HomeMy WebLinkAboutAgenda 06-18-19 Item 8-v - Proposed Changes to the Long-Term Housing Affordability Policy
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: June 18, 2019
Action Agenda
Item No. 8-v
SUBJECT: Proposed Changes to the Long-Term Housing Affordability Policy
DEPARTMENT: Housing and Community
Development
ATTACHMENT(S):
1) Current Long-Term Housing
Affordability Policy
2) Excerpted Federal Regulations for
HOME Reporting Requirements
INFORMATION CONTACT:
Sherrill Hampton, Housing and
Community Development Director,
(919) 245-2490
PURPOSE: To approve changes to the Long-Term Housing Affordability Policy as it relates to
reporting requirements for projects financed with HOME or other federal funds in order to bring
about consistency with federal regulations and to incorporate those changes, if approved, into
the FY2019-20 HOME Annual Action Plan and all future Annual Action Plans.
BACKGROUND: On February 21, 2017, the BOCC approved changes to the 2000 Policy
based on recent activity and input from the Affordable Housing providers. The County Attorney,
based on BOCC action taken for the Greenfield Place Project, crafted an “Exceptions Section”
of the Policy. However, the Exceptions Section and the overall Policy did not at the time
address the associated reporting requirements as it relates to the HOME Program.
The HOME regulations governing “periods of affordability” are contained in 24 CFR Part 92.252
and 92.254. For rental housing projects, see the chart below:
Rental Housing Activity Minimum
Period of
Affordability
in Years
Rehabilitation or acquisition of existing
housing per unit amount of HOME funds:
Under $15,000
5
$15,000 to $40,000 10
Over $40,000 or rehabilitation involving
refinancing
15
New construction or acquisition of newly
constructed housing
20
For HOME projects involving homeownership activities, see the chart below:
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Homeownership Assistance HOME
Amount Per Unit
Minimum
Period of
Affordability
in Years
Under $15,000 5
$15,000 to $40,000 10
Over $40,000 15
Presently there is an inconsistency between the Annual Action Plan and the Long-Term Housing
Affordability Policy, as well as the lack of a mechanism for reporting that is not burdensome to
community partners and/or developers receiving funding under Orange County HOME
Consortium given the County’s Long-Term Housing Affordability Policy.
The proposed changes include the following as a means to bring about consistency:
1.) Annual Action Plans should utilize the “shared net proceeds methodology” listed in the Long-
term Housing Affordability Policy as it relates to recapture and homeownership activities,
excluding transfers to income-eligible family members or other qualified buyers. However, for
rental activities, recapture will be based upon the HOME investment in the project and
whether or not the proposed buyer will maintain the affordability of the unit(s).
2.) As it relates to the Long-Term Housing Affordability Policy, it is requested that the following
change be included as a “new Item V” as it relates to reporting requirements for projects and
state the following:
• “In the case of federally funded and/or other projects affected by this Policy, reporting
requirements will run as follows:
o Federal projects (rental activities) – meet the statutory federal requirements as
stated in the preceding chart and once the federal requirements have been met,
reports should be submitted in 10-year increments, as well as utilize “self-
certification” on an annual basis by tenants and maintain those documents onsite
in the intervening years, excluding initial lease-ups which require full
documentation for eligibility determinations. All reporting shall cease in the 60th
year except in the case of a refinance, substantial rehabilitation or transfer of
ownership. If one of the aforementioned events occurs, reporting will continue or
re-start for the remainder of the affordability period.
o Federal projects (homeownership activities) – meet the statutory federal
requirements in the preceding chart and once those have been met, reports
should be submitted in 10-year increments with an annual verification of
occupancy until the 40th year at such time all reporting will cease except in the
case of a transfer of ownership.
o For locally funded projects (substantial rehabilitation) – reporting shall be similar
to the federal HOME requirements with reporting beginning at the completion of
project and running for a 15-year term. All reporting will cease in year 15.
o For locally funded projects (rental activities) – reporting shall mirror the
requirements outlined in Sub-Bullet 1 above.
o For locally funded projects (homeownership activities) – reporting shall mirror the
requirements outline in Sub-Bullet 2 above.
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(Note that while reporting requirements may cease per the proposed timetable
outlined above, the Declaration of Restrictive Covenants and Deeds of Trust are still
in effect and will serve to protect the County’s affordable housing inventory.)
3.) The current Item V will become Item VI and no changes to the language is proposed.
FINANCIAL IMPACT: No negative financial impact is anticipated by the approving of these
changes.
SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goals are applicable
to this item:
• GOAL: FOSTER A COMMUNITY CULTURE THAT REJECTS OPPRESSION AND
INEQUITY
The fair treatment and meaningful involvement of all people regardless of race or color;
religious or philosophical beliefs; sex, gender or sexual orientation; national origin or
ethnic background; age; military service; disability; and familial, residential or economic
status.
• GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY
The creation and preservation of infrastructure, policies, programs and funding necessary
for residents to provide shelter, food, clothing and medical care for themselves and their
dependents.
• GOAL: CREATE A SAFE COMMUNITY
The reduction of risks from vehicle/traffic accidents, childhood and senior injuries, gang
activity, substance abuse and domestic violence.
