04-5PIHN.DOC - U.S Department of Housing and Urban...

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U.S. Department of Housing and Urban Development Office of Public and Indian Housing Special Attention of: Notice PIH 2004-5 (HA) PHAs; Field Office Public Housing Directors; and Issued: April 9, 2004 HOPE VI Coordinators Expires: April 30, 2005 Subject: HUD PIH Notice for Mixed-Finance Development of Operating Subsidy-Only Projects HUD is issuing this Notice to provide new guidance regarding the statutory, regulatory and program policy issues involved in developing a mixed-finance Operating Subsidy-Only public housing project (the “Operating Subsidy-Only Project” or the “Project”). The term “Operating Subsidy-Only Project” refers to the development of public housing replacement units financed without the use of HUD public housing capital assistance or HOPE VI funds, but for which HUD agrees to provide operating subsidies under Section 9(e) of the U.S. Housing Act of 1937 (the “Housing Act”). One benefit of using the Operating Subsidy-Only model of mixed-finance development is its relative simplicity. It may be used to provide assistance in existing structures or used in concert with private housing production activity. Even where it is utilized in a newly developed project the PHA may not need to be involved in the initial development and construction activity. Another advantage of this model is that HUD is able to expedite its mixed-finance review and approval process since no public housing funds are being invested in the construction, rehabilitation or acquisition of the project. HUD provides PHAs with operating subsidy to support the cost of operating public housing units under the terms and conditions of an Annual Contributions Contract (ACC). Mixed-finance public housing projects may be “developed” (added to a PHA’s ACC) by relatively conventional methods (e.g., new construction or acquisition with or without rehabilitation), or through a variety of innovative development methods and ownership structures. However, if the project will be owned by an entity other than a PHA, then it must be developed in accordance with HUD’s mixed-finance public housing development regulations contained in 24 CFR part 941, Subpart F. The provision of operating subsidy is one of several financial tools that PHAs can use to leverage other public and private funding for the development of public housing. In most mixed-finance projects, the PHA provides public housing capital assistance for development and operating subsidy for on-going operation of the public housing units in the project. However, in the case of an Operating Subsidy-Only project, the PHA commits to provide a stream of operating subsidy, but no public housing capital assistance for development or future modernization. Page 1 of 8 Use of Operating Subsidy in Mixed- Finance Development
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For example, the Housing Authority of Baltimore has agreed to provide operating subsidies to support the operation of 62 public housing units at the 212-unit Arbor Oaks project in Baltimore. No public housing capital
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