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(c) Housing Assistance Council, 1995 This document best viewed using Netscape Navigator, with a monitor resolution of 800 x 600. Permission is granted ONLY to nonprofit community-based organizations to reproduce and/or adapt this document, and only for their own use.
I. INTRODUCTION A. What is the Housing Preservation Grant Program? The Section 533 Housing Preservation Grant (HPG) program of the Rural Housing Service (RHS) provides grants to public agencies and nonprofit organizations for use in targeted repair or rehabilitation programs. (RHS is currently revising HPG regulations to include funding for new construction when repairs are not financially feasible, but this feature is not yet available.) Grantees develop and operate their own grant, loan, or subsidy programs for distribution of HPG and other leveraged funds to low- and very low-income homeowners, to owners of low- and very low-income rental housing, and to low- and very low-income cooperative housing. This guide refers to RHS (the agency responsible for the Section 502 program at the national level) and Rural Development (the designation for local, regional, and state offices and staff administering the program). Like other rural housing programs, Section 502 was formerly administered by the Farmers Home Administration (FmHA) and then by the Rural Housing and Community Development Service. FmHA has been eliminated through USDA restructuring. The FmHA farmer programs and about 30 percent of its staff were transferred to the Farm Service Agency (FSA), as part of a "one stop" center for farmers. The remaining FmHA programs were transferred to three small agencies: the Rural Business-Cooperative Service, the Rural Utility Service and the Rural Housing Service (originally named the Rural Housing and Community Development Service). Field staff and most program support staff for all three agencies became Rural Development staff. The latter are directly responsible to the Under Secretary of Agriculture for Rural Development. B. About this Handbook This handbook is intended to familiarize organizations with the HPG program and to help them prepare successful preapplications. Little space is devoted to the final application because very little new information is required for its submission. Crucial to the success of the preapplication is the Statement of Activities which is described by example in the model preapplication. The model is for an owner-occupied project. Rural Development regulations prohibit mixing owner-occupied preservation with that for rental or cooperative housing, although an organization may submit separate preapplications at the same time. Particularly important parts of Rural Development instructions are reprinted in the text, inserted as appendices to this handbook, or linked. Appendix E is a link to the application process instructions, which are found in Exhibit C of RD Instruction 1944-N. While it may be possible to submit an application solely by studying this handbook, HAC strongly advises packagers (and applicants not working with a packager) to obtain and utilize the complete instructions (RD Instruction 1944-N). II. RHS RURAL HOUSING PROGRAMS A. Using RHS Rural Housing Programs The rural housing programs of the Rural Housing Service are relatively easy to use. While land and housing development are complicated processes with complex governmental involvement, the use of the RHS programs as financing vehicles should not add serious roadblocks to a project's success. They are very close to "do it yourself" programs, for which the informed person or organization can apply without extensive use of expensive consultants. There are five "basics" to understanding and properly using RHS housing programs:
Given a working knowledge in the five basics, anyone can become reasonably proficient in using the RHS programs. B. RHS Service Area RHS rural housing programs are available to eligible applicants in (1) open country that is not part of or associated with an urban area or (2) any town, village, city or place, including a densely settled area, which is not part of or associated with an urban area and which (a) has a population not in excess of 10,000 and is rural in character, or (b) has a population in excess of 10,000 but not in excess of 20,000 and (i) is not contained within a Metropolitan Statistical Area (MSA) and (ii) has a serious lack of mortgage credit as determined by the Departments of Agriculture and Housing and Urban Development. Areas classified as rural or rural areas prior to October 1, 1990 and determined not rural as a result of the 1990 decennial Census will continue to be eligible if they have a population between 10,000 and 25,000, are rural in character, and have a serious lack of mortgage credit for low- and moderate-income families. A determination that open country or any town, village, city, or place is not part of or associated with an urban area must include a finding that any densely populated section of the area in question is separated from the densely populated section of any adjacent urban area by open spaces. These open spaces must be undeveloped, agricultural, or sparsely settled and must not be due to physical barriers, commercial or industrial developments, public parks, other areas reserved for recreation, or similar open spaces. This determination should also consider such other factors as the existence of known plans for development within the near future (e.g., three to five years) of a substantial portion of the intervening land between the area in question and an urban area. The latest official Bureau of the Census data or more recent official population counts (U.S. Census of Population or other governmental official counts) are used in determining population. Two or more towns, villages, cities, and places may have contiguous boundaries and still be considered separately if they are not otherwise associated with each other, provided their densely populated areas are not contiguous. The State Director is responsible for determining boundaries of rural areas and will issue an appropriate State Supplement to identify such areas by list and maps. Areas in excess of 10,000 population will be identified as "rural areas" in a State Supplement only after written authorization by the National Office. Each Rural Development Local Office maintains a map on display of eligible rural areas within its jurisdiction. When a change of designation from rural to nonrural is anticipated, the general public in the areas affected is notified. If any designation is changed from rural to nonrural, only applications received by Rural Development prior to the change of designation may be processed. C. RHS/Rural Development Organization RHS is a federal agency and is part of the Rural Development mission area within the U.S. Department of Agriculture. Most of RHS's loan programs are processed directly by Rural Development employees. Its organization is as follows:
