief of a significant tax or fee (such as waiver of impact fees, property taxes, or other taxes or fees customarily imposed on projects within the jurisdiction) and must contribute to the feasibility of the project.

The provisions of §92.201(b), that provide guidance about how and where State PJs must distribute HOME funds, remain unchanged.

Suggested Next Steps for PJs

  1. When undertaking a joint project, be sure that both jurisdictions make a financial contribution in the form of a grant, loan, and relief of significant tax or fee.

  2. Be sure that the project underwriting reflects the financial contributions of both jurisdictions.

  3. Document the project files to demonstrate compliance with this requirement.

Effective Date

August 23, 2013

§92.202 Site and Neighborhood Standards

§92.202 is amended to update the regulatory citation to the site and neighborhoods regulations, which were moved to 24 CFR 983.57(e)(2) and (3).

There is no substantive change to the pre-2013 Rule related to site and neighborhood standards.  PJs continue to be required to (1) provide housing that furthers compliance with civil rights laws, and that promotes greater choice of housing opportunities; and (2) determine that proposed sites for new construction rental housing meet the cited site and neighborhood standards.

Suggested Next Steps for PJs

  1. For projects involving new construction of rental housing, be sure that proposed project sites meet the site and neighborhood standards prior to making a funding commitment.

Effective Date

August 23, 2013

§92.203 Income Determinations

The 2013 Rule imposes a number of changes to this section, related to calculating the annual income of a family or household in order to determine eligibility for HOME assistance.

Source Documentation for Income Determinations

The 2013 Rule amends §92.203(a)(1)(i) and (a)(2) to require PJs to examine at least two months of source documentation (e.g., wage statements, interest statements, or unemployment compensation documentation) when determining household income for all potential HOME beneficiaries. This change establishes a minimum standard for all PJs. The remaining guidance in §92.203(a) related to how and when to determine household income remains unchanged.

Elimination of Census Long Form as Definition of Income

The 2013 Rule amends §92.203(b)(2) to eliminate the pre-2013 Rule option available to PJs to use the definition of “annual income” that is based on income reported on the U.S. Census Long Form. PJs continue to have the option to use either the income definition in HUD’s regulations at 24 CFR part 5 (often referred to as “the Section 8 definition”) or the definition of adjusted gross income of the IRS, both of which are broadly used in other housing and supportive service programs.

Single Income Definition for Each HOME-Funded Program or Rental Project

§92.203(c) imposes a new requirement that PJs select a single definition of income to use for each HOME-assisted program it administers (e.g., downpayment or homeowner rehabilitation assistance), and for each of its rental housing projects, to ensure equitable treatment for all applicants. Determining which definition to use on a project-by-project basis in rental housing (rather than program-wide) enables the PJ to coordinate the requirements of HOME with other funding sources for each project, while ensuring that all applicants in the project are treated equitably.

Note, although not specifically addressed in the regulatory amendment, HUD considers programs administered by State recipients or subrecipients as distinct programs; they do not each need to use the same definition of income.

Counting All Household Members’ Income

§92.203(d)(1) is amended to clarify that, when determining the annual income of a household to establish eligibility for HOME assistance, the PJ must count the income of all persons in the household, including nonrelated individuals. This clarification is intended to address situations where not all household members are related, or where several adult members will reside in a HOME-assisted unit. It is not intended to supersede the income determination requirements of the definition the PJ has adopted. For instance, if the PJ adopts the Part 5 definition of income, the income of a minor child is not included in the determination of income, even though the minor will reside in the housing unit.

The remaining requirements of §92.203(d) remain unchanged, including requirements related to the frequency of using source documentation, acceptable types of source documents, and use of exclusions to calculate adjusted income.

Suggested Next Steps for PJs  

  1. Revise policies related to making income determinations for all programs (rental and homeownership development, homeowner rehabilitation, tenant-based rental assistance, and downpayment assistance) to reflect the clarifications and changes in the income determination requirements.

  2. If the PJ uses the definition of income from the U.S. Census Long Form for any of its programs, discontinue its use and adopt a new income definition (either the Section 8 or the IRS definition for adjusted gross income).

  3. Notify/train staff and program partners (subrecipients, State recipients, owners, developers, and sponsors) of the changes, particularly the staff responsible for making income determinations.

  4. Look to the OneCPD Resource Exchange for updates to the online Income Calculator and the guidebook, Technical Guide for Determining Income and Allowances for the HOME Program. These updates will be announced through the HOME Mailing List.

  5. Review and revise written guidance and related checklists for staff that makes income determinations to ensure that:

    1. All applicants provide at least two months of source documentation for verification of income.

    2. The income of all household members is included in the income determination.

    3. For each program except for rental housing, determine that the same definition of income is used when calculating a household’s income eligibility. Direct each State recipient, subrecipient, developer, owner, sponsor to do the same.

  6. Determine what definition of income should be used for each rental project and instruct each developer, owner, and sponsor that the same definition of income must be used within a project.

