In the previous two topics of this module, you learned some of the basics about the LIHTC Program. This topic will discuss issues related to combining HOME funds with housing tax credits. The HOME program provides grant funding through formula allocation to states and local governments to strengthen public-private partnerships and increase the supply of affordable housing for low-income households. State and local government agencies that administer HOME programs, or participating jurisdictions, are required to match a portion of federal funds with no-federal resources. HOME funds are provided for transitional housing acquisition, rehabilitation, and new construction, and tenant-based rental assistance.
HOME funds are frequently utilized together with LIHTC. Although LIHTC equity often can fund as much as half of a project's total development costs, often even that is not enough to achieve the developer's affordability objectives. In these situations, adding HOME funds could reduce the property's mortgage payments, thereby allowing rents to be more affordable, or perhaps allowing the property to offer additional features such as a computer learning center. Adding HOME funds could also allow the developer to provide a community building, or to make the dwelling units larger, or to provide larger units.
However, using LIHTC and HOME funds together means learning about how the rules of each program impact the other. This topic will introduce areas where the programs overlap, particularly for financing options and monitoring requirements, while successive topics will cover both programs' requirements in greater detail.
After completing this topic, you will be able to:
- Recognize some of the advantages of combining HOME and LIHTC funds in affordable housing developments.
- Explain how a project's tax credit rate and eligible basis may be affected by the way that HOME funds are provided.
- Identify the four most common ways HOME funds can be added to a tax credit project.
- Understand how HOME funds can be used as project gap financing.
- Comprehend the basic monitoring requirements for projects using HOME and LIHTC funds.
This topic will cover the following subjects: