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This issue of HOMEfires provides guidance to Participating Jurisdictions (PJs) on granting or providing HOME funds for the acquisition, development, or rehabilitation of affordable rental housing to an entity that will then loan the HOME funds to the owner (i.e., Limited Partnership (LP) or Limited Liability Company (LLC)) of the affordable rental housing. View HOMEfires Vol. 16, No. 1: Granting HOME Funds Loaned to Owners.

Q: May a participating jurisdiction (PJ) grant or provide HOME funds for the acquisition, development, or rehabilitation of affordable rental housing to an entity that will then loan the HOME funds to the owner (i.e., limited partnership (LP) or limited liability company (LLC)) of the affordable rental housing?

A: No, a PJ may not grant or provide HOME funds to an entity that then lends the HOME funds to the owner of an affordable rental project because HOME statutory and regulatory requirements require the PJ to ensure compliance with HOME requirements through binding contractual agreements with the project owner. A PJ may only provide HOME funds to an entity to lend to the owner of an affordable rental project if the entity is a subrecipient to the PJ.

The HOME statute and regulations do not permit HOME funds to be disbursed to any entity for the purpose of then loaning the HOME funds to the owner of the rental housing unless the entity loaning the HOME funds to the owner is a public entity or nonprofit acting as a subrecipient or State recipient of the PJ. Only then do the HOME regulations permit an entity other than the PJ to provide HOME funds under written agreements with owners to carry out HOME eligible activities. (See 24 CFR 92.2(2); 24 CFR 92.205; 24 CFR 92.504). If a public or nonprofit entity receives HOME funds under a written agreement with a PJ and loans the funds to the owner of affordable rental housing, the public or nonprofit entity must be a subrecipient, subject to the HOME requirements for a subrecipient. As a subrecipient, the entity may not award funds to an owner it owns or controls in whole or in part. (See 92.2; 92.201(b)(2)). Noncompliance and violations of HOME requirements may result in repayment of the HOME funds, remedies under 2 CFR 200.338, or other legally available actions against the PJ and subrecipient.

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