  7. Revise the written agreement template for use on new projects to reflect these new requirements.

Effective Date

August 23, 2013

§92.205 Eligible Activities: General

Several provisions of §92.205 have been amended.

Housing Must Meet Property Standards to Be Eligible

The 2013 Rule adds language to paragraph §92.205(a)(1) to clarify that activities and costs are eligible for HOME funding only if the housing meets the property standards in §92.251 upon project completion.

Suggested Next Steps for PJs  

  1. See §92.251 for required standards.

Effective Date

August 23, 2013

Acquisition of Vacant Land or Demolition Are Not Eligible Stand-Alone Activities

§92.205(a)(2) clarifies current policy to specify that the acquisition of vacant land or demolition with HOME funds may be undertaken only for an particular affordable housing project on which construction will begin within 12 months, as established in paragraph (2) of the definition of commitment in §92.2. This amendment clarifies and emphasizes the pre-2013 HOME requirement that HOME funds may not be used to acquire property or demolish structures on land for which there is not an immediate, planned HOME-eligible use.

Suggested Next Steps for PJs

  1. In the project review and selection process, for any proposed project that involves acquisition of vacant land or demolition activities, evaluate whether it is reasonable to expect that construction will begin within 12 months of project commitment, before committing HOME funds.

  2. Track the construction start of projects that involve acquisition of vacant land or demolition.

Effective Date

August 23, 2013

Using Alternative Forms of Assistance

A PJ is required to get HUD approval before using HOME funds in any form of assistance that is not specified in the regulation. §92.205(b)(1) is revised to state that HUD must approve alternative forms of investment in writing. Under the pre-2013 Rule, a PJ could seek HUD approval by providing public notice in its consolidated plan and when HUD approved the consolidated plan, the alternative form of assistance was approved. With this change, the PJ must seek and receive written approval from HUD independent of its consolidated plan.

Note, the following forms of assistance are expressly permitted in the HOME Rule (this list remains unchanged from the pre-2013 Rule):

  • Equity investments

  • Interest-bearing loans or advances

  • Non-interest-bearing loans or advances

  • Interest subsidies consistent with the purposes of HOME

  • Deferred payment loans

  • Grants

Suggested Next Steps for PJs

  1. For any new form of assistance the PJ will use that is not one of the six identified in the 2013 Rule (listed above), seek written HUD approval.

  2. If currently using a form of assistance not identified in the HOME Rule, verify that the PJ has obtained written approval from HUD. For existing projects, this approval can be in the form of a HUD-approved consolidated plan.

    1. If HUD has not approved this alternative form of assistance, seek approval as soon as possible.

Effective Date

August 23, 2013

On-Site Manager’s Unit

A new paragraph, at §92.205(d)(2), has been added to make clear that, for multi-unit rental projects, the number of units designated as HOME-assisted may only be reduced for troubled projects in accordance with §92.210, with only one exception. In projects with 100 percent HOME-assisted units, if a PJ determines there is a need for an on-site manager to contribute to the stability of the property, one HOME-assisted unit may be converted to an on-site manager’s (non-assisted) unit. The PJ must be certain that, with this decrease in HOME-assisted units, the costs of the project do not exceed either the actual costs of the HOME-assisted units or the HOME maximum subsidy limit that was in effect at the time HOME funds were committed to the project.

Suggested Next Steps for PJs

  1. Before approving any decrease in the number of HOME-assisted units:

    1. Determine that the project has been identified as having marketing, management, or financial difficulties during ongoing monitoring, and consider whether an on-site manager could provide stability to the property.

    2. Determine whether this change will contribute to the stability of the property.

    3. Re-evaluate the initial cost allocation. Look for updated guidance from HUD on the issue of cost allocation.

  2. See §92.210 (new section) of the 2013 Rule for additional discussion about steps that can be taken in workout situation to stabilize a property.

Effective Date

August 23, 2013

Terminated Projects

A new paragraph is added at §92.205(e)(1) to clarify that when HOME funds are expended for projects that are terminated before completion, for whatever reason, the HOME funds that have been expended are ineligible and must be repaid. It further clarifies the requirement that the PJ must terminate any project that does not meet the HOME requirements for affordable housing (affordability provisions, income targeting, property standards, etc.) and repay HOME funds expended for the project.   

Suggested Next Steps for PJs

  1. Notify PJ staff inspectors and PJ monitors that when HOME funds are expended for projects that are not completed or terminated before completion, for whatever reason, the HOME funds expended are ineligible and HOME funds must be repaid.

  2. Track all HOME projects during the period of affordability and identify units that do not meet the HOME affordability requirements.

  3. Crosscheck IDIS reports and make periodic assessments of projects to determine if any projects are inactive/ terminated.

  4. Repay HOME funds for any projects that are inactive/ terminated.

Effective Date

August 23, 2013

Project Completion Deadline

A new paragraph at §92.205(e)(2) is added. It states that a project that is not completed within four years from the date the written agreement is executed (project commitment) is deemed terminated and that the PJ must repay the HOME funds. In the event that a project is not completed within the four-year timeframe, the PJ may request a 12-month extension from HUD. The request should provide information about the status of the project, steps being taken to overcome any obstacles to completion, proof of adequate funding to complete the project, and a schedule with milestones for completion of the project. This is a new requirement; the pre-2013 Rule imposed a five-year expenditure deadline.

