An intriguing guidance document on HOME grant accounting emerged from the Department of Housing and Urban Development (HUD) in February. Community Planning and Development Notice 2006-01 primarily explains where the definitions of “administrative costs” and “project-related soft costs” do and don’t overlap — which matters because 10% of an agency’s HOME budget can be spent on “administrative” costs, but there are fewer limits on “soft costs.”
The memo uses examples so precise they sound like real cases — suggesting a few participating jurisdictions (PJs) might be getting anonymously slapped by this memo. Purely administrative items, it seems, include office rent and travel, insurance, utilities, office supplies, costs of informing the public about the program, costs of writing HUD reports, and costs of administering tenant-based rental assistance. Costs that can be either “administrative” or “soft” are mainly “staff and overhead costs directly related” either to a project itself or to compliance with federal requirements for a particular project, such as an environmental assessment. The memo further explains what costs can be taken from Community Development Block Grant (CDBG) funds or American Dream Downpayment Initiative (ADDI) grants. Again, the examples seem drawn from life, e.g., “A PJ cannot charge points on HOME or ADDI loans and include them in the cost of a loan to repay a PJ’s administrative costs.” To learn more, visit http://hudclips.org/sub_nonhud/cgi/pdfforms/06-1CPD.doc.
In other new HUD rules, jurisdictions developing their Consolidated Plans for CDBG, HOME and other grant eligibility must now include low-income housing tax credit (LIHTC) properties in their approach to local resources per the Feb. 9 Federal Register (see www.gpoaccess.gov). And a Feb. 14 Federal Register notice removed 34 areas from 50th-percentile Fair Market Rent (FMR) status as proposed in the publication of Aug. 25, 2005. However, most hurricane-affected cities are allowed to subsidize higher exception rents per the FMR notice of Oct. 3, 2005.
Surplus land could allow permanent housing
Every Friday, HUD posts a notice in the Federal Register naming government-surplus properties available for use to help the homeless under the McKinney-Vento Act. But few homeless service groups have managed to make these properties serve their mission, in part because current rules prohibit long-term housing on such sites. Now the Department of Health and Human Services is nearing a breakthrough: In the Jan. 26, 2006, Federal Register, it proposed allowing permanent supportive housing to be built for the first time on McKinney-Vento surplus land. Comments were due Feb. 27.
DDAs named for GO Zones
HUD has named the extra Difficult Development Areas (DDAs) that were authorized by Congress’ tax relief action in the Gulf Opportunity Zones (GO Zones). Developers in these DDAs who are awarded LIHTCs can get up to 30% more than the usual subsidy from this source. The designation applies through 2008. It does not affect the supply of ordinary DDAs, which still exist in places of high contrast between incomes and housing costs. See the Feb. 24 Federal Register.
IRS waives 10-year rule for preservation
An Internal Revenue Service (IRS) private letter ruling (PLR) saved the new acquisition/rehab purchaser of a Sec. 8 project from losing eligibility for LIHTC credits because of a foreclosure in the property’s history. The seller of this multi-unit project had previously sold it to another party, but had re-acquired it through a foreclosure. The foreclosure changed the date the property was placed in service, causing the planned purchase to violate the 10-year holding rule for ownership preceding LIHTC acquisition/rehabs. The IRS rescued the deal by granting a waiver on the grounds that it would preserve the property as low-income housing by preventing the prepayment of the old federally subsidized mortgage. The decision is PLR No. 200607013, available via www.irs.gov/foia/lists/0,,id=97705,00.html. PLRs may not be cited as precedent.
Also from the IRS: Notice 2006-27 on energy-efficiency credits for homebuilders; Notice 2006-17 giving taxpayers until Oct. 16, 2006, to elect whether to deduct certain 2005 hurricane losses, and Revenue Procedure 2006-16, on retroactive tax advantages for buildings in expanded areas of renewal communities.
Meanwhile, in HUD high-tech ...
The Washington Post reports that the now-mandatory Grants.gov grant application system doesn’t work with Macintosh computers, and HUD’s Office of Inspector General says federal housing officials could be on their way to wasting almost $10 million a year by overstating the need for security in their computer systems.