HOMEfires - Vol. 8 No. 1, October 2007

Logo: HOMEfires

Q: Can a participating jurisdiction (PJ) use its HOME funds for projects outside its boundaries?

A. Generally, a PJ may not use its HOME funds for projects outside its borders. For instance, an urban county that is a HOME PJ may not invest its funds in a project in a contiguous metropolitan city, even if that city is located in the county because the boundaries of the HOME PJ are limited to the borders of the urban county. This is the case irrespective of whether the city is a HOME PJ (i.e., HOME funds cannot be used for projects in non-entitled cities and towns that are not a part of the urban county). However, a PJ may provide HOME funds to a project in a contiguous jurisdiction if that project will receive financial support from and serve the residents of both jurisdictions.

The HOME regulations at 24 CFR 92.201(a)(2) provide that "a local participating jurisdiction may only invest its HOME funds within its boundaries, or in joint projects within the boundaries of contiguous local jurisdictions which serve residents of both jurisdictions." When a PJ invests its HOME funds in a project outside its borders, it must ensure that the contiguous jurisdiction makes a financial contribution to the project and that the project will benefit residents of both jurisdictions.

Joint Funding

A PJ may not provide HOME funds to a project outside its borders unless the contiguous jurisdiction also provides a substantial financial contribution to the project. It is not necessary for both jurisdictions to provide HOME funds to the project. In many instances, the other jurisdiction will not be a HOME PJ or a recipient of State HOME funds. The other jurisdiction's financial contribution may take the form of a grant or loan (including from other Federal sources in the jurisdiction's control, such as CDBG funds) or relief of a significant tax or fee (such as waiver of impact fees, property taxes, or other taxes or fees customarily imposed on projects within the jurisdiction).

A PJ Serving Residents of Both Jurisdictions

A PJ may only invest its HOME funds in a project outside of its boundaries if that project will serve its own population as well as that of the contiguous jurisdiction where the project is located. Before committing its funds to a project outside of its boundaries, the PJ must ensure that the project is likely to draw beneficiaries from both jurisdictions.

If a HOME project is serving a special needs population, the PJ can meet this requirement by documenting its files with needs data on the special needs population in both jurisdictions and by ensuring that the project is affirmatively marketed to eligible populations in both jurisdictions.

For HOME rental and homebuyer projects other than special needs projects, the PJ can substantiate compliance with this requirement with a project-specific market analysis that demonstrates that the project is likely to draw applicants from the PJ as well as the jurisdiction in which the project is located. The PJ is responsible for ensuring that the project is affirmatively marketed to persons in both jurisdictions, including persons least likely to apply. HUD suggests that the PJ collect data on the previous place of residence of applicants for the housing to ensure that the marketing efforts in each of the jurisdictions are adequate.

Other Program Considerations

When both jurisdictions contribute HOME funds to the same project, that project is set up as two separate projects in IDIS. Each PJ must enter into a separate written agreement with the owner or developer and must maintain separate project records.

To the extent possible, HOME funds from the two PJs should be attributed through cost allocation to different units so that funds from the two sources are not combined in the same units. This will simplify administration for the PJs and compliance management for the property owner or manager. It will also avoid double counting of units in IDIS

In those instances in which it is not possible to segregate the HOME funds attributable to each PJ in and HOME funds are combined in a unit (i.e., because the cost allocation results in a remainder of each PJ's HOME funds being attributed to the same unit), the combined HOME investment in the unit cannot exceed the maximum per-unit HOME subsidy (221(d)(3)) limit for the jurisdiction in which the project is located. If HOME funds from the two PJs are attributed to the same unit, the period of affordability is determined by the total amount of HOME funds in the unit.

When HOME funds from more than one PJ are provided to a project, a subsidy layering review is required even if HOME funds are the only public subsidy in the project. HOME projects may not receive more subsidy than is necessary to make the project financially viable and will likely be less than the maximum per unit subsidy amount.

If the rent or income limits for the two jurisdictions are different, the limits for the jurisdiction in which the project is located apply. This is true even if both of the jurisdictions are HOME PJs. When the applicability of other federal requirements is based on amount of assistance or number of units, the determination must be based upon total HOME assistance or total number of HOME units in a project. In determining whether the Davis-Bacon Labor Standards requirements are triggered, a PJ must consider the total number of HOME-assisted units in the project (i.e., the total number of units designated as HOME-assisted units by both PJs). With respect to the Lead Safe Housing Regulations applicable to rehabilitation projects, the level of remediation required would be determined by the total amount of Federal assistance provided per unit by both jurisdictions.

In joint projects involving two PJs, the match obligation incurred by each PJ is determined by the amount of HOME funds it disbursed from the U.S. Treasury HOME Investment Trust Fund account for the project. Credit for match contributions made to a joint project can be retained by the PJ that made the contribution or claimed by the other PJ in accordance with 24 CFR 92.221(c)(1).

In the case of a joint project assisted with HOME funds by two PJs, both PJs are responsible for monitoring the project and ensuring compliance with all HOME and other Federal requirements both during construction and throughout the period of affordability. While the two PJs may agree that one PJ will conduct the monitoring and oversight of project for both PJs during the period of affordability, this arrangement does not relieve the other PJ of its responsibility to ensure compliance or to repay HOME funds in the event of noncompliance that cannot be cured. It is advisable for the PJs to execute a memorandum of understanding, outlining sources and uses of the funds, the allocation of the HOME units, the responsibilities of each PJ, and an explanation of how HOME program requirements will be applied and met.

Content Archived: May 19, 2011