RECOMMENDATION(S): The Manager recommends that the Board approve the changes to
the Long-Term Housing Affordability Policy as outlined above.
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LONG-TERM HOUSING AFFORDABILITY POLICY
PURPOSE: This policy establishes the acceptable strategies for ensuring long-term
affordability in all affordable housing programs supported by County financial resources.
TARGET POPULATION:
• Homeownership programs are targeted to families with incomes at or below 80% of
the HUD published area median income.
• Rental housing programs are targeted to families with incomes at or below 60% of
the HUD published area median income.
DEFINITIONS:
1. Affordable Housing-is defined as:
a. Owner-occupied housing for families with incomes at or below 80% of the
HUD published area median income and which the monthly housing costs
(including PITI, HOA dues and required fees) do not exceed 30 percent of
the gross monthly income of the purchaser(s), or
b. Rental housing for families with incomes at or below 60% of the HUD
published area median income and which the occupant pays no more than
30%ofgross income forall housing costs including utilities.
2. First-Time Homebuyer or Qualified Buyer - A First-Time Homebuyer for the
purposes of this program is any low or moderate income household that has not
owned a home within the past three (3) years including households living in
manufactured housing not permanently affixed to a foundation, or owner-occupants
of homes not feasible for renovation. The first-time homebuyer restriction may be
waived after a home is available for sale for 90 days and the home may be sold to a
Qualified Buyer, defined as a person who qualifies for affordable housing in
accordance with this Policy.
I. Impact Fee Reimbursement Program (last revised March 4, 1998.)
A. Owner-Occupied Housing
Any organization requesting impact fee reimbursement must certify in writing, that, for owner
occupied housing, it will remain affordable to the anticipated beneficiary or beneficiaries for a
period of a minimum of ninety-nine (99) years or longer depending upon the funding source.
This requirement will be secured by a Declaration of Restrictive Covenants.
B. Rental Housing
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An organization requesting impact fee reimbursement for rental housing must certify that
the property will remain affordable for ninety-nine (99) years. The rental housing
certification must be secured by a Declaration of Restrictive Covenant requiring repayment
to Orange County of the impact fee if the rental housing does not remain affordable
during the period of affordability,which covenant will be further seemed by a note and deed
of trust. Evidence must be provided that agency and/or program guidelines are in place to
assure affordability compliance.
H. Land Trust Model
The Land Trust model utilizes a non-profit, community based organization known as a
Community Home Trust ("CHT") whose purpose is to acquire land and make it available to
individual families and others, such as cooperatives, through a long-term lease for a term up to
99 years. The leaseholders or homebuyers do not hold title to the land -the title is retained by
the CHT. The CHT conveys a leasehold interest in the land and improvements to the homebuyers
(lessees). The benefits of this model include the ability of the CHT to retain the affordability
of the home over successive generations of home buyers. The land lease gives the CHT the
first option to purchase the home, when and if it is sold, at an affordable price set by a resale
formula. The resale formula gives homeowners a fair return for their investment, while
keeping the price of the housing affordable for future residents.
III. New and Existing First-Time Homebuyer Programs
A. Period of Affordability
All properties supported by County financial resources for the purpose of facilitating
homeownership must be sold to households at or below 80% of area median income for a
minimum of ninety-nine (99)years from the date of initial assistance. Subsequent resales
are allowable to households earning up to 115%of area median income.
B. Right of First Refusal
A right of first refusal or right to purchase is accomplished by means of a Declaration of
Restrictive Covenants on the property purchased by the first-time homebuyer. Any
assignment, sale, transfer, conveyance, or other disposition of the Property or any part
thereof whether voluntarily or involuntarily or by operation of law ('Transfer") shall not
be effective unless and until the below-described procedure is followed.
If the original homebuyer or any subsequent qualified homebuyer ('Buyer")
contemplates a Transfer to an unqualified buyer, Buyer shall send to Orange County
and/or the sponsoring non-profit organization, not less than 90 days prior to the
contemplated closing date of the Transfer, a 'Notice of Intent to Sell." This Notice of
Intent to Sell shall be accompanied by a copy of a completed, fully executed bona
fide offer to purchase the Property on the then current North Carolina Bar Association
"Offer to Purchase and Contract" form. If Orange County and/or the sponsoring non-
profit organizations elects to exercise its said right of refusal, it shall notify the Buyer
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of its election to purchase within 30 days of its receipt of the Notice and shall purchase
the Property or portion thereof within 90 days of the receipt of the 'Notice of Intent to
Sell." As between the County and the sponsoring non-profit organization, if both wish to
and have the means to exercise the right of first refusal, the sponsoring non-profit
organization shall have priority.
If neither Orange County nor the sponsoring non-profit organization advises the Buyer in
a timely fashion of its intent to purchase the Property, then the Buyer shall be free to
transfer the property in accordance with the Equity Sharing subsection of this policy.
C. Equity Sharing
All financial contributions provided by the County will be provided as a deferred second
loan secured by a forty (40) year Deed of Trust and Promissory Note, forgivable at the
end of 40 years. This Deed of Trust and Promissory Note shall constitute a lien on the
Property; subordinate only to private construction financing or permanent first
mortgage financing.
