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Application and Development Process
Getting Ready
• Technical assistance is available from the Multi-family Production Unit
• Contact David Danenfelzer 512-475-3865
• Applications are currently accepted at any time
Application Review ProcessInitial Approvals
• Feasibility assessment – preliminary review done by production staff
• Site review – has TDHCA funded other projects near this site that would constitute undue competition or market impact?
• Project Design – does the design reflect the goals of the agency and the project
• HOME compliance – does application reflect probable compliance with all regulations?
Underwriting and Funding Award
• Once initial reviews are completed, application is forwarded to Real Estate Analysis Unit to determine subsidy
• Costs compared to cost database• Budgets reviewed for completeness• Underwriting attempts to reconcile two
conflicting goals:– Provide as little subsidy as possible– Assure the feasibility of the project
Texas Department of Housing and Community Affairs
Rental Housing Development
Building HOME
• Training provided by TDHCA
• Developed by TDHCA and ICF Consulting
• Who are we?– TDHCA staff– ICF staff
Getting to know you …
• Name
• Organization
• My role in HOME is …..
• The thing I really want learn is ……
Course Objectives
• Provide explanation of the HOME and TDHCA rules and procedures
• Explain what will happen as projects are completed and managed over time
• Answer common questions
• Share techniques and ideas
Course Structure
• Agenda
• Training manual
• Training manual appendices
• Forms
• Overheads
Rules!!!!
• Ask questions
• Share ideas
• Sticky questions board
• Training amnesty
• No cell phones that ring, please
Logistics
• Timing of breaks and lunch
• Telephones
• Restrooms
Rental Housing
• Chapter 3 covers:– Eligible activities and forms of assistance– Eligible beneficiaries and properties
Eligible Activities
• HOME funds may be used for:– Acquisition– Rehabilitation– New construction
• Developers or owners can be:– Nonprofits (incl. CHDOs)– Units of local government– PHAs
Forms of Assistance
• TDHCA provides grants, loans and other forms of assistance
• Most assistance is an amortizing loan
• Common forms of assistance with rental housing:– Predevelopment loans and grants for CHDOs– Construction loans– Permanent mortgage loans
Forms of Assistance
• Developers may budget for a developer fee not to exceed 15%
• CHDOs may receive operating funds
• See the list on 3-2 of eligible hard and soft costs
Operating Deficit Reserves• Initial operating deficit reserve in new
construction AND rehab projects allowed– Reserve cannot exceed 18 months
• Reserve can be used only for:– Project operating expenses– Scheduled payments to replacement reserves– Debt service
What is a Project?
• A project is 1 or more buildings on a site or sites under common ownership, management and financing
• Sites do NOT have to be within a 4-block area
• Project includes ALL activities associated with the site or building
Maximum HOME Investment• HOME investment levels are determined
by TDHCA underwriting
• Federal per unit subsidy limit applies
• Underwriting is based on:– Proportion of total project cost that is HOME-
eligible– How many units are HOME-assisted units
AND– The financial needs of the project
Determining HOME-Assisted Units
• Only units receiving HOME $ are subject to HOME requirements
• Number of HOME units must be specified at project commitment– For properties with HOME and non-HOME
units, must select “fixed” or “floating” HOME units
Fixed & Floating Units
1 A = H 1 B
2 A 2 B = H
3 A = H 3 B
• Fixed = 1A, 2B, 3A always HOME units
• Floating = unit numbers change but always have 3 HOME units
Allocation Costs• Determine total HOME eligible costs
• For projects with HOME and non-HOME units, allocate costs across units– If HOME and non-HOME units are comparable, costs can be pro-rated
– If units are not comparable, actual costs must be determined unit-by-unit HOME - 2.2
Affordability Period
• Also a compliance period where rents and incomes are controlled
• Properties must meet HQS inspections
• Determined by TDHCA and spelled out in Land Use Restriction Agreement
• Federal requirements apply
Roles of Nonprofit and CHDO
• Nonprofits may be:– Developers, owners and sponsors– Property managers– Program administrators (as subrecipients)
• CHDO as owner, developer or sponsor counts towards CHDO set-aside
Eligible Properties• No requirements on structure type or style
of property
• Eligible types of housing include:– Transitional and permanent housing– SROs and group homes– ECHO units
Ineligible Properties
• Property previously assisted with HOME during its affordability period
• HOME funds be used alone or in combination with HUD-funded public housing program funds (e.g., Public Housing capital programs such as Development, CIAP or CGP to acquire, rehabilitate, or construct public housing units). – HOME funds can be used to develop new public housing
units when the units also receive HOPE VI funds.
