INTRODUCTION
The Section 8 rental voucher program is the federal government’s primary program for assisting very low-income families and individuals to rent decent, safe and sanitary housing in the private market. Participating households are generally responsible for locating housing that meets program health and safety requirements and rent caps (for the certificate program). The local public housing agencies (PHAs) and tribal designated housing entities (TDHEs) that administer the programs then pay a rental subsidy directly to the landlord on behalf of the participating household. The household then pays the difference between the actual rent and the subsidy. In FY1996, HUD implemented final rules that merged many features of the certificate and voucher programs, most notably concerning the portability of certificates. On October 1, 1999, the Quality Housing and Work Responsibility Act (also known as the 1998 Housing Reform Act) went into effect. The Act completely merged the certificate and voucher programs into a single voucher program and encouraged the conversion of public housing units into vouchers (see the Code of Federal Regulations, 24CFR Part 982 for the Section 8 unified rule).
PROGRAM BASICS
Purpose: Under the new merged voucher program, a PHA or TDHE makes rental assistance payments to owners (landlords) of rental property on behalf of very low-income households for decent, safe, and sanitary housing in the private market.
Eligibility:
Applicant:Applicants for funding from HUD for both programs are limited to PHAs and TDHEs. A PHA is defined as any state, county, municipality or other governmental entity or public body (or agency or instrumentality thereof) authorized to engage in or assist in the development or operation of housing for low-income families, including TDHEs.
Beneficiary: Very low-income families (whose incomes do not exceed 50 percent of the median income for the area as determined by HUD with adjustments for family size) and, on an exception basis, low-income families (whose incomes do not exceed 80 percent of the median income for the area, adjusted for family size).
Terms:
Tenant-based leases must be for at least one-year terms; however, the PHA/TDHE may approve shorter terms. After a certificate or voucher is issued, recipients have an initial term of 60 days to find a rental unit, and the PHA may grant one or more extensions in cases where a household has difficulty locating a suitable unit. Extensions may not exceed a total of 120 days from the beginning of the initial term. Vouchers are “portable,” which means that a household may retain rental assistance if it moves anywhere in the U.S. outside the jurisdiction of the PHA/TDHE that issued the assistance, as long as the area of relocation has a PHA/TDHE administering a voucher program. However, a housing agency may require a family initially receiving a voucher to live within its jurisdiction for the first 12 months of assistance.
Comments: The 1998 Housing Reform Act has also given authority to PHA/TDHEs providing tenant-based assistance to provide homeownership purchasing assistance to eligible tenants planning to buy a dwelling unit that will be owned by one or more members of the family. The final rule for the homeownership option was issued September 12, 2000 (see the Code of Federal Regulations, 24 CFR Parts 5, 903 and 982).
As of 1993, approximately 24 percent of households receiving Section 8 assistance lived in nonmetro areas.
ADDITIONAL INFORMATION
Applicants should contact the HUD field office that has jurisdiction over the area where the program will be located. For further information contact HUD’s Office of Assisted Housing, Rental Assistance Division, in Washington, DC at 202-708-0477.
This Information Sheet was prepared by the Housing Assistance Council. The work that provided the basis for this publication was supported by funding from the Ford Foundation and the U.S. Department of Housing and Urban Development. The substance and finding of that work are dedicated to the public. HAC is solely responsible for the accuracy of the statements and interpretations contained in this publication and such interpretations do not necessarily reflect the views of the government.
INTRODUCTION
The Section 811 Supportive Housing Program for Persons with Disabilities provides funding to developers of housing for disabled, low-income households. It was created by the National Affordable Housing Act of 1990, which separated housing for people with disabilities from the Section 202 program. Section 202 now provides supportive housing for elderly persons. (See HAC’s Information Sheet on Supportive Housing for the Elderly (Section 202).)
PROGRAM BASICS
Purpose: This program provides capital advances (no-interest loans that are forgiven as long as program requirements are met for 40 years) to be used to finance the construction or rehabilitation of supportive housing for persons with disabilities, including the purchase of buildings that need little or no rehabilitation for use as group homes. Section 811 also provides project rental assistance to cover the difference between the HUD-approved operating cost per unit and 30 percent of a resident’s adjusted income.
