CHDO Basics

1. Indiana Housing and Community Development Authority (IHCDA) Programs and OpportunitiesCommunity Housing Development Organizations (CHDOs)

2. CHDO Basics • To be certified as a CHDO, organizations must: • Meet all the organizational and capacity requirements as outlined in the HOME regulations; and, • Meet one of the three CHDO roles for their HOME construction project • This is in addition to the underwriting and other condition for a project commitment

3. CHDO Benefits • Minimum of 15% of yearly allocation of HOME must go to CHDOs • Seed Money/Pre-Development Loans available to CHDOs exclusively. • CHDO Operating Supplement – new IHCDA policy to provide additional operating supplement funding for CHDOs in second year of construction of an eligible HOME project. • Use of HOME project proceeds. • Points on HOME applications

4. What is a CHDO? • Participating Jurisdictions must consider four requirements when evaluating CHDOs: • CHDO Legal Status • Independence • Accountability to the Low Income Community • Capacity

5. Legal Status • Must be a non-profit organized under State and Local laws • Usually determined through Articles of Incorporation • Must have the provision of decent housing that is affordable to low and moderate income persons • Must be either the Articles of Incorporation or By-Laws • No part of the organization’s net earnings may inure the benefit of any member, founder, contributor or individual • Identified in the Articles of Incorporation • Organization may not be controlled by, nor under the direction of individuals or entities seeking to derive profit or gain • Articles of Incorporation, By-Laws or MOU with any parent organization

6. Legal Status • Must have IRS tax exempt status • Cannot be a governmental entity – including: another PJ, other jurisdiction, Indian tribe, public housing agency, housing finance agency, redevelopment authority, zoning board or commission

7. Independence • No more than one-third of the board members may be public officials or employees of a governmental entity • The Board Roster must identify all board members that meet the above definition. • CHDO employees cannot be government officials or employees • If the CHDO is created by a governmental entity: • The Governmental entity cannot appoint more than 1/3 of the board AND those members may not appoint the remaining 2/3

8. Independence • If created by a for-profit: • For-profit can’t be housing development, or management entity • For profit can’t appoint more than1/3 of the board • For-profit officers/employees can’t be CHDO employees • CHDO must be free to contract for goods and services from vendor of its own choosing

9. CHDO is Accountable to the Low Income Community • Designated Service Area • No restrictions – just cannot be the entire state • Formal process adopted for low-income beneficiaries to advise it on decisions regarding siting, development and management of housing. • Organization has at least one year of serving the community. • Parent can also demonstrate one year experience.

10. CHDO is Accountable to the Low Income Community – Board Composition • At least 1/3 Low Income Representation on the Board • May be: • Low income residents of the community (at or below 80% AMI) • Residents of low-income neighborhoods (block group, census track) • Elected representatives of the LI neighborhood organization • i.e. Neighborhood group • Government officials/employees/appointees cannot count toward the 1/3 LI representation – this may be a problem for organizations who receive CSBG

11. Board Composition examples XYZ Org. – By-laws specify a six-person board. 1. Local Resident (50% AMI) 2. Resident (60% AMI) of a Low Income Neighborhood 3. Resident (120% AMI) of a Low Income Neighborhood • 1/3 low income representation requirement can be met by: • Low income (at or below 80% AMI) resident of the community – 1 & 2 • Residents of low-income neighborhoods as determined by block group and census tract – 2 & 3 • Elected representatives of a low income neighborhood organization – 5 & 6 4. Local Resident (100% AMI) 5. President of Local Neighborhood Group 6. Treasurer of Local Neighborhood Group 

12. Board composition examples XYZ Org. – By-laws specify a six-person board. 1. Mayor (Lives in Low Income Neighborhood) 2. Resident (60% AMI) of a Low Income Neighborhood 3. Resident (120% AMI) of a Low Income Neighborhood • Public officials can’t count towards low income representation, even if they may meet the requirements – 1 & 5 4. Local Resident (100% AMI) 5. Township Trustee (lives in low income neighborhood) 6. Treasurer of Local Neighborhood Group 

