Officials for Arkansas' low-income housing development agency want to change the way it distributes about $1.7 million a year in federal funds for reconstruction and rehabilitation of homes.
Currently, the Arkansas Development Finance Authority awards $90,000 for individual home reconstruction, split between a $45,000 grant and a $45,000 loan, or a $25,000 grant for home rehabilitation.
Most of the money traditionally has been spent on reconstructing homes, agency officials said.
The federal government now requires a 25 percent match of funds for the grants from sources beyond the agency.
Agency officials say they want to eliminate the reconstruction awards and instead provide only $25,000 grants for home rehabilitation.
Authority President Aaron Burkes said the $1.7 million could be used to reconstruct 17 homes each year in Arkansas.
"Or we can do four times that with rehab [grants]," added Andrew Branch, vice president of housing for the state agency.
The money the authority uses for the reconstruction and rehabilitation program comes from the U.S. Department of Housing and Urban Development's HOME Investment Partnership Program, Burkes said.
The authority has helped finance about 1,900 homeowner rehabilitation or reconstruction projects since the program started in 1992, he said.
In addition to the $90,000 paid to a low-income homeowner for reconstruction, the state agency also pays a fee of $9,900 to consultants -- usually nonprofits, individuals, cities or counties -- that work with the homeowner, complete the applications on their behalf and coordinate the process, said Burkes.
"The reconstruction is around $100,000 apiece. You can't do much with the money that is available, when the rehabilitation [grants] are about a quarter of that," Branch told the Arkansas Legislative Black Caucus this week.
Burkes told the legislators that when the reconstruction is complete, "the house ... is worth substantially less than the money that has been invested" and that homeowners sometimes had a burden of a $45,000 mortgage on a home that might be only worth $15,000 or $20,000.
Branch said other states have reduced the amount awarded to low-income homeowners "to try to encourage these partners that we have -- these nonprofits, the cities and counties -- to leverage other funds" through sources such as the federal Home Loan Bank, the U.S. Department of Agriculture and private entities "to try to bring more dollars in."
Using about $1.7 million each year largely for home reconstruction "wasn't a very efficient use, and we saw probably about 20 percent are either foreclosed on or in danger of being foreclosed on, and we certainly don't want the state of Arkansas to be foreclosing on low-income individuals," he said.
It would be better to award only the $25,000 rehabilitation grant, plus a consultant fee of $2,500 for the group or person assisting the homeowner, Branch said, and "ADFA would be able to walk away from it with no risk to the homeowner as far as having their home foreclosed on."
The authority receives a total of $6.8 million a year for various housing programs through the HUD HOME program, Burkes said.
In addition to the money for the reconstruction and rehabilitation program, $1.3 million a year goes for rental housing development, and the remainder funds tenant-based rental assistance, new construction of single-family housing and down-payment assistance, he said.
All beneficiaries of HOME funds are required to meet the low- to moderate-income threshold of below 80 percent of the area median income, he said. The median household income in Little Rock for 2016 was $46,578, according to the U.S. Census Bureau.
The proposed changes in the grant program drew a mixed reaction from lawmakers at the Legislative Black Caucus meeting.
On Wednesday, Burkes said that the agency's board of directors will consider the proposed rule changes today and that the changes will require the approval of the governor's office and the Legislative Council before they take effect. He said he hopes the proposed rules become effective in the next two to four months.
The authority has proposed these changes as part of a planned reduction of its 320-page operation manual for the HOME program to 244 pages to remove layers of state-imposed rules and focus largely on the requirements of the federal housing agency, Branch said
"The one big change that has had really quite honestly the most controversy is we're getting rid of the reconstruction program," Branch told the lawmakers this week.
Branch said the authority paid Philadelphia-based consultant ICF Resources $17,000 for guidance on the best practices in other states and looked at Arkansas' surrounding states, including those with similar economic and demographic issues.
In response, Sen. Joyce Elliott, D-Little Rock, said, "But you know the states around us are no shining light when it comes to addressing disparities."
Burkes said that many of the low-income people in housing in such poor condition that the housing needs reconstruction may be better off getting tenant-based rental assistance through the HOME program.
"They may not be able to afford the upkeep and the maintenance required, when most of your rental properties are going to be managed and maintained by the landlord."
Rep. Monte Hodges, D-Blytheville, said that paying back a $45,000 loan may not seem like a lot of money for some people, but that's a pretty big mortgage for a low-income Arkansan who is financially struggling.
"I don't think we are benefiting that individual by throwing money at them," he said "Although it would beautify their home [and] get them in a safe, clean property, the end result is that they are going to end up losing that home. I just don't see the benefit. It just doesn't make sense to me as a banker."
Caucus chairman Rep. Vivian Flowers, D-Pine Bluff, said the home reconstruction and rehabilitation program was set up to provide assistance in areas "where you were going to be upside down due to the incredible decline in the value of property."
Metro on 12/21/2017