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Tiffani C. Moore, Senior Affordable Housing Specialist

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Reservation (new definition): CHDO set-aside funds are reserved only when committed to a specific project . Non-project-specific reservations no longer count toward ... – PowerPoint PPT presentation

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Title: Tiffani C. Moore, Senior Affordable Housing Specialist


1
2013 HOME Program Final Rule CHDO Clinic for
HOME PJs
  • Tiffani C. Moore, Senior Affordable Housing
    Specialist
  • Office of Affordable Housing Programs
  • January 22, 2015

2
Objectives
  • CHDO provisions of 2013 HOME Final Rule
  • Anticipated impact on CHDOs
  • Organizational shifts
  • Project pipeline planning
  • Be on the lookout for further
  • Guidance and Rulemaking

3
2013 HOME Final Rule
  • First comprehensive update since 1996
  • Changes throughout, but of most importance
  • Timelinesscommitment, completion, occupancy
    deadlines
  • Sustainabilityproject underwriting, emphasis on
    capacity, property standards
  • Generally effective for project commitments
    on/after August 23, 2013
  • Some delayed provisions, property standards still
    pending

4
2013 HOME Rule CHDO Impacts
5
CHDO Reservations
Commitments
  • Reservation (new definition) CHDO set-aside
    funds are reserved only when committed to a
    specific project
  • Non-project-specific reservations no longer count
    toward CHDO set-aside requirements
  • PJs must reserve CHDO set-aside to specific CHDO
    projects within 24 months

6
CHDO Project Commitment
  • PJs may not commit HOME funds (and set up in
    IDIS) to a new construction or rehabilitation
    project until
  • All necessary financing is secured
  • A budget and production schedule is established
  • Underwriting and subsidy layering is completed
  • Construction is expected to start within 12
    months
  • Dated signatures required on written agreement

7
Contingent HOME Award
  • A PJ can make a contingent award of HOME funds
    for a proposed project
  • Contingent on obtaining financing, completing
    environmental review, etc.
  • Contingent awards are NOT reservations or
    commitments
  • Do not satisfy PJs 24 month commitment deadline
  • PJs are advised that contingent awards should
  • Have clear performance and cancellation
    provisions
  • Not be open-ended promises

8
Implications
  • PJ responses
  • More selective funding, key underwriting concerns
  • Commitments will likely come later, will a PJ
    offer contingent awards?
  • Impose shorter completion and interim performance
    deadlines to allow for fall-back
  • Conduct more oversight
  • Add detail to written agreements
  • Increase initial occupancy monitoring and
    reporting

9
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10
CHDO Certification
  • Each time a PJ commits funds to a specific CHDO
    project, it must certify that the nonprofit
  • Meets CHDO definition (including the staff
    capacity requirement)
  • Has capacity to fulfill specific role (owner or
    developer/sponsor) it will assume for the project
  • This is in addition to the underwriting and other
    conditions for a project commitment

11
Maintenance of CHDO Status
  • CHDO is expected to maintain CHDO status for the
    duration of the CHDO project
  • Includes affordability period for rental housing
  • PJ is expected to develop procedures to ensure
    CHDO status is maintained

12
CHDO Checklist
Checklist Item Set-Aside Reservation Pre-Development Loan Operating Expenses
1. Legal Structure ? ? ?
Independence ? ? ?
3. LI Community Accountability ? ? ?
4. Capacity ? ? ?
5. Role ? ?
6. Pre-development costs ?
7. Operating expense eligible ?
Exception Can award funds to an organization
without staff capacity only if the operating
award will allow the organization to obtain staff
capacity needed for project funding.
13
Two Major Revisions to Definition
14
Independence from Governmental Entities
  • Pre-2013 provisions about government entities
    still apply
  • Government entity can create a CHDO, but cannot
    appoint more than 1/3 of board (and they cannot
    appoint remaining 2/3)
  • No CHDO can have more than 1/3 board members who
    are public officials or employees of a government
    entity
  • Plus 2013 HOME Final Rule additions
  • Government entities includes PJ, other
    jurisdictions, public housing agencies, HFAs,
    redevelopment agencies, or tribes
  • Officers/employees of a governmental entity may
    not serve as officers (CEO, COO, CFO, managers)
    or employees of any CHDO

