4/22/2011

1

Managing Your HOME Program in the Current Fiscal Environment

Strategies that Work!

Randall Mullen

Vice‐President

TDA, Inc.

rmullen@tdainc.org

Panelist

Slide 2

Topics

• Fiscal Challenges

• Management Strategies

– Maximizing resources

– Further utilizing subrecipents

– Better managing CHDOs

• Q&A

Slide 3

4/22/2011

2

Fiscal Challenges

• Reductions to HUD grant awards

– HOME

– CDBG

• Diminished match contributions

• Greater financial accountability

• Outdated program designs

Slide 4

Strategy # 1 – Maximize Resources

• Allocation of HOME is only part of picture

– Is it allocated most effectively for affordable housing?

– Examine program design/budget to use HOME for what it does best

– Use other funding for program elements that permit more discretion in spending or management

Slide 5

Maximize Resources (cont’d)

• Program income is more than “icing on cake” 

– Are projects and activities generating maximum feasible amounts of PI?

– Increase collection and receipt of PI where possible

– Identify match contributions that may generate PI

Slide 6

4/22/2011

3

Maximize Resources (cont’d)

• Administrative dollars can be stretched ……….   by re‐assigning administrative costs as project costs where both are eligible

– Are these eligible costs properly assigned?

• Appraisals

• Counseling and underwriting

• Work specifications

• Construction inspections and oversight

– Be prepared to reverse

Slide 7

Slide 8

Strategy # 2 – Further Utilize Subrecipeints

• Non‐profits are hungry!

– Is PJ assigning roles and responsibilities to greatest possible extent?

• Subrecipeints can assist in managing “all or part of HOME program” 

• They implement most of CD projects/activities

• Many have under utilized capacity

– Request proposals, carefully select and tightly engage

Slide 9

Further Utilize Subrecipeints (cont’d)

• Many can do more

– Are present subrecipients doing all they can?

– Consider amending written agreements to enlarge role and reduce PJ cost

4/22/2011

4

Strategy # 3 – Better Manage CHDOs

• Profit motivated CHDOs will produce housing

– Does PJ manage CHDO relationship as originally intended?

– CHDOs permitted to reinvest project proceeds have incentive to perform

– Re‐thinking rental housing may be profitable

– Sustainable projects reduce demands for operating grants

Slide 10

Better Manage CHDOs (cont’d)

• Stimulating greater production will meet community needs

– Can PJ do more to steer CHDOs?

– Obtain and provide capacity building and direction that fully utilizes set‐aside

Slide 11

Q & A

• What is reaction to strategies?

• Are there other suggestions?

Slide 12

    

     

 

4/22/2011

Managing  your  HOME  Program  in  the  Current  Fiscal  Environment

Keith  L.  Free,  MPA,  AICP

Community  Development  Director 

City  of  Owensboro,  Kentucky

Owensboro, Kentucky HOME Admininistration Overview

Staff Funding Admin Breakdown •Community Total Funds: $973,918 Total Admin Cost: $255,396 Development HOME: $365,182 HOME Admin: $36,518 Director: 1 CDBG: $588,736 CDBG Admin: $136,266

CDBG PI: $20,000 City General: $82,612 •Housing Planner: 1

Workload

•Total New Homes Built & Sold: 16 •Total Existing Homeowners Renovated: 12

•Street Extension Projects: 2 •Park Improvement Projects: 1

•Sidewalk Improvement Projects: 3 •Neighborhood Redevelopment Plans Created: 1

•Special NRSA Projects: Slide  2

2

Do More With Less

• This  Challenges  us  to  become  Creative  when  we  have  less  Resource  available.

• The  Program  you  may  be  Implementing  may  not  be  the  most  Efficient  and  Effective  way  to  deliver  that  specific  Outcome.

Slide 3

1

    

 

 

 

 

4/22/2011

Decision Making For New Programs

• Do  we  want  to  Create  this  New  Program?

– Ask  the  following  questions: • Will  we  need  new  staff   to  do  it?

• What  are  the  administrative  burdens  that  it  will  create  for  existing  staff?

• Is  it  complicated  or  simple?

Slide 4

Project  Responsibility

Slide 5

Build  New  Creative  Partnerships

• Are  you  doing  everything  associated  with  Housing  Development

Slide 6

Private $$

? – Buying  Property

HOME  – Building  Homes $$

– Finding  Buyers  &  Selling  Homes

– Financial  Education Non  Profit  $$

2

 

 

4/22/2011

Build  New  Creative  Partnerships Private  Sector

• Do  your  Housing  Programs  Incentivize  the  Private  Sector? In  Owensboro  we  give  HOME  grants  to  Private  Developers  who:

• Build  new  homes  within  our  Neighborhood  Revitalization  Plan  Area  Boundary.

