Demolition and Disposition

U.S. Department of Housing and Urban Development NSP Webinar Demolition and Disposition December 18, 2012 2:00 P.M. EST Community Planning and Development

Moderator and Panel Kent Buhl, Moderator KB Consulting Jennif ifer Hylton Dept. of Housing & Urban Development John Laswick Dept. of Housing & Urban Development David Noguera Dept. of Housing & Urban Development Hunter Kurtz Dept. of Housing & Urban Development Jesse Handforth Kome Dept. of Housing & Urban Development Community Planning and Development 2

Topics of Discussionssion How does the Closeout Notice affect demolition activities? What are my options for disposing i of NSP-assisted properties? I ve acquired a property but can no longer pursue my intended final use, what can I do? U.S. Department of Housing and Urban Development Community Planning and Development 3

Closeout Notice Changes in the Closeout Notice that affect Demolition and Disposition iti Eligible Use D includes acquisition and disposition. This means that property acquired for demolition can meet a national objective through the demolition. Special economic development activities (24 CFR 570.203) under EU B and EU E (NSP1 only) is added Also LMMI Jobs national objective added U.S. Department of Housing and Urban Development Community Planning and Development 4

General Principles NSP PROJECTS MUST: Always fit an eligible USE Always be an eligible ACTIVITY Always meet a NATIONAL OBJECTIVE U.S. Department of Housing and Urban Development Community Planning and Development 5

General Principles In NSP2 & NSP3, if a grantee acquired a property under Eligible Use E that t is vacant and does not meet any other property eligibility (i.e. foreclosed, abandoned, or blighted), the property must be redeveloped for housing. U.S. Department of Housing and Urban Development Community Planning and Development 6

Demolition in NSP Demolition as an End Use Does not include Acquisition Includes Acquisition Options for subsequent uses discussed under Disposition Demolition for Housing Activities Reconstruction t Eligible ibl Use B Redevelopment Eligible Use E U.S. Department of Housing and Urban Development Community Planning and Development 7

NSP National Objectiveses NSP allows only the low-moderate-middle income (LMMI) national objective including: LMMH, which is low-moderate-middle income housing LH25, which is housing for households up to 50% AMI LMMA, which is the area benefit designation LMMJ, the creation or retention of LMMI jobs No slum-blight or urgent need U.S. Department of Housing and Urban Development Community Planning and Development 8

Demolition as an End Use Meeting a national objective on Demo Only (LMMA) Single Demo: eliminating conditions that are detrimental to public safety and health. Examples: Dilapidated property being used as a drug house or a decaying structure that poses a safety hazard for passers-by. U.S. Department of Housing and Urban Development Community Planning and Development 9

Demolition as an End Use (cont.) Meeting a national objective on Demo Only (LMMA) Clustered Demos: part of a comprehensive neighborhood strategy of demolition and preservation, and identify the qualified area. Example: Demolition of a majority of the blighted buildings in a 6 block target area U.S. Department of Housing and Urban Development Community Planning and Development 10

Subsequent ent Use after Demolition Once you have documented that the acquisition and demolition have met a national objective, grantees can then dispose of the property for a subsequent use Options for subsequent uses will be discussed under Disposition U.S. Department of Housing and Urban Development Community Planning and Development 11

Demolition for a Housing Activity Demolition as an allowable cost under Reconstruction (Eligible Use B: Purchase and rehabilitate homes and residential properties that have been abandoned or foreclosed upon ) Site can be acquired and cleared to rebuild housing on site in substantially the same manner Property does not have to be blighted, but must be foreclosed or abandoned Clearance must be integral to end use, and end use begins immediately National objective is either LMMH or LH25 U.S. Department of Housing and Urban Development Community Planning and Development 12

Demolition for a Housing Activity it (cont). Demolition as an allowable cost under new construction (Eligible Use E: Redevelop demolished or vacant properties as housing) Demolished property p does not have to be blighted but must qualify as vacant Clearance must be integral to end use, and end use begins immediately National objective is LMMH or LH25 U.S. Department of Housing and Urban Development Community Planning and Development 13

