Chapter 6: Housing Program

Table of Contents

This Chapter describes the Housing Program component of the Iowa Economic Development Authority’s CDBG program, called the “Upper Story Conversion Program,” which rehabilitates unoccupiable units or converts existing space of an upper story downtown building into new rental units. Recipients should review this chapter carefully, as well as the guidance and sample documents in Appendix 6 to ensure program compliance. The various chapter components include:

  • Program Requirements
  • CDBG Upper Story Project Management
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Program Requirements

Meeting a National Objective

The Upper Story program uses the “low-and-moderate housing” HUD national objective. This means that in order to be successful, the project must benefit persons of low-to-moderate income (LMI) by leasing units to LMI tenants.

At least 51% of all rental units in the project, rounded up to the nearest whole number, shall be made available to and occupied by LMI tenants. These LMI units must be proportionate in bedroom sizes to the non-LMI units.

During the Period of Affordability, which is defined as three years from the issuance of the Certificate of Occupancy or the date the first lease is signed, the Recipient or Grant Administrator must verify the tenants’ income.

  • During the initial lease up, income verification must be completed by the administrator.
  • When calculating income for tenants, verifications must be completed in accordance with 24 CFR 5.609 (“Part 5”). For more detail on the “Part 5” process, please see the resources in Appendix 6.
  • Income verifications are valid for twelve months from the date verification was completed.
  • A “Housing Unit Verification” form must be completed in IowaGrants at the time of project completion and the initial lease-up in order to verify that the National Objective was met. The project will not meet the National Objective until ALL units are rented. If the National Objective is not or cannot be met, all funds may be required to be paid back in full.
  • For the following two years, the Owner/Developer will recertify the tenants’ income annually and provide completed certification forms to IEDA (see “Period of Affordability Documents” in Appendix 6). The original LMI to Market-rate ratio of units must be maintained during this entire period.

Project Preparation and Considerations

As you prepare to undertake the Upper Story project, be sure to keep the following considerations in mind:

  • Funding must be proportional to the number of LMI units in the project. For example, if CDBG is funding two thirds of the total project budget, then a minimum of two thirds of the units must be leased to LMI households.
  • Maximum rent limits on the CDBG-funded rental units shall not exceed the most current Home Program 65% rent limits (see the “Resource Links” page in Appendix 6).
  • The maximum number of new units allowed is seven (7), regardless of funding source.
  • In accordance with 24 CFR 5.100, if the project consists of new construction OR substantial rehabilitation, as substantial rehabilitation is defined by 24 CRF 5.100, of a building with more than 4 rental units, installation of broadband infrastructure must be included, except where the recipient documents the determination that:
    • The location of the substantial rehabilitation makes installation of broadband infrastructure infeasible
    • The cost of installing broadband infrastructure would result in a fundamental alteration in the nature of its program/activity or in an undue financial burden; or
    • The structure of the housing to be substantially rehabilitated makes installation of broadband infrastructure infeasible.
  • Units shall be designed and constructed in accordance with all locally adopted and enforced building codes and standards. In their absence, the requirements of the Iowa State Building Code shall apply.

Documentation and Project Progression

As the Upper Story project gets underway and progresses toward completion, be sure to attend to the following steps: 

  • Finalize the securing of all other financial resources above the CDBG funding limitation.
  • Complete the Environmental/Historic review.
  • Enter into a Development Agreement between the Recipient and the Developer/Owner (see template in Appendix 6).
  • Prior to the first construction payment, each property receiving CDBG funds will be required to enter into a three (3) year non-receding forgivable loan/mortgage and agreement for covenants and restrictions in the form of a recorded lien to ensure sufficient insurance and project compliance from the onset of construction (see templates in Appendix 6).
  • CDBG funding requires that the Federal Lead-Safe Housing regulations, impacting dwelling units built prior to 1978 must be adhered to (see Lead Summary in Appendix 6).
  • For projects opting to use Green Streets, a HERS Rater must complete an assessment when the units are at the point of installing drywall and again at completion of the project to make sure the acceptable rates have been reached.
  • Finally, if optional funding for Iowa Green Streets activities was awarded to the project, all units must meet the Green Streets requirements chosen at the time of application when construction is complete.
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CDBG Upper Story Project Management

Procurement

CDBG recipients must comply with procurement requirements described in this Guide. These regulations direct that all supplies, equipment, construction, and services be acquired efficiently and economically, through open and fair competition. (Please refer to Chapter 2 and Appendix 2 of the Management Guide for procurement information.)

Reporting

Recipients are required to report on their expenditure of funds and activity status. These reports help keep IEDA and your IEDA Project Manager informed about the project progress and provide the State with information needed for reports submitted to HUD. 

Recipients will submit project status information when submitting claims for CDBG funds.

Project Monitoring

The CDBG housing program will be monitored by an IEDA project manager during the life of the program. This may include desk monitoring and/ or on-site monitoring by IEDA staff. The IEDA has a formally established process for conducting project monitoring. (Please refer to Chapter 2 of this Guide for more information regarding project monitoring.)

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