15
Created by For-Profit Entity
  • Pre-2013 provisions for CHDO created by a for
    profit entity apply, for-profit creating CHDO
  • Cannot have primary purpose of housing
    development or management
  • Cannot appoint more than 1/3 of board those
    members cannot appoint remaining 2/3
  • CHDO must be free to contract w/any vendor
  • Plus 2013 HOME Final Rule addition
  • Officers and employees of the for profit that
    created the CHDO cannot serve as officers or
    employees of the CHDO

16
Defining Paid Employee
  • Staff counted toward capacity must be paid
    directly by and accountable to the CHDO
  • Cannot be contracted through/cost-allocated from
    another entity
  • Usually, staff will be employees for tax
    purposes
  • CHDO pays payroll/unemployment taxes and
    withholds from wages
  • W-2 is definitive evidence of being paid
    employee for HOME purposes
  • Absent W-2, PJ must review employment contract to
    assess CHDOs level of control over when, where,
    and how work is done
  • Draft HOMEfire

17
What is not paid staff?
  • CHDOs must have paid staff w/ demonstrated
    capacity appropriate to CHDOs role
  • Use of consultants to demonstrate capacity ONLY
    during the 1st year of funding as a CHDO
  • Role is primarily to train staff to build their
    capacity
  • Cannot meet capacity requirement with volunteers,
    donated staff, or board members

18
Capacity Considerations
  • Staff can be full time or part-time, but PJ must
    determine whether capacity is sufficient, based
    on
  • Role owner, developer, sponsor
  • Size, scope, and complexity of project
  • Experience of employees in similar projects
  • Core development skills and rental or
    homebuyer-specific knowledge
  • Level of staff effort for pipeline and project(s)
    (part-time vs. full time, number of staff)

19
Implications
  • Tie certification to project funding, determine
    how
  • To handle full and updated review for CHDOs
    receiving multiple commitments (e.g. series of SF
    projects)
  • To address ongoing CHDO status in rental
    monitoring
  • Determine framework to evaluate staff capacity
  • Variation for own vs. develop vs. sponsor AND
    homebuyer vs. rental
  • Additional attention to board composition
  • Expanded definition of governmental entity, need
    to document for all board members

20
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21
CHDO Checklist
Checklist Item Set-Aside Reservation Pre-Development Loan Operating Expenses
1. Legal Structure ? ? ?
Independence ? ? ?
3. LI Community Accountability ? ? ?
4. Capacity ? ? ?
5. Role ? ?
6. Pre-development costs ?
7. Operating expense eligible ?
Exception Can award funds to an organization
without staff capacity only if the operating
award will allow the organization to obtain staff
capacity needed for project funding.
22
Own, Develop, or Sponsor
  • Own, Develop, and Sponsor roles defined in
    92.300(a)(2) - (6)
  • Previously in CPD-97-11
  • Roles clarified/redefined, especially
  • Expands opportunities under owned
  • Clarifies Tax Credit and subsidiary projects
    under sponsored
  • CHDO must demonstrate capacity in relation to its
    role

23
CHDO as Developer Homebuyer
  • CHDO owns, rehabs or constructs, then sells
    property
  • Written agreement with CHDO must include
  • Actual sales price or method for determining it
  • Disposition of proceeds of sale (return to PJ or
    permit CHDO to retain), and use of proceeds if
    CHDO will retain
  • Not CHDO-specific, but all buyers must be
    underwritten, no more one-size fits all
    downpayment assistance

24
CHDO as Owner Rental
  • CHDO acquires acts as owner of rental housing
  • It does not have to develop housing units
  • If development, CHDO hires and oversees project
    manager or contracts with developer to perform
    rehab or construction
  • CHDO must be owner in fee simple or have
    long-term ground lease during development and
    affordability period

25
CHDO as Developer Rental
  • CHDO itself owns and develops housing
  • CHDO arranges financing and is in sole charge of
    construction or rehab
  • CHDO must be owner in fee simple or have
    long-term ground lease during development and
    affordability period

