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Presentation, discussion, and possible action authorizing the Department to submit an application for the U.S. Department of Housing and Urban Development’s Preservation and Reinvestment Initiative for Community Enhancement Program, and if successfully awarded to operate such program
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RECOMMENDED ACTION
recommendation
WHEREAS, on February 29, 2024, the U.S. Department of Housing and Urban Development (HUD) released a Notice of Funding Opportunity (NOFO) for the Preservation and Reinvestment Initiative for Community Enhancement (PRICE) Program designed to preserve and revitalize manufactured housing and eligible manufactured housing communities (MHCs);
WHEREAS, nationally approximately 15% of occupied rural housing stock is manufactured homes (MHUs), in Texas approximately two million people, or 7.4% of the state’s population, live in manufactured homes, and that percentage rises up to 15% along the Texas/Mexico border;
WHEREAS, the Department’s experience in successfully operating one-time programs such as the variety of pandemic related funds, and its success in operating single family assistance programs such as homebuyer assistance and homeowner rehabilitation assistance, enables the Department to have the appropriate expertise and infrastructure to take on the activities of the PRICE NOFO and, if awarded to perform such work;
WHEREAS, the NOFO released by HUD has a main competition of funds available that would allow applicants to apply for up to $75 million;
WHEREAS, the NOFO requires that before submitting to HUD, applicants must publish their PRICE application in its entirety for public comment, hosting at least one public hearing for the application and providing a 15 day public comment period;
WHEREAS, staff recommends that a full application be submitted by the deadline of June 5, 2024, and that the Department apply for the maximum allowable request amount of $75 million in PRICE Program funds;
WHEREAS, several unanswered questions have been identified that may influence the program design of the application and staff request flexibility to revise the program concept described below to ensure a compliant and competitive application; and
WHEREAS, should the application be successful and a PRICE Program award be granted by HUD to the Department staff requests Board authority with this item to then operate such program;
NOW, therefore, it is hereby
RESOLVED, that the Executive Director and his designees be and each of them hereby are authorized, empowered, and directed, for and on behalf of the Department, to prepare an application for up to $75 million for the PRICE NOFO with flexibility to revise the program concept described below to ensure a compliant and competitive application;
FURTHER RESOLVED, that staff be authorized to make that application publicly available as required by HUD and make subsequent responsive changes, as warranted, prior to submission to HUD;
FURTHER RESOLVED, that staff be authorized to submit the application and any other appropriate responsive documents to HUD; and
FURTHER RESOLVED, that if HUD makes an award of PRICE Program funds from this NOFO to the Department, the Department is authorized to proceed with accepting such an award and implementing the program.
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BACKGROUND
Current Data regarding Manufactured Housing
In Texas, around two million people, or 7.4% of the state’s population, live in manufactured homes. The percentage of households who live in manufactured homes rises along the Texas/Mexico border. There, manufactured housing accounts for about 15% of the housing stock. The most recent reports available on Fannie Mae’s website show that over one quarter of manufactured homeowners earn less than $20,000 annually, and two-thirds earn less than $50,000 annually. The median income continues to decrease for manufactured home renters, compared to manufactured homeowners.
In a study conducted by the Consumer Financial Protection Bureau (CFPB), their findings identified that only 27% of manufactured home loan applications resulted in the loan being financed, compared to 74% of applications for site-built homes. The lack of approved manufactured home loan applications could be attributed to the higher interest rates for MHUs, due to the limited amount of lenders available.
HUD NOFO
HUD issued the Preservation and Reinvestment Initiative for Community Enhancement (PRICE) competition NOFO to preserve long-term housing affordability for residents of manufactured housing or an MHC, to redevelop MHCs, and to primarily benefit low- and moderate-income (LMI) residents. This NOFO is authorized by the Consolidated Appropriations Act, 2023 (Public Law 117-328, approved December 29, 2022). Congress appropriated $225 million for competitive grants to preserve and revitalize manufactured housing and eligible manufactured housing communities and directed HUD to undertake a competition under title I of the Housing and Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq.). This program uses HUD’s Community Development Block Grant (CDBG) statutory and regulatory framework for this first-of-its-kind initiative.
Of the $225 million available, $200 million is reserved for the main PRICE competition (PRICE Main), of which at least $10 million is intended for Indian tribes or Tribally Designated Housing Entities and Tribal organizations designated by such Indian tribes (hereinafter referred to as “Tribal Applicants”), and $25 million is reserved for a pilot program to assist in the redevelopment of manufactured housing communities as replacement housing that is affordable (PRICE Replacement Pilot). Staff recommends applying for the PRICE Main component rather than applying for the pilot. The pilot funding is very limited, has a match requirement and most lenders would most likely not be inclined to accept the terms of the program, particularly the affordability period. The minimum grant request for the PRICE Main competition is $5 million for TDHCA and the maximum is $75 million. PRICE Main activities must assist in preserving and revitalizing manufactured housing and eligible MHCs. HUD anticipates that awards will be made in the fall of 2024, and expects to make approximately 25 awards.
