What Is HOME?

HOME Program and Project Requirements

All participating jurisdictions are responsible for compliance with HOME program requirements. These requirements are primarily intended to insure that HOME funds benefit low-income households and that the amount of subsidy provided is reasonable and necessary. Some requirements vary depending upon how the HOME funds are used. However, all HOME-assisted units are subject to per unit subsidy limits adjusted for each area and published by HUD. There is also a minimum subsidy requirement of $1,000 per unit. HOME units must also meet local codes and standards and, at a minimum, Section 8 Housing Quality Standards.

Homeownership

Participating jurisdictions must meet the following conditions with respect to all HOME funds used for homeownership:

all funds must benefit homebuyers or existing homeowners with incomes at or below 80 percent of median;
the purchase price of the property or the appraised value after rehabilitation cannot be greater than 95 percent of the median area purchase price;
the property must be the owner's principal residence; and
resale of the assisted property is subject to recapture of the subsidy or restrictions established by the participating jurisdiction to ensure continued affordability.

Rental Housing

Participating jurisdictions must meet the following conditions with respect to all HOME funds used for rental housing:

at least 90 percent of the assisted households must have incomes no greater than 60 percent of median;
the remaining assisted households (no more than 10 percent) may have incomes up to 80 percent of median;
all HOME-assisted rental units must have rents that are at or below the Section 8 Fair Market Rent (FMR) or 30 percent of 65 percent of median income* whichever is less; and
for projects with five or more units, at least 20 percent of the HOME-assisted units must be occupied by very low-income families (incomes at 50 percent of median or less) paying no more than 30 percent of their income for rent OR have rents no greater than 30 percent of 50 percent of median income. The remaining units (up to 80 percent) may be occupied by low-income households with incomes no greater than 80 percent of median.
*When HOME funds are combined with Federal or State project-based assistance, rents may be set at the maximum rent allowable under the Federal or State program for units occupied by families with incomes at or below 50 percent of median paying no more than 30 percent of their income for rent.

HOME funds may be used to assist eligible units in a mixed income or mixed use project. Frequently, only a portion of the total units in a project are HOME-assisted. It is important to note that all of the program requirements and restrictions apply only to the HOME-assisted units in a project.

For example, a new mixed income, 12-unit rental development may have a total development cost of $1,000,000 including $300,000 in HOME funds. Because the HOME contribution constitutes approximately 30 percent of the total cost, at least 30 percent, or four of the units must be designated as HOME-assisted units.

HOME-assisted units may be fixed or they may "float." That is, the units may be specifically identified within the project, such as all first floor units or units 1A, 2A, 3A, 4A, etc. Alternatively, the units may "float" meaning that the project will maintain the required number of comparable units, subject to all HOME program requirements, for the required period of time. Comparability of units is based on the size distribution and the amenities.

Example: HOME Rent and Occupancy Requirements

Total Development Cost	$1,000,000
HOME Investment	$300,000
Total Units	12
Total HOME Units	4
Median Annual Income (family of 4)	$39,300
High HOME Rents (30% of 65% of median)	$639
Low HOME Rents (30% of 50% of median)	$491
Market Rent	$750

Units	Rents	Annual Income of Tenants
#1-8	$750 (market)	No Restrictions
#9 (Low HOME Rent)	$491 (less tenant-paid utilities)	$19,650 (50% of median)
#10,11,12 (High HOME Rent)	$639 (less tenant-paid utilities)	$31,440 (80% of median)

HUD calculates "high HOME rents" (equal to the lesser of the FMR or 30 percent of 65 percent of median income) that may be charged on up to 80 percent of the HOME-assisted units in a project and "low HOME rents" (equal to 30 percent of 50 percent of median income) that represent the maximum rent that can be charged on at least 20 percent of the HOME-assisted units in a project (with five or more units).

Tenant-Based Rental Assistance

HOME funds can be used to provide tenant-based rental assistance if the applicable Consolidated Plan certifies that such assistance is needed, and subject to the following conditions:

	1.	Contract terms cannot exceed 24 months although they may be renewed, subject to availability of HOME funds.
	2.	Tenants must make a minimum contribution toward rent.
	3.	The rents on all units must be reasonable and comparable to similar unassisted units
	4.	Assistance cannot exceed the difference between 30 percent of a tenant's income and a locally established rent standard.
	5.	The participating jurisdiction may base the rent standard on local market conditions or the Section 8 Fair Market Rent. If the FMR is used, the rent standard cannot exceed the HUD established exception rent but cannot be less than 80 percent of the FMR.
	6.	Assistance must be provided according to written tenant selection rules.
	7.	Units must meet Section 8 housing quality standards.

Affordability Restrictions

All HOME assisted units--both rental and homeownership--are subject to affordability restrictions based on the amount of HOME funds invested in the unit:

Amount of HOME Per Unit Investment	Required Period of Affordability
Less than $15,000	5 years
$15,000 - $40,000	10 years
More than $40,000 (or refinancing of rental housing)	15 years
New construction or acquisition of newly constructed rental units	20 years

All program requirements apply to HOME-assisted units during the respective time periods.

For homeownership units, the affordability period may be enforced either through resale restrictions or recapture provisions, allowing the participating jurisdiction to recapture its HOME investment in the unit if it fails to qualify as affordable housing under the HOME regulations during the required affordability period. Either method can be established by the PJ within the context of the subsidy technique.

Participating jurisdictions must review HOME-assisted rental housing annually to assess compliance. For projects with more than 25 units, the assessment must include an on-site review. For projects with fewer units, an on-site review is required every two or three years (depending on the number of units). Owners of HOME assisted rental housing may annually reexamine the incomes of tenants and recalculate rents with the approval of the participating jurisdiction.

Non-Federal Match Requirement

Participating jurisdictions are required to make permanent contributions to HOME-eligible activities equal to 25 percent of the amount of HOME funds received. The match requirement must be satisfied on a program-wide, rather than a project by project basis. Thus, although each HOME assisted project incurs a match liability, it is not necessary that the liability be satisfied by each individual project. HOME funds used for administration (up to 10 percent of the allocation) or for CHDO operating expenses (up to five percent of the allocation) are not subject to the match requirement.

In general, eligible matching contributions are permanent contributions to a project in any of the following forms:

cash from nonfederal sources;
the value of foregone taxes, fees or other usually imposed charges (by either public or private institutions);
the value of donated land or real property (not acquired with federal resources);
the cost of on-site and off-site infrastructure that is required for HOME-assisted housing;
a percentage of the proceeds from bond financing;
value of donated materials, equipment, labor and professional services;
sweat equity
direct costs of support services to residents of HOME projects;
direct costs of homebuyer counseling to families purchasing homes with HOME assistance;
similar contributions made to non HOME-assisted housing that qualifies as affordable housing under HOME and meets other occupancy and monitoring requirements may also count toward the HOME match contribution.

The following types of contributions do not count as match:

owner equity or investment;
interest rate subsidy attributable to the federal tax-exemption on financing or the value attributable to federal tax credits; and
contributions made with federal funds or resources.

Match requirements may be reduced or eliminated for jurisdictions experiencing fiscal distress. The determination of distress is based on the jurisdiction's poverty rate and level of per capita income. HUD publishes a list of those jurisdictions that qualify for a match waiver along with the annual Notice of Funding Availability (NOFA).

Copyright 1997 - 1998 - 1999 - 2000 - 2001
Affordable Housing and HOME
National Association of Housing and Redevelopment Officials (NAHRO)
630 Eye Street, NW
Washington, DC 20001-3736
Telephone: (202) 289-3500
Fax: (202) 289-4949