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HOME Grants

Grants to Tennessee Nonprofits and Agencies to Promote
Affordable Housing for Low-Income Residents

Agency Type:

State

Funding Source:

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Tennessee Housing Development Agency (THDA)

Conf. Date:

01/31/18

Deadline Date:

03/08/18 4:00 PM CST

Description:

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Grants to Tennessee nonprofit organizations, local governments, and community housing development organizations to increase the availability of affordable housing for low-income households. Funding will support the rehabilitation, preservation, and production of eligible housing units.

Eligible Activities:

There are specific eligible activities under the HOME Program that must address the housing needs of low- income households. Manufactured housing and manufactured housing lots are not eligible for HOME assistance. Housing does not include emergency shelters (including shelters for disaster victims) or facilities such as nursing homes, convalescent homes, hospitals, residential treatment facilities, correctional facilities, and dormitories, including those for farm workers or housing for students. Eligible housing activities include:

1. Homeowner Rehabilitation Program.

Homeowner Rehabilitation: The use of HOME funds will include the rehabilitation and reconstruction of existing housing units that are the principal residence of the owner. For the purposes of the HOME program, rehabilitation includes the demolition and rebuilding or reconstruction of substandard housing.

“Reconstruction” is defined as the rebuilding, on the same lot, of housing standing on a site at the time of project commitment, except that housing that was destroyed by a disaster may be rebuilt on the same lot if HOME funds are committed within 12 months of the date of destruction. The number of housing units on the lot may not be decreased or increased as part of a reconstruction project. However, the number of rooms per unit may be increased or decreased depending upon the needs and the size of the household. The reconstructed housing must be substantially similar to the original housing unit. All reconstructed housing will have a compliance period of 15 years.

For all homeowner rehabilitation activities, the value of the HOME assisted property after rehabilitation must not exceed 95 percent of the median purchase price for the area.

If the proposed HOME investment for hard construction costs into a unit to be rehabilitated exceeds 75% of the after rehabilitation appraised value of the unit, the unit must be reconstructed. Hard construction costs exclude those for building inspections, lead-based paint inspections, energy related inspections, and work write-ups, but includes all remaining costs associated with addressing lead-based paint hazards for the unit.

Priority should be given to the Uniform Property Condition Standards (UPCS) Checklist deficiencies identified during the initial inspection. Level 3, 2, and 1, respectively, rate the severity of the item needing the repair, including, but not limited to: roofs, HVAC systems, electrical systems, plumbing systems, foundation problems, water supply issues, exterior painting to maintain the structure, and limited interior painting. The structure must exhibit at least one code violation as revealed by the initial code inspection.

HOME regulations require that after the work is complete, the entire structure must meet the Uniform Physical Condition Standards (UPCS) and the adopted building code in effect for the jurisdiction in which the housing unit is located, or in the absence of a local building code, the Existing Building Code of the International Code Council (ICC). Units assisted with HOME funds must require at least $1,000 of rehabilitation work to bring the unit into compliance with the applicable codes. Housing units that cannot be brought up to the applicable code using the maximum grant funds are ineligible.

Housing Rehabilitation Costs and Lead-based Paint. If a unit to be rehabilitated was built after 1978, the rehabilitation costs are capped by the HOME subsidy limit. All units built prior to 1978 will require a risk assessment by a qualified lead inspector. If the risk assessment of a pre-1978 unit discloses no lead, then the cap for rehabilitation costs will be the HOME subsidy limit. If the risk assessment for a pre-1978 unit reveals the presence of lead-based paint and the estimated rehabilitation costs are less than $25,000, then standard treatments will apply and the HOME subsidy for rehabilitation is limited to $25,000. If the risk assessment reveals the presence of lead-based paint and the estimated rehabilitation costs exceed $25,000, then abatement will be required by a qualified abatement contractor to provide rehabilitation assistance up to the HOME subsidy limit.

2. Homeownership Programs.

CHDO: CHDOs must use HOME funds to develop units for homeownership, including new construction or acquisition and substantial rehabilitation of substandard single-family dwellings. The CHDO must be the owner and developer of all units at the time the units are constructed or rehabilitated. When units are sold to eligible home buyers, the HOME funds must be repaid to the CHDO as CHDO proceeds and must be used to develop additional single- family units for homeownership in compliance with the HOME regulations. A CHDO must allow an amount up to $14,999 of HOME funds to remain with the unit as a soft second mortgage as necessary to qualify the household for permanent financing, but not less than $1,000. THDA requires that a subsidy remain in the financing when the unit is sold so affordability is based on the less restrictive recapture provision of the HOME regulations. Any homeownership unit developed by a CHDO that cannot be sold to an eligible homebuyer within nine months of the Certificate of Occupancy must be converted to rental housing and rented to an income eligible tenant.

