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