NCSHA Details Key Changes to HOME in the 21st Century ROAD to Housing Act
Wondering how the 21st Century ROAD to Housing Act would strengthen the HOME program? Here’s a deep dive into the HOME changes under consideration.
This week, the Senate began consideration of the 21st Century ROAD to Housing Act, which combines most of the Senate Banking Committee’s ROAD to Housing Act with most of the House-passed Housing for the 21st Century Act. Section 502 of the consolidated bill makes wholesale changes to the U.S. Department of Housing and Urban Development’s flagship affordable housing production program: the HOME Investment Partnerships Program (HOME). These improvements are the result of years of advocacy by the National Council of State Housing Agencies and its partners in the HOME Coalition who have long sought to modernize and streamline the program to increase its efficacy and improve outcomes for low-income families and seniors.
These are some of the highlights of how the 21st Century ROAD to Housing Act would strengthen HOME.
- Reauthorization. The bill reauthorizes the HOME program indefinitely. The program was first established in the Cranston-Gonzalez National Affordable Housing Act of 1990, with authorization extended through 1994. Since then, Congress has provided annual appropriations for HOME, but the program has operated without formal authorization for decades. Formal authorization provides legal authority and direction in program implementation. Without it, programs are more vulnerable to calls for funding cuts or elimination.
- Eliminating barriers to using HOME to support homeownership. While homeownership activities, such as down payment assistance, mortgage interest buy-downs, construction of for-sale homes, and homeowner rehab, have always been HOME-eligible, the law that established HOME inadvertently created barriers to using the program for homeownership that the 21st Century ROAD to Housing Act would fix. The bill would:
- Allow households using HOME for homeownership activities to purchase or rehabilitate homes valued at up to 110 percent of the average purchase price for the area in which the property is located. Currently, the HOME statute limits the value of for-sale homes that may be purchased, produced, or rehabilitated with HOME to no more than 95 percent of the average area purchase price.
- Expand eligibility for HOME homeownership assistance to households earning up to 100 percent of area median income (AMI) so that more families can benefit from the program. Currently HOME assistance of any kind (both rental and homeownership) is limited to households earning no more than 80 percent of AMI. Rental housing financed with HOME would still be limited to households earning no more than 80 percent of AMI, with at least 90 percent of HOME-assisted units in any individual project occupied by households with incomes of no more than 60 percent of AMI.
- Streamline the “resale” option for HOME homeownership activities. When HOME is used to support homeownership activities, the property that is purchased or rehabilitated is subject to either resale or recapture requirements if the HOME-assisted owner sells the property during the affordability period. If resale restrictions are in place, the HOME-assisted owner may sell their property only to a buyer who is also income eligible for HOME, whereas recapture restrictions require the HOME-assisted owner to repay a portion of the HOME funds if they sell during the affordability period but do not require the buyer to meet HOME income limits. In practice, most participating jurisdictions (PJs) — the state and local governments that administer the HOME program — usually apply recapture restrictions rather than resale because of conflicting requirements in the program’s authorizing statute related to resale rules. The 21st Century ROAD to Housing bill would make technical modifications to the resale provision to better facilitate that option and allow PJs to preserve the stock of affordable for-sale housing benefiting lower-income buyers.
- Allow homeownership housing to continue to qualify as affordable housing if the property is owned by a member of the military who is forced to sell before the end of the affordability period.
- Allow homeownership housing to continue to qualify as affordable housing if the property owner passes away during the affordability period and the heir or other beneficiary who inherits the property would not otherwise qualify for HOME assistance.
- Streamlining Section 3 requirements. The HOME program is subject to Section 3 of the Housing and Urban Development Act of 1968, which requires recipients of HOME funds to prioritize employment, training, and contracting opportunities for low-income individuals and businesses within their communities. While the goals of Section 3 are commendable, its practical implementation often results in unnecessary cost and administrative burdens with negligible benefits to low-income workers. Section 3 is often a disincentive for contractors to work on HOME-financed properties, particularly in areas that have an insufficient supply of qualified contractors, like rural areas and other smaller communities. The bill would adjust Section 3 requirements such that states and local PJs allocated less than $3 million annually would only need to comply with Section 3 for properties with more than 50 total units in them. Larger local PJs still would need to comply with Section 3 regardless of the size of the HOME-assisted property.