Before construction or acquisition and rehabilitation can begin under homeownership, all CHDOs must demonstrate a pipeline of eligible buyers pre-qualified for a permanent loan. Although speculative construction or acquisition is not generally allowed, under certain circumstances THDA will allow a CHDO to apply for an exception to this policy on a project by project basis. To be considered for an exception, the CHDO must demonstrate that it meets certain criteria, including:

(1) Experience and capacity to manage an affordable rental housing program;
(2) Success during the last three (3) years in managing affordable rental housing in the area of the proposed project with an average list to lease-up term of no more than 180 days;
(3) A current average market time of list to contract for sale for similarly priced, comparable homes in the area of the proposed project of no more than 120 days;
(4) Extenuating circumstances that prevent the CHDO from having a pipeline of pre-qualified homebuyers to support their development activity.

Additionally, if the property remains unsold nine months after completion, a lease purchase may be permitted if the CHDO can demonstrate that it has an existing and active lease-purchase program.

Cities, counties and nonprofit organizations (non-CHDO). Homeownership programs are restricted to a soft second mortgage necessary to qualify the household for permanent financing.

Soft second mortgages. Any HOME funds used for a soft second mortgage in homeownership programs are limited to the lesser of $14,999 in HOME funds or the amount of HOME funds necessary to qualify the household for permanent financing, but not less than $1,000. All grant recipients using HOME for soft second mortgages must use the THDA single-family underwriting template to determine the amount of HOME assistance, and must submit the determination to THDA for review and final approval. If the underwriting template indicates that the home buyer does not have an unmet need for the soft second mortgage, the grant recipient may not provide direct HOME assistance to that home buyer. The amount of the soft second mortgage is the “direct HOME subsidy” provided to the home buyer and subject to recapture.

The soft second mortgage will have an affordability period of five years which is forgiven at the end of the fifth year if the unit remains in compliance, i.e., the unit remains the permanent residence of the initial buyer and is not leased or vacated. If the unit is sold or transferred during the affordability period, the amount of the HOME subsidy subject to recapture will be reduced by twenty percent (20%) per year of occupancy by the initial home buyer. If the unit is leased or vacated during the affordability period, the entire HOME subsidy must be repaid.

The soft second mortgages may not be combined with other THDA-funded “second mortgage” assistance programs, including Great Choice Loan Plus assistance, or with funding available through the New Start program, and any subsequent or similar programs operated by THDA. The THDA HOME funded soft second mortgage may be combined with a THDA Great Choice first mortgage loan.

Sales Price. All units must be sold for an amount not to be lower than the appraised value of the unit.

Sales Price Limits. The sales price limit for homeownership programs are the Property Value Limits. See Attachment Two: Property Value Limits Existing Homes HOME Purchase Price and New Homes HOME Purchase Price.

Underwriting. Front and back end ratios may not exceed twenty-nine (29%) and forty-one percent (41%), respectively. Lower ratios are encouraged.

Permanent Financing. Under homeownership programs, THDA expects the use of THDA mortgage loans whenever suitable. Other financing may be used if it is comparable to a THDA mortgage loan. Permanent financing is considered comparable if the interest rate does not exceed the prevailing THDA Great Choice interest rate by more than one percentage point and when it is demonstrated that the home buyer represents a commensurate underwriting risk to the lender. All loans must have a fixed interest rate fully amortizing over the 30 year term of the loan. There can be no pre-payment penalty for early payoffs.

Home Buyer Contribution. The home buyer must make a contribution from their own funds equal to one percent (1%) of the purchase price of the property.

Home Buyer Education. All home buyers must complete a home buyer education program from a THDA qualified home buyer education provider prior to purchase.

Neighborhood market conditions. Applicants proposing homeownership projects must document that neighborhood market conditions demonstrate a need for the project and must complete a market study as part of the 2018 application cycle for homeownership programs.

Deadline for Sale. Homeownership units must be sold to an eligible home buyer within nine (9) months of project completion. If a homeownership unit is not sold to an eligible home buyer within nine months of the Certificate of Occupancy, the unit must be converted to rental housing for the appropriate rental affordability period or the HOME funds must be repaid by the grant recipient to THDA.

