Editorial

The federal HOME Investment Partnership program profoundly changed the landscape of federal affordable housing policies when it was authorized by Congress in 1990.  The intent of Congress was very clear at the time, and was carried forward in subsequent federal housing legislation later in the decade.  State and local housing officials – not HUD – would decide how federal housing funds would be used to address housing needs. 

Housing advocates involved in the struggle to create the HOME program can vividly recall the debate – one that included discussions about how the needs of the lowest income households would be addressed.  In particular, there was legitimate concern about several key issues: 

• Would state and local housing officials end up using the HOME program simply as an extension of the popular Community Development Block Grant program, rather than use it more creatively to expand affordable housing?

• Would the flexibility built into the program mean that housing officials could get away with not serving those households most in need of housing assistance?

• Could the program actually produce housing for the lowest income households without some type of subsidy mechanism built into the program design?

More than 10 years later, we have the answers to these questions, and they are extremely relevant to the current events unfolding in Washington D.C.  

The HOME program has more than fulfilled its promise of flexibility and creativity.  HUD data indicates that over 617,000 new units of housing – both rental and homeowner – have been created with the HOME program.  Almost $4 in other financing is contributed for every $1 of HOME funding invested.  Some say that HOME is an affordable housing developer’s “dream come true.” 

Unfortunately, if you are an extremely low-income person with a disability looking for housing assistance in 2001, the HOME program is not likely to be the answer to your problems.  As this issue of Opening Doors documents, not enough HOME funding is going to address the housing needs of people with disabilities – or other households with incomes below 30 percent of median income for that matter. 

This outcome might not have been a problem if other federal housing programs were addressing this need.  However, by the 1990s, virtually all other housing production programs for people with the lowest incomes (with the exception of “boutique” programs such as Section 811 and 202 programs) had ceased to exist, and were replaced with programs that work best for households with incomes above 30 percent of median and above. 

Now another opportunity may be at hand.  Currently, the Millennial Housing Commission is beginning to draft its report to Congress with recommendations for the future of federal housing policies and programs.  The Commission has heard testimony from housing advocates about how difficult it is to rely exclusively on Section 8 vouchers to solve the housing problems of the poorest households.  Hopefully, their recommendations will take into account both the successes and the failures of the federal policies of the 1990s and include strategies to ensure that the full range of housing needs can be addressed in future federal housing production programs. 

As the Commission finalizes its recommendations, legislation proposing a new National Housing Trust Fund is also pending in Congress and has a growing number of co-sponsors.  Housing advocates for people with disabilities and others who advocate on behalf of the poorest of the poor are as concerned now as they were 11 years ago when the HOME program was first authorized - except this time we have the evidence from the HOME program to prove our case. 

We cannot afford to make the same mistake again!  Advocates must ensure that any federal housing trust fund legislation include specific mechanisms – including a source of operating or rental assistance funding – to create affordable units for the lowest income households.  Without these assurances, the flaws in the HOME program design will be perpetuated, and the lowest income people will continue to be overlooked by federal policy makers.

The Editors

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Distributing HOME Funds

HUD distributes HOME funds every year to all 50 states and more than 500 eligible localities.  Localities that receive HOME funds directly are referred to as “HOME participating jurisdictions” and include metropolitan cities, urban counties, and other local governments that join with adjacent cities or towns to form a “HOME consortium.”  Communities that do not receive HOME funds directly from HUD can obtain HOME funding through the state’s HOME program. 

The actual amount of funding received each year is based on the amount appropriated by Congress for that year, as well as a formula that HUD uses to allocate HOME funds to each state and participating jurisdictions.  The formula takes into account certain local conditions including the inadequacy of the housing supply, the amount of substandard rental housing, the number of low-income units in need of rehabilitation, the cost of producing housing, and the overall incidence of poverty, etc. 

For HUD’s most up-to-date and complete listing of HOME grants to cities and states go to the HUD website and choose the HOME grants link.  

 Table 1:  High and Low One-Bedroom HOME Rent Limits as Compared to Area SSI

The Consolidated Plan Process

All states and eligible communities must have a HUD-approved Consolidated Plan (ConPlan) in order to obtain HOME resources.  The ConPlan is the “master plan” for affordable housing in local communities and states.  The ConPlan is intended to be a comprehensive, long-range planning document that describes housing needs, market conditions, and housing strategies.  The ConPlan also includes an Annual Action Plan for the use of federal housing funds including HOME dollars.  

The ConPlan process was established by Congress so that state and local government and citizens – rather than the federal government – could make affordable housing and community development decisions.  Congress made sure that citizens could be involved in making these decisions by requiring that government housing officials in charge of preparing the ConPlan meet specific citizen participation requirements including: holding at least two public hearings; consulting with public and private service providers; and soliciting feedback from residents and members of the community.  