The 99 year period of affordability for each individual housing unit will be secured
by a declaration of restrictive covenants that will incorporate a right of first refusal
that may be exercised by a sponsoring non-profit organization and/or Orange County.
This declaration of restrictive covenants will be further secured by a deed of trust.
The non-profit organization and/or the County as applicable retains full responsibility
for compliance with the affordability requirement for assisted units throughout the
term of affordability, unless affordability restrictions are terminated due to the sale of the
Property to a non-qualified buyer.
If the buyer no longer uses the Property as a principal residence or is unable to continue
ownership, then the buyer must sell, transfer, or otherwise dispose of their interest in
the Property only to a qualified homebuyer, i.e., a low-income household, one whose
combined income does not exceed 80% of the area median household income by family
size, as determined by theU.S.Department ofHousing and Urban Development at the time
of the transfer,to use as their principal residence.
However, if the property is sold during the term of affordability to a non-qualified
homebuyer to be used as their principal residence,the net sales proceeds (sales price less:
1) selling cost, 2) the unpaid principal amount of the original first mortgage and 3) the
unpaid principal amount of the initial County contribution and any other initial
government contribution secured by a deferred payment promissory note and deed of
trust) or "equity" will be divided 50/50 by the seller of the Property and the County. If
the initial County contribution does not have to be repaid because the sale occurs more
than forty years after the County contribution is made, then the seller of the Property and
the County will divide the entire equity realized from the sale.
Any proceeds from the recapture of funds under this provision will be used to
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facilitate the acquisition, construction, and/or rehabilitation of housing for the purposes of
promoting affordable housing.
IV. Exceptions
A. The Board of Commissioners may reduce the required ninety-nine (99) year
affordability restriction to forty (40)years when:
i. The County's total financial contribution to the project is less than
fifteen percent (15%)of the total project cost; or
ii. The developer agrees to and develops at least thirty-five percent
(35%)of the project units as affordable units.
B. The Board of Commissioners may authorize the cancellation of restrictive
covenants upon a determination that:
i. A structure is in a state of disrepair such that the estimated cost to
repair the structure exceeds one hundred percent (100%) of the value
of the structure; and
ii. Redevelopment of the property is cost prohibitive; and
iii. Sale of the property is substantially unlikely to occur if the restrictive
covenants are not cancelled.
C. The Board of Commissioners authorizes the County Manager to approve
removal of properties from the affordable housing inventory in accordance with
the April 21, 2015 Interlocal Agreement for the Community Home Trust.
D. In the event an application for exception does not meet all of the required
elements to grant an exception pursuant to IV A — D above the Board of
Commissioners may examine each application individually and ascertain
whether the circumstances justify the granting of an exception. In such event the
Board of Commissioners may grant an exception upon making findings of fact
setting out all the relevant factors that reasonably and equitably justify such
exception to this policy.
V. Policy Review
This policy will be reviewed by County staff and officials within two (2) years of the
original approval date to ensure continued congruency with local affordable
housing programs.
Effective Date: April 3,2000
Revised: June 6,2000
Revised: February 21, 2017
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92.252 Qualification as affordable housing: Rental housing.
The HOME-assisted units in a rental housing rp oject must be occupied by households that are
eligible as low- income families and must meet the requirements of this section to qualify as
affordable housing. If the housing is not occupied by eligible tenants within six months following the
date of project completion, HUD will require the participating jurisdiction to submit marketing
information and, if appropriate, submit a marketing plan. HUD will require the participating
jurisdiction to repay HOME funds invested in any housing unit that has not been rented to eligible
tenants 18 months after the date of project completion. The affordability requirements also apply to
the HOME- assisted non-owner-occupied units in single-family housing purchased with HOME funds
in accordance with § 92.254. The tenant must have a written lease that complies with 92.253.
(a)Rent limitation. HUD provides the following maximum HOME rent limits. The rent limits apply to
the rent plus the utilities or the utility allowance. The maximum HOME rents (High HOME Rents) are
the lesser of:
(1) The fair market rent for existing housing for comparable units in the area as established by HUD
under 24 CFR 888.111; or
(2)A rent that does not exceed 30 percent of the adjusted income of a family whose annual income
equals 65 percent of the median income for the area, as determined by HUD, with adjustments for
number of bedrooms in the unit. The HOME rent limits provided by HUD will include average
occupancy per unit and adjusted income assumptions.
(b)Additional rent limitations (Low HOME Rents). The participating jurisdiction may designate (in its
written agreement with the rp oject owner) more than the minimum HOME units in a rental housing
rp olect, regardless of rp oject size, to have Low HOME Rents that meet the requirements of this
paragraph (b). In rental rp oiects with five or more HOME-assisted rental units, at least 20 percent of
the HOME-assisted units must be occupied by very low-income families and meet one of the
following rent requirements:
(1) The rent does not exceed 30 percent of the annual income of a family whose income equals 50
percent of the median income for the area, as determined by HUD, with adjustments for smaller and
larger families. HUD provides the HOME rent limits which include average occupancy per unit and
adjusted income assumptions. However, if the rent determined under this paragraph is higher than
the applicable rent under paragraph (a) of this section, then the maximum rent for units under this
paragraph is that calculated under paragraph (a) of this section.