THDA expects that the grant recipient will not only shepherd the home buyer through the home buying process, but also work toward fostering an on-going relationship with the home buyer. This responsibility includes facilitating additional homeowner counseling, verifying homeowner occupancy requirements on an annual basis, and monitoring mortgage loan default issues.

3. CHDO Operating Expenses, Developer’s Fees and CHDO Proceeds.

a. CHDO Operating Expenses. A CHDO may request up to 7% of the funds awarded for the acquisition and rehabilitation or new construction of housing for sale to low and moderate income home buyers as CHDO operating expenses to help with the administrative costs of operating the organization. Operating expenses are separate from project funds and are funded from the 5% set- aside for CHDO operating expenses from the annual HOME allocation.

b. Developers Fees. A CHDO may also request an 8% developer’s fee if the CHDO is acting as a developer of housing. The developer’s fee is 8% of the HOME funds used to construct or acquire and rehabilitate the unit. The developer’s fee is a project soft cost and counts against the maximum per unit subsidy limit.

c. CHDO Proceeds. CHDO proceeds are the HOME funds returned to a CHDO upon the sale of a unit developed by the CHDO from the buyer’s permanent financing. The CHDO must use its CHDO proceeds to develop more housing for homeownership. A CHDO may use 15% of the CHDO proceeds for operating expenses, divided as follows: Maximum of 7% for administration and Maximum of 8% for developer’s fees. Once the CHDO proceeds are used a second time to develop more housing for homeownership, the HOME restrictions on the use of proceeds are eliminated. The 25% cap on the amount of CHDO proceeds that can be used for operating or administrative expenses has been eliminated. This policy applies retroactively to current, active CHDO grants.

4. Project Soft Costs.

In planning their programs, applicants may include the costs for inspections and work write-ups as a project-related soft cost. The costs for inspections and work write-ups are capped at $2,500. In addition to the costs for inspections and work write-ups, the costs for lead-based paint inspections, risk assessments and clearance testing, and architectural and engineering fees are also paid as project soft costs. Costs associated with HUD-mandated THDA inspections are also a project soft cost, but do not count against the $2,500 cap. All project soft costs count toward the HUD maximum per unit subsidy limit.

Income Limits:

HOME funds may be used to benefit only low-income households. "Low income households" means an individual or household whose income does not exceed 80% of the area median income, adjusted for household size. THDA encourages the targeting of HOME resources for homeowner rehabilitation activities to very low income households.

GrantWatch ID#:

GrantWatch ID#: 167520

Estimated Total Program Funding:

$9,500,000

Estimated Size of Grant:

An applicant must apply for at least $100,000 and may apply for a maximum HOME grant of $500,000. There is a $750,000 limit on the amount of HOME funds that can be awarded in any one county.

Term of Contract:

HOME contracts will begin July 1, 2018 and will end June 30, 2021.

Additional Eligibility Criteria:

HOME funds are awarded through a competitive application process to cities, counties and nonprofit organizations outside the local participating jurisdictions of Clarksville, Chattanooga, Jackson, Knoxville, Memphis, Knox County, Nashville-Davidson County, Shelby County, and the Northeast Tennessee/Virginia Consortium (Bluff City, Bristol, Johnson City, Kingsport, Sullivan County and Washington County).

HOME funds are also awarded to Community Housing Development Organizations (CHDOs) designated by the State working in any community across Tennessee.

Nonprofit organizations located in a local participating jurisdiction may apply for projects located outside the local participating jurisdictions. For the 2018 application cycle, nonprofit organizations seeking designation as a Community Housing Development Organization (CHDO) serving a local participating jurisdiction may apply for projects located within the local participating jurisdictions.

To be eligible, a nonprofit organization must:

1. Meet one of the two following criteria:
a. All private, nonprofit organizations must be organized and existing in the State of Tennessee (as evidenced by a Certificate of Existence from the Tennessee Secretary of State, dated no more than thirty (30) days prior to the application date); OR
b. Be organized and existing under the laws of another state and be qualified to do business in Tennessee (as evidenced by a Certificate of Existence from the other state’s Secretary of State dated no more than thirty (30) days prior to the application date and by a Certificate of Authorization to do business in Tennessee from the Tennessee Secretary of State, dated no more than thirty (30) days prior to the application date).

2. Demonstrate at least two (2) years of experience providing affordable housing or affordable housing related services in the state of Tennessee satisfactory to THDA, in its sole discretion.

