U.S. Department of Housing and Urban Development Arriving at the NSP Benchmark: Close Out, Disposition and Meeting LH25 Strategies HUD Community Planning and Development
Agenda • Grant Close-out Overview – Requirements and Expectations • Disposition Strategies – Marketing – Lease Purchase – Rental Strategies – Use of demolished & land banked properties • LH25 Strategies U.S. Department of Housing and Urban Development • Community Planning and Development 2
NSP1 & NSP2 Life Cycle (NSP3 is One Year Behind) Continue to Re-Use Expend Landbanked Remaining Monitor Expend Meet Expend Grant Funds Close Out During or Grant Funds Expenditure Program & PI – NSP Grant Affordability Acquired & & PI Deadlines Income Document Period Demolished National Properties Objective Feb/March 5-20 years At time of re-use – In (depending 2013 Approx. Approx. commit to 2013 – 2014 perpetuity on level of (depending 2013 - 2014 (depending investment landbank Now – (depending (depending on grant on program & program re-use within on program on program Feb/March agreement design) 10 years design) design) design) 2013 date) U.S. Department of Housing and Urban Development • Community Planning and Development 3
Expenditure Deadlines v. Grant Close-Out • Expenditure deadline = when amount equivalent to 100% of grant funds must be expended – Grant can remain open & accessed in DRGR • Close-out = when original activities complete & funds fully drawn from DRGR – Occurs after expenditure deadline U.S. Department of Housing and Urban Development • Community Planning and Development 4
NSP Expenditure Deadlines • Clock starts with HUD signing grant agreement • NSP1: Must expend 100% within 4 years – Generally, February – March 2013 • NSP2: Must expend 100% within 3 years – 100% by February 11, 2013 • NSP3: Must expend: – 50% within 2 years (March-April 2013, depending on grant date) – 100% within 3 years (March-April 2014) U.S. Department of Housing and Urban Development • Community Planning and Development 5
NSP Recaptured Funds NSP1 or NSP3 recapture policy is forthcoming NSP2 funds will be returned to Treasury Note: Recaptured funds will not be reallocated to NSP grantees. U.S. Department of Housing and Urban Development • Community Planning and Development 6
When Can You Close Out? – NSP Line of Credit has been depleted – Activities are complete and national objectives are met (ie: units are occupied or demolished if end use) – Applicable laws and regulations are followed – Final QPR is submitted – Closeout agreement between HUD Field Office and grantee is signed U.S. Department of Housing and Urban Development • Community Planning and Development 7
When Can You Close Out cont. Program assets are accounted for • List of properties subject to affordability requirements • List of properties held in land banks • Value of program income on hand Redevelopment plans for • Land banked properties • Affordability period enforcement U.S. Department of Housing and Urban Development • Community Planning and Development 8
Operating NSP Programs After Close-Out • If receiving NSP PI after close-out, can: – Continue to operate almost the same NSP eligible program – Use PI to set up new NSP eligible activities – Use PI for NSP program administration (capped) • What’s different – Reporting will be done on annual basis – LH25 requirement (still under review) – NSP2 nonprofit grantees will track PI for 5 years after close out – Keep property inventory registry with affordability periods updated anuallly 9
Disposition: Definition Selling, renting or donating a home or residential property to an income eligible household or entity that will use it to serve an income eligible household. Selling, renting or donating residential or commercial property to a public or private nonprofit to be used as a public facility that will serve an income eligible area 10 U.S. Department of Housing and Urban Development • Community Planning and Development
Eligible Disposition Costs • Marketing property for sale – Realtor fees – advertizing – Staging • Taxes/Insurance • Maintenance costs – General maintenance – Grounds keeping – Boarding up – Security system installation [Applicable citation 24 CFR 570.201 (b)] 11 U.S. Department of Housing and Urban Development • Community Planning and Development
Continuum of Disposition Strategy Options in Slow Selling Markets Demolish Change Alter Scattered Blighted Lease Land Marketing Financial Site Units & Purchase Banking Approach Structure Rental Re-Use Land 12 U.S. Department of Housing and Urban Development • Community Planning and Development
Developing a Disposition Strategy • Evaluate what you have to market • Determine the length of the plan • Clarify the neighborhood goals • Review the resource needs • Address maintenance and vandalism • Consider alternative options 13 U.S. Department of Housing and Urban Development • Community Planning and Development
Tracking Grantee/Subrecipient Owned NSP Property • HUD will be releasing additional guidance about disposing of vacant and land banked property – Policy will focus on end use of property • Land banks (tentative pending HUD guidance): – Properties must be owned by grantee or sub – Once property comes out of land bank, use must meet national objective – Must be obligated to specific redevelopment within 10 years (HUD is developing guidance) U.S. Department of Housing and Urban Development • Community Planning and Development 14
What is LH25? • Requirement contained in ARRA, HERA and Dodd-Frank legislation – Applies to NSP1, NSP2, and NSP3 • Legislation specifically requires that not less than 25% of funds are used to house individuals or families at < 50% AMI – Bases the requirement on FUNDS but ties it to occupancy – Also known as “LH25” due to way it is recorded in DRGR • Cannot be waived by HUD because is statutory 15 U.S. Department of Housing and Urban Development • Community Planning and Development
What Happens if We Fail to Meet the Set Aside Requirement? HUD will require repayment or make grantee use its own funds to meet the LH25 requirement – May result in findings – Potential repayment of all funds – Will delay close-out 16 U.S. Department of Housing and Urban Development • Community Planning and Development
What Are Some Options for Meeting the Set Aside? Rental and For sale • New construction or Acquisition/rehab • Mixed income housing • Scattered SF or MF • Special Needs-disabled, supportive housing or formerly homeless (operating subsidies would be needed) • Lease/Purchase • LIHTC projects (often targeted at very low income) U.S. Department of Housing and Urban Development • Community Planning and Development 17
What Else Can be Done to Meet the Setaside? Increase Subsidies – Increase size of homeownership assistance Provide down payment & closing cost assistance – Eliminate caps on soft seconds – Act as first mortgage lender with affordable terms – Consider land trust models with long term land leases 18 U.S. Department of Housing and Urban Development • Community Planning and Development
NSP Resource Exchange Links NSP Resource Exchange http://hudnsphelp.info Search the Resource Library http://hudnsphelp.info/resources Search the FAQs http://hudnsphelp.info/faqs View All Training Materials on the Learning Center http://hudnsphelp.info/learning Submit a Policy Question via Ask A Question http://hudnsphelp.info/question Request Technical Assistance http://hudnsphelp.info/RequestTA Connect with NSP Join the Listserv http://hudnsphelp.info/listserv Visit the NSP Flickr Gallery http://www.flickr.com/photos/nspresourceexchange Visit the NSP YouTube Channel http://www.youtube.com/user/NSPResourceExchange 19 U.S. Department of Housing and Urban Development • Community Planning and Development
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