(2) The rent does not exceed 30 percent of the family's adjusted income. If the unit receives Federal
or State rp olect-based rental subsidy and the very low-income family pays as a contribution toward
rent not more than 30 percent of the family's adjusted income, then the maximum rent(i.e., tenant
contribution plus rp o'ect-based rental subsidy) is the rent allowable under the Federal or State
rp oject-based rental subsidy program.
(c)Additional rent limitations for SRO projects.
(1) For SRO units that have both sanitary and food preparation facilities, the maximum HOME rent is
based on the zero-bedroom fair market rent. The rp oject must meet the requirements of paragraphs
(a) and (b) of this section.
(2) For SRO units that have no sanitary or food preparation facilities or only one of the two, the
maximum HOME rent is based on 75 percent of the zero-bedroom fair market rent. The rp oject is
not required to have low HOME rents in accordance with paragraph (b)(1) or (2) of this section, but
must meet the occupancy requirements of paragraph (b) of this section.
(d)lnitial rent schedule and utility allowances.
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(1) The participating jurisdiction must establish maximum monthly allowances for utilities and
services (excluding telephone) and update the allowances annually. The participating jurisdiction
must use the HUD Utility Schedule Model or otherwise determine the utility allowance for the rp oject
based on the type of utilities used at the rp oject.
(2) The participating jurisdiction must review and approve rents proposed by the owner for units,
subject to the maximum rent limitations in paragraphs (a) or (b) of this section. For all units subject
to the maximum rent limitations in paragraphs (a) or(b) of this section for which the tenant is paying
utilities and services, the participating jurisdiction must ensure that the rents do not exceed the
maximum rent minus the monthly allowances for utilities and services.
(e)Periods of affordability. The HOME-assisted units must meet the affordability requirements for not
less than the applicable period specified in the following table, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment,
or the transfer of ownership;
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement
restricting the use of the property, or other mechanisms approved by HUD and must give the
participating jurisdiction the right to require specific performance (except that the participating
jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or
transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive
rights to purchase the housing before foreclosure or deed in lieu of foreclosure in order to preserve
affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original
affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any
entity that includes the former owner or those with whom the former owner has or had family or
business ties, obtains an ownership interest in the rp oject or property.
(4) The termination of the restrictions on the rp oject does not terminate the participating jurisdiction's
repayment obligation under& 92.503(b).
Minimum period of
Rental housing .
Rehabilitation or acquisition of existing housing per unit amount of 5
HOME funds: Under$15,000
$15,000 to $40,000 10
10
Over $40,000 or rehabilitation involving refinancing 15
or acquisition of newt constructed housing 20
New constructionq y g
(f)Subsequent rents during the affordability period.
(1) The maximum HOME rent limits are recalculated on a periodic basis after HUD determines fair
market rents and median incomes. HUD then provides the new maximum HOME rent limits to
participating jurisdictions. Regardless of changes in fair market rents and in median income over
time, the HOME rents fora rp oject are not required to be lower than the HOME rent limits for the
rp oject in effect at the time of rp oiect commitment.
(2) The participating jurisdiction must provide rp oject owners with information on updated HOME
rent limits so that rents may be adjusted (not to exceed the maximum HOME rent limits in paragraph
ff)1( ) of this section) in accordance with the written agreement between the participating jurisdiction
and the owner. Owners must annually provide the participating jurisdiction with information on rents
and occupancy of HOME-assisted units to demonstrate compliance with this section. The
participating *urisdiction must review rents for compliance and approve or disapprove them every
year.
(3) Any increase in rents for HOME-assisted units is subject to the provisions of outstanding leases,
and in any event, the owner must provide tenants of those units not less than 30 days prior written
notice before implementing any increase in rents.
(g)Adjustment of HOME rent limits for an existing project.
(1) Changes in fair market rents and in median income over time should be sufficient to maintain the
financial viability of a rp oject within the HOME rent limits in this section.
(2) HUD may adjust the HOME rent limits fora rp oject, only if HUD finds that an adjustment is
necessary to support the continued financial viability of the rp oject and only by an amount that HUD
determines is necessary to maintain continued financial viability of the rp olect. HUD expects that this
authority will be used sparingly.
(h)Tenant income. The income of each tenant must be determined initially in accordance with
92.203(a)(1)(i). In addition, each year during the period of affordability the rp olect owner must re-
examine each tenant's annual income in accordance with one of the options in § 92.203 selected by
the participating jurisdiction. An owner of a multifamily rp olect with an affordability period of 10 years
or more who re-examines tenant's annual income through a statement and certification in
accordance with § 92.203(a)(1)(ii), must examine the income of each tenant, in accordance with§
92.203(a)(1)(i), every sixth year of the affordability period. Otherwise, an owner who accepts the
tenant's statement and certification in accordance with § 92.203(a)(1)(ii) is not required to examine
the income of tenants in multifamily or single-family rp ojects unless there is evidence that the
tenant's written statement failed to completely and accurately state information about the family's
size or income.
(!)Over-income tenants.
