Community Development

Set-aside funds must be invested in housing that is owned, sponsored, or developed by the CHDO. This means the CHDO serves in at least one of the following roles: 

• Owner. The CHDO holds valid legal title to or has a long-term leasehold interest in the rental property. The CHDO may be an owner with more than one individual, corporations, partnerships, or other legal entities. 

• Sponsor. The CHDO develops or owns a property and agrees to convey ownership to another nonprofit organization. 
• Developer. The CHDO either owns a property and develops a project or has a contractual obligation to a property owner to develop a project. 

When using set-aside funds in eligible housing, the CHDO may perform one of the following activities: 

• Acquisition, rehabilitation or new construction of rental housing, 

• Acquisition, rehabilitation or new construction of homebuyer properties, and 
• Direct financial assistance to purchasers of HOME-assisted housing sponsored or developed by a CHDO with HOME funds. 

Set aside funds may not be used for tenant-based rental assistance, existing homeowner rehabilitation, or direct homebuyer assistance. PJs may, however, provide non-set-aside funds to CHDOs to carry out these activities. 

To qualify as a CHDO, a nonprofit must demonstrate that meets certain requirements regarding its: 

• Legal and tax-exempt status, 
• Financial management capacity and accountability, 
• Staff capacity to carry out HOME-funded activities, 
• Experience serving the community, 

• Board representation by community members, with at least one-third of its members low-income, and 
• Lack of for-profit or public control 

In addition to its 15 percent set-aside, PJs may use HOME funds to provide special assistance to support and build the capacity of CHDOs. This assistance includes: 

• Project pre-development loans. A PJ may loan CHDOs up to 10 percent of its annual allocation for up-front eligible project expenditures, seed money, or site control. Pre-development loans count toward the CHDO set-aside if the project moves forward; they are forgivable if the project does not move forward. 

• Operating assistance. PJs may provide up to 5 percent of its annual HOME allocation for salaries, wages, employee education and training, rent and utilities, taxes and insurance, and materials. Assistance may not exceed the greater of $50,000 or 50 percent of the CHDO’s total annual operating expenses for that year. 
• Use of HOME project proceeds. At the discretion of the PJ, a CHDO may be authorized to retain some or all of the proceeds generated from development activity to support additional HOME-eligible activities or other low-income housing activities. A PJ must stipulate in its written agreement with the CHDO whether the CHDO may retain project proceeds. 
• Capacity-building assistance. Within the first two years of becoming a PJ, PJs that cannot identify a sufficient number of capable CHDOs may commit a limited amount of HOME funds for capacity-building assistance.