Leveraging refers to a program’s ability to use its own program dollars to attract additional funding from other sources, including non-federal sources of funds. Leveraging can be an important concept for affordable housing because attracting multiple funding sources makes projects more feasible, and because the ability to attract other sources of funds could reduce the amount of federal funding that needs to be invested in a project. Attracting other types of funding for affordable housing can also help to build the capacity of organizations that might not be able to undertake projects without the assistance of HOME funds. HOME does not have a specific leveraging requirement, although PJs do have to meet the matching requirement described previously.
HUD reports leveraging statistics for HOME. According to HUD, every dollar of HOME funds used for housing units that were completed between FY1992 (the first year in which the program was first funded) and July 31, 2014, attracted $4.16 in non-HOME funds. This amount includes other federal funding sources as well as funding from other sources (such as states, local governments, and private entities).
In 2008, the Government Accountability Office (GAO) released a report analyzing the leveraging statistics that HUD and the Department of the Treasury report for various programs and calculating alternative leverage measures. It found that alternative measures of a program’s leverage ratio may provide a more complete picture of how effective a program is at leveraging specific types of funds. For example, according to the GAO report, for HOME-assisted units completed in FY2006, HUD’s reported leverage ratio was $4 of non-HOME funding for every dollar of HOME funding. Using the same data, GAO found that for every dollar of HOME funding used in units that were completed in FY2006, HOME-assisted units used $1.92 of private spending, $1.33 of other federal spending, and $0.76 of state or local spending. Therefore, a leverage ratio that only took into account other non-federal sources of funding for HOME-assisted projects completed in 2006 would be $2.68 for every dollar of HOME funding ($1.92 of private funding and $0.76 of state and local funding).
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