The Development Process An Overview. Forming the development concept Evaluating your capacity and the needs of your community Evaluating the properties in your community Feasibility Creating an experienced project development team Preparing financial statements and budgets and cost estimates.
NSP is organized according to the eligible activities provided in the Housing and Economic Recovery Act of 2008.
These activities provide for a wide array of projects.
Applicants can combine activities if necessary to achieve the scope of their project.
State’s Plan estimated funding by activity
“Establish financing mechanisms for purchase and redevelopment of foreclosed upon homes and residential properties, including such mechanisms as soft-seconds, loan loss reserves, and shared-equity loans for low- and moderate-income homebuyers.”
The State’s Plan estimated 15% of overall NSP funds for this activity
Types of Projects:
“Purchase and rehabilitate homes and residential properties that have been abandoned or foreclosed upon in order to sell, rent, or redevelop such homes and properties.”
The State’s Plan estimated 20% of NSP funds would address this activity.
Possible Project Types:
The type of property that can be assisted with NSP funds varies according to the eligible activity undertaken.
Federally required minimum of 25% of all NSP funds must be used to provide housing for households with incomes at or below 50% of the area median income
State has set goal of targeting 40% of NSP funds to assist 50% AMI households.
Properties must be residential and have been foreclosed or abandoned in order to meet the 25% requirement, even if that is not required by the activity.
HUD has defined –
Foreclosed: “A property has been foreclosed upon at the point under state or local law, the mortgage or tax foreclosure is complete. Title to the property must have been transferred.”
Abandoned: “When mortgage or tax foreclosure proceedings have been initiated for that property, no mortgage or tax payments have been made by the property owner for at least 90 days, AND the property has been vacant for at least 90 days.”
Homes: “Any type of permanent residential dwelling unit, such as detached single family structures, townhouses, condominium units, multifamily rental apartments (covering the entire property), and manufactured homes where treated under state law as real estate (not personal property).”
Residential Properties: “includes all of the above plus vacant land that is currently designated for residential use, e.g. through zoning.”
Blighted Structure: “A structure is blighted when it exhibits objectively determinable signs of deterioration to constitute a threat to human health, safety, and public welfare.”
Further defined by the State’s NSP Plan. State’s Plan allows local laws defining blight to be used or, in the absence of a local definition to use the State’s definition.
Presence of Structures below minimum code
Illegal Use of Individual Structures
Lack of Ventilation
Excessive land coverage and overcrowding of structures
Deleterious land layout
Environmental Clean Up
Lack of community planning
Total equalized assessed value of the proposed redevelopment has declined for 3 of the last 5 years
State’s definition of blight is satisfied by displaying at least 5 of the following characteristics:
Targeting and Site Selection
Areas of Greatest Need
Property Type and End Use
Applicants proposing a single site activity should be able to able to discuss location, while applicants proposing a scattered site should be able to discuss target area, type of properties, and availability of those properties, at a minimum.
Market Assessment and Outreach Plan
Qualifying Home Buyers
Final sale of home to income eligible household must be for less than the total cost to acquire and redevelop the property
Home Purchase Financing
IHDA’s “Schedule of Maximum Monthly Gross Rents for Most Multifamily Programs”
Tenant Selection Plan and Tenant Outreach
Income Qualifying Tenants
Evaluation of Property Condition
Establish Construction and Rehab Standards
Cost estimates Construction/Rehab
Davis Bacon applies at 8 units or more
NSP funds will be structured largely as grants
Will require an affordability period
CDBG program income requirements apply
State will consider providing 100% project financing from NSP funds
Traditional State resources will be difficult to combine with NSP
Bring local resources to the project
Acquisition and Construction Financing
Bank Financing, Local CDBG, HOME
Proceeds from Resale
Private and pool financing
Foundations and local grants
End buyer financing - IHDA
+ Residential rental income
+ Commercial rental income
- Rental vacancy
Taxes, insurance, utilities
Property management, maintenance
Feasible projects will be self supporting