Suggested Next Steps for PJs

  1. Evaluate the readiness of all projects before committing funds to them. Make sure the production schedule reflects completion before the 4-year deadline.

  2. Update written agreements to reflect this deadline; in the written agreement include intermediate benchmarks, progress reporting requirements, and appropriate enforcement mechanisms.

  3. Monitor project progress using the “HOME Activities Reports” (available online at http://www.hud.gov/offices/cpd/affordablehousing/reports/activities.cfm) to identify stalled and slow-moving projects.

  4. For any project that is progressing, albeit slowly, determine if it is likely to be completed within five years. If yes, make a written request for an extension to HUD, providing the necessary information, outlined above.

Effective Date

August 23, 2013

§92.206 Eligible Project Costs

Refinancing

HOME funds can be used for refinancing only in projects where rehabilitation is the primary activity. The 2013 Rule adds a provision at §92.206(b)(1) that clarifies that for refinancing to be an eligible cost, the rehabilitation cost must exceed the amount of debt that is refinanced with HOME funds. Refinancing alone is not an eligible HOME activity and HOME funds may not be used to refinance existing debt of projects unless rehabilitation is the primary activity taking place. This is a clarification of the pre-2013 requirement.
The 2013 Rule also amends §92.206(b)(2) to require that the eligibility of costs of refinancing existing debt, and the requirement for PJs to adopt accompanying refinancing guidelines, are intended to cover all rental housing – multifamily and single family.

Suggested Next Steps for PJs

  1. If the PJ chooses to permit refinancing when funding rehabilitation projects, it must modify program policies and procedures as necessary to ensure that projects receiving funds for refinancing and rehabilitation have rehabilitation costs greater than the amount of debt to be refinanced.

  2. Incorporate this requirement into project application and underwriting/evaluation reviews and checklists.

Effective Date

August 23, 2013

Costs Incurred Before Commitment of HOME Funds

§92.206(d)(1) is revised to allow for the use of HOME funds to pay architectural and engineering and other professional services costs that are incurred before the PJ has made a commitment of HOME funds. These costs can be paid when the PJ expressly authorizes payment in the written agreement and when the costs have been incurred in the 24 months prior to the commitment of funds.  This change provides increased flexibility to PJs and affordable housing developers that are planning a project that is intended to eventually receive HOME financing. It also permits PJs to reimburse these costs for projects that are already under construction when it becomes clear that HOME financing is necessary to complete the project.  

Suggested Next Steps for PJs

  1. Determine whether this is an option that the PJ wishes to make available to applicants and developers and amend program policies and procedures accordingly.

  2. If yes, revise policies regarding cost eligibility for projects and/or Requests for Proposals.

  3. Review and include the specific costs that are eligible for reimbursement (pre-paid) in the written agreement. Specify that these costs must be incurred no earlier than 24 months prior to the HOME commitment.

Effective Date

August 23, 2013

Clarification of Eligible Audit Costs

The amendment to §92.206(d)(3) clarifies that eligible costs of a project audit include the cost certification of costs performed by a certified public accountant. This has always been an eligible cost; the amendment clarifies and codifies this.

Suggested Next Steps for PJs

  1. Update policies regarding cost eligibility for projects and/or Requests for Proposals to clarify the eligibility of cost certifications.

  2. Clarify this policy with staff and program partners.

Effective Date

August 23, 2013

Prohibition on Charging PJ “Soft” Costs to Beneficiaries

§92.206(d)(6) is revised to clarify that the PJ’s, State recipient’s or subrecipient’s staff and overhead costs related to carrying out a project cannot be charged to, or paid by, low-income families. These costs can be charged as administrative or project costs.  Examples of these costs are construction management fees, loan servicing fees, loan processing fees, and underwriting fees.

Note that PJs, State recipients, and subrecipients are permitted to charge reasonable and customary fees commonly charged to a loan applicant in unassisted real estate transactions, such as the cost of credit reports and appraisals fees since these are customarily charged by a lender as part of a home purchase and paid to third parties performing services on behalf of the lender. PJs, State recipients, subrecipients, contractors, project owners/developers are permitted to charge nominal application fees to applicants for assistance, pursuant to §92.214(b).

These revisions are consistent with pre-2013 policy. However, the eligibility of certain fees was not specified in the pre-2013 Rule.

Suggested Next Steps for PJs

  1. Update policies and procedures to clarify that the PJ’s, State recipient’s or subrecipient’s staff and overhead costs related to carrying out a project cannot be charged to, or paid by, low-income families. These costs can be charged as administrative or project costs.

  2. Review and update policies and procedures for all programs to permit reasonable and customary fees commonly charged to a loan applicant.