3. Have no part of its net earnings inuring to the benefit of any member, founder, contributor or individual;

4. Have among its purposes the provision of decent housing that is affordable to low-income and moderate-income persons, as evidenced in its charter, articles of incorporation, resolutions or by-laws, and experience in the provision of housing to low income households;

5. Have standards of financial accountability that conform to 2 CFR Part 200, Uniform Administrative Requirements, Audit Requirements and Cost Principles; and

6. Have an IRS designation under Section 501(c)(3) or Section 501(c)(4) of the federal tax code. A 501(c)(3) nonprofit applicant may not submit an application until they have received their designation from the IRS. A 501(c)(4) nonprofit applicant must provide documentation satisfactory to THDA, in its sole discretion, that the nonprofit has filed the necessary materials with the IRS and received a response from the IRS demonstrating 501(c)(4) status.

THDA will also accept HOME applications from community housing development organizations (CHDOs). A CHDO is a private, nonprofit organization that meets all the requirements for a nonprofit listed above, plus the following additional requirements:

1. Not be controlled by, or under the direction of, individuals or entities seeking to derive profit or gain from the CHDO. If a CHDO is sponsored or created by a for-profit entity, all of the following shall apply:
a. The for-profit entity may not be an entity whose primary purpose is the development or management of housing, such as a builder, developer or real estate management firm;
b. The for-profit entity may not have the right to appoint more than one-third of the membership of the CHDO’s governing body. CHDO board members appointed by the for-profit entity may not appoint the remaining two-thirds of the board members;
c. The CHDO must be free to contract for goods and services from vendors of its own choosing;
d. The officers, directors, owners (stockholders, managers, members, etc.) or employees of the for-profit entity cannot be officers, directors, owners (stockholders, managers, members, etc.) or employees of the CHDO.

2. Is not a governmental entity (including the participating jurisdiction, other jurisdiction, Indian tribe, public housing authority, Indian housing authority, housing finance agency, or redevelopment authority) and is not controlled by a governmental entity. An organization that is created by a governmental entity may qualify as a CHDO; however, the governmental entity may not have the right to appoint more than one-third of the membership of the organization’s governing body and no more than one-third of the board members may be public officials or employees of recipient governmental entity. Board members appointed by the State or local government may not appoint the remaining two-thirds of the board members. The officers or employees of a governmental entity may not be officers of the Board or employees of a CHDO

3. Maintains accountability to low income community residents by:
a. Including residents of low-income neighborhoods, other low-income community residents, or elected representatives of low-income neighborhood organizations in at least one-third of the CHDO’s governing board's membership. For urban areas, “community” may be a neighborhood or neighborhoods, city, county or metropolitan area; for rural areas, it may be a neighborhood or neighborhoods, town, village, county, or multi-county area (but not the entire State); and
b. Providing a formal process for low-income program beneficiaries to advise the CHDO in its decisions regarding the design, site selection, development, and management of affordable housing.

4. Has a demonstrated capacity to successfully carry out housing projects assisted with HOME funds. A CHDO undertaking development activities as a developer or sponsor must satisfy this requirement by having paid employees with housing development experience who will work on projects assisted with HOME funds. Paid staffing may be documented by providing copies of the most recent W-2 or W-4, as applicable, issued by the nonprofit entity for each staff member. For its first year of funding as a CHDO, a CHDO may satisfy this requirement through a contract with a consultant who has housing development experience to train appropriate key CHDO staff. A CHDO that will own housing must demonstrate capacity to act as owner of a project and meet the requirements of 24 CFR 92.300(a)(2). A CHDO does not meet the test of demonstrated capacity based on any person who is a volunteer or whose services are donated or cost allocated by another organization, or by hiring a consultant.

5. Has a history of serving the community within which the housing to be assisted with HOME funds is to be located. In general, a CHDO must be able to show at least one year of serving the community through housing activities benefiting low income persons or families before HOME funds may be awarded to that CHDO. However, a newly created CHDO formed by local churches, service organizations, or neighborhood organizations may meet this requirement by demonstrating that its parent organization has at least one year of serving the community through housing activities benefiting low income persons or families.

CHDOs may only apply for HOME funding for projects in which the CHDO is the owner and developer. CHDO applicants must submit Part I and Part II of Attachment One: Nonprofit Checklist/CHDO Designation with supporting documentation and signed by the applicant's counsel.

