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Presentation, discussion, and possible action on a staff-initiated waiver of 10 TAC §11.204(15) related to HOME Match Requirements for certain Tax-Exempt Bond Developments
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RECOMMENDED ACTION
recommendation
WHEREAS, the Department annually receives HOME Investment Partnerships Program (HOME) funding from the U.S. Department of Housing and Urban Development (HUD), and is required to match that funding at 25% using non-federal funds that contribute towards housing that would otherwise be HOME-eligible;
WHEREAS, proceeds from Tax-Exempt Bonds may be used as HOME Match funding, and accordingly, 10 TAC §11.204(15) of the 2024 Qualified Allocation Plan (QAP) requires that all Tax-Exempt Bond Developments provide HOME Match Units unless the bonds were issued through a local issuer and the local HOME Participating Jurisdiction intended to claim those bond proceeds as Match;
WHEREAS, Developments funded with Tax-Exempt Bonds must close on financing within 180 days of the bond reservation, and the additional administrative burden of the HOME Match requirement could put some Developments at risk of not meeting this deadline, which staff has determined to be an unacceptable risk;
WHEREAS, this risk is significantly mitigated for Developments for which the Department is providing Multifamily Direct Loan Funding (MFDL), as those Developments must already provide Match Units; and
WHEREAS, the Department will generate a significant amount of HOME Match by requiring Developments that include MFDL funding to comply with 10 TAC §11.204(15);
NOW, therefore, it is hereby
RESOLVED, that the staff-initiated waiver of 10 TAC §11.204(15) for all Tax-Exempt Bond Development except those that include Department MFDL funds is hereby approved.
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BACKGROUND
The Department annually receives HOME funding from HUD and is required to match that funding at 25% using non-federal funds that contribute towards housing that would otherwise be HOME-eligible. Failure to meet this requirement could result in the Department being disallowed from allocating additional HOME funds until the deficit is remedied. Proceeds from Tax-Exempt Bonds may be used to meet up to 25% of the Department’s Match obligation, and accordingly, the 2024 QAP includes a new requirement that all Tax-Exempt Bond Developments provide HOME Match Units unless the bonds were issued through a local issuer and the local HOME Participating Jurisdiction intends to claim those bond proceeds as Match.
The timing of Developments funded with Tax-Exempt Bonds is extremely sensitive. These Developments must close on their financing within 180 days of the initial bond reservation, otherwise the reservation will expire. While the Match requirement was added to the 2024 QAP in good faith by the Department as a means to help meet the Match obligation, the number of Developments that are required to provide Match Units under this rule has greatly exceeded initial estimations. The complexity of administering the HOME Match requirements for these Developments has created a tremendous amount of uncertainty, both internally and within the housing development industry, as to the ability for all of these Developments to both comply with the HOME Match requirements and meet the 180-day closing deadline. After careful consideration, staff has determined that the HOME Match requirement creates an unacceptable level of risk for these Developments, and is recommending that the Board grant a waiver of the Match requirement for most of the affected Developments.
Despite the recommendation of this waiver, the Department still has a Match obligation to HUD that must be addressed. Because of that, staff is recommending that Developments that include the Department’s Multifamily Direct Loan Funding still be required to comply with the HOME Match requirement found at 10 TAC §11.204(15). Because these Developments are already required to provide HOME Match Units as a result of the MFDL funds, staff believes that the risk of a delayed closing due to the Match requirement is sufficiently mitigated.