The CDFI Fund recently published proposed rules as well as a Notice of Funds Availability (NOFA) for the fiscal year 2010 funding round of the Capital Magnet Fund (CMF). The CMF was established under the Housing and Economic Recovery Act of 2008 with direct funding of $80 million for grants to finance affordable housing and related community development activities. The CDFI Fund has also posted an application that must be submitted by April 15. In addition to the NOFA and proposed rules, the CDFI Fund has provided an application Q&A document as a further aid in answering the application questions. Given the detail and amount of information required, applicants would be well advised to begin as soon as possible in preparing and completing the application.
Who is eligible?
Only certified community development financial institutions (CDFIs) or nonprofit organizations are eligible to apply, and both types of entities must have been legally in existence for at least three years prior to April 15. A nonprofit organization must have as one of its principal purposes the development or management of affordable housing and be designated as exempt from federal income tax by the Internal Revenue Service. At least 33 percent of the nonprofit’s resources must be dedicated to the development or management of affordable housing. Entities that have a CDFI certification pending or submitted on or before April 1 are also eligible.
What is the maximum grant award, and what are the eligible uses?
No single applicant may apply or receive more than $12 million under the 2010 application round. Each CMF award is expected to result in total eligible project costs of at least 10 times the CMF award amount. The grant funds may be used to provide loan loss reserves, or capitalize a revolving loan fund, an affordable housing fund, or a fund to support economic development or community service facilities. The grant may also be used for risk-sharing loans, loan guarantees, and to support operations.
What are the eligible activities and restrictions?
The grant awards are intended to support the development, preservation, rehabilitation, or purchase of affordable housing for primarily low-, very low-, and extremely low-income families, and economic development activities and community service facilities.
“Affordable Housing” means rental or for-sale single-family or multifamily housing. While not final, the proposed regulations provide that the CMF affordability requirements are based generally on the affordability qualifications for rental and homeownership properties under the HOME program regulations. Rental housing is deemed affordable if the rent does not exceed 30 percent of a family’s annual income. In no event can families with income in excess of 120 percent of the area median income be eligible for rental housing. The affordability restrictions must remain in place for 10 years from the date of project completion. In addition, no more than 30 percent of the CMF award may be used to support economic development activities and community service facilities. Finally, no more than 5 percent of an award may be used for operations.
“Economic Development Activities” covers the development, preservation, rehabilitation, or purchase of community service facilities and/or other neighborhood-based facilities that operate in conjunction with affordable housing activities to stabilize and/or revitalize a low-income area.
“Community Service Facilities” include health care, child care, educational, cultural, and/or social services facilities that operate in conjunction with affordable housing activities to stabilize and/or revitalize a low-income area.
What information is required under the application?
The application (similar in evaluation and selection protocols as the CDFI Fund Award programs) is divided into three parts: Part I—Applicant Information and Eligibility Questionnaire; Part II—the CMF proposal composed of five discrete sections: an Executive Summary, Business Strategy, Leveraging Strategy, Community Impact, and Organizational Capacity; and Part III—Certifications and Assurances. Each section provides detailed instructions and helpful tips in preparing responses. The applications are scored with a maximum of 100 points. The scoring sections include the Business Strategy, Leveraging Strategy, Community Impact, and Organizational Capacity, with each section scored at a maximum of 25 points each. The application and instructions as well as all other supporting documents and forms are available on the . Applicants are required to create a user account in order to access the application. The application Q&A document provides additional useful information when completing the application.
The CDFI Fund expects this first round to be very competitive given the relatively low funding level and the large unmet need for additional funding sources within the affordable housing industry. Awards are expected to be announced this fall.
Susan Reaman is a syndication counsel in Nixon Peabody’s Washington, D.C., office. She focuses her practice on advising clients on complex tax, regulatory, and compliance matters. Her practice draws on her significant experience with partnership tax issues and tax credit programs, involving low-income housing credits, New Markets Tax Credits, historic tax credits, and renewable energy tax credits.