• HOME funds cannot be used to operate public housing units under any circumstances.
Property Standards• Acquisition only:
– State/local code– If no state/local code applies, Section 8 HQS
• Rehabilitation:– Texas Minimum Construction Standards AND
applicable state/local building codes– HQS
STANDARDS
Property Standards• New construction:
– State/local code OR– If no local code, Southern Building Code– International Energy Conservation Code
• All construction must be done according to written specifications
STANDARDS
Ongoing Property Condition
• Properties must be maintained to meet HQS at a minimum and any other local codes
• Inspections will be carried out
Other Standards• Handicapped accessibility (Section 504
and Fair Housing) requirements
• Site and Neighborhood Standards apply to new construction of rental housing
• Environmental Review
• Lead-based paint
Rent and Occupancy Requirements
• Will be legally enforced for the term of the affordability period through:– Covenants– Deed restrictions– Developer cannot “buy out” of terms
• May only be terminated upon transfer by or deed in lieu of foreclosure (Financial obligations do not go away.)
HOME Rents
• High HOME and low HOME rents– Formally set in LURA– Tenants given notice of increases
• Adjust rents for tenant-paid utilities
Initial Occupancy• Projects must have at least 20% of units
occupied by families at/below 50% of MFI– Rents must be at Low HOME rent level
• 90% Of households must have incomes at/below 60% of MFI– Balance of units may be at/below 80% of MFI
Ongoing Occupancy• Projects must have at least 20% of units
occupied by families at/below 50% of MFI– Rents must be at Low HOME rent level– Balance of units may be at/below 80% of
median with high HOME rent level
• Owners must make every effort to maintain compliance when renting next available unit
Initial Income Eligibility
• To determine eligibility, use 1 of 3 income definitions:– Part 5 (gross) income– Adjusted gross income defined by IRS for IRS
Form 1040– Annual income as reported on Census long
form
• Source documentation must be obtained and verified
Annual Income Re-examinations
• Annually, tenant income must be re-examined– Review source docs OR (if LURA allows)– Get written statement and certification from
the family OR– Get written statement from another means-
tested government program
• At least every 6th year, source docs MUST be reviewed
Increases in Tenant Income
• If the income of a tenant in Low HOME Rent unit increases up to 80% of MFI:– May increase rent to High HOME rent level– Must rent the next HOME-assisted unit (fixed
projects) or next available unit (floating projects) at Low HOME rent
Increases in Tenant Income
• If income of a tenant in a HOME unit exceeds 80% of MFI...– Tenant may remain in HOME-
assisted unit BUT – Tenant must pay rent equal to 30%
of adjusted monthly income (HOME fixed units)
• Projects with HOME and LIHTCs are exempted from this requirement
Increases in Tenant Income in “Floating” Unit Projects
• Exception for tenants whose income increases above 80% MFI in “floating” HOME units -- rent cannot exceed comparable market rent
• In “floating” unit projects, next available unit must be rented to HOME-eligible tenant
Tenant Selection
• Owners must have clear procedures and criteria for tenant selection
• Maintain waiting lists
• Keep all applications on file
• May not reject Section 8 without other cause
Home Lease Terms
• Leases must be for at least 1 year, unless agreed upon by owner and tenant
• Leases may not contain certain provisions
• Owner may terminate tenancy with 30 days notice under certain conditions
• Owners MUST adopt written tenant selection policies and criteria
Monitoring and Inspections • TDHCA will verify compliance with
HOME requirements each year• On-site property inspections are
required:– Every 3 years for projects with 1-4 units– Every 2 years for projects with 5-25
units– Each year for projects with 26 or more
units
Additional Federal Requirements
FEDERAL REQUIREMENTS
