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HUD Releases Housing Trust Fund Interim Rule

Published on January 30, 2015 by Althea Arnold
HUD Releases Housing Trust Fund Interim Rule

Today’s Federal Register contains the new HUD Interim Rule implementing the Housing Trust Fund (HTF).  The Interim Rule establishes regulations governing HTF administration and the allocation formula for grant distribution to states.  It says HUD will consider public comment on the Interim Rule once funding is available and grantees gain experience administering the program.

The regulations closely mirror those governing the HOME Investment Partnerships program.  The regulations include guidance on eligible costs and activities; income targeting; siting and neighborhood standards; income determinations; project requirements; tenant and homeowner qualification requirements; program administration; and quality control provisions.

The Interim Rule reflects numerous changes to the earlier Proposed Rule, several of which NCSHA requested.  The changes include increased flexibility to use HTF funds for operating assistance; removal of a proposed incentive for transit-oriented development; guidelines for a recapture provision on homeownership funds; and authority to use HTF funds for public housing under certain federal housing programs.

The Interim Rule also relaxes a requirement in the Proposed Rule that would have directed grantees to use all their HTF funds for extremely low-income (ELI) housing [for persons at or below 30 percent of area median income (AMI)] during the first year of the program.  The Rule maintains the 100 percent ELI requirement when HTF receives less than $1 billion in a single year, but reduces that requirement to the statutory minimum of 75 percent of HTF funds when annual funding is $1 billion or greater.  The remaining 25 percent of the funds must support affordable housing for very low-income (VLI) persons (with incomes at or below 50 percent of AMI).

The allocation formula described in the Interim Rule is based on four factors:  (1) a state’s relative shortage of rental housing available to ELI families; (2) a state’s relative shortage of rental housing available to VLI families; (3) the relative number of ELI renter households living in substandard, overcrowded, or unaffordable units in a particular state; and (4) the relative number of VLI renter households living in substandard, overcrowded, or unaffordable units in a particular state.  In addition, each state’s local cost of construction is factored into the formula.  The law establishes a $3 million minimum allocation for each of the 50 states and the District of Columbia.

The Interim Rule’s publication today follows the Federal Housing Finance Agency’s (FHFA) December 11, 2014 announcement that it was directing Fannie Mae and Freddie Mac to begin setting aside and allocating funds to the HTF and the Capital Magnet Fund in calendar year 2015.  Money is expected to begin flowing to the HTF sometime after March 2016.

The Interim Rule states that HUD will publish a notice in the Federal Register announcing the availability of the allocations to states no more than 60 calendar days after HUD determines the formula amounts.

States will have 30 calendar days after HUD’s publication of the allocation amounts to notify HUD in writing of their intention to become HTF grantees for the first year of HTF funding.  Each grantee must submit a Consolidated Plan in accordance with 24 CFR part 91 to be considered.  A state may choose to be the HTF grantee to receive and administer its grant or it may choose a qualified state-designated entity to be the HTF grantee.  HUD says it will provide more guidance soon on how states can communicate to HUD entities they have designated to administer the HTF funds.

NCSHA will review the Interim Rule further and provide a more in-depth analysis in the coming days.