26
CHDO as Sponsor-Rental Turnkey to Other Nonprofit
  • CHDO develops rental housing on behalf of another
    non-profit and transfers title after completion
  • Conveyed at pre-determined time to pre-identified
    non-profit
  • Other non-profit cannot be created by
    governmental entity, but can be another CHDO
  • If transfer does not happen, CHDO must maintain
    ownership for affordability period

27
CHDO as Sponsor Rental CHDO Affiliate
  • Rental housing is sponsored by a CHDO if owned
    or developed by a
  • For-profit or non-profit that is wholly-owned
    subsidiary of the CHDO or
  • If owned by an Limited Partnership (LP) or
    Limited Liability Company (LLC), the CHDO or its
    wholly owned subsidiary must be the sole general
    partner (LP) or sole managing member (LLC)

28
CHDO as Sponsor Rental CHDO Affiliate (cont)
  • Written agreement must be signed by PJ and the
    entity that will own the project
  • Funds (loan) must be provided directly to
    ownership entity
  • If LP/LLC, documents must specify
  • Removal of CHDO only permitted for cause
  • CHDO must be replaced with another CHDO

29
Implications
  • Owner role expands opportunity for CHDOs without
    development experience, some may be new CHDOs
  • Re-examine turnkey sponsor role
  • Sponsor in LIHTC transactions
  • No more 51/49 joint ventures
  • No more grant to CHDO, loan to partnership
    structures
  • New written agreement provisions re maintaining
    CHDO status, removal/replacement of CHDO

30
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31
CHDO Checklist
Checklist Item Set-Aside Reservation Pre-Development Loan Operating Expenses
1. Legal Structure ? ? ?
Independence ? ? ?
3. LI Community Accountability ? ? ?
4. Capacity ? ? ?
5. Role ? ?
6. Pre-development costs ?
7. Operating expense eligible ?
Exception Can award funds to an organization
without staff capacity only if the operating
award will allow the organization to obtain staff
capacity needed for project funding.
32
Optional CHDO Support
  • Predevelopment loans
  • Increased importance with enhanced commitment
    requirement
  • Overcome liquidity issues impeding project
    planning
  • CHDO operating assistance
  • Program design issue shifting from ongoing
    entitlement to focus on building capacity
  • Available without full certification if
    operating addresses but for capacity concerns

33
CHDO Proceeds
  • Proceeds from sale of homebuyer development
  • PJ choice RETURN as Program Income vs. RETAIN as
    CHDO Proceeds
  • Written Agreement specifies use
  • HOME-eligible activities
  • Could including operating support or
    non-set-aside activities
  • Other housing activities to benefit low-income
    families
  • Could include assistance to struggling rental
    project, broad based counseling program, etc.

34
If a CHDO does not know what a PJ wants
  • CHDOs need
  • Pipeline
  • Predictability
  • Tell them
  • What types of projects does your PJ want (and
    what your PJ does not want)
  • Key underwriting requirements, esp. market data
  • Skills framework
  • Challenge communicating in shifting environment
  • Markets, funding levels, guidance

35
Strategic challenges
  • Mutually dependent, but not equal
  • Set-aside alone cannot sustain a CHDO
  • PJs wants / CHDO own vision
  • Balancing size and focus
  • Expanding product portfolio
  • Expanding geographic footprint
  • Staying focused on community

36
Implications
  • Evaluate the CHDO pool, does it need to be
  • Thinned or expanded
  • Reconsider predevelopment, operating, proceeds
  • Focus on capacity needs
  • Rebalance funding process
  • Competition vs. matchmaking

37
Still to Come
  • Further HUD Guidance
  • Notices on CHDOs, Commitment, Underwriting, etc.
  • HOME accounting changes
  • FIFO
  • Cumulative deadline measurement (requires rule
    making)
  • Future rulemaking
  • Technical corrections, technical amendments
  • Homeownership counseling, cross-cutting standards
  • Energy efficiency and resiliency
  • Broader HUD/USDA/Treasury alignment efforts

38
Questions Answers
39
Reminders Tips
  • Anticipate some uncertainty
  • Communicate with your CHDOs
  • See hudexchange.info for more information
  • Join the HOME Program listserv
  • www.hudexchange.info/mailinglist/
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