Demolition Table: Meeting eligibility requirements and national objectives Eligible Use (EU) National Objective EU D Demolish blighted properties Demolition as End Use Demolition with Acquisition Federal Register Notice now allows acquisition of blighted properties under EU D LMMA Demolition without Acquisition EU D Demolish blighted properties LMMA Demolition for Housing Activities Reconstruction (Rehabilitate housing) Redevelopment (New construction or Reconstruction of housing) EU B Purchase and rehabilitate homes and residential properties that have been abandoned or foreclosed upon in order to sell, rent, or redevelop such homes and properties EU E Redevelop demolished or vacant properties as housing LMMH LMMH U.S. Department of Housing and Urban Development Community Planning and Development 14

Demolition of Landbanked properties Demolition Landbanked Properties (Eligible Use D: Demolish blighted properties) Eligible Use C only allows acquisition and disposition of foreclosed residential property In a landbank, blighted & foreclosed residential properties can be demolished with Eligible Use D then can continue to be held in a land bank Meets LMMA national objective (identify qualified area), but requires eligible re-use within 10 years of the grantee s closeout agreement (new). At this point, LB properties follow dispo rules U.S. Department of Housing and Urban Development Community Planning and Development 15

Landbank: End Use Options Local government or non-profit will use as a CDBGeligible publi c improvement such as parks, open space or flood control; Owned by a community land trust to create affordable housing; Committed for any other use in the grantee s CDBG program; Designated for affordable housing according to HERA; Included in a redevelopment plan, approved by the local governing body. ***(also can dispose of these properties for any subsequent use di scussed under disposition) U.S. Department of Housing and Urban Development Community Planning and Development 16

Landbank: End Use (cont.) Any NSP assisted properties remaining in the land bank ten years after the date of grant closeout shall: revert entirely to the CDBG program, and must be immediately used to meet a national objective or disposed of in accordance with CDBG use of real property U.S. Department of Housing and Urban Development Community Planning and Development 17

Disposition Disposition can be used in one of the following three scenarios: 1. An all owabl ble expense in an eligible acti tivit ity 2. Both the eligible activity and end use 3. The eligible activity used to dispose of a property for an ineligible end use that meets a national objective U.S. Department of Housing and Urban Development Community Planning and Development 18

Disposition Disposition is an eligible activity 24 CFR 570.201 (b) Disposition Disposition, through sale, lease, donation, or otherwise, of any real property acquired with CDBG funds or its retention for public purposes U.S. Department of Housing and Urban Development Community Planning and Development 19

Disposition iti for Non-Housing Activities iti Examples: Public Facilities Communit ity gardens Community art Youth center Economic Development activities Commercial Development Side lots U.S. Department of Housing and Urban Development Community Planning and Development 20

Disposition iti Disposition can be used in one of the following three scenarios:: 1. An allowable expense in an eligible activity A. Use as a Public Facility (NSP1) B. Special Economic Development ta Activities iti 2. Both the eligible activity and end use 3. The eligible activity used to dispose of a property for an ineligible end use that meets a national objective U.S. Department of Housing and Urban Development Community Planning and Development 21

1. An allowable expense in an eligible activity A. Use as a Public Facility (Eligible Use E) Is an eligible expense in NSP1 and meets the LMMA National Objective. U.S. Department of Housing and Urban Development Community Planning and Development 22

1. An allowable expense in an eligible activity B. Special Economic Development activities (24 CFR 570.203) Eligible Use B and for NSP1 Eligible Use E Activities meet the national objective LMMJ if they benefit LMMI individuals throu gh the creation or retention of jobs Or Activities meet the national objective LMMA, through an economic benefit to the area U.S. Department of Housing and Urban Development Community Planning and Development 23

Special Economic Development activities (cont.) Meeting a National Objective (LMMA) o Be located in a predominantly LMM income neighborhood and serve the LMM income residents Example: A parking lot for a grocery store serving a LMM income neighborhood qualifies as area benefit U.S. Department of Housing and Urban Development Community Planning and Development 24

Special Economic Development activities (cont.) Meeting a National Objective (LMMC) o Involve facilities designed for use predominantly by LMM income persons Example: A for-profit clinic that is designed to serve patients on Medicaid or welfare qualifies as limited clientele U.S. Department of Housing and Urban Development Community Planning and Development 25

