On January 6, the U.S. Department of Housing and Urban Development’s Office of Community Planning and Development published a final rule in the Federal Register making changes to the HOME Investment Partnerships (HOME) program regulations. The final rule, which goes into effect February 5, represents the most significant regulatory update to the HOME program since the 2013 final HOME rule.
The final rule modifies a number of HOME program requirements and is intended to streamline administration to better align the program with other federal housing programs, including the Housing Credit and other HUD programs, subject to the constraints of the HOME statute (42 USC 12741 et seq.). The final rule includes numerous changes and updates proposed by NCSHA — as an individual organization and in its capacity as chair of the HOME Coalition — over the years and directly in response to the proposed rule HUD promulgated in 2024.
Notable highlights of the final HOME program rule:
- Allows project owners to charge the permissible Housing Choice Voucher, project-based voucher (PBV), or project-based rental assistance (PBRA) rent even if the rent is higher than what would otherwise be the maximum HOME rent for all HOME units. Prior to this change, only low HOME rent units could accept the maximum PBV or PBRA rent if it exceeded the HOME maximum rent. The change could provide additional rental income for properties, which could help address operating needs, and is consistent with how rents are determined for the Housing Credit program.
- Permits HOME-assisted project owners to use a local public housing authority’s utility allowance, even when that HOME-assisted project does not also receive PBV or HUD-Veterans Affairs Supportive Housing PBV assistance.
- Provides HUD authority to allow higher maximum per-unit subsidy limits for properties in high-cost areas by increasing the cap on those limits from 240 to 270 percent of the Section 234 elevator condominium mortgage limit on an interim basis while HUD develops a new methodology for establishing maximum per-unit subsidy limits under Section 212(e), to be published and subject to public comment in a future Federal Register notice. HUD adopted NCSHA’s proposal to further increase by 10 percent the per-unit subsidy limit for properties that meet eligible green building standards. The proposed rule would have provided just a five percent increase per unit subsidy limit for these properties.
- Makes it easier for nonprofit organizations to qualify as Community Housing Development Organizations (CHDOs) in three major ways: (1) The rule allows the expertise of volunteers involved with the CHDO (as a board member or officer) to count towards the statutorily required CHDO capacity requirement; (2) expands who may count toward the minimum low-income board representation to include individuals representing legal aid, tenants’ rights, fair housing, and other civil rights organizations; and (3) narrows who counts against the limit on public officials’ participation on a CHDO’s board (currently no more than one-third of total board representation) by defining public officials as staff of a participating jurisdiction (PJ) rather than staff of any governmental entity. Unfortunately, in response to comments on the proposed rule, the final rule does not permit statewide organizations to become CHDOs, as initially included in the proposed rule.
- Permits ownership of rental housing developed or sponsored by a CHDO to be transferred to a non-CHDO entity in cases involving bankruptcy or decrease in capacity by the CHDO, or other business necessity.
- Includes several changes supported by NCSHA to HOME regulations that pertain to homeownership activities, such as extending the deadline for the sale of home buyer units supported with HOME funds from nine to 12 months and establishing model resale formulas to provide clarity for program participants seeking to use the resale option for homeownership. The final rule also provides for an extension of the six-month deadline for bringing a homeownership unit into compliance with a PJ’s property standards.
- Allows PJs to accept inspections performed under the NSPIRE standard that are conducted for other HUD programs for purposes of HOME physical inspections. In response to comments received from NCSHA and others, the final rule revises language from the proposed rule to clarify that inspections conducted for the Housing Credit that meet or exceed the NSPIRE standard also satisfy HOME inspection requirements.
The final HOME program rule includes numerous other changes and technical fixes that are beyond the scope of this blog post.