13. Board composition examples XYZ Org. – By-laws specify a six person board. 1. Local Resident living in low income neighborhood (Appointed by Mayor) 2. Resident (60% AMI) of a Low Income Neighborhood 3. Local Resident (120% AMI) • The definition of a public official is very broad. It includes obvious categories like mayors and county commissioners but also township trustees, local and state government employees, appointees of public officials, and employees of public officials – 1, 5, 6 4. Local Resident (100% AMI) 5. Township Trustee (lives in low-income neighborhood) 6. Administrative Assistant for County Treasurer (60% AMI) X

14. Board composition examples XYZ Org. – By-laws specify a six person board. 1. Mayor (Lives in Low Income Neighborhood) 2. Resident (60% AMI) of a Low Income Neighborhood 3. Local Resident (120% AMI) • The organization looking to be certified as a CHDO cannot also be the organization counting toward a person’s low-income representation - 6 4. Local Resident (100% AMI) 5. Township Trustee (lives in low-income neighborhood) 6. Treasurer of XYZ Org. X

15. Board composition examples XYZ Org. – By-laws specify a six person board. 1. Mayor (Lives in low income neighborhood) 2. Resident (60% AMI) of a Low Income Neighborhood 3. Local Resident (120% AMI) • The 1/3rd requirement is based on the size of an organization’s board as stated in its by-laws, regardless of vacancies or other extenuating circumstances - 6 4.Vacant 5. Vacant 6. Vacant X

16. Board composition examples XYZ Org – By-laws specify board consists of between 4 and 6 members. 1. Mayor (Lives in low income neighborhood) 2. Resident (60% AMI) of a Low Income Neighborhood 3. Resident (120% AMI) of a Low Income Neighborhood • Incorporate flexibility into your by-laws. By establishing a range for your board size you may still be able to meet the CHDO requirements even if you have vacancies – 5 & 6 • Board size should be manageable and effective. • 1/3 requirement will always round up. 4. Local Resident (100% AMI) 5. Vacant 6. Vacant 

17. Capacity • Financial Management system must conform to 2 CFR 200.302-.303 • CHDO must have paid staff with capacity to oversee the project • Must receive a W2 directly from the CHDO • Cannot share staff with another organization • Cannot have only volunteers • No consultants • Can be full or part time

18. CHDO as Developer: Homebuyer • CHDO itself owns, rehabs or constructs, then sells property • Development through wholly‐owned subsidiary would • require HUD waiver • Written agreement with CHDO must include: • Actual sales price or method for determining it • Disposition of proceeds of sale (return to PJ or permit • CHDO to retain), and use of proceeds if CHDO will • retain • Not CHDO‐specific, but all buyers must be underwritten, no more one‐size fits all DPA

19. CHDO as Developer: Rental • CHDO itself owns and develops housing • CHDO arranges financing and is in sole charge of construction or rehab • CHDO must be owner in fee simple or have long‐term ground lease during development and affordability period

20. CHDO as Owner: Rental • CHDO itself acquires & owns rental housing • It does not have to develop it • If development, CHDO hires and oversees project manager or contracts with developer to perform rehab or construction • CHDO must be owner in fee simple or have long‐term ground lease during development and affordability period

21. CHDO as Sponsor: Rental – Turnkey to other Non-Profit • CHDO develops housing on behalf of another non‐profit and transfers title after completion • Conveyed at pre‐determined time to pre-identified nonprofit • Other nonprofit cannot be created by governmental entity, but can be another CHDO • If transfer does not happen, CHDO must maintain ownership for affordability period

22. CHDO as Sponsor: Rental – CHDO Affiliate • Rental Housing is “sponsored” by a CHDO if owned or developed by a: • For-profit or nonprofit that is wholly-owned subsidiary of the CHDO; or • If owned by a Limited Partnership, or Limited Liability Company, the CHDO or its wholly owned subsidiary must be the sole general partner or sole managing member (with limitations on replacement) • Must provide loan fund directly to ownership entity

23. How to become an IHCDA CHDO? • New HUD guidelines on certifying CHDOs • Organizations must be a certified CHDO upon submitting an eligible HOME application and will be certified by project • Must submit both an application (for either pre-development/seed money loan OR construction) and a separate CHDO application • IHCDA will not accept a sole CHDO application