Eligibility:
Projects are expected to start construction within 18 months of the date of fund reservation, with limited provision for extensions. Funds are advanced on a monthly basis during construction.
Comments: The Section 811 program can be used to develop three general types of housing: group homes, independent living facilities, and cooperative/condominium projects. The program does not provide funding for supportive services. Therefore, the project sponsor must demonstrate that necessary supportive services will be funded on a long-term basis. An application for a Section 811 fund reservation is made to the appropriate HUD field office in response to a Notice of Fund Availability published in the Federal Register (typically in the spring of each year). Selections are usually announced in September.
ADDITIONAL INFORMATION
For further information, contact the nearest HUD field office (see www.hud.gov/local) or HUD’s national Multifamily Housing Clearinghouse at 800-685-8470 (TTY: 800-483-2209), or visit www.hud.gov/progdesc/multindx.html.
HAC’s publications list, all information sheets, and most full-length manuals and reports may be obtained free from HAC’s web site at www.ruralhome.org. A printed copy of the publications list is available free, and copies of manuals and reports are available for a charge to cover costs, from HAC, 1025 Vermont Avenue, N.W., Suite 606, Washington, D.C. 20005; 202-842-8600.
September 2002
This Information Sheet was prepared by the Housing Assistance Council (HAC). The work that provided the basis for this publication was supported by funding from the Ford Foundation and funding under Cooperative Agreement H-5925 CA with the U.S. Department of Housing and Urban Development. The substance and finding of that work are dedicated to the public. HAC is solely responsible for the accuracy of the statements and interpretations contained in this publication and such interpretations do not necessarily reflect the views of the government.
HAC, founded in 1971, is a nonprofit corporation that supports the development of rural low-income housing nationwide. HAC provides technical housing services, loans from a revolving fund, housing program and policy assistance, research and demonstration projects, and training and information services. HAC is an equal opportunity lender.
INTRODUCTION
In order to receive program funds administered by the Office of Community Planning and Development (CPD) of the Department of Housing and Urban Development (HUD), jurisdictions must submit planning, application and monitoring documents to HUD. Previously each CPD program had its own planning requirements, including the HOME Investment Partnerships (HOME) program’s Comprehensive Housing Affordability Strategy (CHAS). In January 1995, HUD replaced its regulations for the CHAS with a final Consolidated Planning Submission Requirements rule, consolidating into a single submission the planning and application requirements of the Community Development Block Grant (CDBG), Emergency Shelter Grant (ESG), HOME Investment Partnerships (HOME), and Housing Opportunities for Persons with AIDS (HOWPA) formula programs. The Consolidated Plan rule also replaces the CHAS and four program performance reports with one performance report.
Rural communities and the organizations that serve them generally receive HUD CPD program funds through their states. Applications for nearly all existing HUD programs must be consistent with a state’s HUD-approved Consolidated Plan. States are also expected to use their Consolidated Planning processes as public participation tools for planning for the use of state-generated housing and community development funds.
One of the most important things to note about the Consolidated Plan is that it is both a plan and a process. Housing development organizations should not only be familiar with their states’ existing Consolidated Plans, but involved in the formulation of future plans.
CITIZEN PARTICIPATION AND THE CONSOLIDATED PLANNING PROCESS
HUD’s January 5, 1995 final rule on the Consolidated Plan includes planning process regulations by which all participating jurisdictions must abide. States must submit complete Consolidated Plans every five years and updates and performance reports annually. The annual performance report assesses state performance in meeting overall priorities and objectives and identifies the housing and community development resources available within the state.
HUD regulations establish minimum citizen participation requirements for the Consolidated Plan process. While drafting a Consolidated Plan or annual update the state must consult with other public and private agencies that provide assisted housing, health services, and/or social services. The regulations also require that every state adopt a citizen participation plan, which sets forth the state’s policies and procedures for citizen participation and acts as a set of rules that govern the planning process.
HUD requires each state’s citizen participation plan to “provide for and encourage citizens . . . to participate in the development of the consolidated plan, any substantial amendments to the consolidated plan, and the performance report.” Regulations require states “to take whatever actions are appropriate” to encourage the participation of all citizens, including minorities and non-English speaking persons, as well as persons with disabilities.