Recently, Rural Development State Directors have been given considerable authority and discretion on organizational make-up and location of offices. Consequently, the type and name for offices described in numbers 3 and 4 above may vary from state to state. This decentralization of authority often provides Area and Local Offices with the flexibility to consider unique local factors. The best way to insure success with RHS programs is to be well informed. D. Locating Rural Development Offices In some states, HPG applications are made directly to the State Office; in others, they are made to the Area Office. Rural Development maintains more than 200 Area Offices serving all rural areas of the United States, Puerto Rico, the Virgin Islands, Guam, American Samoa and the Western Pacific Trust Territories. To locate the Rural Development Area Office serving your area:
E. Ordering Rural Development Instructions Public entities and nonprofit organizations can obtain, free of charge, one copy of a limited number of Instructions. Others can obtain a copy or copies for a copying charge. The Instructions may be ordered from Rural Development Local, Area, or State Offices by requesting the instruction by name and number. If the Instruction you need is unavailable from those offices, contact the Rural Housing Service, Assistant Administrator, Finance Office, FC-313, 1520 Market Street, St. Louis, MO 63103. Many instructions can also be downloaded from http://rdinit.usda.gov/regs/. III. THE HOUSING PRESERVATION GRANT PROGRAM A. Program Overview The Rural Housing Service Housing Preservation Grant program provides a useful tool for nonprofit organizations and public agencies who assist owner-occupied, rental, or cooperative low- and very low-income housing with essential repairs and/or rehabilitation. Grantees design and operate their own programs to distribute HPG funds to low- and very low-income homeowners, rental housing owners, or cooperatives. The grant or project period may be for either one or two years. The HPG program regulations (RD Instruction 1944-N) are relatively complex, and competition for the limited funds is fierce. HAC produced this guide to help applicants understand what is required of them and to provide them with insight into what may make their applications more competitive. Because the HPG program regulations were developed to provide maximum flexibility for program design by applicants, there may be RHS/Rural Development policies or requirements that are not completely defined in the Instruction. This guide endeavors to clarify unspoken RHS/Rural Development expectations and criteria and provides an example preapplication. HAC strongly advises applicants to acquire and utilize the HPG program instructions. Moreover, we remind you that there is no universal model application; RHS will expect you to create a program best suited to your local needs, reflecting the other resources available to you. The HPG application process is comprised of two parts: the preapplication and the final application. This guide's emphasis is on the preapplication since it is the primary hurdle the applicant faces (the final application requires little new information). See a list of the components of the preapplication. In the preapplication, the Statement of Activities is especially critical since it describes what the applicant proposes to do and how s/he proposes to do it. Moreover, the Statement of Activities is the portion of the application that the State Historic Preservation Officer, local officials and the public have the opportunity to review and comment on. HAC recommends that potential applicants develop the framework for a Statement of Activities prior to the notice of competition in order to mitigate any time constraints and so public notification can begin as soon as a competition is announced. Proposals (preapplications) must be either for owner-occupied (individual) housing or for rental properties or cooperatives. Applications for combining these will not be accepted. Applicants may file separately, at the same time, for these functions, but the projects cannot be merged. B. Eligibility for HPG Assistance 1. Individual Homeowners To be eligible, an individual homeowner must have a low or very low income. (See Exhibit C to RD Instruction 1944-A [this is not available on the web but can be ordered from RHS] for definitions of low and very low income; income limits are the same as for the HUD Section 8 program.) S/he must be the owner of an individual dwelling unit at least one year prior to receiving HPG assistance. S/he must also be the intended occupant after repairs are made. S/he must provide evidence of ownership in accordance with RD 1944.661(b). 2. Rental Property Owners and Cooperatives An owner of rental housing or a housing cooperative must own the units at the time HPG assistance is received. The owner/cooperative must provide documentation of ownership of units in need of housing preservation. The owner/cooperative must use the HPG funds only for repair of units occupied by low- or very low-income tenants or occupants. Units occupied by owners may only be repaired with HPG funds if the owners are income- eligible. No identity of interest between the grantee and the owner may exist (see RD 1924.4(i) in 1924-A, Appendix N of this handbook). The rental housing owner/cooperative must agree to execute an ownership agreement with the grantee (described below). C. Ownership Agreements Between Rental Property Owners or Cooperatives and Grantees Rental property owners and cooperatives must agree to limit occupancy of any repaired unit to low- or very low-income tenants or members for a minimum of five years. They must also agree to:
