(c) Housing Assistance Council, July 1998

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

IV.   CASE STUDY: MISSISSIPPI

According to the 1990 Census, Mississippi’s total population was 2,573,216. Over 50 percent of the state’s population lived in rural areas, or 1,309,063 residents, and 262,547 people lived in remote rural counties. Mississippi had 911,374 occupied housing units, with 461,084 located in rural counties. Remote rural counties had 90,465 occupied housing units. Rural units made up 50.6 percent of the state’s total, while remote rural units accounted for 9.9 percent of Mississippi’s occupied housing units.

In 1990, 59.1 percent of the poverty population lived in rural counties. Mississippi’s poverty rate was 24.5 percent. The poverty rate for rural counties was 28.5 percent, and 33.4 percent in remote rural counties. Substandard housing rates were quite high, especially in rural and remote areas. Statewide, 7.2 percent of housing units were rated substandard in the 1990 Census. Rural counties had a substandard housing rate of 8.4 percent, and remote rural counties had a substandardness rate of 11.3 percent. Of all substandard housing units in Mississippi, 59.1 percent were in rural counties in 1990.

The Mississippi Department of Economic and Community Development (MDECD) administers the state’s HOME program. MDECD awarded over $36.9 million in HOME funds between FY1992 and FY1995. Almost $27 million was awarded to projects in rural counties in that time, which was 70.6 percent of the state’s HOME awards. Remote rural counties received $7.8 million in HOME funds, accounting for 21.2 percent of all HOME awards and 30.2 percent of rural awards. Mississippi’s HOME awards supported 2,064 HOME units. Rural counties had 73.1 percent of all HOME-assisted units, which amounted to 1,509 housing units. Remote rural counties had 408 HOME-assisted units, which is 19.8 percent of all HOME units and 27 percent of rural units.

MDECD staff observe that the state’s most pressing rural housing problems involve older houses in disrepair, lack of plumbing, and overcrowding. Consequently, homeowner rehabilitation is the most common project type requesting funding in Mississippi.

Program Design

Mississippi awarded between $10 million and $12 million per year in state HOME funds from FY1994 through FY1996. According to MDECD staff, CHDOs receive 15 percent of HOME awards per year, as required by statute. All of the funding received by CHDOs is for housing projects, since the state does not offer CHDO capacity grants. The state uses a competition for HOME awards, but the competition occurs within program activity categories as opposed to a general competition where applications for all types of projects would have to compete with one another. The program year begins in April, and in June MDECD staff hold an application workshop where HOME dollar amounts are announced for the different activity categories. Groups are given two months after the workshop to prepare and submit HOME applications. If excess funds remain in one of the activity categories after the competition, then MDECD will shift funds to another category with greater applicant demand.

Each activity category has its own point system for ranking applications. New construction projects receive points for leveraging, site plan design, exceeding the minimum 20 year period of affordability, location within an Empowerment Zone or Enterprise Community, availability of housing counseling for single-family homeownership projects, and job training or childcare available for low-income beneficiaries. The CHDO setaside is considered a separate activity category, and has evaluation criteria similar to those for new construction. Homeowner rehabilitation projects must note how they will alleviate safety problems, document area need for rehabilitation, show a record of meeting or exceeding state goals on prior projects that received HOME funds, and promote energy efficiency. Homebuyer assistance projects receive points for leveraging and for providing homeownership training and counseling. Tenant based rental assistance proposals must document area need, show the assistance will be targeted accordingly, and show evidence of local support and commitment to the project.

Mississippi does not list low-income residents of rural areas as a special needs population, so organizations serving rural counties do not receive additional application points in this regard. No other group that is especially prevalent in rural areas, such as migrant farmworkers, is listed in the state’s Consolidated Plan (ConPlan) as a special needs population.