(1) HOME-assisted units continue to qualify as affordable housing despite a temporary
noncompliance caused by increases in the incomes of existing tenants if actions satisfactory to HUD
are being taken to ensure that all vacancies are filled in accordance with this section until the
noncompliance is corrected.
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(2) Tenants who no longer qualify as low-income families must pay as rent the lesser of the amount
payable by the tenant under State or local law or 30 percent of the family's adjusted income, except
that tenants of HOME-assisted units that have been allocated low-income housinq tax credits by a
housing credit agency pursuant to section 42 of the Internal Revenue Code of 1986 (26 U.S.C. 42)
must pay rent governed by section 42. In addition, in rp ojects in which the Home units are
designated as floating pursuant to paragraph (j) of this section, tenants who no longer qualify as low-
income are not required to pay as rent an amount that exceeds the market rent for comparable,
unassisted units in the neighborhood.
(j)Fixed and floating HOME units. Ina rp oject containing HOME-assisted and other units, the
participating jurisdiction may designate fixed or floating HOME units. This designation must be made
at the time of rp oject commitment in the written agreement between the participating jurisdiction and
the owner, and the HOME units must be identified not later than the time of initial unit occupancy.
Fixed units remain the same throughout the period of affordability. Floating units are changed to
maintain conformity with the requirements of this section during the period of affordability so that the
total number of housing units meeting the requirements of this section remains the same, and each
substituted unit is comparable in terms of size, features, and number of bedrooms to the originally
designated HOME-assisted unit.
(k)Tenant selection. The tenants must be selected in accordance with 92.253(d).
(I)Ongoing responsibilities. The participating jurisdiction's responsibilities for on-site inspections and
financial oversight of rental rp ojects are set forth in § 92.504(d).
[61 FR 48750, Sept. 16, 1996, as amended at 62 FR 28929, May 28, 1997; 62 FR 44840, Aug. 22,
1997; 78 FR 44672, July 24, 20131
§ 92.254 qualification as affordable housing: Homeownership.
(a)Acquisition with or without rehabilitation.Housing that is for acquisition by a family must meet the
affordability requirements of this paragraph (a).
(1)The housing must be single family housing.
(2)The housing must be modest housing as follows:
(i) In the case of acquisition of newly constructed housing or standard housing, the housing has a
purchase price for the type of single family housing that does not exceed 95 percent of the median
purchase price for the area, as described in paragraph (a)(2)(iii) of this section.
(ii) In the case of acquisition with rehabilitation, the housing has an estimated value after rehabilitation
that does not exceed 95 percent of the median purchase price for the area, described in paragraph
(a)(2)(iii) of this section.
(iii) If a participating jurisdiction intends to use HOME funds for homebuyer assistance or for the
rehabilitation of owner-occupied single-family properties,the participating jurisdiction must use the
HOME affordable homeownership limits provided by HUD for newly constructed housing and for
existing housing. HUD will provide limits for affordable newly constructed housing based on 95 percent
of the median purchase price for the area using Federal Housing Administration (FHA) single family
mortgage program data for newly constructed housing, with a minimum limit based on 95 percent of
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the U.S. median purchase price for new construction for nonmetropolitan areas. HUD will provide limits
for affordable existing housing based on 95 percent of the median purchase price for the area using
Federal FHA single family mortgage program data for existing housing data and other appropriate data
that are available nation-wide for sales of existing housing, with a minimum limit based on 95 percent of
the state-wide nonmetropolitan area median purchase price using this data. In lieu of the limits
provided by HUD, the participating jurisdiction may determine 95 percent of the median area purchase
price for single family housing in the jurisdiction annually, as follows.The participating jurisdiction must
set forth the price for different types of single family housing for the jurisdiction.The participating
jurisdiction may determine separate limits for existing housing and newly constructed housing. For
housing located outside of metropolitan areas, a State may aggregate sales data from more than one
county, if the counties are contiguous and similarly situated.The following information must be included
in the annual action plan of the Consolidated Plan submitted to HUD for review and updated in each
action plan.
(A)The 95 percent of median area purchase price must be established in accordance with a market
analysis that ensured that a sufficient number of recent housing sales are included in the survey.
(B) Sales must cover the requisite number of months based on volume: For 500 or more sales per
month, a one- month reporting period; for 250 through 499 sales per month, a 2-month reporting
period; for less than 250 sales per month, at least a 3-month reporting period.The data must be listed in
ascending order of sales price.
(C) The address of the listed properties must include the location within the participating jurisdiction.
Lot, square, and subdivision data may be substituted for the street address.
(D)The housing sales data must reflect all, or nearly all, of the one-family house sales in the entire
participating jurisdiction.
(E)To determine the median, take the middle sale on the list if an odd number of sales, and if an even
number,take the higher of the middle numbers and consider it the median.After identifying the median
sales price,the amount should be multiplied by 0.95 to determine the 95 percent of the median area
purchase price.
(3)The housing must be acquired by a homebuyer whose family qualifies as a low-income family, and
the housing must be the principal residence of the family throughout the period described in paragraph
(a)(4) of this section. If there is no ratified sales contract with an eligible homebuyer for the housing
within 9 months of the date of completion of construction or rehabilitation,the housing must be rented
to an eligible tenant in accordance with § 92.252. In determining the income eligibility of the family,the
participating jurisdiction must include the income of all persons living in the housing.The homebuyer
must receive housing counseling.