Owners are responsible for keeping HPG assistance within 75 percent of total cost of repair or rehabilitation and for determining a pro rata share of costs for ineligible units. See Appendix M for a copy of the standard ownership agreement between the HPG grantee and the rental property owner or cooperative. D. Notification of Competition Each year, a competition will be held within each state for the available funds. RHS will announce the competition period each year via a notice in the Federal Register. This usually occurs in December or early January and establishes a deadline by which preapplications must be received. RHS annually prepares an administrative notice (AN) providing advice to field offices on handling preapplications and establishing critical dates for the fiscal year. The AN for fiscal year 2000 is Appendix P to this handbook. E. Applying for Funds Contact your Rural Development State Office to obtain a preapplication package and to determine your state's allocation. The program regulations permit State Directors to determine whether the preapplications will be handled by Area Offices or by the State Office. Contact your State Office for this information. An applicant may apply for 100 percent of a state's allocation. However, whenever two or more preapplications are received by RHS for the state, no more than 50 percent of the state's HPG funds may go to any one applicant. States with high demand may receive additional funds if others do not use all of their allocation. However, the initial premise is that states with allocations of $400,000 or more will stay within that amount, at least for the first two projects. For states with small allocations, the RHS National Office may add reserve funds in order to approve two projects. This means that amounts applied for are not necessarily limited to the state allocation amounts. F. Matching Funds Leveraging of other funds for rehabilitation activities is important in the HPG program. While not mandatory, it is doubtful that an application can be competitive (in rating points) without matching funds on at least a one-to-one basis. Not all funds from other sources will qualify for points.
The HPG program instructions provide no guidance regarding non-cash or in-kind contributions, but they can be considered leveraged funds if a dollar value can be determined. Examples include donated labor for rehabilitation work and donated materials or equipment. All chargeable program costs must be documented sufficiently so that a paper trail can be followed later. Where in-kind services such as inspections will be provided, include a proposed contract with an estimate for the value of the contribution. We recommend that your bookkeeping reflect a charge for in-kind services under "expenses" and an income entry to properly account for in- kind contributions. Leveraged funds must be sufficiently documented in the preapplication. G. Eligible Housing Preservation Assistance Housing preservation assistance can be provided through grants, loans, or subsidy and may include but is not limited to:
Specific language on eligible assistance is found in RD Instruction 1944.664 in 1944-N, Appendix O to this handbook. HPG funds cannot be used to build or complete a new dwelling, to refinance debts, or repair properties in a coastal barrier resources system. HPG funds must be used for rehabilitation that is not feasible solely with other resources and that is not merely an extension of an effort funded primarily with other resources. H. Administrative Cost Determination The use of HPG funds for administrative expenses is limited to 20 percent of the grant but should be less than 20 percent in order to receive rating points. There is no RHS limit on the amount or percentage of administrative funds secured from other and/or matching sources. However, the other administrative funds must be a grant, because RHS regulations (1944.666(d)) prohibit the grantee from charging HPG recipients for technical or administrative services. Typically, administrative expenses include the costs of the executive director, secretary, clerk, and the bookkeeper who will be responsible for the preparation of the development plan to carry out the objectives of the HPG project. To calculate salary expenses, the percentage of each employee's time that will be devoted to the project should be taken into account. Typical administrative costs include outreach, interviews with prospective families, organizing, the contracting of labor, and arranging for materials and services necessary to perform the rehabilitation (see 1944.666(a)). Reimbursement can be based on direct salary costs and actual fringe benefits. Related travel expenses will be billed at actual cost except for automobile travel costs which will be billed at twenty-two and a half cents ($.225) per mile (check with Rural Development for any rate changes). Office expenses such as telephone and rental equipment are billed at an indirect rate of fifty percent of the total personnel costs (salaries plus fringe benefits), which is in accordance with the overall agency budget included in the sample preapplication in this guide. Program costs (non-administrative costs) include payment for any incidental expenses which are normally related to housing construction such as fees for the connection of utilities, inspections, architectural, engineering, and other technical services, construction supervision, insurance and building permits, in addition to the direct labor, materials and sub-contractor services (see III G). When the applicant organization has the capacity to do and does the rehabilitation, all work directly related to construction may be charged to program cost. A brief identification of the charges in such a case follows.
