© 2002 Corporation For Enterprise Development Leveraging Funds for IDAs: Strategies for Linking to Existing State Programs Friday, November 8, 2002 State

© 2002 Corporation For Enterprise Development

Leveraging Funds for IDAs: Strategies for Linking to Existing

State Programs

Friday, November 8, 2002State IDA Policy Conference • St. Louis, MO

Carl Rist, Program DirectorCorporation for Enterprise Development


Funding Environment

Vast majority of states facing budget deficits.

New funding for IDAs likely to face stiff challenges.

Existing funds in danger of being withdrawn or re-captured.

How can states leverage related sources of funds for IDAs in a time of scarcity?


IDAs and Housing

Most common use of IDAs:– 61% of participants in ADD demonstration

intend to save for home purchase or repair.– 80% of participants used IDAs for

homeownership in NC (according to recent evaluation).


Options for Leveraging Housing Funds for IDAs

1. Community Development Block Grant (CDBG) funds

2. Federal Home Loan Bank

3. Family Self-Sufficiency Program

4. State Housing Trust Funds

5. Low-Income Housing Tax Credits


CDBG Funds

Why CDBG?– One of the largest sources of funds for

community development.– Funds a broad range of c.d. activity.

What CDBG funds can be used for:– Match for first-time homebuyers (or small

business start-up)– Administrative costs


CDBG Funds

Models: NC, OK, TN, VA Pros:

– Funds match and admin– Available in every state– Considered non-federal for purposes of matching

federal dollars Cons:

– Regs– Restrictive funding categories– Only small towns and rural areas qualify– Applicants must be unit of local government


Federal Home Loan Bank

Why FHLB?– Affordable Housing Program (AHP) –

matched savings program for low-income families.

What FHLB funds:– Up to 3:1 match for downpayment

assistance.


Federal Home Loan Bank

Models: Many Cons:

– Have to apply through FHLB member bank

– Account must be held by member bank

Pros:– Good source of funds for downpayment

assistance

– Mortgage does not have to be with member bank


HUD Family Self-Sufficiency Program (FSS)

Why FSS?– Structured saving program for public

housing residents with earned income– Many FSS savers have used escrow

accounts to purchase homes

What FSS escrow accounts fund:– Downpayment or other uses.


HUD Family Self-Sufficiency Program (FSS)

Models: Many Cons:

– Not additional source of funds– FSS programs also not always well staffed

Pros:– Existing system for structuring saving for

key target population– Economies of scale in linking FSS and

IDAs


State Housing Trust Fund

Why Housing Trust Funds?– Own-source stream of funds for states– Dedicated to affordable housing

What Housing Trust Funds fund:– Housing development– Housing rehab– Downpayment assistance– Low-interest financing


State Housing Trust Fund

Model: NC DOL-HFA collaboration – “Virtual” match from Housing Trust Fund provides

non-federal match for AFIA grant Pros:

– Source of state funds for asset-building as appropriations and tax credits dry up

– Leverages housing funds at a time when many states are not reinvesting in their Trust Funds

Cons:– Not every state has a Housing Trust Fund– Feds approved NC application, but nothing in writing


Low-Income Housing Tax Credits (LIHTC)

Why LIHTC?– One of most significant sources of funds

for low-income housing development– LIHTC continue to be in great demand on

part of housing developers

What LIHTCs fund:– Housing construction


Low-Income Housing Tax Credits (LIHTC)

Models: None Modest proposal:

– Give extra credit to applicants for LIHTC if they set up IDA programs for their tenants.


IDAs and Small Business Development

Second most common use of IDAs:– 18% of participants in ADD demonstration

intend to save for microenterprise or small business start-up.


Options for Linking Small Business Development Funds

and IDAs1. Integrating microenterprise

development products and services and IDAs


Integrating Micro and IDAs

Why integrate micro and IDAs?– Both share common goals – accumulation

of wealth by poor.


Integrating Micro and IDAs

Models: FSCLF in Delaware (“high integration” model); others

Pros:– Minimize program costs (economies of scale) – Establishing ability to save can increase credit-

readiness and credit-worthiness– IDA “equity” valued as a credit enhancement

during consideration for loan Cons:

– Not new money, rather cost savings


123 W. Main St. 3rd Floor Durham, NC 27701

Tel: 919-688-6444 Fax: [email protected]

Website: www.cfed.org Visit the Internet IDA Learning Network at

http://idanetwork.org

Carl RistCorporation for Enterprise Development

THE END

Documents

© 2002 Corporation For Enterprise Development Leveraging Funds for IDAs: Strategies for Linking to Existing State Programs Friday, November 8, 2002 State