States must hold public hearings every year to obtain citizens’ views and to respond to proposals and questions. The hearings must address housing and community development needs, proposed activities, and review of program performance. At least one hearing must be held before the proposed Consolidated Plan is published for comment.
States must provide at least 30 days for comments from citizens on the Consolidated Plan and any substantial amendments. Each citizen participation plan must specify what changes constitute a substantial amendment to the state’s plan and the actual use of the block grants. For the annual performance report, states must provide at least 15 days to receive comments. Regulations also require the state to consider any comments or views of citizens received in writing, or orally at the public hearings, in preparing the final Consolidated Plan. A summary of these comments or views, and a summary of any comments or views not accepted and the reasons therefore, must be included in the final plan, substantial amendments, and performance reports.
The citizen participation plan also describes how the jurisdiction will take the required step of publishing a proposed Consolidated Plan in a manner that affords citizens, public agencies, and other interested parties a reasonable opportunity to examine its contents and to submit comments. Summaries of the proposed plan must be published in a newspaper (and not just in the legal section). Copies of the proposed Consolidated Plan must be available at libraries, government offices, and public places. In addition, each state must provide a reasonable number of free copies of the plan to citizens and groups that request it.
CONSOLIDATED PLAN CONTENT REQUIREMENTS
HUD requires that every state Consolidated Plan contain six basic elements:
Each state must include in the body of its Consolidated Plan a detailed description of the housing needs of residents by income category, race, tenure (owners or renters), and household types of those needing assistance, including extremely low-income, low-income, and moderate income persons, elderly persons, single persons, and large families. The plan must describe the nature and extent of homelessness, including rural homelessness, in the state. The state must analyze housing market conditions, including trends in population and housing costs, the size and type of units available, areas of concentration of different race groups, and the facilities available for helping homeless people. Each Consolidated Plan identifies the resources available to meet stated needs, including federal, state, local, and private resources. Lastly, the plan establishes the priority housing needs and numeric goals for meeting priority needs.
FOR MORE INFORMATION
General information on the Consolidated Plan can be obtained from American Communities at 1-800-998-9999. For information specific to your state’s Consolidated Planning process and/or to obtain a copy of your state’s Consolidated Plan, contact the agency that administers the HOME program in your state (generally an office of the state administrative branch or a Housing Finance Agency) or the nearest HUD field office.
This Information Sheet was prepared by the Housing Assistance Council. The work that provided the basis for the publication was supported by funding under Cooperative Agreement H-5971 CA with the U.S. Department of Housing and Urban Development. The substance and finding of that work are dedicated to the public. The publisher is solely responsible for the accuracy of the statements and interpretations contained in this publication and such interpretations do not necessarily reflect the views of the government.
HUD’s Supportive Housing for the Elderly program was authorized by Section 202 of the Housing Act of 1959, as amended by Section 801 of the National Affordable Housing Act of 1990 (NAHA). The program is often referred to as Section 202. Prior to the 1990 legislation, Section 202 funding was available to developers of housing for both elderly and disabled low-income households. Low-income disabled households are now served through the Supportive Housing for Persons with Disabilities (Section 811) program.
All three of these objectives must be evaluated before becoming in any way obligated to a real estate transaction. While it may appear to be complex or expensive, or both, to investigate some of the environmental factors discussed below, the consequences of ignorance can be far worse.
HEALTH AND SAFETY ISSUES
The developer must look for at least the following man-made or naturally occurring substances:
There are two possible levels of professional audit. A Phase I assessment determines quickly, but to a greater depth and detail than an informal site review, whether information currently exists to evaluate clearly a property’s environmental status. The assessment involves a review of records, interviews with people knowledgeable about the property, and an inspection of the property, the buildings, its fenceline and adjoining properties. Phase II audits are often advisable (and are required by some funding sources) for many environmental conditions identified by the Phase I audit. A Phase II audit often involves soil testing and other analysis, and can be costly.
