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Friday, November 8, 2002 State IDA Policy Conference • St. Louis, MO. Leveraging Funds for IDAs: Strategies for Linking to Existing State Programs. Carl Rist, Program Director Corporation for Enterprise Development. Funding Environment. Vast majority of states facing budget deficits.
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Friday, November 8, 2002 State IDA Policy Conference • St. Louis, MO Leveraging Funds for IDAs: Strategies for Linking to Existing State Programs Carl Rist, Program Director Corporation for Enterprise Development
Funding Environment • Vast majority of states facing budget deficits. • New funding for IDAs likely to face stiff challenges. • Existing funds in danger of being withdrawn or re-captured. • How can states leverage related sources of funds for IDAs in a time of scarcity?
IDAs and Housing • Most common use of IDAs: • 61% of participants in ADD demonstration intend to save for home purchase or repair. • 80% of participants used IDAs for homeownership in NC (according to recent evaluation).
Options for Leveraging Housing Funds for IDAs • Community Development Block Grant (CDBG) funds • Federal Home Loan Bank • Family Self-Sufficiency Program • State Housing Trust Funds • Low-Income Housing Tax Credits
CDBG Funds • Why CDBG? • One of the largest sources of funds for community development. • Funds a broad range of c.d. activity. • What CDBG funds can be used for: • Match for first-time homebuyers (or small business start-up) • Administrative costs
CDBG Funds • Models: NC, OK, TN, VA • Pros: • Funds match and admin • Available in every state • Considered non-federal for purposes of matching federal dollars • Cons: • Regs • Restrictive funding categories • Only small towns and rural areas qualify • Applicants must be unit of local government
Federal Home Loan Bank • Why FHLB? • Affordable Housing Program (AHP) – matched savings program for low-income families. • What FHLB funds: • Up to 3:1 match for downpayment assistance.
Federal Home Loan Bank • Models: Many • Cons: • Have to apply through FHLB member bank • Account must be held by member bank • Pros: • Good source of funds for downpayment assistance • Mortgage does not have to be with member bank
HUD Family Self-Sufficiency Program (FSS) • Why FSS? • Structured saving program for public housing residents with earned income • Many FSS savers have used escrow accounts to purchase homes • What FSS escrow accounts fund: • Downpayment or other uses.
HUD Family Self-Sufficiency Program (FSS) • Models: Many • Cons: • Not additional source of funds • FSS programs also not always well staffed • Pros: • Existing system for structuring saving for key target population • Economies of scale in linking FSS and IDAs
State Housing Trust Fund • Why Housing Trust Funds? • Own-source stream of funds for states • Dedicated to affordable housing • What Housing Trust Funds fund: • Housing development • Housing rehab • Downpayment assistance • Low-interest financing
State Housing Trust Fund • Model: NC DOL-HFA collaboration • “Virtual” match from Housing Trust Fund provides non-federal match for AFIA grant • Pros: • Source of state funds for asset-building as appropriations and tax credits dry up • Leverages housing funds at a time when many states are not reinvesting in their Trust Funds • Cons: • Not every state has a Housing Trust Fund • Feds approved NC application, but nothing in writing
Low-Income Housing Tax Credits (LIHTC) • Why LIHTC? • One of most significant sources of funds for low-income housing development • LIHTC continue to be in great demand on part of housing developers • What LIHTCs fund: • Housing construction
Low-Income Housing Tax Credits (LIHTC) • Models: None • Modest proposal: • Give extra credit to applicants for LIHTC if they set up IDA programs for their tenants.
IDAs and Small Business Development • Second most common use of IDAs: • 18% of participants in ADD demonstration intend to save for microenterprise or small business start-up.
Options for Linking Small Business Development Funds and IDAs • Integrating microenterprise development products and services and IDAs
Integrating Micro and IDAs • Why integrate micro and IDAs? • Both share common goals – accumulation of wealth by poor.
Integrating Micro and IDAs • Models: FSCLF in Delaware (“high integration” model); others • Pros: • Minimize program costs (economies of scale) • Establishing ability to save can increase credit-readiness and credit-worthiness • IDA “equity” valued as a credit enhancement during consideration for loan • Cons: • Not new money, rather cost savings
THE END Carl Rist Corporation for Enterprise Development 123 W. Main St. 3rd Floor Durham, NC 27701 Tel: 919-688-6444 Fax: 919-688-6580 rist@cfed.org Website: www.cfed.org Visit the Internet IDA Learning Network at http://idanetwork.org