1. Requested (submitted an official Request for Payment Form with supporting documentation) the following percentages of their grants by February 28, 2018 to be eligible for the 2018 HOME program:

Home Grant Year / Spend Down Requirement:
-1992 – 2011: Spend Down Requirement 100%
-2012 CHDOs: 100%
-2012 – 2013 Regular Rounds: 100%
-2013 CHDOs: 100%
-2014 Regular and CHDOs: 75%
-2015-2016 Regular and CHDO Round and CHDO Mini-Round 1 & 2: 50%
-2017 Regular, CHDO and CHDO Mini-Rounds 1 and 2: 25%

These spending requirements also apply to applications from CHDOs. In addition, CHDOs that were funded for homeownership programs that generate CHDO proceeds will have to demonstrate a need for additional HOME funds and documentation that neighborhood market conditions demonstrate a need for the project to be eligible for the 2018 HOME program.

2. To be eligible, all applicants for the 2018 HOME application cycle must be in compliance with all other THDA programs in which they participate.

Prohibited Activities:
1. Provide project reserve accounts, or operating subsidies;
2. Provide tenant-based rental assistance for the special purposes of the existing Section 8 program, in accordance with Section 212(d) of the Act;
3. Provide non-federal matching contributions required under any other Federal program;
4. Provide assistance authorized under Section 9 of the 1937 Act (annual contributions for operation of public housing);
5. Carry out activities authorized under 24 CFR Part 968 (Public Housing Modernization);
6. Provide assistance to eligible low-income housing under 24 CFR Part 248 (Prepayment of Low Income Housing Mortgages;
7. Provide assistance (other than assistance to a home buyer to acquire housing previously assisted with HOME funds) to a project previously assisted with HOME funds during the period of affordability established by HUD or THDA in the written agreement. However, additional HOME funds may be committed to a project up to one year after project completion, but the amount of HOME funds in the project may not exceed the HUD maximum per-unit subsidy amount;
8. Pay for any cost that is not eligible under 24 CFR 92.206 through 92.209;
9. Use HOME funds for rental housing projects;
10. Provide assistance for a homeowner rehabilitation project by a CHDO from the 15% CHDO set-aside. A CHDO funded through the 15% CHDO Set-aside can only participate in the HOME program if they are the owner and developer of a project.

Layering:
Layering is the combining of other federal resources on a HOME-assisted project that results in an excessive amount of subsidy for the project. Such activity is prohibited. Grantees must analyze each project to insure that only the minimum amount of assistance is allocated to the project. In no case may the amount of HOME funds exceed the HUD Maximum Per Unit Subsidy Limit.

Pre-proposal Conference:

The Tennessee Housing Development Agency is pleased to announce that it will host application workshops for the 2018 HOME program in each of the Grand Divisions.

All three workshops will be held at 9:00 AM - Noon Local Time at the following locations and dates:

Middle Tennessee - 1/18/2018
Midtown Police Precinct
1441 12th Ave. S
Nashville, TN 37203

E ast Tennessee - 1/24/2018
Knoxville Community Development Corporation Board Room
901 N Broadway
Knoxville, TN 37917

West Tennessee - 1/31/2018
Southwest Tennessee Development District Offices
102 E College St.
Jackson, TN 38301

Pre-Application Information:

The amount of the 2018 HOME allocation is unknown until there is an approved federal budget; however, THDA anticipates receipt of an amount equivalent to the amount received in FY 2017, approximately $9,500,000. Additionally, THDA will make available any returned or leftover funds from the 2017 or earlier funding rounds as determined at the time of award in May 2018.

For the FY 2018 HOME program, THDA will continue to provide the required federal match for projects submitted under the Urban/Rural Round. Although no local match is required from Urban/Rural Round applicants, THDA will award points based on the contribution of eligible match reflected in an application as specified in the scoring matrix. THDA will count any non-federal project funds or other resources reflected in successful applications that qualify as match under the HOME rule toward the match requirement.

All applications from nonprofit housing developers submitting an application under the CHDO Round must provide a 25% match towards the proposed project.

Applications for the HOME program must be received by THDA on or before 4:00 PM CST on Thursday, March 8, 2018. THDA anticipates notifying successful applicants by the end of May, 2018.

Contact Information:

Before starting your grant application, please review the funding source's website listed below for updates/changes/addendums/conferences/LOIs.

If you have questions please call Bill Lord at (615) 815-2018.

Community Programs Office
502 Deaderick St
Nashville, TN 37243

URL for Full Text (RFP):

Geographic Focus:

USA: Tennessee