• Build  the  Homes  that  we  design  in  office  (we  control  the  look).

• Find  the  buyers  (we  help,  but  they  are  ultimately  responsible).

• Get  HOME  funding  gran

Slide 7

t  after  they  sell  the  home  to  a  qualified  buyer.

Owensboro  HOME  Homebuyer  Program  – How  it  Works

Developer Purchase Lot or Vacant Old House & Demo $10,000

Hard Cost to Build New Home (1,200 sqft x $70) $84,000 Soft Cost to Construct New Home $ 2,000

Total Real Cost $96,000

Developers Incentive (15%) x 1.15

Total Development Cost $110,400

Total Max Grant - $40,000

Best Sales Price for Max Profit ($71,400 min. appraisal) $70,400

Developer  Net  Profit  is  ($110,400 ‐ $96,000)  =

$14,400 Developer  Could  Sell  Home  for  $65,000  and  still  make  a  nice  

Net  Developer  Profit  of     $9,000 Slide  8

Build  New  Creative  Partnerships Non  Profit  Organizations

• Do  you  Maximize  Non  Profit  Partnerships  in  your  Community?

– Can  be  treated  the  same  as  a  Private  Developer.

– Can  be  creative  in  timing  of  funding  distribution  to  assist  the  Non  Profits  cash  flow  (creating  more  capacity  to  have  more  homes  under  construction).

Slide 9

3

 

 

 

4/22/2011

Build  New  Creative  Partnerships Other  Funding  Sources

• Bundle  HOME  with  other  Sources  of  Funding.

– CDBG

– Federal  Home  Bank

– State  Funds

– Other  Federal  Funding  Sources

– Private  Investment

(don’t  go  on  a  heavy  suSlide 10

bsidy  binge)

High  Subsidy Medium  Subsidy Low Subsidy

Home  Grant:  $80,000 Home  Grant:  $60,000 Home Grant: $40,000

Private  Mortgage:  $30,000 Private  Mortgage:  $50,000 Private Mortgage: $70,000

Serves:  30 ‐80%  LMI Serves:  40 ‐80%  LMI Serves: 50‐80% LMI

Homes  Completed:  6 Homes  Completed:  8 Homes Completed: 12

If you had $480,000 in Home Funds to Ex pend

Calibrate  the  HOME  Subsidy  Amount  for  Maximum  Impact

Slide 11

Calibrate  the  HOME  Subsidy  Amount  for  Maximum  Impact

Slide 12

High Subsidy ($80,000) 6 Homes

Medium Subsidy ($60,000) 8 Homes

Low Subsidy ($40,000) 12 Homes

……If  You  Had  $480,000  in  HOME  Funding

4

 

   

 

 

4/22/2011

Calibrate  the  HOME  Subsidy  Amount  for  Maximum  Impact

Slide 13

High Subsidy ($80,000) 18 Homes

Medium Subsidy ($60,000) 24 Homes

Low Subsidy ($40,000) 36 Homes

……If  You  Had  $480,000  in  HOME 

Funding  For  3 Years  ($1,440,000)

High Quality Homes

• Homes  Should  be  part  of  a  Greater  Plan  to  Stabilize  a  Defined  Neighborhood.

• The  more  you  can  Transform  an  Affordable,  yet  Undesirable  Neighborhood  into  an 

Affordable  Desirable  Neighborhood,  you  have  Exponentially  Leveraged  Affordable  Housing 

Choice  in  your  Community.

Slide 14

Effective  Communication Homes  Can  Speak

The Home That You Build Communicates to the Neighborhood……. What are You are Trying to Say?

Slide 15

5

 

 

4/22/2011

Effective  Communication Homes  Can  Speak

• Now  you're  talking…

Slide 16

The  High  Cost  Of  Hand  Holding

17

•Creates Unneeded Dependency

•Robs Individuals of their Rights of Ownership in the Process

•Creates Added Responsibility and Cost to Administer of Grant

Programs

•Deprives Applicants of their Rights of Ownership in the

Process

Slide

Who  owns  the  Direction  for  Affordable  Housing  and  Neighborhood  

Redevelopment  in  your  Community?

The  Direction

•Do Much More with Much Less

•Make Good Program Decisions

•Consolidate Project Responsibility

•Build Creative New Partnerships

•Leverage HOME Subsidy Amount to Maximize Neighborhood Impact

•Build High Quality Homes That Positively Communicate To Neighbors

Slide  18

6

4/22/2011

Keith  L.  Free,  MPA,  AICP

Community  Development  Director   /  City  of  Owensboro,  Kentucky

Email:  freekl@owensboro.org

Website:  www.owensboro.org

Phone:  (270)  687‐8658

7