HOME Program Favors Building Over Direct Assistance

Next up in this series reviewing federal housing programs is the “HOME Investment Partnerships Act,” known as the HOME program. The HOME program was created in Title II of the National Affordable Housing Act of 1990. Like the Housing Trust Fund, the HOME program seeks “to increase the number of families served with decent, safe, sanitary, and affordable housing and to expand the long-term supply of affordable housing.”

A statutory formula allocates funds from the HOME program to states and localities by formula; 60% is set aside for urban counties and the remaining 40% for states. States with no participating jurisdictions receive the minimum allocation of $500,000. Six weighted factors comprise the formula used to determine the need for affordable housing. These factors are:

• Inadequate housing supply – This is measured using the vacancy rate from the United States Census and has a weight of 0.1 (or 10%).
• Substandard housing – The measure for this factor is overcrowding, inadequate kitchen and plumbing, and a high rent-to-income ratio and has a weight of 0.2 (20%).
• Low-income housing needing rehabilitation – Rental units built before 1950 and occupied by low-income people based on the United States Census is used for this measure. This factor has a weight of 0. 2 (or 20%) in the formula.
• Housing production costs – This measure takes substandard rental unit data from the measure above and combines it with a national average of cost-per-square-foot for building new housing. This factor has a weight of 0.2 (or 20%) in the formula.
• Poverty – The United States Census measure of poverty is used here and has a weight of 0.2 (or 20%) in the formula.
• Housing capacity – This factor is confusing and it is unclear how it relates to housing need, but it is a measure of national net per capita income (PCI) index compared with local PCI and population. This factor has a weight of 0.1 (10%).

Funds from the HOME program, as with almost every other federal housing program, are used in tandem with other sources of capital and from rental assistance programs. One ongoing feature of HOME is that each dollar of HOME funding must have at least a $0.25 match from participating jurisdictions, either state or local government. Residents of projects may earn no more than 80% of AMI, with 90% of the dollars targeted to help households earning 60 percent AMI.

Ryan’s review of HOME cited a study by the Government Accountability Office indicating that “information on the overall effectiveness (or impact) of . . . HOME programs is limited.”

Recently the National Council of Housing Agencies reported that, “since 1992, more than 1.34 million units of housing have been produced with HOME funds. HOME funds also have helped more than 403,000 families through tenant-based rental assistance. HOME frequently provides critical gap financing to make rental housing funded with Low Income Housing Tax Credits (Housing Credits) or other federal, state, and local housing projects feasible and allows the housing produced to reach even lower income populations.”

However, like the Housing Trust Fund, one has to ask was this the most efficient use of the funds? Would direct rental support have been better and faster, and would it have resolved more housing problems? The other obvious question is the extent of the overlap between Low Income Housing Tax Credits (LIHTC), HTF, and numerous other sources? Probably a great deal since all these projects, as I mentioned, rely on stacking capital which takes time and costs money in the form of transaction costs. And just look at the criteria used to distribute HOME funds; it takes a small army of bureaucrats – all paid – to manage all those requirements and distributions and monitoring and tracking.

Funding

In fiscal year 2012, HOME outlays totaled $1.78 billion and in 2022 was $1.5 billion.