- Simplifying HOME property inspection requirements for states. The bill modifies property inspection requirements for state agencies administering HOME funds by allowing them to conduct inspections based on a national standard rather than in accordance with local codes. For state PJs, this would bring HOME in line with other HUD programs that simply apply a national standard for inspections. The current local code inspection requirements effectively require state agency compliance staff to be fully trained in the details of codes for every locality across their state. By allowing state PJs to use a national standard, such as NSPIRE established by HUD’s Real Estate Assessment Center, states can ensure HOME-financed housing remains high quality without requiring expertise in potentially hundreds of different local codes. Property owners would still be responsible for attesting that their properties meet these local codes, and individual local governments still may take enforcement actions, as they would with any other property. Local PJs still would need to monitor properties in accordance with their own local codes.
- Allowing HUD to forgive repayment if a property is no longer financially viable due to economic reasons beyond the grantee’s or owner’s control. Under current requirements, HUD mandates full repayment of HOME funds by the PJ if a HOME-assisted property no longer qualifies as affordable housing at any point during the affordability period with few exceptions. This means that, if a property no longer qualifies as affordable housing in year 19 of a 20-year affordability period, the PJ is still responsible for repayment of the entire HOME grant provided to finance the property. The 21st Century ROAD to Housing Act allows HUD to waive repayment if a property no longer qualifies as affordable housing because it is not financially viable due to unforeseen circumstances beyond the control of the HOME grantee or owner that significantly impact the financial or physical condition of the property.
- Streamlining CHDO qualification requirements. HOME grantees must set aside at least 15 percent of annual funds to allocate to Community Housing Development Organizations (CHDOs), which are specialized nonprofit entities that meet statutory requirements related to the makeup of their boards and other qualifications. The HOME statute also sets forth prescriptive requirements related to the role CHDOs must play in the ownership, sponsorship, or development of affordable housing financed with CHDO set-aside dollars. The bill would simplify CHDO board requirements, allowing more nonprofit entities to qualify as CHDOs, and adjust CHDO participation rules such that CHDOs can more effectively partner with other high-capacity entities and still qualify for CHDO set-aside funds.
- Codifying provisions in annual appropriations bills that simplify HOME administration. For some time, yearly appropriations legislation has included language nullifying on an annual basis the redundant HOME commitment deadline and the requirement for recapture of unspent CHDO set-aside funds, allowing those funds to instead roll over into a grantee’s HOME trust fund. The bill would codify these two changes so that they do not need to be included in each year’s HUD appropriations bill.
- Expanding HOME-eligible activities to include certain infrastructure activities. The bill expands the activities for which HOME may be used to include infrastructure improvements directly related or adjacent to a property receiving either HOME or Low-Income Housing Tax Credit financing if the property is located in a non-entitlement area (an area in which there is no local entity administering the Community Development Block Grant program).
Other changes in the 21st Century ROAD to Housing Act support the use of HOME by Community Land Trusts, align HOME rules with other housing programs, empower HUD to ensure grantee compliance, provide flexibility when HOME is used to finance small projects of four or fewer units, and make other technical fixes to the program.
Notably, the bill does not include relief from Build America, Buy America (BABA) requirements imposed on HUD programs in the bipartisan Infrastructure Investment and Jobs Act of 2021, which requires the use of domestically sourced materials in housing financed with federal funds. NCSHA has advocated that BABA should not apply to HOME or other affordable housing programs.
The bill also does not include an increase in HOME administration fees, which had been part of a previous version of the legislation passed by the Senate Banking Committee and in underlying HOME reauthorization legislation sponsored by Senator Catherine Cortez Masto (D-NV).
The Senate is expected to pass the bill next week and send it back to the House. The House could either pass the bill without further changes or both chambers would need to agree on and pass final legislation that could be sent to President Trump for his signature.