(4)Periods of affordability.The HOME-assisted housing must meet the affordability requirements for not
less than the applicable period specified in the following table, beginning after project completion.The
per unit amount of HOME funds and the affordability period that they trigger are described more fully in
paragraphs (a)(5)(i) (resale) and (ii) (recapture) of this section.
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Under$15,000 5
$15,000 to $40,000 10
Over$40,000 15
(5)Resale and recapture.The participating jurisdiction must establish the resale or recapture
requirements that comply with the standards of this section and set forth the requirements in its
consolidated plan. HUD must determine that they are appropriate and must specifically approve them in
writing.
(i)Resale. Resale requirements must ensure, if the housing does not continue to be the principal
residence of the family for the duration of the period of affordability that the housing is made available
for subsequent purchase only to a buyer whose family qualifies as a low-income family and will use the
property as the family's principal residence.The resale requirement must also ensure that the price at
resale provides the original HOME-assisted owner a fair return on investment(including the
homeowner's investment and any capital improvement) and ensure that the housing will remain
affordable to a reasonable range of low- income homebuyers.The participating jurisdiction must
specifically define "fair return on investment" and "affordability to a reasonable range of low-income
homebuyers," and specifically address how it will make the housing affordable to a low-income
homebuyer in the event that the resale price necessary to provide fair return is not affordable to the
subsequent buyer.The period of affordability is based on the total amount of HOME funds invested in
the housing.
(A) Except as provided in paragraph (a)(5)(i)(B) of this section, deed restrictions, covenants running with
the land, or other similar mechanisms must be used as the mechanism to impose the resale
requirements.The affordability restrictions may terminate upon occurrence of any of the following
termination events:foreclosure,transfer in lieu of foreclosure or assignment of an FHA insured
mortgage to HUD.The participating jurisdiction may use purchase options, rights of first refusal or other
preemptive rights to purchase the housing before foreclosure to preserve affordability.The affordability
restrictions shall be revived according to the original terms if, during the original affordability period,the
owner of record before the termination event, obtains an ownership interest in the housing.
(B) Certain housing may be presumed to meet the resale restrictions (i.e.,the housing will be available
and affordable to a reasonable range of low-income homebuyers; a low-income homebuyer will occupy
the housing as the family's principal residence; and the original owner will be afforded a fair return on
investment) during the period of affordability without the imposition of enforcement mechanisms by
the participating jurisdiction.The presumption must be based upon a market analysis of the
neighborhood in which the housing is located.The market analysis must include an evaluation of the
location and characteristics of the housing and residents in the neighborhood (e.g., sale prices, age and
amenities of the housing stock, incomes of residents, percentage of owner-occupants) in relation to
housing and incomes in the housing market area.An analysis of the current and projected incomes of
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neighborhood residents for an average period of affordability for homebuyers in the neighborhood must
support the conclusion that a reasonable range of low-income families will continue to qualify for
mortgage financing. For example, an analysis shows that the housing is modestly priced within the
housing market area and that families with incomes of 65%to 80%of area median can afford monthly
payments under average FHA terms without other government assistance and housing will remain
affordable at least during the next five to seven years compared to other housing in the market area;
the size and amenities of the housing are modest and substantial rehabilitation will not significantly
increase the market value; the neighborhood has housing that is not currently owned by the occupants,
but the participating jurisdiction is encouraging homeownership in the neighborhood by providing
homeownership assistance and by making improvements to the streets, sidewalks, and other public
facilities and services. If a participating jurisdiction in preparing a neighborhood revitalization strategy
under§ 91.215(e)(2) of its consolidated plan or Empowerment Zone or Enterprise Community
application under 24 CFR part 597 has incorporated the type of market data described above,that
submission may serve as the required analysis under this section. If the participating jurisdiction
continues to provide homeownership assistance for housing in the neighborhood, it must periodically
update the market analysis to verify the original presumption of continued affordability.
(ii)Recapture. Recapture provisions must ensure that the participating jurisdiction recoups all or a
portion of the HOME assistance to the homebuyers, if the housing does not continue to be the principal
residence of the family for the duration of the period of affordability.The participating jurisdiction may
structure its recapture provisions based on its program design and market conditions.The period of
affordability is based upon the total amount of HOME funds subject to recapture described in paragraph
(a)(5)(ii)(A)(5) of this section. Recapture provisions may permit the subsequent homebuyer to assume
the HOME assistance (subject to the HOME requirements for the remainder of the period of
affordability) if the subsequent homebuyer is low-income, and no additional HOME assistance is
provided.
(A)The following options for recapture requirements are acceptable to HUD.The participating
jurisdiction may adopt, modify or develop its own recapture requirements for HUD approval. In
establishing its recapture requirements,the participating jurisdiction is subject to the limitation that
when the recapture requirement is triggered by a sale (voluntary or involuntary) of the housing unit,the
amount recaptured cannot exceed the net proceeds, if any.The net proceeds are the sales price minus
superior loan repayment(other than HOME funds) and any closing costs.
