Using HOME and HTF Funds within Opportunity Zones

What Challenges Might Arise When Using OZ Investor Equity in a HOME or HTF Project?

Challenges & Implications When Using OZ Investor Equity in a HOME or HTF Project. The Challenge: As a new program, OZ has a learning curve. To address it, the grantee can have an open mind and learn, and identify new partners and opportunities for new capital resources for affordable housing. The Challenge: Projects with multiple funding sources and multiple requirements can be complex. To address it, the grantee can communicate needs, constraints, and requirements clearly, negotiate project details carefully, and develop detailed timelines; communicate schedule and roles clearly; and review progress frequently. The Challenge: OZ investors may be unfamiliar with projects that have high grantee involvement and approvals. To address it, the grantee can reassure investors by executing federal requirements efficiently and in a non-threatening way, and emphasize grantee’s experience (and role) in executing and complying with federal requirements. The Challenge: Affordability periods for HOME / HTF projects are likely to exceed typical OZ investment period. To address it, the grantee can discuss long-term affordability requirements up-front, and seek projects where the affordability period matches the investment period. The Challenge: 180-day OZ investor deadline may conflict with grantee’s need for thorough project review prior to funding commitment. To address it, the grantee can orchestrate project reviews (especially environmental) to ensure timeliness, and seek QOF investments, where investors have already met the 180-day deadline. The Challenge: Many OZ investors seek high rate of return on investments that may not be realized in affordable housing projects. To address it, the grantee can take time to find the right investor, research investors’ interests and motivations, work with mission-minded investors where appropriate, and consider mixed use or mixed income projects for possibly higher returns.

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When considering HOME and HTF investments in the OZ, grantees and their financial partners need an understanding of obstacles that may have to be confronted in order to execute a successful transaction. The OZ industry is new and the relationships between the parties may be new. By addressing challenges up-front, the parties are more likely to accomplish mutually beneficial goals.

The first challenge may be bringing all parties up to speed on the opportunities and challenges the combination of resources may offer. OZ is a relatively new resource and grantees, developers, and investors may need assistance in learning the basics involved in combining OZ investments with HOME and HTF. This guide is intended to assist with this first step in learning the basics and where to link to additional resources.

Investors will seek HOME and HTF funds for projects that need it, and vice versa. Grantees need to convey how HOME/HTF can fit into the puzzle and play an important role, while acknowledging that these funds carry restrictions. This section reviews some requirements that may require special attention and consideration when structuring HOME or HTF deals in an OZ.