BUILDING HOME CHDO Requirements and Activities slide 1

CHDOs n CHDO This chapter covers: w The set-aside requirement w CHDO Qualifying criteria w Uses of HOME funds and roles for CHDOs w Selecting CHDOs w Building eligibility and capacity w Establishing long-term relationships slide 2

CHDO Set-Aside n The equivalent of at least 15% of each allocation must go to housing owned/developed/ sponsored by CHDOs n PJs have 24 months to reserve Funds for CHDOs slide 3

CHDO Qualifying Criteria n CHDOs must meet requirements pertaining to their: w Legal status w Organizational structure w Capacity and experience slide 4

Legal Status n To be eligible, organization must: w Be organized under state and local law w Have as its purpose to provide decent and affordable housing to low/mod income persons w Provide no individual benefit w Have a clearly defined service area w Have an IRS non-profit status slide 5

Organizational Structure n CHDO board must have: w At least 1/3 reps of low-income community w No more than 1/3 reps of public sector n Balance is unrestricted except when sponsored/organized by a for-profit slide 6

Low-Income Representation n Three ways to meet the 1/3 minimum requirement: w Residents of low-income neighborhoods in the community w Low-income residents of the community w Elected representatives of low-income neighborhood organizations slide 7

Low-Income Input n CHDO must also provide formal process for low-income beneficiaries to provide input w Must be described in writing w Must be in by-laws or resolution n Ways to achieve this: w Special committees or neighborhood advisory councils w Open town meetings slide 8

Public-Sector Representatives n Public sector representatives include: w Elected officials w Appointed officials w Public employees w Persons appointed by a public official n Low-income public officials count against the 1/3 public sector max slide 9

CHDO Spin-Offs (I) n Religious entities can sponsor a CHDO w Must be secular organization w Religious entity may not control organization w Housing must be for secular purposes slide 10

CHDO Spin-Offs (II) n For-profit entities can sponsor a CHDO: w Cannot be controlled by the for-profit w Primary purpose of for-profit cannot be housing ownership/management w For-profit reps cannot be more than 1/3 of board w CHDO must be free to contract for goods/services from any vendor slide 11

Capacity and Experience n Organization must: w Have at least ONE YEAR of experience serving the community w Demonstrate staff capacity to carry out planned activities w Have financial accountability standards n Capacity must be relevant to type of CHDO activity to be undertaken slide 12

CHDO Designation n Don’t make these mistakes w No geographic boundaries w Have applied for IRS tax-exempt status but haven’t received IRS letter w Re-designation not done each year and board has changed w CHDO designation from neighboring jurisdictions used w CHDO doesn’t have capacity slide 13

Uses of HOME Funds n Eligible uses of CHDO set-aside funds: w Acquisition and/or rehab of rental or homebuyer housing w New construction (rental or homebuyer) w Direct financial assistance to: • buyers of HOME-assisted units • sponsored/developed by CHDO slide 14

Uses of HOME Funds II n Ineligible use of set-aside funds: w Tenant-based rental assistance w Homeowner rehab w “Brokering” or other real estate transaction slide 15

CHDO Roles n To count towards the CHDO set-aside, CHDO must act as: w Owner w Developer OR w Sponsor slide 16

CHDO as Owner n As owner, CHDO: w Holds valid legal title OR w Has long-term leasehold interest n CHDO may be an owner in partnership w Must have effective control n CHDO may be both owner and developer of its own project slide 17

Developer n CHDO owns property OR has contractual obligation to property owner to: w Obtain financing AND w Rehabilitate or construct If rental, may also manage project n If homeownership, CHDO transfers property to homebuyer n slide 18

Sponsor n As sponsor of rental housing, w Develops a project that it solely or partially owns w Conveys ownership to a second non-profit n As sponsor of a homebuyer project, w Owns property and shifts responsibility to second non-profit w Second non-profit transfers title and obligations to homebuyers slide 19

CHDO vs. Subrecipients n CHDOs may take on the role of subrecipient w Not a CHDO set-aside activity w May not receive HOME funds for a project through the subrecipient activity w May get access to PJ’s admin $$ slide 20

Special Assistance n PJs may provide special forms of assistance to CHDOs w Project pre-development loans w Operating assistance w Use of HOME project proceeds w Capacity-building assistance slide 21

Pre-Development Funds Access to up-front money n Costs must be n w related to specific project w for HOME eligible activities Uses and costs must be customary and reasonable n Up to 10% of set-aside n Not limited to 10% of a project n slide 22

Types of Pre. Development Loans n Technical assistance and site control loans w Used to establish preliminary feasibility prior to site control w Do not require environmental clearance n Seed money loans w Cover pre-construction costs w Must have site control slide 23

Restrictions on Pre-Development Loans n Funds must be provided as a loan w CHDO must repay from construction loan proceeds or other income w PJ may waive repayment if: • There are impediments to project development beyond the CHDO’s control • Project deemed infeasible slide 24

CHDO Operating Assistance n Up to 5% of PJ's HOME allocation may be used for CHDO operating n Eligible uses: w Organizational support w Housing education w Admin expenses w Operating expenses slide 25

Limitations on Operating Assistance n Assistance may NOT exceed: w $50, 000 each fiscal year OR w 50% of CHDO’s total annual operating expenses for that year WHICHEVER IS GREATER! n Admin funds to CHDOs acting as subrecipients do NOT count towards cap slide 26

Project Proceeds PJs may allow CHDO to retain some or all proceeds from a HOME project n Proceeds might be: n w Proceeds from permanent financing w Interest on HOME loans n Proceeds are NOT considered program income slide 27

Use of Project Proceeds n Use of proceeds must be for: w HOME-eligible activities OR w Other low-income housing activities n Written agreement with CHDO must include: w Whether CHDO will retain any proceeds w The specific use of proceeds slide 28

Capacity-Building Assistance Only applies to PJs in first 2 years of participation in the HOME Program! n HOME funds can be used for CHDO capacity building n w Up to 20% of CHDO set-aside w Total cannot exceed $150, 000 w Use for intermediary organizations, training and TA or operating expenses slide 29

Selecting CHDOs n Identify potential organizations w Hold information sessions w Provide information to groups n Determine eligibility and basic capacity w Use the CHDO checklist n Assess additional needed capacity w Organizational issues w Experience w Financial management slide 30

Building Eligibility and Capacity Eligibility Issues “Fix It” n Building capacity requires more n w Good business planning w Sufficient capital w Keen marketing/customer knowledge w Technical expertise w Strong leadership and staffing slide 31

Creating New CHDOs n Create new CHDOs when: w No CHDOs exist w Potential groups don’t want to change structure or to work on bricks-and-mortar w Qualified groups don’t have sufficient capacity n PJs must avoid controlling organizations they charter slide 32

Building Long-Term Relationships Plan ahead and take a multi-year approach n Build successful partnerships n Continuously build the capacity of the “system” n Create a network n slide 33