(1)Recapture entire amount.The participating jurisdiction may recapture the entire amount of the
HOME investment from the homeowner.
(2)Reduction during affordability period. The participating jurisdiction may reduce the HOME investment
amount to be recaptured on a prorata basis for the time the homeowner has owned and occupied the
housing measured against the required affordability period.
(3)Shared net proceeds. If the net proceeds are not sufficient to recapture the full HOME investment (or
a reduced amount as provided for in paragraph (a)(5)(ii)(A)(2) of this section) plus enable the
homeowner to recover the amount of the homeowner's downpayment and any capital improvement
investment made by the owner since purchase,the participating jurisdiction may share the net
proceeds.The net proceeds are the sales price minus loan repayment (other than HOME funds) and
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closing costs.The net proceeds may be divided proportionally as set forth in the following mathematical
formulas:
HOMEinvestment x Net proceeds = HOME amount to be recaptured
HOME i nvestment+homeowner investment
homeowner investment x Net proceeds =amount to homeowner
HOME investment +homeowner investment
(4)Owner investment returned first.The participating jurisdiction may permit the homebuyer to recover
the homebuyer's entire investment (downpayment and capital improvements made by the owner since
purchase) before recapturing the HOME investment.
(5)Amount subject to recapture.The HOME investment that is subject to recapture is based on the
amount of HOME assistance that enabled the homebuyer to buy the dwelling unit.This includes any
HOME assistance that reduced the purchase price from fair market value to an affordable price, but
excludes the amount between the cost of producing the unit and the market value of the property (i.e.,
the development subsidy).The recaptured funds must be used to carry out HOME-eligible activities in
accordance with the requirements of this part. If the HOME assistance is only used for the development
subsidy and therefore not subject to recapture,the resale option must be used.
(6)Special considerations for single-family properties with more than one unit. If the HOME funds are
only used to assist a low-income homebuyer to acquire one unit in single-family housing containing
more than one unit and the assisted unit will be the principal residence of the homebuyer, the
affordability requirements of this section apply only to the assisted unit. If HOME funds are also used to
assist the low-income homebuyer to acquire one or more of the rental units in the single-family housing,
the affordability requirements of§ 92.252 apply to assisted rental units, except that the participating
jurisdiction may impose resale or recapture restrictions on all assisted units (owner-occupied and rental
units) in the single family housing. If resale restrictions are used,the affordability requirements on all
assisted units continue for the period of affordability. If recapture restrictions are used, the affordability
requirements on the assisted rental units may be terminated, at the discretion of the participating
jurisdiction, upon recapture of the HOME investment. (If HOME funds are used to assist only the rental
units in such a property then the requirements of§ 92.252 would apply and the owner-occupied unit
would not be subject to the income targeting or affordability provisions of§ 92.254.)
(7)Lease-purchase.HOME funds may used to assist homebuyers through lease-purchase programs for
existing housing and for housing to be constructed.The housing must be purchased by a homebuyer
within 36 months of signing the lease'purchase agreement.The homebuyer must qualify as a low-
income family at the time the lease-purchase agreement is signed. If HOME funds are used to acquire
housing that will be resold to a homebuyer through a lease-purchase program,the HOME affordability
requirements for rental housing in § 92.252 shall apply if the housing is not transferred to a homebuyer
within forty-two months after project completion.
(8)Contract to purchase. If HOME funds are used to assist a homebuyer who has entered into a contract
to purchase housing to be constructed,the homebuyer must qualify as a low-income family at the time
the contract is signed.
(9)Preserving affordability of housing that was previously assisted with HOME funds.
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(i)To preserve the affordability of HOME-assisted housing a participating jurisdiction may use additional
HOME funds for the following costs:
(A)The cost to acquire the housing through a purchase option, right of first refusal, or other preemptive
right before foreclosure, or at the foreclosure sale. (The foreclosure costs to acquire housing with a
HOME loan in default are eligible. However, HOME funds may not be used to repay a loan made with
HOME funds.)
(B)The cost to undertake any necessary rehabilitation for the housing acquired.
(C)The cost of owning/holding the housing pending resale to another homebuyer.
(D)The cost to assist another homebuyer in purchasing the housing.
(ii) When a participating jurisdiction uses HOME funds to preserve the affordability of such housing,the
additional investment must be treated as an amendment to the original project.The housing must be
sold to a new eligible homebuyer in accordance with the requirements of§ 92.254(a) within a
reasonable period of time.
(iii)The total amount of the original and additional HOME assistance may not exceed the maximum per
unit subsidy amount established under§ 92.250. Alternatively to charging the cost to the HOME
program under§ 92.206,the participating jurisdiction may charge the cost to the HOME program under
§ 92.207 as a reasonable administrative cost of its HOME program, so that the additional HOME funds
for the housing are not subject to the maximum per-unit subsidy amount.To the extent administrative
funds are used,they may be reimbursed, in whole or in part, when the housing is sold to a new eligible
homebuyer.