PROTECTION OF IMPORTANT NATURAL RESOURCES
The second set of environmental issues faced by rural housing developers concerns the potential impact of the proposed housing upon the environment itself. Developers must comply with several important federal laws and executive orders that are designed to protect our natural resources, as well as with any applicable state and local laws. Federal lending agencies, as well as the general public, must comply with these laws. Developers should be concerned with issues such as:
Other environmental issues to be aware of include:
*The information presented in this fact sheet is discussed in greater detail in a technical manual entitled Environmental Concerns in Choosing a Site for Rural Housing Development, available for $4.00 from the Housing Assistance Council. Another HAC publication, Case Studies on Environmental Issues Affecting Rural Housing Development, examines ways specific developers handled environmental concerns arising during their development processes, and is also available for $4.00.
This Information Sheet was prepared by the Housing Assistance Council. The work that provided the basis for this publication was supported by funding under Cooperative Agreement H-5971 CA with the U.S. Department of Housing and Urban Development. The substance and finding of that work are dedicated to the public. The publisher is solely responsible for the accuracy of the statements and interpretations contained in this publication and such interpretations do not necessarily reflect the views of the government.
Introduction
The development of decent, affordable rural housing can improve the lives of those with inadequate shelter, while at the same time benefitting the local economy. There are several different methods to improve rural housing conditions: the local government can provide public housing; the individuals in need can join a self-help program to build their own housing; or a private or nonprofit group can develop affordable housing units. While these strategies affect the economy differently, each contributes to the economic development effects discussed below.
Construction
Building or renovating homes requires the services of a diverse group of persons and the products of many different industries. Initial land development activities will usually involve architects, lawyers, financiers and other consultants. As the project enters the building process, construction workers and specialized personnel like plumbers and electricians are needed. The development of rural housing creates jobs for those already living in the rural community, and encourages others to enter the community to fill the new demand in the construction-related professions. The Citizens’ Housing and Planning Association reports that housing construction and rehabilitation have a high ratio (62.3 percent) of value-added to total gross outlays. This means that a high percentage of the gross outlays for a residential construction project are available for wages and salaries, thus stimulating job creation.1 The U.S. Department of Agriculture’s Rural Housing Service estimates that each single-family home financed by the Section 502 program generates 1.75 jobs and $50,201 in wages.2
In addition, housing production requires an increase in transportation and trade services that can benefit a local economy. Building materials must be produced for the construction project, and people must be hired to transport those goods from their source to the building site. While many of these products must come from outside the community, some like milled timber and construction tools may be supplied by local businesses..
Residents
The economic impacts of developing housing extend beyond the construction stage to the years when the new homes or rental units are occupied by rural residents. The increased pride and responsibility that the residents feel for their dwellings often results in the consumption of goods and services to complement the new home. Beginning a life in a new home is often accompanied by the purchase of new appliances, new furnishings, and moving services. Later, other improvements may be made to the home itself including the addition of decks, new rooms, and landscaping. The new residences and the later improvements can encourage others in the community to take care of their own properties and common areas, ultimately stabilizing an area socially and reducing crime rates. Finally, new construction in rural areas is often accompanied by infrastructure improvements like paved roads, electrification, and water/sewer lines which encourage further housing development. An abundance of new housing can lower the cost of living for a community, making it attractive to new residents and industries.
Ripple Effect
The National Association of Home Builders found that the economic impacts listed above create a ripple effect that moves beyond the building-related professions to the entire local economy.3 Construction workers generally live close to the construction site, and thus spend a substantial part of their wages in the local community. Area businesses benefit from this increased patronage, from the sale of building supplies for the project, and from sales to the residents of the new units. The prosperity of the owners and employees of these businesses increases, allowing them to purchase more from other local ventures, and so the ripple continues and reaches more parts of the community than those directly related to construction.
Government
The revenues of the state, local, and federal governments can increase as the result of a housing development project. There is an immediate increase in governmental income from building fees, taxes on workers’ wages, and taxes on the sale and transport of building materials. Increased sales taxes can also be expected as workers spend their wages and the residents purchase supplies and services for their new homes. In the long run, the local government will be able to generate revenue from property taxes and mortgage and deed transfer taxes. All these taxes add up so that even a small project can generate a great deal of government revenue.4 Officials in the Mississippi Delta region estimate that the construction of 20 homes worth over $50,000 each generates $1 million in tax revenue. Some of this revenue must be used to provide infrastructure and services to the homes, and in many impoverished areas some fees and taxes must be waived to make a project viable. However, the remainder of the increased government revenue may be used to encourage more housing development or improve services like education, and thus promote further economic development.