Units of local government are the primary applicants for HOME funds. CHDOs generally compete with one another for the 15 percent CHDO setaside, and generally do not compete for funds in the other activity categories, although CHDOs are not prohibited by the state from competing in other categories. Fifteen CHDOs have received HOME awards since the program’s inception. Most of the projects proposed by units of local governments are carried through in partnership with for-profit developers. This is especially true in the more rural counties, where local governments are less likely to have staff with significant housing development expertise.

Mississippi does not require a local match in order to receive HOME funds. HUD has designated the state "significantly distressed," and has granted it a waiver providing exemption from the match requirement.

Program Use

There has been significant competition for HOME funds in Mississippi. In FY1994, 86 applications were submitted, with 50 of these unfunded. In FY1995, MDECD received 107 applications, with 68 not receiving awards. In FY1996, 68 applications were submitted and 31 went unfunded.

As noted, MDECD staff observe that homeowner rehabilitation is a pressing housing need throughout Mississippi. Given the high rates of substandard housing, especially in rural and remote rural counties, moderate and substantial rehabilitation are the most frequent project proposals. HOME data for Mississippi show that the state has supported moderate rehabilitation of 1,100 units in rural counties and substantial rehabilitation of 73 units in these areas between FY1992 and FY1996. Rehabilitation comprises 75 percent of the HOME-assisted units located in rural counties, with moderate rehabilitation accounting for 70.4 percent of rural HOME units during this period. Among all units rehabilitated, 76 were new homebuyer, 1,315 were current owner units, and 28 were rental units. Mississippi has also supported new construction of 359 units in rural areas, and used HOME for the acquisition of 31 units. Rehabilitation activities account for 68 percent of HOME funding in rural counties, with rehabilitation awards totaling approximately $1.9 million.

Individuals own 79.7 percent of Mississippi’s rural HOME units. Nonprofits own 14 percent, while partnerships have ownership of 4.9 percent of the state’s rural HOME units. Corporations own 1.4 percent of Mississippi’s rural HOME units.

HOME has been used in conjunction with LIHTC, administered by the Mississippi Home Corporation (MHC), the state’s housing finance agency. MHC also has a revolving loan fund, which is often used in conjunction with HOME on new construction projects. HOME projects with financing from the revolving loan fund usually receive credit for leveraging in their HOME applications. Most tenant based rental assistance provided through the HOME program has been used by residents of projects whose construction or rehabilitation was financed through HOME.

While MDECD does not use HOME for CHDO capacity grants, some CHDOs have received capacity building and operating funds from the CDBG program. In 1994, Mississippi set aside 1 percent of its CDBG allocation, amounting to $420,000, and awarded the funds to the Local Initiatives Support Corporation (LISC). LISC then used these funds for capacity building grants among local LISC partner groups. Mississippi nonprofit housing organizations that are not LISC partner groups have not received capacity building grants.

MDECD has worked to streamline the paperwork required for HOME applications by frequently reassessing the application package and "fine-tuning" the forms so that they are more accessible to applicants and reduce staff time for preparation. Additionally, MDECD also makes applications available to applicants on computer disk, also reducing the paperwork burden for groups trying to access the HOME program.

By establishing the CHDO setaside as a separate competitive category, and working with local governments in rural areas, MDECD has been able to award substantial amounts of HOME funds to improve housing for the state’s rural poor. Tallahatchie Housing, Inc. (THI) is a CHDO which has successfully used HOME in rural areas. In fact, THI has received more HOME awards than any other CHDO in the state. THI has used its HOME funding to serve over 300 households in Mississippi’s rural areas.

Tallahatchie Housing, Inc.

THI was founded in 1992, and its service area is Tallahatchie County in the northwest section of the state. THI is also considering expanding its activities into Alabama and Arkansas. THI has developed multifamily rental projects, and has sponsored the construction of single-family homes using the mutual self-help development method where groups of households work together to build their own homes. The organization also does housing counseling for clients.

