HOMEfires - Vol. 1 No. 2, July 1, 1997

Applicability of HOME Program Requirements to Purchasers of 2-4 unit Owner-Occupied Projects

Q: The City of Hartford, Connecticut, in an effort to address its low homeownership rate and lack of affordable rental housing designed a HOME Program funded Homebuyer Downpayment Assistance Program for purchasers of 2-4 unit properties whose incomes may exceed low-income limits. Can HOME assistance to the purchasers under this downpayment assistance program be structured to avoid triggering the income requirement and affordability and resale/recapture restrictions contained in 92.254 (http://edocket.access.gpo.gov/cfr_2004/aprqtr/24cfr92.254.htm) of the HOME regulations for the owner-occupant?

A: The answer is yes. CPD Notice 94-12, Allocating costs and identifying HOME-assisted units in multi-family projects, provides guidance on prorating HOME costs and total development costs for the purpose of determining the minimum number of units that must be designated as HOME-assisted units in a multi-family development. Since the units in a two to four unit structure may not always be comparable, a participating jurisdiction must take into consideration such factors as number of bedrooms in the units, square footage, and amenities, in order to determine how many and which units should be designated as HOME-assisted. The participating jurisdiction may designate the owner-occupied unit and/or one or more of the rental units as HOME-assisted. (It may also, of course, designate all units as HOME-assisted.)

If the participating jurisdiction chooses to designate the unit the owner-purchaser lives in as a HOME-designated unit, then the owner assumes the role of a typical homebuyer under HOME and is subject to HOME's income requirements, affordability, and resale/recapture requirements. The rental units may or may not be subject to HOME rental requirements, depending on the participating jurisdiction's objectives and the results of the cost proration analysis.

On the other hand, the participating jurisdiction may choose to designate one or more of the rental units, but not the owner-occupied unit, as HOME-assisted. In this case, the rental units are subject to the typical HOME affordability and rent restrictions. The owner, however, is not subject to income limits, affordability, or resale/recapture requirements.

The final regulation at section 92.254(a)(ii)(6) (http://edocket.access.gpo.gov/cfr_2004/aprqtr/24cfr92.254.htm), Special consideration for single family properties with more than one unit, explains these provisions.

For those participating jurisdictions with the appropriate housing stock (i.e., duplexes, triple deckers and fourplexes), this approach may offer a way to assist municipal employees, such as police and teachers, to live in targeted neighborhoods. These employees, although not income eligible, may receive HOME assistance in exchange for maintaining affordable rental housing.

F.Y.I.

• On May 28, 1997, technical amendments to the HOME final rule were published in the Federal Register. The changes apply retroactively to the final rule published on September 16, 1996. They will eventually be incorporated into the consolidated version of the rule disseminated to field offices and participating jurisdictions.
  
  
• A new Model Program Guide has been published and is available upon request from Community Connections (1-800-998-9999). The topic is, "Using HOME Funds for Homebuyer Programs: Structuring Recapture and Resale Provisions."
  
  
• The HOME final rule is available to you on the World-Wide-Web with links to approved waivers, CPD Notices, and the statute with other improvements on the way! The rule can be accessed directly by clicking on 24 CFR Part 92, HOME Final Rule (http://www.access.gpo.gov/nara/cfr/waisidx_04/24cfr92_04.html)