Q: What are eligible CHDO activities in the HOME program?

A: A Community Housing Development Organization (CHDO ) is a private nonprofit, community-based organization that has obtained or intends to obtain staff with the capacity to develop affordable housing for the community it serves, and meets the definition at 24 CFR 92.2. Participating jurisdictions (PJs) must set aside a minimum of 15 percent of their HOME allocations for housing development activities in which qualified CHDOs are the owners, developers, and/or sponsors of the housing.

CHDOs, as owners, must hold title to or have a long term lease in a given housing property. Additionally, a CHDO developer may own and develop a property or have a contractual obligation to a property owner to develop a project. Finally, a CHDO sponsor develops a project that it solely or partially owns and agrees to convey ownership to a second nonprofit that retains ownership for the purpose of providing affordable housing to low-income renters. The distinction between being a sponsor and a developer is that CHDO sponsors have an ownership interest in the property prior to the development phase, and then transfer title to another legally and financially separate nonprofit at a pre-determined time. The CHDO sponsor must provide sufficient resources to the second nonprofit organization to ensure the completion of the development and long-term operation of the project.

The CHDO set-aside provides equity for community-based organizations to undertake projects, build their capacity to serve a broad range of affordable housing needs, and provide guaranteed resources for affordable housing development. Using the 15-percent set-aside, a CHDO acting as an owner, sponsor, or developer may undertake any of the following: acquisition and/or rehabilitation of rental housing, new construction of rental housing, acquisition and/or rehabilitation of homebuyer properties, new construction of homebuyer properties, and direct financial assistance to purchasers of HOME-assisted housing sponsored or developed by a CHDO with HOME funds (See Chart 1). However, activities which a CHDO may not undertake using the 15-percent CHDO set-aside include rehabilitation of existing homeowners' properties, and tenant-based rental assistance, and providing downpayment assistance unless the project was developed using CHDO set-aside funds.

CHDOs may also act as subrecipients with non-set-aside funds by undertaking all other HOME-eligible activities including tenant-based rental assistance (TBRA), homeowner rehabilitation, providing down payment or closing assistance, and brokering or other real estate transactions that are not counted towards the set-aside. A CHDO may also serve as a subrecipient when it is selected by the PJ to administer specific aspects of its HOME program or the entire program. When acting as a subrecipient, a CHDO may not fund its own projects (when it is acting as owner, sponsor or developer) from the funds it has been charged to administer by the PJ.

Additional guidance on the use of CHDOs is provided in CPD Notice 97-11, CPD Notice 97-09, and HUD CPD Notice 96-09. The Final Rule contains regulatory guidance on CHDOs at 24 CFR 92.2 and 92.300-303.