THI has eight housing staff. The housing staff includes the executive director, a deputy director who heads the organization’s Multifamily Housing Department, a fiscal director who oversees bookkeeping and finance, a housing director, a case manager, and a family counselor. An office manager and secretary complete the organization’s housing staff. The housing director oversees the group’s first-time homebuyer program, a lease/purchase program, and the family counseling program. The case manager and family counselor work under the supervision of the housing director.

THI has received funding from a variety of sources in addition to awards through the HOME program. THI has accessed federal housing programs for its rental housing projects. The group has built projects using HUD’s Section 202 program for elderly housing, and has used the Section 515 program, which is administered by the U.S. Department of Agriculture’s Rural Housing Service (RHS) to develop rural rental units. THI has also used the LIHTC program. In addition to these government funds, THI has received funding through private and foundation sources. The organization received a capacity building grant from LISC, and has used low-interest predevelopment loans and approximately $10,000 in CHDO technical assistance pass-through funding from the Housing Assistance Council. THI is also located in an Enterprise Community, and will soon receive funding for a rehabilitation program developed for the area.

THI has received six HOME awards since 1992. Two projects together received awards totaling $700,000. Other HOME awards totaled $343,000, $293,000, $245,000 and $575,000. All of the HOME funds were awarded as grants, and THI has been able to use these funds to leverage other financing sources, such as the Section 202 and Section 515 funds. Additionally, THI used HOME as leverage and entered a limited partnership with a local bank to sponsor an affordable rental project.

THI tailors its rental housing projects to the housing composition of the rural areas in which it works. While all of its HOME-assisted units are rentals, they are single-family, detached structures with three bedrooms and two baths.

THI staff noted a number of challenges to using HOME in rural areas. If an organization is not very experienced, MDECD encourages the group to enter into a limited partnership in order to access HOME funds, even if tax credits are not involved in project financing. THI did this with its first HOME awards, but in so doing, lost a portion of its developer’s fee to the partnership. Once the group gained experience, however, it was able to obtain bank financing on its own without forming a limited partnership. In this way, THI was able to retain its developer’s fee and maintain full control of its projects. Many rural housing organizations in Mississippi and other states have fewer resources and more limited experience than more established urban groups. This places them in the position of having to enter into limited partnerships and similar arrangements that reduce their fee income and control over projects. As a related problem, THI staff noted that the most significant obstacle they have faced is securing gap financing for their rental housing developments. Less experienced groups, or organizations in rural areas with fewer financial institutions, will thus have more difficulty leveraging other funding sources with their HOME awards.

THI has hired consultants to assist in preparation of all of its HOME applications. MDECD does not provide technical assistance as part of the application process, but does provide assistance once a project is underway as part of its monitoring and oversight function. With careful planning, productive partnerships and consultants, and use of HOME to leverage a variety of financing sources, THI has produced a large number of affordable rental housing projects that serve the needs of Tallahatchie County’s rural low-income households.

Rural Challenges and Improvements

MDECD has been able to award a significant proportion of its HOME funds to rural areas. In large part, this is due to requiring units of local government to be the primary applicants for most HOME awards. In practice, the sponsoring of local government improves the prospects for local support of projects, and fosters partnerships with local for-profit developers. Nonprofit affordable housing developers have been able to compete effectively for the CHDO setaside, and HOME awards have helped build ties between nonprofit developers and local financial institutions.

THI staff feel that reduced paperwork requirements and common applications for multiple state affordable funding sources would improve the accessibility of the HOME program for rural organizations. THI staff also suggest that site visits, technical assistance and outreach by MDECD staff to help groups prepare applications would help rural organizations access HOME funds. MDECD staff observe that many applicants have strong projects, which means that many of the project proposals receive the maximum number of points in the rating process. A large number of the recipients win multiple HOME awards, primarily because they have built up experience with HOME-funded projects. MDECD is in the process of finding ways to continue funding experienced groups while providing more awards for less experienced housing organizations. This effort should allow less experienced rural organizations with fewer staff resources to compete on a stronger basis for HOME funds.

Next section