Conclusion
The impact of rural housing development on the local economy will vary by area and by project. The specifics of land values, local incomes, community culture, and tax structures will determine whether it is appropriate to build new units or rehabilitate older ones, and whether the new dwellings should be single-family homes or multifamily rental units. The exact economic impact of a project cannot be predicted without a detailed study of these individual circumstances, but it is clear that the development of rural housing has the potential not only to benefit those that receive the new dwellings, but to improve the economy of the entire community.
Table 1: One-Year Economic Impacts of the Development of 100 Housing Units5
|
Type of Units |
Local Jobs Supported |
Local Wages and Salaries |
Local Business Owner’s Income |
Local Taxes |
|---|---|---|---|---|
|
Single Family |
253 |
$7,388,000 |
$2,670,000 |
$854,000 |
|
Multifamily |
121 |
$3,543,000 |
$1,280,000 |
$409,000 |
Table 2: Ongoing, Annual Economic Impacts After 100 New Units Are Occupied6
|
Type of Units |
Local Jobs Supported |
Local Wages and Salaries |
Local Business Owner’s Income |
Local Taxes |
|---|---|---|---|---|
|
Single Family |
76 |
$1,983,000 |
$416,000 |
$393,000 |
|
Multifamily |
36 |
$945,000 |
$238,000 |
$243,000 |
Footnotes
1 Citizens’ Housing and Planning Association, Creating Jobs and Increasing Economic Development: The Economic Benefits of the 1997 Housing Bond Bill (March 1997).
2Maureen Kennedy, “Increasing Homeownership Through Partnership,” Rural Voices (Summer 1996).
3 Paul Emrath, “Local Impact of Home Building,” Housing Economics (March 1997), and Housing Policy Department, The Local Impact of Home Building in Average City, USA: A Brief Description of the Model (March 1997).
4 Sheryl Stolberg, “Moving from Shanties to a Subdivision,” Los Angeles Times (January 26, 1997).
5Adapted from the National Association of Home Builders’ The Local Impact of Home Building in Average City, USA: Income, Jobs, and Taxes Generated by Single Family Construction (March 1997) and The Local Impact of Home Building in Average City, USA: Income, Jobs, and Taxes Generated by Multifamily Construction (March 1997). The figures are based on an average metropolitan statistical area, and homes with an average construction value of $145,372.
This Information Sheet was prepared by the Housing Assistance Council. The work that provided the basis for this publication was supported with funding from the Ford Foundation.
The Federal Home Loan Bank (FHLBank)System consists of 12 district banks that provide lending, deposit, and other services to member mortgage-lending institutions under the oversight of the Federal Housing Finance Agency. The 12 FHLBanks are instrumentalities of the federal government, but are wholly owned by their member institutions. The 12 FHLBanks reserve 10 percent of their collective net income or $100 million, whichever is greater, for use in the Affordable Housing Program (AHP). In 2004, the AHP had $229 million available.
INTRODUCTION
The Low Income Housing Tax Credit (LIHTC) provides an incentive for private, profit-motivated entities to develop affordable housing. Structuring a development project to use the tax credit is complex, but may well be worthwhile. This information sheet provides only very brief introductory material about the tax credit. To evaluate potential tax credit funding for a specific project, perform detailed calculations, carry out the syndication process, develop a project and then manage it, the would-be developer will want not only to learn more about the tax credit but also to acquire the services of experts such as an accountant, an attorney and perhaps a syndicator.
PROGRAM BASICS
The LIHTC, adopted by Congress in the 1986 Tax Reform Act, is a reduction in the dollar amount of federal taxes owed by an individual or corporation, in exchange for his/her/its investment in low-income rental housing. The amount of tax reduction is tied directly to the proportion of low-income persons among the residents of the housing produced. To obtain the tax reduction, an investor provides the cash – called capital or equity in development terms – that will be used to help develop the project. The investor has no role in the development process or the management of the project after it is rented up. A for-profit or nonprofit developer does those tasks. The investor receives a tax credit paid annually over a 10-year period and cannot withdraw his/her/its investment for 15 years.
