Show Me the Real Estate Money: Housing Highlights under the American Recovery and Reinvestment Act of 2009
Corporate & Finance Alert
March 3, 2009
On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (the “Act”) was signed into law. The following is a brief summary of the various housing related programs that are slated to receive funding under the Act.
Public Housing Capital Fund
The Act appropriated $4 billion to the Public Housing Capital Fund to carry out capital and management activities for public housing agencies. The Public Housing Capital Fund makes funds available to public housing agencies for the development, financing, and modernization of public housing projects, which includes redesign, reconstruction, and reconfiguration of public housing sites and buildings (including accessibility improvements). The funds are prohibited from being used for luxury improvements, direct social services, costs funded by other Housing and Urban Development Department (“HUD”) programs, and activities as determined by HUD on a case-by-case basis.
$3 billion of the funds made available to the Public Housing Capital Fund will be distributed by the same formula used for amounts made available in fiscal year 2008, except that the Secretary of HUD may determine not to allocate funding to public housing agencies currently designated as troubled or to public housing agencies that elect not to accept such funding. The remaining $1 billion are being made available pursuant to a new competitive grant process for priority investments, including investments that leverage private sector funding or financing for renovations and energy conservation retrofit investments.
Public housing agencies are required to commit all of the funds made available to them within one year, and are required to expend 60% of such funds within two years, and 100% of such funds within three years. Failure to comply with the foregoing requirements will cause the funds to be reallocated to agencies that are compliance with the spending requirements.
More information about the Public Housing Capital Fund may be found at: http://www.hud.gov/offices/pih/programs/ph/capfund/index.cfm.
Community Development Fund
$1 billion was appropriated for the Community Development Fund to carry out the community development block grant program (the “CDBG”). The primary objective of the CDBG program is the development of viable urban communities by providing decent housing, a suitable living environment, and expanding economic opportunities, principally for persons of low and moderate income.
The CDBG is available to States and local jurisdictions and is allocated between “non-entitlement” and “entitlement” communities. Entitlement communities are comprised of central cities of metropolitan statistical areas; metropolitan cities with populations of at least 50,000; and qualified urban counties with a population of 200,000 or more (excluding the populations of entitlement cities). States distribute CDBG funds to non-entitlement localities not qualified as entitlement communities.
HUD determines the amount of each grant by using a formula comprised of several measures of community need, including the extent of poverty, population, housing overcrowding, age of housing, and population growth lag in relationship to other metropolitan areas.
The $1 billion may only be distributed to grantees that received funding in fiscal year 2008, and HUD is charged with establishing requirements to expedite the use of the funds with a bias towards projects that can award contracts within 120 days from the date funds are made available.
More information about the Community Development Fund may be found at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/communitydevelopment.
Neighborhood Stabilization Program
The Act appropriated $2 billion for the provision of emergency assistance for the redevelopment of abandoned and foreclosed homes pursuant to the Neighborhood Stabilization Program (“NSP”) authorized under the Economic Recovery Act of 2008.
NSP provides emergency assistance to state and local governments to acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities. NSP provides grants to every state and certain local communities to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop these homes in order to stabilize neighborhoods and stem the decline of house values of neighboring homes. Eligible uses for NSP funds include the purchase and rehabilitation of homes and residential properties abandoned or foreclosed; the establishment of land banks for foreclosed homes; the demolition of blighted structures; and the redevelopment of demolished or vacant properties.
The additional funding will be made available to States, units of local government, and nonprofit entities or consortia of nonprofit entities, which may submit proposals together with for profit entities. HUD is required to allocate funding to areas with the greatest number and percentage of foreclosures; provided the funds can be expended 50% within two years, and fully within three years.
More information about the Neighborhood Stabilization Program may be found at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/communitydevelopment/programs/neighborhoodspg.
HOME Investment Partnership Program
$2.25 billion was made available to the HOME Investment Partnerships Program (“HOME”). HOME is authorized under the Cranston-Gonzalez National Affordable Housing Act, and provides funds to State and local governments to create affordable housing for low-income households.
HOME funds are used primarily to provide financing assistance to eligible homeowners and new homebuyers to purchase or rehabilitate homes and for “other reasonable and necessary expenses related to the development of non-luxury housing,” including site acquisition or improvement, demolition of dilapidated housing to make way for HOME-assisted development, and payment of relocation expenses.
Housing credit agencies within the States are required to distribute the $2.25 billion competitively to owners of projects who have received or receive simultaneously an award of low-income housing tax credits under section 42(h) of the Internal Revenue Code of 1986. 75% of such funds are required to be committed within one year, with 75% expended within two years, and 100% expended within three years. Failure to so commit and expend will result in the redistribution by the housing agency to “a more deserving project.”
More information about the HOME Investment Partnerships Program may be found at: http://www.hud.gov/offices/cpd/affordablehousing/programs/home/.
Homelessness Prevention Fund
$1.5 billion was allocated to the Emergency Shelter Grants Program, which provides homeless persons with basic shelter and essential supportive services. The program is designed to help improve the quality of emergency shelters and transitional housing for the homeless, to make available additional shelters, to meet the costs of operating shelters, to provide essential social services to homeless individuals, and to help prevent homelessness.
The funding will be made available to States, metropolitan cities, urban counties, and territories and must be used for the provision of short-term or medium-term rental assistance, housing relocation and stabilization services, including housing search, mediation or outreach to property owners, credit repair, security or utility deposits, utility payments, rental assistance for a final month at a location, moving cost assistance, and case management or other appropriate activities for homelessness prevention and rapid re-housing of persons who have become homeless.
Grantees must expend at least 60% of funds within two years, and 100% of funds within three years. Unexpended funds may be recaptured and reallocated to grantees in compliance with the expenditure requirements.
More information about the Emergency Shelter Grants Program may be found at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/homeless/programs/esg.
Assisted Housing Stability and Energy and Green Retrofit Investments
The Act appropriated $2.25 billion to be used as assistance to owners of properties receiving project based assistance pursuant to (i) Section 202 of the Housing Act of 1959 (a program which helps expand the supply of affordable housing with supportive services for the elderly); (ii) Section 811 of the Cranston-Gonzalez National Affordable Housing Act (a program which provides funding to nonprofit organizations to develop rental housing with the availability of supportive services for very low-income adults with disabilities); and (iii) Section 8 of the United States Housing Act of 1937 (a program which subsidizes housing for low-income families and individuals), of the $2.25 billion, $250 million is required to be used for grants or loans for energy retrofit and green investments in assisted housing.
More information about Section 202 of the Housing Act may be found at: http://www.hud.gov/offices/hsg/mfh/progdesc/eld202.cfm.
More information about Section 811 of the Cranston-Gonzalez National Affordable Housing Act may be found at: http://www.hud.gov/offices/hsg/mfh/progdesc/disab811.cfm.
More information about Section 8 Housing Assistance may be found at: http://www.hud.gov/offices/hsg/mfh/progdesc/disab811.cfm.