  3. Update policies and procedures to permit nominal application fees to applicants by program participants.

  4. Provide guidance on this issue in Requests for Proposals.

  5. Clarify the policy with staff and program partners.

  6. Document this policy in written agreements with program partners, as required by §92.504(c).

Effective Date

August 23, 2013

§92.207 Eligible Administrative and Planning Costs

Amendments to §92.207(b), which describe eligible staff and overhead costs, clarify that lead-based paint evaluations (including visual assessments, inspections, and risk assessments), are allowable as administrative costs or project costs. This section reiterates the change to §92.206(d)(6) that prohibits PJs, State recipients, and subrecipients from charging administrative or PJ soft costs to low-income families. Reasonable and customary fees commonly charged to a loan applicant in unassisted real estate transactions, such as the cost of credit reports or appraisals, are permissible. In addition, nominal application fees charged to applicants for assistance are expressly permitted, as are housing counseling fees. See §92.214(b) for additional clarification of allowable and prohibited fees.

Suggested Next Steps for PJs

  1. Determine how lead-based paint evaluations are currently being charged and decide if a change is warranted. Note:

    1. If lead-based paint costs are counted as administrative costs, the PJ must absorb them within the 10 percent administrative cap.

    2. If lead-based paint costs are counted as project costs, they are included in the per unit subsidy limit determination.

  2. Review and revise policies and procedures for all programs to clarify the new regulations about fees that are permitted or not permitted. See “Suggested Next Steps for PJs” for §92.206(d)(6).

  3. Provide guidance on these issues in Requests for Proposals.

  4. Clarify the policy with staff and program partners.

  5. Document this policy in written agreements with program partners, as required by §92.504.

Effective Date

August 23, 2013

§92.208 Eligible Community Housing Development Organization (CHDO) Operating Expense and Capacity Building Costs

Under §92.208 in the pre-2013 Rule, a PJ may use up to five percent of its fiscal year HOME allocation for operating expenses of CHDOs. HOME policy has always considered CHDO operating funds (for general operating assistance such as office rents, utilities, staff salaries, or insurance) to be separate from and not intended to supplant CHDO set-aside funds for project costs provided under §92.300(a). §92.208(a) has been revised to clarify this point.  

Suggested Next Steps for PJs  

None needed.

Effective Date

August 23, 2013

§92.209 Tenant-Based Rental Assistance: Eligible Costs and Requirements

The 2013 Rule amends the tenant-based rental assistance provisions at §92.209 in several ways.

Eligible Costs

Language is added to §92.209(a) that:

  • Expressly states that payment of utility deposits is an eligible HOME cost, but only in conjunction with the provision of HOME tenant-based rental assistance or security deposit assistance. HOME funds cannot be used for programs that provide only utility deposit assistance, since such assistance does not constitute tenant-based rental assistance. This amendment codifies longstanding HUD policy.

  • Changes existing policy by making eligible the costs of inspecting housing units and determining income eligibility of the family as general management and oversight [administrative cost under §92.207(a)] or as a cost of the TBRA [as a project-related soft cost under §92.206(d)(6)].

Suggested Next Steps for PJs

  1. Review current TBRA program policies and practices to be sure that utility deposit assistance is not permitted independent of tenant-based rental assistance or security deposit assistance.

    1. If it is, discontinue this practice immediately. Update policies and procedures and revise written agreements with subrecipients (if applicable).

  2. Evaluate the staff or contractor costs related to making income determinations and inspecting TBRA housing units to determine whether it would be advantageous to charge these costs as project costs.

    1. If yes, document the basis of the costs, and implement the change.

Effective Date

August 23, 2013

Tenant Selection

§92.209(c) has been amended to clarify that a PJ’s tenant selection policies and criteria must be based on local housing needs and priorities consistent with the PJ’s consolidated plan. This requirement conforms to the existing requirement in §91.325(d)(1) that a PJ that plans to use HOME funds for tenant-based rental assistance must certify that the tenant-based rental assistance is an essential part of its consolidated plan.

Suggested Next Steps for PJs

  1. If administering a TBRA program, determine whether or not the program is consistent with the local housing needs and priorities identified in the consolidated plan.
    1. If it is not, amend the consolidated plan to address the need for TBRA or discontinue this use of funds.

 Effective Date

August 23, 2013

Targeted Assistance in Tenant-Based Rental Assistance

§92.209(c)(2)(i) and (ii) are revised to clarify and add provisions on using HOME funds to target tenant-based rental assistance to special needs populations and to persons with disabilities:

  • The pre-2013 Rule at §92.209(c)(2)(i) permits a PJ to establish a preference for individuals with special needs. The 2013 Rule clarifies that preferences can be established for both individuals with special needs (such as homeless persons or elderly persons) and persons with disabilities, in certain situations.

