© Housing Assistance Council, 1999

Permission is granted ONLY to nonprofit community-based organizations to reproduce and/or adapt this document, and only for their own use.

ISBN 1-58064-049-4

V.  PROCESSING A SECTION 514/516 PREAPPLICATION

The preapplication is a crucial step in securing an RHS loan and/or grant and should be prepared carefully and completely.  The information required in the preapplication, such as that on clearances, zoning requirements, and the results of cost and market surveys, is very important to the project’s development.  The NOFA that opens the preapplications filing period may add specific requirements or priorities for special RHS initiatives.

A.  Where to Apply

Preapplications for LH loans and grants are filed at Rural Development Area Offices or Rural Development State Offices as directed in the application package announced in the NOFA.

B.  Authorized Representative of Applicant

Rural Development will deal only with the applicant or its bona fide representative and technical advisors.  The authorized representative of the applicant must be a person who has no pecuniary interest in the award of the architectural or construction contracts, management contracts, the purchase of equipment, or the purchase of land for the housing site.

C.  Composition of the Preapplication

A brief cover letter to the Rural Development Manager (Area Office) or State Director should accompany the preapplication.  It should include the name of the project’s sponsor, names of organizations and agencies that will be providing assistance, the location of the proposed housing, and the number of units and cost of the proposed project.

D.  Standard Form 424.2, “Application for Federal Assistance (for Construction)”

This form is used for both the preapplication and the final application.  The instructions on the back of the form should be reviewed carefully (see Appendix 4).  Some of the elements of Standard Form 424.2 require no explanation.  Those that do appear below and are numbered as they appear on the Form.

Budget Information Section

• Complete Column A (total cost) only.

• Include only capital costs, with one exception:  include initial operating costs in #11 (include in total but show “initial operation expenses $____” in cost classification column).

• Do not put anything in contingency.

Assurances Section

This section is self-explanatory.  The applicant must certify that it will follow all rules, current and prospective.

E.  Project Description

The following information should be included in the narrative attachment to S.F. 424.2:

1. location of project - street or road;

2. size of tract;

3. zoning;

4. number of buildings to be constructed and type (garden apartments, townhouses, fourplexes, duplexes, etc.);

5. type of construction (frame, brick veneer, etc.);

6. number of units:

   1. total; and

   2. number by bedroom count (example: 8 two-BR, 8 three-BR);

7. number of parking spaces;

8. intended tenants (singles, family, mixed, special group, etc.);

9. estimated rents by bedroom count;

10. additional subsidy (RHS, state, or other rental assistance);

11. descriptions of other (non-RHS) funding for the project – capital cost and operating subsidies;

12. if there are existing structures on the site, describe disposition;

13. if there are occupants in existing structures, describe relocation procedures, if any; and

14. any other pertinent information of interest to non-RHS/Rural Development reviewers.

F.  Information to Include in Preapplication

The information supplement to Standard Form 424.2 is the heart of the preapplication and is detailed below.  Exhibit A-1 (Appendix 3) contains specific requirements.  The list below includes those and also several items recommended by HAC:

1. Standard Form 424.2;

2. financial statement;

3. statement on source of cash for initial operating expenses;

4. statements or letters verifying inability to obtain credit from other sources (not required of public body applicants);

5. statement justifying need for an LH grant and or RA;

(HAC also recommends inclusion of the following items:

1. estimate of costs (Form 1924-13, optional in most states);

2. summary of project costs;

3. utility allowance (1944-E Exhibit A-6);

4. budget (Form 1930-7);

5. brief reference to incomes of farm laborers;)

6. statement on proposed method of operation and management (see Exhibit A-1 and B to 1944-D);

7. statement of experience in operating and/or managing farm labor housing, or other rental housing;

8. copy of, or accurate citation to, the provision in the state law under which the applicant is organized;

9. copy of the applicant’s charter, articles of incorporation, by-laws, and any other basic authorizing documents;

10. list of members, officers, and directors, including address and occupation of each;

11. preliminary market study for the market area which includes:

    1. farm laborer incomes;

    2. number and type of farm laborers (families, individuals, year-round, seasonal, migrant, etc.);

    3. description of agriculture in area, particularly for labor intensive crops and of continued demand for farm labor;

    4. overall occupancy rates for comparable rental units in area;

    5. customary rental practices in the area;

    6. number and conditions of units currently used or available for farm laborers;

    7. description of results of contact with farmers and farm laborers;

12. a general description of the proposed housing which includes:

    1. number, size, and type of units;

    2. type of construction;

    3. schematic plans and drawings;

    4. preliminary plot plan;

    5. description of and justification for related facilities;

    6. preliminary cost estimates;

    7. information and detail on proposed leveraged funds (this should include documentation of the amount);

13. evidence of site control;

14. environmental assessment information including:

    1. Form 1940-20; and

    2. required state environmental submissions;

15. preliminary plans and specifications;

16. a supportive services plan describing services that will be available to tenants on-site or through agreements with service providers in the community;

17. Affirmative Fair Housing Marketing Plan (HUD Form 935.2);

18. a detailed map showing services and facilities available on the site and in the community;

19. description and justification of related facilities;

20. proposed architect’s agreement; and

21. previous participation certification (Form 1944-37).

G.  HAC Comments on Specific Preapplication Items

1. Information.  Check with your Area or State Office prior to submitting a preapplication, as some states may require more information at the preapplication stage than indicated in 1944-D.  Additionally, some states may have special instructions regarding the packaging of the preapplication.

2. Experience.  In addition to organizational experience in operating rental housing, the individual experience of staff and board members should be described.  When experience is totally lacking, the proposal should include very specific information on contracting for management.  If the need for housing in the area is clear and the proposal is well done, lack of experience need not be a problem.

3. Market Survey.  The market survey is a critical determinant of overall feasibility for the proposed project, and the applicant may wish to perform a more detailed study of the market than RHS actually requires for the preapplication.  It is advisable for applicants to check with growers who use farm laborers and/or suppliers of labor housing and include their information in the survey.  However, under no circumstances may RHS require study of a housing market other than that directly related to farm laborers.  This prohibition became part of the law in 1983.

4. Additional Information.  Although the RHS Instruction is permissive concerning site maps and schematic plans, these should always be included, even if the plans may change later.  Both Rural Development and the applicant should have a good understanding from the beginning of what is being proposed.  (The maps will also be needed in the future.)

5. Relationship with Growers.  It is a good practice to work cooperatively with the farmers in the area, especially if the housing will be for seasonal use.  This relationship with the growers should be reflected in the preapplication.

6. Site.  Preferably, the site should be located within a community that provides some services.  If the site selected is questionable or substantial funds are required to gain control, Rural Development officials should be asked to provide a written opinion regarding the acceptability of the site prior to the submission of the preapplication.  Controlling the land at this point via option or suitable purchase contract is preferable to waiting until the final submission.

7. Costs.  Preliminary cost data should be obtained and a preliminary budget should be developed.  This is an excellent time to test the economic feasibility of the project (prior to spending sizeable sums of money for architectural services, etc.).  The prescribed budget, Exhibit A-5 to Instruction 1944-D, should be used in conjunction with Exhibit A-6 to Instruction 1944-D, which covers utility allowances. (Appendices 9 and 10 to this guide).

8. Proposed Architectural Contracts.  Although proposed contracts are not required by RHS until the final application, HAC recommends submitting them with the preapplication.  Considerable actual expense will accrue with the development of the final application and the sponsor should not wait until after costs have been incurred to obtain RHS/Rural Development approval of the architectural proposal.  

Go to the Next Section

Return to Previous Section

Return to Table of Contents