At the local level, the planning or community development department is usually responsible for coordinating the preparation of the ConPlan.  At the state level, the state’s housing agency (it may be called the Department of Community Affairs or Community Development, the state Housing Finance Agency, or the Department of Economic Development) develops the ConPlan.  Through the ConPlan process, the disabilities community can educate local housing officials; provide information and data on housing needs of people with disabilities; and advocate that HOME funds be used to assist people with disabilities.  For more detailed information on the ConPlan process, see TAC’s online publication Piecing It All Together.

 How HOME Funds Can Be Used

The HOME program is notable for the flexibility it offers communities in meeting their affordable housing needs.  HOME dollars can be used to fund four primary housing activities:  

q      Rental housing development;

q      Tenant-based rental assistance;

q      Homeownership activities; and

q      Homeowner repair

Up to 15 percent of a community’s HOME grant must be reserved for projects owned, developed, or sponsored by community housing development organizations (CHDOs).  CHDOs are community-based, non-profit housing organizations that meet specific federal requirements.  (For example, at least one third of the Board of Directors of a non-profit CHDO must be low-income residents).  States and localities can also use up to 10 percent of their HOME funds to cover administrative expenses. 

Rental Housing Development

HOME resources can be used to cover the cost of acquiring land and buildings, renovating properties, as well as constructing new rental housing.  However, HOME funds cannot be used to fund on-going housing operating costs – a major drawback of the HOME program.  Funds can be provided for projects developed by both for-profit and non-profit developers and can be made available in the form of grants or loans, which are designed to ensure affordability.  Sometimes HOME funds are used to cover costs incurred to determine if a project is feasible, such as architect and engineering fees.

The rental housing developed using HOME funds can take on many forms.  The units can range in size from single room occupancy units or efficiencies to multi-bedroom apartments.  HOME-funded rental housing can be as small as a single family home or as large as an apartment complex with hundreds of units.

The fact that HOME funds cannot be used to subsidize the operating costs of rental housing is a real barrier to using the program for people with disabilities, particularly people with disabilities receiving SSI benefits.  The federal housing programs that can provide this on-going subsidy are the Section 8 project-based assistance program, the McKinney/Vento Homeless Assistance programs, and the Section 811 Supportive Housing for Persons with Disabilities program.  However, most housing officials administering the HOME program are not familiar with strategies that can link HOME-funded rental housing activities with these other HUD programs. 

Tenant-Based Rental Assistance

Congress specifically created the tenant-based rental assistance component of the HOME program so that extremely low-income households, including people with disabilities, could easily benefit from the program.  HOME tenant-based rental assistance operates in much the same way as other federal rental assistance programs, such as the Section 8 voucher program.  HOME funds can provide a rent subsidy directly to a landlord on behalf of an eligible household.  The household selects the rental unit from units available in the community.  The unit must meet the HOME program guidelines, which are similar to those used in the Section 8 voucher program.

Tenants are required to pay a portion of their income for rent (generally 30 percent of their adjusted gross income) and HOME funds pay the difference between the tenant share of the rent and the approved monthly rent for the unit.  HOME tenant-based rental assistance is awarded for a two-year timeframe but can be renewed if additional HOME funds are available.  Since households that receive HOME tenant-based rental assistance can also be on Section 8 waiting lists, strategies can be developed that link people receiving HOME funds to Section 8 vouchers at the end of the two years. 

Homeownership Activities

The combination of limited incomes and tight housing markets has made it nearly impossible for many people with disabilities to purchase homes without some sort of financial assistance.  Because of limited incomes, people with disabilities may also require more down payment assistance and lower mortgage rates.  HOME funds can be used to finance the acquisition, rehabilitation, and/or new construction of homes for homebuyers by providing resources for down payments, low-interest mortgages, and/or to subsidize the cost of construction.  The HOME program permits the purchase of owner-occupied 1- to 4-family residences, condominiums, cooperative units, or manufactured housing initiatives.

A few states and communities have made considerable headway in expanding homeownership opportunities for people with disabilities using the HOME program.  In these localities, housing officials are implementing innovative and collaborative homeownership strategies benefiting people with disabilities that combine the HOME program with other homeownership resources.  For example, HOME funds have been used for down payment assistance in conjunction with below-market interest mortgage program for people with disabilities in Alaska and Maryland. 