  • The 2013 Rule at §92.209(c)(2)(i) also clarifies that a PJ can limit TBRA to persons with a specific disability or disabilities if doing so is necessary to provide housing, aid, benefit, or services that are as effective as those provided to others, in accordance with the requirements in 24 CFR 8.4(b)(1)(iv). The 2013 Rule does not change the provision at §92.209(c)(2)(ii), that allows the PJ to provide a preference for a specific category of individuals with disabilities (e.g., persons with HIV/AIDS or chronic mental illness) if the specific category is identified in the PJ’s consolidated plan as having an unmet housing need and the preference is needed to narrow the gap in benefits and services received by such persons.

  • A PJ may not require participation in medical or disability-related services as a condition of receiving or continuing to receive HOME-funded tenant-based rental assistance.

Suggested Next Steps for PJs

  1. Review the consolidated plan needs and action plan and amend TBRA program policies and procedures to accommodate needs of persons with a specific disability, for whom housing assistance is needed to provide housing, aid, benefit, or services that are as effective as those provided to others.

  2. If warranted, amend tenant selection policies and procedures to either limit or give preference to persons with specific disabilities.

  3. Inform and provide guidance to program administrators (PJ staff, State recipients, or subrecipients) on how to implement the limitation or preference.

  4. Document this guidance in written agreements with program partners in accordance with §92.504(c).

  5. If services are offered with the TBRA, be sure that these are not mandatory.

  6. See §92.253 for guidance on developing tenant selection policies that reflect these preferences and limitations.

Effective Date

August 23, 2013

Self-Sufficiency Programs

A new paragraph §92.209(c)(2)(iii) has been added to codify longstanding administrative guidance on using HOME tenant-based rental assistance in self-sufficiency programs. It states that a PJ may use HOME tenant-based rental assistance to administer a self-sufficiency program in which the family is required to participate as a condition of selection for tenant-based rental assistance. The family’s failure to continue participation in the self-sufficiency program cannot be grounds for terminating the assistance, but renewal of the assistance can be conditioned on participation in the program. (As noted above, PJs may not require persons with disabilities to participate in medical or disability-related services as a part of a self-sufficiency program.)  The pre-2013 Rule was silent on this issue.

Suggested Next Steps for PJs  

  1. Review the PJ’s TBRA self-sufficiency program policies to determine that this policy is clear, and revise it if it is not.

  2. If a TBRA self-sufficiency program is administered by a State recipient or subrecipient, notify them of this clarification.

  3. Document this requirement in any written agreements for projects or programs that include self-sufficiency programming.

  4. Update program materials (such as brochures and application forms) for program applicants and beneficiaries of a self-sufficiency program to be sure this requirement is clearly stated.

Effective Date

August 23, 2013

Homebuyer Program

A new paragraph §92.209(c)(2)(iv) has been added to codify longstanding administrative guidance on using HOME tenant-based rental assistance in homebuyer programs. It states that a PJ may select tenants to participate in a lease-purchase homebuyer program. In such cases, the HOME tenant-based rental assistance payment may not be used to accumulate a downpayment or closing costs for the purchase. The HOME tenant-based rental assistance payment must be used for the monthly rental payment. However, all or a portion of the homebuyer-tenant's own monthly contribution toward rent can be set aside for these purposes.  The pre-2013 Rule was silent on this issue.

Suggested Next Steps for PJs  

  1. If permitting the use of TBRA to support lease-purchase programs, review TBRA program policies to determine whether this policy is in effect, and if not add it.

  2. If a TBRA program is administered by a State recipient or subrecipient, notify them of this clarification and be sure it is reflected in the written agreement [executed in accordance with §92.504(c)].

Effective Date

August 23, 2013

Protections for Persons with Disabilities that Have a Preference in the TBRA Program

§92.209(c)(2)(iii) of the pre-2013 Rule is redesignated as §92.209(c)(2)(v) and amended to expressly prohibit the exclusion of persons who are given preferences for HOME TBRA from participating in any other program of the jurisdiction.  

Suggested Next Steps for PJs  

  1. Review program policies for all programs to determine that the programs are available to all eligible persons, regardless of whether the applicant receives a preference under the TBRA program, and make any revisions, if necessary.

  2. Clarify this requirement with staff and program partners.

Effective Date

August 23, 2013

Tenant Leases

§92.209(g) is revised to make explicit that all tenants must have a written lease. This section retains the pre-2013 requirement that the lease must comply with the HOME lease requirements specified at §92.253(a) and (b).

Suggested Next Steps for PJs

  1. Review TBRA program policies and procedures to determine that these clearly state that all tenants receiving TBRA must have a written lease.

  2. Clarify this requirement with staff and program partners.

  3. Incorporate this requirement in written agreements with State recipients and subrecipients.

  4. For any tenants that do not have a written lease, upon renewal of TBRA assistance, be sure a written lease is signed.

  5. Amend monitoring materials so that monitors verify compliance with this requirement in on-site project visits.

  6. See §92.253(a) and (b) for additional lease requirements.

Effective Date

August 23, 2013

TBRA Rent Standard

Under the pre-2013 Rule, when using HOME for tenant-based rental assistance, the PJ is required to establish both a minimum tenant contribution to rent and a rent standard for the unit size. The pre-2013 Rule described two options for how the PJ could determine the rent standard—either by basing it on local market conditions, or by setting it at no less than 80 percent of the Section 8 existing housing Fair Market Rent, and no more than the HUD-approved community-wide exception rents. The 2013 Rule does not change the requirement to have a rent standard. However, §92.209(h)(3)(ii) is revised so that the PJ can use either local market conditions, or base the rent standard on those established in 24 CFR part 982, which govern the Section 8 Housing Choice Voucher Program.  

