HUD administers block grant programs, which provide flexible resources that help fund affordable rental and homeownership activities as well as economic development and neighborhood revitalization. HUD uses a formula to allocate funds for each program to large cities and urban counties, as well as to states, which can distribute the federal grant funds to jurisdictions that do not receive money directly. To be eligible for these and other grant programs, jurisdictions are required to submit a “Consolidated Plan” that details the local housing needs of low- and moderate-income residents, as well as proposed strategies and local resources that may be brought to bear to meet those needs.
HOME
The HOME Investment Partnerships Program, commonly referred to as HOME, is a federal block grant program administered by HUD that distributes approximately $1 billion each year to states and participating localities. In 2010, HOME received $2 billion in funding, the highest amount ever received by the program. Since then, the program’s funding has been cut by 50 percent. HOME funds may only be used for activities that provide affordable housing for low-income households. While HOME funds are limited to affordable housing activities, the range of eligible uses that meet this requirement includes a variety of strategies.
HOME funds flow directly from HUD to larger cities and counties and to states. Smaller localities are eligible to receive HOME funds indirectly by applying to their state. The program comes with a matching requirement under which communities receiving HOME funds must match every dollar of HOME funds with 25 cents of local resources. This matching requirement may be met either with cash or in-kind contributions.
How can HOME funds be used?
The eligible uses of HOME funds encompass a broad range of activities, including but not limited to:
- Home purchase or rehabilitation financing assistance
- Construction or rehabilitation of housing for rent or ownership and related expenses, including site acquisition, demolition of dilapidated homes to make way for a HOME-assisted development and relocation assistance
- Tenant-based rental assistance (assistance expires after two years, unless renewed)
- Program planning and administration
In all cases, affordability of a home must be maintained for at least 20 years for new construction and 5 to 15 years for acquisition and/or rehabilitation, depending on the award amount.
While the possible applications of funds are numerous, limits apply to the incomes of families receiving assistance. In general, rental projects that receive HOME funds must benefit households with incomes below 60 percent of the area median income (AMI), while assistance related to homeownership must be used for households with incomes below 80 percent of AMI. Additional income restrictions apply depending on specific project details. This is a general summary of rather complex income eligibility and targeting rules.
Who administers the HOME program?
The HOME program was authorized by Congress in 1990 under Title II of the Cranston-Gonzalez National Affordable Housing Act, and is administered by HUD’s Office of Community Planning and Development. Local eligibility for direct assistance as a participating jurisdiction (PJ) is determined by a formula that incorporates measures of poverty and housing conditions.
Overall, 60 percent of funds go directly to localities, and 40 percent of HOME dollars go to states. A formula is used to determine individual allocations to PJs and states, with certain minimums. (States receive a minimum of $3 million annually, while local PJs are normally guaranteed at least $500,000 per year.) In addition, 15 percent of a PJ’s funds must be used for homes that are developed, sponsored or owned by a nonprofit designated as a “community-based housing development organization.”
Community Development Block Grant (CDBG)
The Community Development Block Grant (CDBG) program provides annual grants on a formula basis to be used for a wide range of community development activities directed toward neighborhood revitalization, economic development, affordable housing and improved community facilities and services. Local and state governments choose how to deploy CDBG funds based on their communities’ needs. According to HUD, in fiscal year 2014, CDBG was used to help meet the housing needs of more than 85,800 households nationwide through initiatives offering home rehabilitation assistance and other housing programs.
Housing Opportunities for People with AIDS (HOPWA) grants
Like CDBG, Housing Opportunities for People with AIDS (HOPWA) is not strictly a housing program. Funds may be used for health care, case management and other supportive services for people with HIV/AIDS, in addition to covering the costs associated with the acquisition and rehabilitation or development of housing. Funds may also be used to provide rental assistance and, on a short- term basis, prevent homelessness among individuals diagnosed with HIV or AIDS. HOPWA also sets aside a limited amount of funding to be awarded on a competitive basis to jurisdictions in addition to the formula allocations.
National Housing Trust Fund
The National Housing Trust Fund (NHTF) was authorized by Congress in 2008, and is intended to provide a dedicated source of funding for the preservation and production of new homes for extremely low-income families. (Ten percent of funds may be used for activities that support first-time homebuyers, including down payment and closing cost assistance.) The NHTF was initially slated to be funded with a share of Freddie Mac and Fannie Mae’s new business; in 2015, the Federal Housing Finance Agency decided to begin funding NHTF, and states will receive funds for the first time in 2016. While the goal is for NHTF to provide $1 billion in annual affordable housing funding, these first initial years are expected to be smaller allocations, with $174 million allocated for fiscal year 2016.
Capital Magnet Fund
The Capital Magnet Fund was authorized by Congress in 2008. The Department of Treasury, through the Community Development Financial Institutions (CDFI) Fund, administers the program, providing competitively awarded grants to CDFIs and qualified nonprofit housing organizations. The Capital Magnet Fund can support affordable housing, economic development and community service facilities. Awardees are required to produce housing and community development investments at least 10 times the size of the award amount. The program was initially slated to be funded with a share of Freddie Mac and Fannie Mae’s new business and received a direct appropriation of $80 million from Congress in 2010. In 2016, the Federal Housing Finance Agency decided to begin funding the National Housing Trust Fund and the Capital Magnet Fund.
Neighborhood Stabilization Program
To help states and localities stabilize neighborhoods impacted by the foreclosure crisis of 2007-2010, Congress funded the Neighborhood Stabilization Program (NSP). The initial round of NSP funding, known as NSP1, was authorized by the Housing and Economic Recovery Act (HERA) of 2008. NSP1 provided $3.92 billion in grants to states and selected localities based on a formula that allocated more funding to communities that had been greatly impacted by foreclosures. Eligible activities included:
- Establishment of financing mechanisms to facilitate the purchase and redevelopment of foreclosed homes;
- Direct purchase and rehabilitation of abandoned and foreclosed homes for resale, rent or redevelopment;
- Establishment of land banks for foreclosed homes; and
- Demolition of blighted structures.
In 2009, the American Recovery and Reinvestment Act (ARRA) established two additional rounds of NSP funding, known as NSP2 and NSP-TA. NSP2 provided $1.93 billion in competitive grants to states, localities and nonprofit organizations, while NSP-TA provided $50 million on a competitive basis to organizations that provide technical assistance to NSP grantees. Congress funded a third round of NSP in 2010 as part of the Dodd-Frank Wall Street Reform Act. Both NSP-1 and NSP-3 were by formula allocation. The program has not received additional funding since 2010, although some grantees continue activities by recycling program income on a limited scale.
Additional resources on HUD programs
The National Low Income Housing Coalition’s Advocates’ Guide includes a thorough description of HUD programs and acts as a resource for advocating in support of these programs.