Home Repair

HOME resources can be provided to existing eligible homeowners to fund the repair, rehabilitation, or reconstruction of their homes.  For example, localities can make HOME funds available to people with disabilities to support general repairs to their homes, such as installation of a new roof or boiler.  The HOME program can also help make properties accessible for people with physical or sensory impairments, including the installation of wheelchair ramps, renovating entranceways, modifying bathrooms and kitchens, and adding assistive technology.  Similar to homeownership activities, the housing must be an owner-occupied 1- to 4-family residence, condominium, cooperative unit, or manufactured housing.

Income Targeting

HOME funds must be used to create housing for low and very low-income households, meaning households with annual incomes at or below 80 percent of the area median income.  Complicated income eligibility guidelines for the HOME program ensure that, for rental housing activities, most of the households assisted must be below 60 percent of median income.  However, there are virtually no requirements that a state or community set aside a portion of HOME funds for the lowest income households – that is, households with incomes below 30 percent of median. 

Because the HOME program can assist households below the area median income, the vast majority of people with disabilities in need of housing assistance qualify for the HOME program.  The irony is that the lower the income of the household, the less likely it is that the household will benefit from the HOME program.  This is particularly true for people with disabilities receiving SSI benefits, who, according to housing advocates, receive very little benefit from the HOME program.  [In fact, recent data from HUD’s website indicates that people with disabilities are generally not benefiting from HOME-funded housing activities – see Table 2 for more information]. 

HOME Rents Not Affordable for Lowest Income Households  

The HOME program creates “affordable” rental housing by requiring the owner(s) of HOME-funded units to use the program’s rent limits.  These rent limits are referred to as High and Low HOME Rents and are derived from HUD’s Fair Market Rents (FMRs) and area median income levels.  The High HOME Rent is a ceiling above which rents cannot be charged.  The Low HOME Rent must be used for at least 20 percent of the units in most HOME-funded projects to ensure affordability for very low-income households below 50 percent of median income.  

Unfortunately, even the HOME program’s Low Rent limits are not low enough to be affordable to people with disabilities receiving SSI benefits.  Although technically eligible to live in housing developed through the HOME program, people with disabilities with incomes below 30 percent of median rarely live in HOME-funded rental housing because – unless they have additional rental assistance like a Section 8 voucher – they cannot afford to pay the Low HOME Rent.  

In fact, in most areas of the country, a person would need to spend more than 60 percent of their monthly SSI benefit for a unit renting at the HOME Low Rent.  In some communities, the Low HOME Rent limit is actually higher than monthly SSI benefits, making it literally impossible for a person with SSI benefits to live in a HOME-assisted property without a rent subsidy.  For example, in New Haven, Connecticut, an individual on SSI would pay almost 80 percent of his/her income in a Low HOME Rent unit and over 90 percent at the High HOME rent.  Table 1 provides a snapshot of the High and Low HOME Rent Limits for some communities, and compares them to SSI benefit levels. 

Table 2:  Project Funding Commitments by Activity Type and Tenure
(Figures as of Oct. 31 and in millions of dollars)

[NOTE:  HUD publishes a list of HOME High and Low Rents for each participating jurisdiction.  For a complete listing of the High and Low HOME Rents go to the HUD website.

The HOME Program’s Track Record  

As mentioned previously, state and local government housing officials decide how their HOME funds will be used.  The funds can be committed to any one, or to all four approved HOME activities, as long as it is clearly specified in the HUD-approved ConPlan.  For example, one participating jurisdiction may elect to use all of its HOME funds to support the development of new rental housing.  Another participating jurisdiction can choose to use all of its HOME funds for homeownership programs.  More commonly, communities use a portion of their HOME funds for several of the four eligible activities. 

Statistics for the HOME program available on HUD’s website provide a breakdown of exactly how HOME program funds have been used since 1992.  As indicated in Table 2, 55.4 percent of HOME funds have been committed to rental housing activities and 44.6 percent for homeownership.  [NOTE:  Homeownership percentage includes both homebuyer and homeowner repair activities].  What is most notable and disconcerting about this data is the extremely low percentage of funding spent on tenant-based rental assistance. 

Out of the $9.9 billion in funding commitments made under the HOME program by state and local housing officials, only $263 million – or 2.7 percent- of the total funding committed in the past nine years has been used for tenant-based rental assistance.  

Table 3:  HOME Tenant-Based Rental Assistance Program Costs

To estimate what a HOME tenant-based rental assistance program would cost your community, multiply the number of units by the local Fair Market Rent (FMR) for the applicable bedroom size by 24 months.  (# of units x FMR x 24 months).  Below are sample costs of a tenant-based rental assistance project in different parts of the country. 

None of this data is good news for people with disabilities receiving SSI who cannot afford to live in HOME-funded rental housing developments without an additional rent subsidy, but who would benefit greatly from HOME tenant-based rental assistance.