Suggested Next Steps for PJs

  1. Review TBRA program policies and procedures to determine whether the PJ’s rent standard is that used for the Section 8 Housing Choice Voucher Program in its jurisdiction, and ensure that this policy is clear.

  2. Clarify this requirement with staff and program partners as needed.

  3. Incorporate this requirement in written agreements with State recipients and subrecipients.

  4. Amend monitoring materials so that monitors verify compliance with this requirement in on-site visits.

Effective Date

August 23, 2013

Technical Change

A minor wording change is made to §92.209(l) to clarify the existing provision requiring that households on a PHA’s Section 8 waiting list that accept HOME TBRA must be permitted to remain on the Section 8 waiting list with the same preference status and must be offered Section 8 Housing Choice Voucher assistance when it becomes available to them.

Suggested Next Steps for PJs

None needed.

Effective Date

August 23, 2013

§92.210 Troubled HOME-Assisted Rental Housing Projects (new provision)

A new section is added at §92.210 of the 2013 Rule. This section addresses the efforts of PJs to preserve HOME-assisted rental housing projects that are no longer financially viable during the period of affordability and are at-risk of foreclosure. §92.210(a) specifies that a HOME-assisted rental unit is no longer financially viable when its operating costs significantly exceed its operating revenue.

For troubled projects, the PJ may take the following actions with HUD approval:

  • Investment of additional HOME funds. §92.210(b) allows PJs to invest additional HOME funds in financially troubled projects, making an exception to the restriction on investing additional HOME funds in a project after the first 12 months following project completion. The use of these funds can be in the form of additional funds to rehabilitate the HOME-assisted units or to recapitalize project reserves for the HOME units. The total HOME funding for the project (initial investment amount plus the additional funds) may not exceed the maximum per unit subsidy, established at §92.250(a). This determination is made using the maximum per unit subsidy that is in effect at the time the additional funds are invested. HUD’s approval for this action must be in the form of a written memorandum of agreement.  

    In granting approval for an additional investment of funds, HUD may require an extension of the affordability period and/or an increase in the number of HOME-assisted units.
  • Reduction of the number of HOME-assisted units. A new §92.210(c) permits a reduction in the number of HOME-assisted units in the project, but only if the project contains more than the minimum number of units required to be designated as HOME-assisted units under §92.205(d). This strategy must be approved, in writing, by HUD Headquarters.

§92.210(a) specifies that HUD Headquarters must approve of the permitted actions outlined in the section. HUD’s approval will be based on its assessment of the market needs, available resources, and the likelihood of the project’s return to financial viability.
The pre-2013 Rule did not anticipate the need for these provisions; however, as the inventory of HOME-assisted housing has grown nationwide, there have been a number of instances where HOME-assisted projects became troubled due to excessive debt, unsustainable high operating costs, poor physical conditions, or weak market conditions. The financial workouts to return these projects to financial viability and preserve the affordable units have involved any number of actions: restructuring of private debt, investing of additional owner equity, and altering the terms of existing HOME financing. In many instances, these workouts required HUD waivers, which are sometimes time-consuming to develop and process. The addition of these provisions to the 2013 Rule eliminates the need for PJs to pursue regulatory waivers, thereby speeding up the workout process.

Suggested Next Steps for PJs

  1. Where a project is no longer financially viable or is at risk of foreclosure during the period of affordability, analyze the financial and physical status of the project and consider whether any of these actions might assist in workout efforts when intervening in a situation:

    1. Investment of additional HOME funds per §92.210(b), to rehabilitate the HOME-assisted units or to recapitalize project reserves for the HOME units.  

    2. A reduction in the number of HOME-assisted units in the project to prevent the loss of affordable housing, but only if the project contains more than the minimum number of units required to be designated as HOME-assisted units under §92.205(d).

  2. Because HUD Headquarters’ approval is required, PJs should contact their Field Office to determine what project information may be required. The PJ and HUD Field Office will work with HUD Headquarters to determine what remedies and actions may be appropriate for a project.

Effective Date

August 23, 2013

§92.213 HOME Funds and Public Housing

The 2013 Rule adds a new §92.213 to the HOME regulations to address the use of HOME funds with public housing funds. These provisions are based on a longstanding legal interpretation of the three programs’ authorizing statutes: the National Affordable Housing Act (HOME); section 24 of the Housing Act of 1937 (HOPE VI); and section 9 of the 1937 Act (public housing Capital and public housing Operating Funds). This provision clarifies existing policy. This section addresses three issues, the details of which are outlined below:

  1. HOME funds cannot be used, alone or in combination with Capital Funds, for public housing units.  HOME units cannot receive public housing Capital Fund or Operating Fund assistance.