Some of the attributes of the PRICE Main program include:
• No match or leverage is required.
• The estimated period of performance is from October 1, 2024 to September 30, 2030.
• Eligible activities include but are not limited to;
o Preservation and revitalization (to include rehabilitation);
o Establishing loan or grant programs for new MHUs and land acquisition;
o Replacement of existing manufactured homes built before 1976;
o Development or improvement of Infrastructure to support MHCs or manufactured units;
o Acquisition/purchase, installation, and new construction of housing;
o Mitigation and resilience activities; and
o Establishing a manufactured housing preservation fund to serve manufactured housing residents who own or lease the lots on which their home is placed.
Staff Analysis
Based on the breadth of rural Texas, staff feels that the state of Texas is an ideal candidate to receive these funds from HUD.
As staff has evaluated the NOFO to identify how such a program would be operated, it was noted that the potential structural issues with rehabilitation/improvements and the required period of affordability would limit the effectiveness of funds. As an example, if a household wanted to apply for a grant or loan of $20,000 to replace a septic system, the household would need to own the property outright in order for HUD’s recording requirements to be imposed. If that grant were awarded to a household with an older MHU that became unlivable after 3-4 years, TDHCA would then be responsible for continuing the MHU’s period of affordability, regardless of the condition of the home. Because of these restrictions and limitations, it seems like the most viable options to assist low- to moderate-income families would be to use the funds for larger projects like planning, land acquisition, acquisition or installation of affordable housing, development or improvements of infrastructure, and/or to help support MHCs or Colonias.
The required period of affordability for eligible activities, lifespan expectancy of a MHU, structural engineering issues, and the depreciation in value for MHUs titled as personal property would place significant limitations on effectively and efficiently executing any new program(s) that could provide long-term success for smaller projects like rehabilitation, repairing, and improvements. The potential risk for HUD to recapture funds would be significantly higher than with other HUD funded programs.
One caveat at this time, is that the NOFO does not clearly identify if the subrecipients have to be identified and selected prior to the submission of the application. An inquiry to HUD regarding this question is currently pending.
Staff is also seeking out input from TDHCA’s Manufactured Housing Division which may influence the design considerations noted below.
Initial Program Concept
At this time staff is recommending that the application submission to the NOFO be designed roughly as proposed herein. Staff is basing this model on the assumption that land and MHU acquisitions will be included as an activity in our plan, and that subrecipients to assist with the program (or the decision to self-administer the program) do not have to be identified prior to application. However, the feedback received from HUD, ongoing review of the NOFO, consultation with the Manufactured Housing Division, and program design considerations may alter the below concept prior to a draft application being released for public comment. Additionally, the public comment received on the application may further revise the application and program design ultimately submitted to HUD.
Manufactured Housing Development Program (MHD)
This program would be for subrecipients to use the funds to purchase larger tracts of land to parcel out into small lots (estimated at .25-acre), develop the needed infrastructure, place new MHUs on each lot, and finance each individual lot to qualified households with a 0% interest loan, or deferred forgivable loan. Finding larger tracts of land would allow for infrastructure to be installed on a larger scale, and would be more cost effective compared to individual lot projects. Program concepts include:
• Subrecipients would be identified through either a NOFA or Request for Applications;
• Funds would be available throughout Texas in rural and small metropolitan areas, with a priority or short-term set-aside for unincorporated areas of counties within 150 miles of the Texas-Mexico border;
• Provides 0% interest or deferred forgivable loans to households;
• Possibly 80-90% loan-to-value ratio loans with 10-20% deferred forgivable loans so that families can join the program with existing equity;
• Per HUD, loan income generated from these loans can be retained and used for other CDBG activities
• Households must meet income limits, debt-to-income ratios, and affordability requirements
• The program requires that all MHUs be tied to land and titled as real property which sustains property value
• Home maintenance course required to increase lifespan of MHU
• MHU must demonstrate a form of energy efficiency
• Program may be designed similarly to two existing HOME activities, Single Family Development and Home Acquisition with New Construction, taking advantage of existing program knowledge and documents. However, there would be fewer construction/design requirements since new MHUs built in Texas already meet the federal standards construction requirements in the NOFO.
• Compliance with the model subdivision rule, specifically that there is only one MHU on one lot
• Administered by non-profit organizations with a 501(c) designation or local governments or potentially a procured vendor
Staff does not believe there is sufficient time prior to an application submission to fairly identify experienced geographically diverse subrecipients. If HUD indicates that subrecipients have to be selected in advance, staff will look further into that option, but may also consider TDHCA self-administering the program from start to finish with internal staff (or a procured vendor) instead of using subrecipients. The lack of construction supervision, more limited inspections, or construction standard requirements that need to be verified would make this easier to administer remotely.