– Fair housing and equal opportunity– Handicapped accessibility– Labor standards– Environmental review– Flood insurance– Lead-based paint
FEDREGS
FAIR HOUSING ANDEQUAL OPPORTUNITY
• Applicable laws:– Title VI of Civil Rights Act of 1964– The Fair Housing Act– E.O. 11063 - Equal Opportunity in Housing– Age Discrimination Act of 1975
• Cannot discriminate on the basis of race, color, religion, sex, national origin, handicap, familial status or age
page 12-1 to 12-2
AFFIRMATIVE MARKETING• Owners must adopt affirmative marketing
procedures– Informing the public, owners and tenants
about Fair Housing and housing opportunities– Assessing efforts and taking corrective action
when necessary
• Procedures apply to projects with 5 or more units
page 12-2
HANDICAPPED ACCESSIBILITY
• Americans with Disabilities Act– Civil rights to persons with disabilities– Facilities built after 1/93 must be accessible– Barriers in existing facilities must be removed,
if achievable
• Fair Housing Act – Requires multi-family dwellings meet certain
design/construction standards
page 12-3
SECTION 504
• Prohibits discrimination on the basis of handicap
• Four components:(1) program accessibility
(2) employment accessibility
(3) administrative requirements
These 3 requirements apply to all programs of recipient & subrecipients -- not just the program receiving federal funds!page 12-4
SECTION 504(4) removal of physical barriers
Requirements differ based on whether project is:
•New construction•Substantial rehab•Other rehab
EMPLOYMENT AND CONTRACTING
• Applicable laws:– E.O. 11246 - Equal Employment Opportunity– Section 3– Executive Orders concerning minority and
women’s business enterprise
page 12-5
LABOR REQUIREMENTS• Four applicable laws
• Fair Labor Standards Act– Basic minimum wages– Overtime at time and one-half
• Copeland Anti-Kickback Act– Governs deductions– Can’t induce employee to forgo pay– Requires weekly payrolls
page 12-6
LABOR REQUIREMENTS• Contract Work Hours and Safety
Standards Act– Requires time and one-half for hours over 40
per week– Addresses health and safety issues
• Davis-Bacon Labor Standards – Requires wages & benefits at prevailing local
rates– Addresses apprentices and trainees
LABOR REQUIREMENTS• CWHSSA and Davis-Bacon triggered at:
– 12 or more HOME-assisted units– $2,000 construction contract under CDBG except for residential rehab of less than 8 units
• There is new guidance from HUD on implementing Davis-Bacon in a more flexible way
PROCUREMENT• Procurement rules:
– Local governments - 24 CFR 85.36– Nonprofit subrecipients - 24 CFR 84.40 - 84.48
• No federal to any contractor or subcontractor who is:– Debarred– Ineligible– Suspended
page 12-7
ENVIRONMENTAL REVIEW REQUIREMENTS
• Environmental review requirements are at 24 CFR Part 58– Requires review of all federally-assisted
activities– Sets forth level of review required
• Step 1: Start the review process when activities are known
page 12-7
ENVIRONMENTAL REVIEW PROCESS
• Step 2: Aggregate activities by location or type
• Step 3: Determine level of review required:– Exempt– Categorically excluded– Require an environmental assessment
• Step 4: Document the files based on level of review required
ENVIRONMENTAL REVIEW PROCESS
• If necessary...
• Step 5: Publish FONSI and NOI/RROF notices
• Step 6: Submit FONSI and RROF to HUD
• Step 7: Once approved, begin activities
FLOOD INSURANCE• No federal assistance in areas designated
by FEMA unless:– Community is in National Flood Insurance
Program OR it has been a year since the designation
AND– Flood insurance is obtained
page 12-11
LEAD-BASED PAINT• PJs still under requirements at 24 CFR
Part 35 AND
• Lead provisions in Section HQS apply
• Proposed regulations published - new rule coming!
page 12-12
LEAD-BASED PAINT• General requirements:
– Notification and disclosure– Identification of defective paint surfaces– Treatment of defective paint surfaces– Response to children (under age 6) with EBL
• Test chewable surfaces• If necessary, treat chewable surfaces
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