  2. HOME funds can, however, be used to develop a new unit that will serve as public housing, if that unit also receives HOPE VI funding and no Capital Funds (section 9) are used to develop the unit. Such a unit may receive Operating Fund assistance.

  3. HOME funds may be used in a project that also contains public housing units, provided that HOME funds are not used in the public housing units and the HOME units are separately designated.

  • General rule prohibiting the use of HOME funds in public housing. §92.213(a) prohibits: (1) the use of HOME funds for public housing modernization or operating assistance, (2) a HOME-assisted unit from receiving Operating Fund or Capital Fund assistance under section 9 of the Housing Act of 1937 during the period of affordability, and (3) the use of HOME funds for public housing units, whether funded under section 9 of the 1937 Act or another source.

  • Exception for HOPE VI public housing units. §92.213(b) establishes an exception to this prohibition that permits the use of HOME funds to develop a unit that also receives HOPE VI funds for development, as long as no Capital Funds are used in the unit. In projects receiving HOME, HOPE VI, and Capital funds for the development of units, the separation of public housing units that receive HOME and HOPE VI funds from units receiving Capital Funds under section 9 must be accomplished through the cost allocation process for multi-unit HOME projects that is established at §92.205(d).

    • Rent limits when HOME funds are invested in HOPE VI public housing units.§92.213(d) makes clear that when HOME funds are used in a public housing unit, the HOME rent requirements of §92.252(a) and (b) apply. Consequently, the gross rent (tenant contribution and operating subsidy) for any public housing unit that receives HOME funds that is occupied by a household with an income above 50 percent of area median income may not exceed the High HOME rent established under §92.252(a).  Public housing operating assistance may be provided to units that were developed with HOME and HOPE VI.

    • Relocation requirements when HOME is invested in HOPE VI public housing units. When HOME funds are invested in a project that involves demolition, the requirements for a residential anti-displacement and relocation assistance plan [at §92.353(e)] and for one-for-one replacement of units [as required by section 104(d) of the Housing and Community Development Act] apply to the entire project. Therefore, while these requirements do not to apply to HOPE VI projects the addition of HOME funds to a HOPE VI project may trigger the section 104(d) requirements.

  • Using HOME funds in public housing projects. §92.213(c) makes clear that HOME funds may be used to develop or rehabilitate affordable housing units that are not public housing units in projects that also contain public housing units funded by section 9, HOPE VI, or other funds. The units must be separated through the cost allocation process required for units that are not comparable (allocation is based on actual unit costs rather than proration) under §92.205(d). In such projects, the HOME and public housing units would have separate waiting lists and rent structures. This means that the units must be designated as fixed units. The residential anti-displacement and relocation assistance plan requirements of §92.353(e) are applicable to the entire project.

Suggested Next Steps for PJs

  1. Review and revise project selection policies or Request for Proposal language for all projects that contain public housing units.

  2. Ensure compliance with all statutory requirements.

Effective Date

August 23, 2013

§92.214 Prohibited Activities and Fees

Several amendments are made to §92.214(b) to specify allowable and prohibited fees.

Fees Charged by PJs, State Recipients, and Subrecipients

  • Administrative fees are not allowable. §92.214 (b)(1) is revised to clarify that PJs and other program participants cannot charge fees to cover their administrative costs, especially fees charged directly to low-income program beneficiaries. Prohibited fees include loan servicing, origination, or other fees related to the cost of administering the HOME program. This paragraph also requires PJs to extend the prohibition to State recipients, subrecipients, and CHDOs. See related changes at §92.206(d)(6) and §92.207(b).

Suggested Next Steps for PJs  

  1. Review and revise program policies and procedures for rental and homeowner development projects to ensure that no prohibited fees are permitted or charged in the program.

  2. Notify and instruct staff and program partners of this clarification/change in regulations.

  3. Incorporate this prohibition on administrative fees in written agreements with State recipients, subrecipients, and project owners, developers, and sponsors, as required by §92.504(c)(1)(xiii) for State recipients; §92.504(c)(2)(xi) for subrecipients; and §92.504(c)(3)(xi) for owners, developers, and sponsors.

  4. Incorporate this requirement in monitoring checklists to ensure that compliance is verified during monitoring reviews.

Effective Date

August 23, 2013

  • Exceptions:

    • Rental Compliance Monitoring Fees. §92.214(b)(1)(i) permits PJs to charge fees to cover the cost of ongoing monitoring and physical inspection of HOME projects during their period of affordability. This is a reversal of pre-2013 HOME requirements, when such fees were prohibited. Charging monitoring fees is standard industry practice in other programs that require ongoing inspections, including the Low-Income Housing Tax Credit program. PJs can begin to charge reasonable annual monitoring fees to owners of rental housing projects to which a commitment of HOME funds is made on or after August 23, 2013, the Effective Date of the Final Rule. 

