Attachment 2-2: How to Determine the Minimum Number of Home-Assisted Units in a Project

Determining the Minimum Number of HOME-Assisted Units

The PJ must designate the number of HOME-assisted units at the time of project commitment. The minimum number of units that the PJ can designate is based on the amount of the HOME investment. The process for determining this number varies, depending on whether the units are comparable or not. Comparable units have the same number of bedrooms, amenities, and square footage.

  • When units are not comparable, the minimum number of HOME-assisted units is based on:
    • The actual units in which HOME funds are invested (i.e., the actual costs for the HOME-assisted units, plus a proportional share of the HOME-eligible common costs). These costs cannot exceed the maximum per unit subsidy limit.
    • For example, if the PJ rehabilitates six units that are not comparable, the PJ must track the development costs by unit. If the PJ invests $25,000 per unit for three 3- bedroom units, and invests only private funds in the remaining units, then only the units with HOME investments are HOME-assisted.
  • When units are comparable, the minimum number of HOME-assisted units is based on one of the following:
    • The proportional share of total HOME-eligible costs paid with HOME funds, in relation to the total eligible development cost
    • The maximum per unit subsidy limit, in relation to the total eligible development cost.

The HOME maximum per unit subsidy is based on the 221(d)(3) limits. These limits are available on the HOME Program website at https://www.hud.gov homeprogram.

Exhibit 2-16 illustrates how to determine the minimum number of HOME-assisted units in a project with comparable units.

The PJ may designate more than the minimum number of HOME-assisted units, if it so chooses.

Exhibit 2-16: Example: Determining the Minimum Number of HOME-Assisted Units When the Units Are Comparable

Scenario: The Paradise PJ plans to develop a 10-unit rental property. It will invest $450,000 in HOME funds. The maximum per unit subsidy for the planned bedroom size in this locality is $80,000. The units are comparable, as they all have the same square footage, two bedrooms, and the same amenities.

Paradise PJ must perform two tests, to determine the minimum number of units that it must designate as HOME-assisted.

Test 1: Fair Share Test

Step 1: Determine the total eligible project costs. $900,000

Step 2: Determine the planned HOME investment. $450,000

Step 3: Divide the HOME investment by the total project cost and convert to a percentage.

$450,000/$900,000

= .5

= 50%

Step 4: Multiply the number of total units in the development by the cost percent (determined in Step 3), to get the pro-rata share.

Ten Total Units

x 50%

= 5 units

Step 5: If the result is not a whole number, round up.

Test 2: Per Unit Subsidy Test

Step 1: Determine the total eligible project costs.

$900,000

Step 2: Identify the maximum per unit subsidy.

$ 80,000

Step 3: Divide the total eligible project costs by the maximum per unit subsidy.

$450,000/$80,000

= 5.6 units

Step 4: Note—if the result is not a whole number, round up:

6 units



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