(b)Rehabilitation not involving acquisition.Housing that is currently owned by a family qualifies as
affordable housing only if:
(1)The estimated value of the property, after rehabilitation, does not exceed 95 percent of the median
purchase price for the area, described in paragraph (a)(2)(iii) of this section; and
(2)The housing is the principal residence of an owner whose family qualifies as a low-income family at
the time HOME funds are committed to the housing. In determining the income eligibility of the family,
the participating jurisdiction must include the income of all persons living in the housing.
(c)Ownership interest.The ownership in the housing assisted under this section must meet the
definition of"homeownership" in § 92.2, except that housing that is rehabilitated pursuant to paragraph
(b) of this section may also include inherited property with multiple owners, life estates, living trusts and
beneficiary deeds under the following conditions.The participating jurisdiction has the right to establish
the terms of assistance.
(1)Inherited property. Inherited property with multiple owners: Housing for which title has been passed
to several individuals by inheritance, but not all heirs reside in the housing, sharing ownership with
other nonresident heirs. (The occupant of the housing has a divided ownership interest.)The
participating jurisdiction may assist the owner-occupant if the occupant is low-income, occupies the
housing as his or her principal residence, and pays all the costs associated with ownership and
maintenance of the housing (e.g., mortgage, taxes, insurance, utilities).
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(2)Life estate. The person who has the life estate has the right to live in the housing for the remainder of
his or her life and does not pay rent.The participating jurisdiction may assist the person holding the life
estate if the person is low-income and occupies the housing as his or her principal residence.
(3)Inter vivos trust, also known as a living trust. A living trust is created during the lifetime of a person.A
living trust is created when the owner of property conveys his or her property to a trust for his or her
own benefit or for that of a third party(the beneficiaries).The trust holds legal title and the beneficiary
holds equitable title.The person may name him or herself as the beneficiary.The trustee is under a
fiduciary responsibility to hold and manage the trust assets for the beneficiary.The participating
jurisdiction may assist if all beneficiaries of the trust qualify as a low-income family and occupy the
property as their principal residence (except that contingent beneficiaries,who receive no benefit from
the trust nor have any control over the trust assets until the beneficiary is deceased, need not be low-
income).The trust must be valid and enforceable and ensure that each beneficiary has the legal right to
occupy the property for the remainder of his or her life.
(4)Beneficiary deed. A beneficiary deed conveys an interest in real property, including any debt secured
by a lien on real property, to a grantee beneficiary designated by the owner and that expressly states
that the deed is effective on the death of the owner. Upon the death of the owner, the grantee
beneficiary receives ownership in the property, subject to all conveyances, assignments, contracts,
mortgages, deeds of trust, liens, security pledges, and other encumbrances made by the owner or to
which the owner was subject during the owner's lifetime.The participating jurisdiction may assist if the
owner qualifies as low-income and the owner occupies the property as his or her principal residence.
(d)New construction without acquisition. Newly constructed housing that is built on property currently
owned by a family which will occupy the housing upon completion, qualifies as affordable housing if it
meets the requirements under paragraph (a) of this section.
(e)Providing homeownership assistance through lenders. Subject to the requirements of this paragraph
(e),the participating jurisdiction may provide homeownership assistance through for-profit or nonprofit
lending institutions that provide the first mortgage loan to a low-income family.
(1)The homeownership assistance may be provided only as specified in a written agreement between
the participating jurisdiction and the lender.The written agreement must specify the forms and
amounts of homeownership assistance that the participating jurisdiction authorizes the lender to
provide to families and any conditions that apply to the provision of such homeownership assistance.
(2) Before the lender provides any homeownership assistance to a family,the participating jurisdiction
must verify that the family is low-income and must inspect the housing for compliance with the property
standards in § 92.251.
(3) No fees (e.g., origination fees or points) may be charged to a family for the HOME homeownership
assistance provided pursuant to this paragraph (e), and the participating jurisdiction must determine
that the fees and other amounts charged to the family by the lender for the first mortgage financing are
reasonable. Reasonable administrative costs may be charged to the HOME program as a project cost. If
the participating jurisdiction requires lenders to pay a fee to participate in the HOME program, the fee is
program income to the HOME program.
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(4) If the nonprofit lender is a subrecipient or contractor that is receiving HOME assistance to determine
that the family is eligible for homeownership assistance, but the participating jurisdiction or another
entity is making the assistance to the homebuyer(e.g., signing the documents for the loan or the grant),
the requirements of paragraphs (e)(2) and (3) of this section are applicable.
(f)Homebuyer program policies.The participating jurisdiction must have and follow written policies for:
(1) Underwriting standards for homeownership assistance that evaluate housing debt and overall debt
of the family, the appropriateness of the amount of assistance, monthly expenses of the family, assets
available to acquire the housing, and financial resources to sustain homeownership;
(2) Responsible lending, and
(3) Refinancing loans to which HOME loans are subordinated to ensure that the terms of the new loan
are reasonable.
[61 FR 48750,Sept. 16, 1996, as amended at 67 FR 61756, Oct. 1, 2002; 68 FR 10161, Mar. 4, 2003; 69
FR 16766, Mar. 30, 2004; 69 FR 68052, Nov. 22, 2004; 72 FR 16685, Apr.4, 2007; 78 FR 44674,July 24,
2013]