HOME Update: Match, Utility Allowance, Subsidy, Income, Rent, and Homeownership Value Limits Slide 1

Each PJ must contribute $0.25 for every $1.00 of HOME funds it expends Match must be: – A permanent contribution to housing – From a non-federal source – In an eligible form (e.g., cash or BMIR financing, sweat equity, volunteer labor, donated materials, equipment or services, foregone taxes, fees, etc.) – Calculated according to HOME rule methodology What is Match? Slide 2

Eligible match contributions for homebuyer development projects narrowed by Final Rule Contribution to development of homebuyer housing only counts as match to the extent it: – reduces sales price of the housing below FMV; OR – enables unit to be sold for less than TDC (if TDC exceeds the market value) If contribution is mortgaged, it is not match. Match Changes Slide 3

Example: Vacant lot with a FMV of $40,000 is donated to CHDO for HOME homebuyer unit. CHDO expends $80,000 (TDC $120,000) to develop unit Unit FMV is $125,000. Unit sold to a homebuyer for $110,000. Land donation enabled CHDO to sell for $15,000 below FMV. Value of donation is $15,000 Match Reduces Sales Price Below Fair Market Value Slide 4

Example: Vacant lot w/$40,000 FMV donated to CHDO for homebuyer unit. CHDO spends $150,000 (TDC $190,000) to develop the unit Unit FMV is $170,000. CHDO sells unit for $170,000. Match contribution is $20, difference between TDC of $190,000 and sales price of $170,000. Match Reduces Sales Price Below Total Development Cost Slide 5

2015 limits for new and existing units will be posted to HUD Exchange this week. – Listserv message will be sent Most limits have increased over the 2014 limits; however, there were decreases in some areas. Homeownership Value Limits (95% of Median Sales Price) Slide 6

Regulation required use of 221(d)(3) limits – HUD is no longer publishing these limits HUD must undertake rulemaking for new maximum per-unit subsidy limits New CPD Notice allows for use of Section 234 limits as an interim policy – Historically, these are identical to 221(d)(3) limits Limits can be increased up to 240% of Section 234 basic mortgage limit in high-cost areas Maximum Per-unit Subsidy Limits Slide 7

The 2015 HOME rent limits and income limits should be published within the next month. – PJs should use the published High HOME Rent and Low HOME Rent limits not calculate their own limits – This year all rent limits should be based on the actual limit and not adjusted PJs cannot use new income limits until the effective date of the limits published by CPD – This includes the Section 8, 202, 811 income limits issued by HUD effective March 6, 2015 HOME Rents & Income Limits Slide 8

Utility Allowances (UA), §92.252(d) – “The {PJ} must use the HUD Utility Schedule Model or otherwise determine the utility allowance for the project based on the type of utilities used at the project.” – Curtails the use of area-wide PHA utility schedule developed for HCV program; UA must be project specific – Must update UA annually – Applies only to new project commitments on/after effective date (pending HUD Guidance) PJ may choose to apply to existing projects Depending on written agreeme Utility Allowances Slide 9

UAs “always acceptable,” incl. at underwriting & lease-up or affordability period : – Utility Company Estimate – LIHTC Agency Estimate – Energy Consumption Model – HUD Utility Schedule Model Utility Allowances Slide 10

UAs acceptable only during underwriting & lease-up – Any of “always acceptable” methods – Area-wide PHA UA Chart Cannot be used beyond 18 months from project completion in IDIS Corresponds to new lease-up requirements Flexibility intended to address costs of project- specific options, esp. for small projects Utility Allowances Slide 11

UAs acceptable only during affordability period – HUD/USDA approved UA based on actual usage Including UA approved by HUD’s contract administrator (e.g. Section 8, USDA 515, etc.) – Actual Usage (falls within LIHTC “agency estimate” definition), PJ policy should define: Source documentation requirements (utility company v. tenant) Sampling methodology (#, location of each unit type) Foreseeable rate increases Review period (e.g. LIHTC requires 12 month history ending <60 days from date of estimate) Utility Allowances Slide 12

Rule says PJ “must establish” maximum UA – Can require owner to prepare, submit for PJ approval May define qualifications of provider (e.g. HERS rater, Building Performance Institute (BPI) certification, etc.) Can review using PJ staff, subrecipients, or contracted professionals – Cost to establish initial UA, including PJ’s review Project soft cost – Cost to update annually—may affect underwriting Operating cost if incurred by owner PJ’s review costs can be incorporated into annual monitoring fee allowed under §92.214(b)(1)(ii) Utility Allowances Slide 13

Existing projects (committed prior to effective date) – Existing projects may continue to use PHA schedule – Any of other methodologies have been acceptable under prior regulation – Subject to written agreement, PJ can allow existing projects to adopt UA using other options Esp. if project-specific UA results achieves higher rent potential PJ might prefer administrative consistency across portfolio Utility Allowances Slide 14

HOME webpage on HUD Exchange (formerly OneCPD): Join the mailing list: HOME on the Web Slide 15