      This provision specifies that the amount of the monitoring and inspection fees:

      • Must be included in the cost of the project as part of the project underwriting;

      • Must be based upon the average actual cost of monitoring HOME-assisted rental property. The PJ must document how it makes this determination.

    • Application Fees. §92.214(b)(1)(ii) restates the pre-2013 Rule to specify that PJs, subrecipients, and State recipients can charge nominal application fees (although these fees are not an eligible HOME cost) to discourage frivolous applications. This paragraph is revised to clarify that the fees must be appropriate to the type of application and may not create an undue impediment to participation in the PJ’s program by a low-income family, a jurisdiction, or entity.

    • Homebuyer Counseling Fees. §92.214(b)(1)(iii) is a new provision that permits PJs, subrecipients, and State recipients to charge homebuyers a fee for the cost of housing counseling. Note, the 2013 Rule imposes a new requirement at §92.254(a)(3) that all homebuyers that receive HOME assistance or purchase a HOME-assisted unit must receive housing counseling.

Suggested Next Steps for PJs

  1. Consider the advantages and disadvantages to charging permitted fees (rental compliance monitoring fees, application fees, and/or homebuyer counseling fees).

  2. If a decision is made to charge any or all of the permitted fees, determine the best method for establishing a reasonable and appropriate fee.

    1. For rental compliance monitoring and homebuyer counseling fees, evaluate the monitoring or counseling costs for recent years and document the basis for the fees. [Note, adjust the past monitoring costs for any anticipated changes in monitoring activities, such as changes to the financial inspection requirements in §92.504(d).]

    2. If using third parties, solicit several price quotes to determine the reasonable amount.

    3. For application fees, research what other agencies charge for similar types of applications and use that information to assist in the determination of reasonable fees that will be sufficient to discourage frivolous applications.

    4. Document the basis of the each of the fee amounts.

  3. Notify staff and program partners of any change in policy related to allowable fees.

    1. If rental compliance monitoring fees will be charged, work with underwriters to ensure that these fees are reflected in project operating pro formas.

  4. Incorporate the revised policy on allowable fees in public documents such as program marketing materials, application documents, and written agreements with State recipients; subrecipients; and owners, developers, and sponsors.

Effective Date

August 23, 2013 (PJs can begin to charge reasonable annual monitoring fees to owners of rental housing projects to which a commitment of HOME funds is made on or after August 23, 2013.)

Fees Charged by Project Owners

§92.214(b)(3) has been added to clarify that PJs must prohibit project owners from charging fees to tenants that are not reasonable or customary, such as a monthly fee for access to pay laundry facilities. This provision also clarifies what fees are allowable, including reasonable application fees to prospective tenants, parking fees in neighborhoods where such fees are customary, and the cost of nonmandatory services such as meal or bus service.

Suggested Next Steps for PJs

  1. Review and revise the rental program policies and procedures to ensure that no prohibited fees are permitted in the program.

  2. Notify and instruct staff and program partners of this clarification/change in regulations.

  3. If reasonable and customary fees are permitted in the program, be sure these are reflected as revenue in the project’s operating pro forma during the underwriting process.

  4. Incorporate the policy on fees in the written agreements with State recipients; subrecipients; and project owners, developers, and sponsors, as required by §92.504(c).

  5. Incorporate this requirement in monitoring checklists to ensure that compliance is verified during project monitoring reviews.

Effective Date

August 23, 2013

§92.221 Match Credit

§92.221(d) is a new provision that addresses the issue of match credit in the development of homeownership projects for sale to homebuyers. This provision clarifies that contributions to the development of HOME-assisted or HOME-eligible homeownership projects can “count” toward match credit only (1) in the amount by which the investment reduced the sales price to the homebuyer, or (2) if development costs exceed the fair market value of the housing, in an amount by which the contribution enabled the housing to be sold for less than its development cost. This provision ensures that match credit is a permanent contribution to the housing, and not provided for the value of contributions that are included in the homebuyer’s mortgage (e.g., donated land or construction materials).

This new provision applies only to donations to the development cost of homebuyer housing. Contributions that directly benefit the homebuyer (e.g., downpayment or closing cost assistance from non-federal sources, the yield foregone on below-market interest rate mortgage financing, the direct cost of donated homebuyer counseling) continue to be eligible at face value.

Suggested Next Steps for PJs

  1. Review the program administrative policies related to match contributions to determine how the PJ currently counts contributions to homebuyer projects toward match.

  2.  Revise the policies and procedures for recording match.

  3. Notify and instruct staff and program partners of this clarification/change in regulations.

Effective Date

August 23, 2013

§92.222 Reduction of Matching Contribution Requirement

§92.222(b) addresses the reduction of match for PJs in disaster areas. §92.222(b)(1) has been added to require HUD to consider the extent of a disaster’s fiscal impact on a PJ when determining whether to grant a match reduction, as well as the amount and duration of any match reduction.

Suggested Next Steps for PJs

None needed. The determination of match reduction is considered by HUD.

Effective Date

August 23, 2013

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