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HOME Helps Low-Income Households, Says Evaluation

The HOME Investment Partnership Program is fulfilling its purpose of serving the neediest communities and households, according to an Urban Institute evaluation of the program's first year. A block grant for housing that replaced several categorical programs, HOME was first funded in fiscal year 1992 at $1.5 billion. The report provides an initial examination of the low-income housing choices States and localities made in using HOME funds.

HOME was designed to give participating jurisdictions a great deal of flexibility in providing affordable housing opportunities. Participating jurisdictions can use HOME funds to support four different general types of housing assistance, including acquiring and developing rental housing, rehabilitating owner-occupied housing, facilitating homeownership, and providing tenant-based rental assistance.

At the same time, the program is highly targeted to lower income families: all program funds must benefit families with incomes below 80 percent of their area median income. In addition, 90 percent of the families being assisted through HOME rental housing must have incomes below 60 percent of their area median income.

HOME has lived up to its promise in serving America's neediest families, according to the report. The program has directed housing resources to needy families in the neediest cities. About 57 percent of program funds were allocated to the 20 percent of American cities that were most distressed. Nearly half of all local participating jurisdictions applied more stringent income targeting than was required by statute in at least one of their HOME-funded projects, while 16 percent did so in all their programs. Overall, more than half of all rental households served had incomes below 30 percent of the area median.

In the first year of the program, participating jurisdictions emphasized rental housing. About 85 percent of participating jurisdictions allocated some portion of their grants to acquire or develop rental housing, and overall about 60 percent of program funds were allocated for this type of activity. This is consistent with the program's low income emphasis, as families with the lowest incomes tend not to be able to afford homeownership, even with the levels of assistance likely to be provided through HOME. Participating jurisdictions committed lesser portions of funds for the other activity types: owner-occupied rehabilitation (20% of funds); homeownership assistance (18%); and tenant-based rental assistance (3%).

When HOME started, there was some concern that participating jurisdictions would use HOME funds to substitute for other resources used for housing. For example, HOME resources might cause some communities to shift Community Development Block Grant (CDBG) funds previously used for housing to economic development, public works, or other activities eligible under that program. At least in the first year of operation, this rarely occurred, as administrators in 75 percent of participating jurisdictions said that HOME funds were not offset by a reduction in funding for housing from other sources. In almost all of the remaining jurisdictions, HOME funding was only partially offset by reductions in housing funding from other sources.

The program required set-asides of 15 percent for Community Housing Development Organizations (CHDOs) -- nonprofit organizations that provide housing assistance to low- and moderate-income people and that have provisions for community representation in their own governance. Overall, HOME succeeded in encouraging use of CHDOs and other nonprofits, says the report. Through August 1994, State and local participating jurisdictions had committed about 28 percent of their funding to nonprofits and 15 percent to CHDOs. A relatively small number of jurisdictions (11 percent) reported having difficulties meeting the set aside, largely because of a shortage of local organizations that qualify as CHDOs under HOME guidelines. A provision since included in the law allows jurisdictions to provide operating support and fund technical assistance to help CHDOs qualify.

Implementing Block Grants for Housing: An Evaluation of the First Year of HOME is available from HUD USER for $5. Please contact HUD USER to obtain copies.

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