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Mixed Finance Development in Public Housing

Mixed-finance development of public housing was temporarily authorized under the Omnibus Consolidation and Rescissions Appropriations Act of 1996. Local housing agencies had been producing affordable housing using these techniques for some time, but not with public housing program funds. Since its first appearance in 1996, the mixed finance provision was re-authorized in successive appropriations acts, then established in statute under QHWRA section 539 (this is the new section 35 in the 1937 Act). There are no appropriations for this program. It is a regulation that permits local housing agencies to use public housing program funds in public-private ventures.

Mixed-finance development is simply the necessary combination of resources to produce an affordable unit. HUD offers several programs in its Office of Housing and Office of Community Planning & Development, such as HOME and Community Development Block Grant, which can be used in combination with low-income housing tax credits, bond financing, other grants and equity sources, even section 8 tenant-based vouchers, to create a spectrum of affordable housing. Now, public housing capital and operating funds can also be used to support the development of units in a mixed-finance deal.

Eligible activities include:

  • using operating funds to set up necessary reserves for public housing units in a mixed-finance development to ensure affordability for low- and very-low income families in a development,
  • providing capital assistance in the form of a grant, loan, guarantee, or other form of investment, which can include drawing down funds commensurate with the construction draws for deposit into an escrow-bearing account to serve as collateral or credit enhancement,
  • for other forms of public or private borrowing.

Public housing eligible units in a mixed-finance development are counted in the agency's inventory, and those units must be operated as public housing units. The units may be built by the housing agency, an entity affiliated with the agency, by a partnership in which the agency has an active role, by an entity that grants right of first refusal to the agency when the compliance period is over (as with low income housing tax credits), or other terms the HUD secretary may set out.

This set of regulations has yet to be published by HUD. The expected publishing date is the summer of 2000. In the meantime, agencies are to continue using published notices and guidance, and must submit proposals for mixed-finance development that use public housing funds to HUD's Office of Public Housing Investments for approval.

QHWRA inserted two restrictions on the use of capital funds for new construction of public housing units. One is an exception regarding the use of assistance. The other exception is regarding the use of formulas.

  • Assistance. LHAs may use operating or capital assistance for the construction or operation of units in excess of the number in their inventory on October 1, 1999, but the LHA's formula amounts will not be increased to allow this construction or operation. Formula amounts may be increased under the following exception:
  • Formulas. LHAs may receive additional formula funding in capital or operating funds for the operation or modernization (but not initial development costs) for units in excess of its inventory as of October 1, 1999, IF the units are part of a leveraged, mixed-finance project, and the estimated cost of the units' useful life is less than the cost of providing tenant-based assistance for the same time period.

For more information, please contact Christine Siksa, Policy Analyst for Housing, at 202-289-3500, ext. 252 or by e-mail at csiksa@nahro.org.

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