Special Economic Development activities (cont.) Meeting a National Objective (LMMJ) o Involve the employment of persons, the majority of whom are LMM income persons Example: A home day care center that creates or retains jobs principally for LMM income persons U.S. Department of Housing and Urban Development Community Planning and Development 26

Disposition Disposition can be used in one of the following three scenarios: 1. An allowable expense in an eligible activity 2. Both the eligible activity and end use A. Useasaside a side lot 3. The eligible activity used to dispose of a property for an ineligible end use that meets a national objective U.S. Department of Housing and Urban Development Community Planning and Development 27

2. Both the end use and eligible activity (side lot) Allowable under Eligible Use B, C, or D NSP1 can also occur under Eligible Use E Vacant or demolished properties can be made available to any adjacent residential property owner Grantees may donate or sell the property to a neighbor in a qualified LMMI area to use as a side lot ***Meets the area benefit national objective not the housing national objective*** U.S. Department of Housing and Urban Development Community Planning and Development 28

2. The end use and eligible activity it (cont.) The acquisition and disposition can meet the national objective (LMMA), but the grantee must determine and document the actual service area benefiting fii from the disposition ii of the property. In NSP, if a grantee has met a national objective by demolishing a property, the disposition of the property as a side lot will continue to meet the LMMA national objective No continuing affordability requirement because no housing units are being produced with NSP funds U.S. Department of Housing and Urban Development Community Planning and Development 29

Disposition Disposition can be used in one of the following three scenarios: 1. An allowable expense in an eligible activity 2. Both the eligible activity and end use 3. The eligible activity for an ineligible end use that meets a national objective U.S. Department of Housing and Urban Development Community Planning and Development 30

Ineligible end use that meets a national objective Dispose of NSP-assisted properties acquired or demolished for ineligible activities, or use such properties for NSP ineligible activities, as long as: 1. the NSP-ineligible activities are not assisted with NSP funds 2. The property was acquired under eligible use B, C, or D (Eligible Use E works for NSP1 only) U.S. Department of Housing and Urban Development Community Planning and Development 31

Ineligible end use that meets a national objective (cont.) 3. The NSP ineligible activity will contribute to neighborhood stabilization in the NSP target area 4. The initial acquisition or demolition and use of the property meets an NSP national objective 5. The planned use of these properties is described in the grantee s grantee Action Plan or substantial amendment U.S. Department of Housing and Urban Development Community Planning and Development 32

Ineligible end use that meets a national objective (cont.) Example: A property is used as a neighborhood playground, but the swing sets and equipment are not paid for with NSP funds U.S. Department of Housing and Urban Development Community Planning and Development 33

Change of Use 570.505505 The use of grant funds must meet a national objective. If a grantee has documented d that t it has met a national objective on a property but can not continue to meet a national objective, the grantee may contact the Field Office to see if the Change of Use provision would apply U.S. Department of Housing and Urban Development Community Planning and Development 34

Change of Use (cont.) Total NSP Funds Invested Initial Use met a National Objective, but Subsequent Use does not Never able to meet a National Objective Greater than $25,000 Less than $25,000 Ri Reimburse NSP for Fair Market Value Ask HUD for permission to remove from program Reimburse NSP for all expended funds on project Reimburse NSP for all expended funds on project U.S. Department of Housing and Urban Development Community Planning and Development 35

Acquisition occurred under Allowable Activities Housing Activity National Objectives LMMH LH25 Examples Multi family or single family housing units Eligible Use B Disposition or Special Econ Development LMMA LMMC LMMJ In home day care Disposition for Ineligible activities Housing Activity LMMA LMMC LMMJ LMMH Donate to a non profit to develop a community garden Multi family or single family housing units LH25 Eligible Use C Disposition LMMA Side Lot Eligible Use D Disposition for Ineligible activities LMMA LMMC LMMJ Donate property to be used for a hair salon Disposition LMMA Side Lot Disposition for Ineligible activities LMMA LMMJ Donate land for local business development Housing Activity LMMH LH25 Multi family or single family housing units Eligible Use E NSP1 Disposition or Special Econ Development Disposition for Ineligible activities LMMA LMMC LMMJ LMMA LMMC LMMJ Build a parking lot for a grocery store Donate to a for profit to develop a shopping mall NSP2 & NSP3 Housing Activity only LMMH LH25 Multi family or single family housing units 36

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