I. Financing Mechanisms RHS permits flexibility as to how the grant funds will be used to provide actual rehabilitation (preservation). The type of mechanism used should depend upon:
The applicant should make a complete assessment of typical costs, estimated household finance, and total resources before deciding on a financing plan or plans. Remember that the financing mechanism must yield payments affordable to the identified recipients (or typical recipient) or RHS will reject the application. Financing mechanisms may include:
J. Threshold and Weighted Selection Criteria Project selection is composed of two essential parts: threshold criteria and selection criteria. These are found in RD 1944.679 and in outline form in Exhibit D to RD Instruction 1944-N.
As you will notice, points are awarded for the percentage of very low-income households to be assisted, and feasibility may warrant more direct subsidy per unit. Somewhat contrary to this are the points awarded for maximum rehabilitation with the least possible use of HPG funds or greater use of non-HPG funds. This is particularly applicable where loans are used as matching funds. Applicants need to examine this part of the regulations carefully before designing their programs. Applicants must be sure to document and clearly identify information directly related to the weighted selection criteria. Although in some states an organization with fewer than the maximum number of points can be awarded funding, in others, only the full amount will suffice. The lack of available matching funds may cause your application to score lower than expected, but do not arbitrarily decide not to submit until investigating the number of potential applicants and whether the lack of matching funds is widespread in your state. Exhibit C to RD 1944-N, Appendix E to this guidebook, provides information on what Rural Development will look for in preapplications and is based on the agency's experience with the program. After review, the top rated projects are selected to receive HPG funds, with the state's allocation providing limits on the number of grants.
K. RHS Policy Emphasis The RHS National Office has provided the following guidance to State Offices on critical elements and essential components of HPG applications. Your preapplication must address these items in addition to the weighted rating points used in the selection process described above.
L. HAC Recommendations RHS places a great deal of weight on the experience of the applicant organization and its staff. HAC suggests that applicants address this concern clearly in the preapplication. Applicants who cannot demonstrate repair and/or rehabilitation experience by the organization and/or its staff will stand little or no chance of being funded. The message is: if you do not have it, you had better be able to hire it. Feasibility (affordability) is another area covered by the instructions to which RHS will pay particular attention. Each applicant organization will design its own program and is given flexibility in using HPG funds as grants, loans, interest subsidy or combinations of these. It is extremely important that the financing mechanism used be affordable for the proposed low- and very low-income population in the community. If the product appears unaffordable the application will be rejected. Other areas of the preapplication that RHS considers particularly important and that HAC recommends addressing clearly involve financial assistance details, recipient screening and outreach, the process for dealing with environmental and historic preservation concerns, assignments and standards for work write-ups, and inspection procedures. M. The Final Application Following selection after submission of the preapplication, applicants must submit:
N. Appeals Applicants not selected are notified and provided with review or appeal rights. Any adverse decision not governed specifically by RHS/Rural Development regulations or law may be appealed. For example, not allowing 15 days of public notice for review of the statement of activities is not appealable. A subjective determination by RHS of experience or administrative capacity is appealable. O. Operating Procedures and Reporting Requirements Grant conditions, disbursement of funds and accounting procedures are covered by a grant agreement, Exhibit A to 1944-N. See Appendix D to this handbook. Grantees must submit Standard Form 269 to RHS on a quarterly basis, together with Exhibit E-2 to 1944-N "Quarterly (and Final) Performance Report." See Appendix F to this handbook. |