ELIGIBLE ACTIVITIES
The tax credit program provides funding for two types of rental housing development: construction of new buildings or substantial rehabilitation of existing buildings. New construction can produce single-family houses, apartment buildings, duplexes, rowhouses or townhouses. Rehabilitation can be performed on these same types of buildings, and conversion of structures like warehouses, schools and motels is also possible.
PROJECT REQUIREMENTS
The value of the tax credit depends on the type of financing used. A larger credit is provided for development that does not use federal financing (except for the HOME program in some situations). For projects with federal financing, the tax credit is approximately 4 percent of development cost, excluding land; for projects without federal financing, it is approximately 9 percent.
A tax credit project can be partly occupied by households that are not low-income. However, the incentive is structured to encourage low-income occupancy by increasing the amount of credit for a higher proportion of low-income residents or for lower incomes of the residents. The tax credit provides investment benefits only for the amount of investment attributable to the portion of the building occupied by low-income tenants.
The project must comply with the chosen income levels, and with certain rent limitations, for at least 15 years. Because the tax credit’s benefits are tied directly to the characteristics of the tenants, management of a tax credit project throughout the credit’s 15-year term is a vitally important function. Of course, if a project receives financing from a program or a lender that imposes stricter tenant income requirements or longer use restrictions, it must comply with those provisions as well as the LIHTC provisions.
While the investors’ benefits from the Low Income Housing Tax Credit are provided by the Internal Revenue Service, states bear most of the responsibility for administering the tax credit program itself. Each state must set aside at least 10 percent of its credit allocation for projects developed by nonprofits.
Syndication is the process of selling the tax credits to investors and thus raising capital for a project. The nonprofit developer that holds the tax credit allocation can solicit the market for the best price and terms to generate cash for project development. Most often, investors or investor funds will seek out the holder of the tax credit instead. A syndicator may be contacted by either party and works as a professional to bring investors and nonprofit developers together. A nonprofit – particularly one that has served as a general partner in a tax credit deal – may receive calls from syndicators or potential investors looking for general partners and tax credit projects.
BENEFITS FOR NONPROFITS
Nonprofits are exempt from paying income taxes, so the tax-related values of the tax credit are meaningless to them. However, there are other benefits for a nonprofit organization in a tax credit project, including:
RISKS FOR NONPROFITS
Like any development process, the tax credit market involves risk. For example:
Some risks can be avoided by an experienced attorney and/or consultant making sure the partnership is properly set up. The partnership agreement should include provisions about title insurance, fire and casualty insurance, contractor bonding, vacancy limits, guarantees and other language that generally minimizes risk.
FOR MORE INFORMATION
A good introduction to the basics of the tax credit and its use in rural areas is Utilizing the Low Income Housing Tax Credit for Rural Rental Projects: A Guide for Nonprofit Developers, published by the Housing Assistance Council.
HAC’s publications list, all information sheets, and most full-length manuals and reports may be obtained free from HAC’s web site at www.ruralhome.org. A printed copy of the publications list is available free, and copies of manuals and reports are available for a charge to cover costs, from HAC, 1025 Vermont Avenue, N.W., Suite 606, Washington, D.C. 20005; 202-842-8600.
April 2002
This Information Sheet was prepared by the Housing Assistance Council (HAC). The work that provided the basis for this publication was supported by funding from the Ford Foundation and funding under Cooperative Agreement H-5971 CA with the U.S. Department of Housing and Urban Development. The substance and finding of that work are dedicated to the public. HAC is solely responsible for the accuracy of the statements and interpretations contained in this publication and such interpretations do not necessarily reflect the views of the government.
HAC, founded in 1971, is a nonprofit corporation that supports the development of rural low-income housing nationwide. HAC provides technical housing services, loans from a revolving fund, housing program and policy assistance, research and demonstration projects, and training and information services. HAC is an equal opportunity lender.