Rental Housing Rehabilitation

The City may utilize HOME Program funds to support the acquisition and/or rehabilitation of affordable Rental Housing units. Eligible projects may be existing one or more multifamily buildings with rental units on a single site, or multiple sites that are under common ownership, management and financing. In no case shall funding be provided for a unit to be converted to a rental unit if the existing use or former use was owner-occupied housing. The project should also utilize private funds, Low Income Housing Tax Credits, Low Income Housing Revenue Bonds or other grant /loan programs to help leverage the HOME funds.

Units that are rehabilitated with HOME funds must meet all applicable state and local codes, rehabilitation standards and ordinances, including the City of Kenosha Minimum Housing Rehabilitation Standards. All assisted units are required to meet the accessibility requirements of the Fair Housing Act and Section 504 of the Rehabilitation Act of 1973. The property must be maintained in accordance with these property standards throughout the affordability period.

Rehabilitation of rental housing utilizing HOME funds will require a 5 to 15-year affordability period for the HOME Assisted Units. The HOME Assisted Units will be "fixed units" as opposed to "floating" HOME units for the entire affordability period. HOME Assisted Units must be comparable to non-HOME Assisted Units in terms of amenities, number of bedrooms, square footage and location in the building.

The household occupying such rental units shall be families or individuals whose income does not exceed 50% of Kenosha County median family income as published annually by the US Department of Housing and Urban Development (HUD). Low HOME Rent Limits will apply to all designated HOME units. The 50% HOME Rent Limits less any tenant paid utilities would apply to all other 50% CMI designated Assisted Senior Units. Determination of the minimum number of HOME Assisted Units per project and maximum per-unit HOME subsidy will be calculated according to all HOME Program standards, including, pro-rata (fair share test), the HOME per unit subsidy limit and subsidy layering analysis to determine the funding gap to be financed to provide the HOME affordable units.

The City's subsidy layering evaluation requirements are included in the next section below. The City may use the subsidy layering review done by WHEDA for the Low Income Tax Credit Program to ensure that no more than the necessary amount of HOME Program funds are invested in any one project to provide affordable housing.

Subsidy Layering Review, Underwriting & Market Analysis

HUD establishes subsidy limits annually on the amount of HOME funds that may be invested in affordable rental housing on a per-unit basis per locality.

Before committing HOME funds to a project that combines the use of any other local, state or federal assistance, the City must evaluate the proposed project in accordance with the guidelines that it has adopted, to ensure that the City does not invest any more HOME funds than are necessary to provide affordable rental housing. The guidelines, referred to as Subsidy Layering Guidelines, are incorporated as part of the City of Kenosha HOME Program Description, Consolidated Plan and Policies and Procedures.

The City of Kenosha will use the following types of subsidy layering review before committing HOME Program funds to any rental housing rehabilitation project:

1. A subsidy layering review produced by HUD when the other source of funding is provided by HUD, and HUD conducts a subsidy layering review;
2. Subsidy layering analysis produced by the Wisconsin Economic and Housing Development Authority when Low Income Housing Tax Credit (LIHTC) is used, and WHEDA conducts an evaluation to determine whether there are excess tax subsidies;
3. A subsidy layering analysis produced by the developer and reviewed by the City of Kenosha in accordance with the guidelines presented in HUD Notice CPD 98-1. These guidelines include review of the following documents supplied by the developer/applicant:
   • Sources & Uses of Funds: As part of the application process, the City of Kenosha will require a Sources and Uses of Funds Statement for the proposed project with supportive documentation, including lender commitment letter(s), documentation of owner cash equity and any deferred developer fees. This should reflect the project development budget and should list:
     1. All proposed sources (both private and public) of the funds and dollar amounts for each respective source; and
     2. All uses of funds (including acquisition costs, rehabilitation or new construction costs, financing costs, and professional fees) associated with the project.
   • Certification of Governmental Assistance: The applicant/developer must provide a formal certification as to whether or not additional governmental assistance will be provided to the project, and if so, what kind of assistance.
   • Project Development Budget: The City of Kenosha will review the project development budget to determine whether the development costs are necessary and reasonable. The budget is to include all costs associated with the development of the project, regardless of the funding sources.
     1. "Reasonableness" of costs should be based on all of the following factors:
        1. Cost of comparable projects in the same geographical area;
        2. The qualifications of the cost estimators for the various budget line items; and
        3. Comparable costs published by recognized industry cost index services.
   • Proforma: The City of Kenosha will determine the reasonableness of the rate of return on equity investment by looking at the applicants proforma (project income and expense statement). The proforma should include achievable rent levels, market vacancies, and operating expenses. It should also specify the consequences of tax benefits, if any, and any other assumptions used in calculating the project cash flow. The proforma should represent, at a minimum, the term of the HOME affordability requirements (20 years) or longer if any other funding sources require longer affordability terms.
   • The subsidy guidelines can also be used to determine the appropriate level of HOME funds to be used in a project absent of any other governmental assistance.
   • The City will utilize the underwriting guidelines in its Policies and Procedures and will assess whether there is adequate market demand prior to commitment of HOME funds.

Interested applicants should contact HOME Program staff to discuss eligibility, and to obtain the password for the application.