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09-15-81 agendaHOUSING AND REDEVELOPMENT AUTHORITY Office of Executive Director HRA Letter No. 32 Agenda September 15, 1981 Housing and Redevelopment Authority Commissioners City of Richfield Dear Commissioners: Subject: Rehabilitation Program Update and Recommended Changes to the CDBG Procedural Guidelines for Processing Rehabilitation Grants • ~- Attached to this letter are modified procedural guidelines for processing CDBG rehabilitation grants for the period September, 1981 to August, 1982. These guidelines were originally approved. by the HRA on September 15, 1980. The suggested changes, as discussed in this letter allow the HRA to continue to meet the needs of Richfield residents. It also allows Richfield's rehab- ilitation program to function in a manner consistent with programs in other communities which are under the jurisdiction .of Hennepin County. By evaluating and approving the changes at this time, the staff will be able to process requests for grant assistance in a timely manner. Funding for the rehabilitation program comes through Hennepin County and from the federal government and the Minnesota Housing Finance Agency (bIHFA). Hennepin County provides Community Develop- ment Block Grant (CDBG) monies to the city, a portion of which has been designated by the city council to be used for housing rehabil- itation in the past. P~7HFA provides funds through legislative appropriation which are allocated to the county and subsequently to "planning areas" (groups of cities within the county). N1HFA procedures for disbursing money are established by state legislative action with no flexibility in program procedures being allowed. Hennepin County procedures are approved by the county commissioners; and at least for the present, are designed to pro- vide both consistency from community to community and some pro- gram flexibility which recognizes the uniqueness of each city. Thus, our program has procedural guidelines, which are modified slightly to fit the needs of Richfield residents for administering CDBG grants and flood grants (CDBG rehabilitation funds set aside for a special purpose). TTHFA grant guidelines are also part of the program. Since 1975, 139 CDBG grants totaling $276,939 have been processed. Five CDBG flood damage related grants have been appraved totaling $12,430, and 51 AIHFA grants totaling $202,001 have been processed. HRA Letter No. 32 -2- September 15, 1981 The MHFA Home Improvement Grant Program has been discontinued • after this funding year (September, 1980 to August, 1981) due to 1980 legislative cuts_in funding. Guidelines for a new MHFA Rehabilitation Loan program have not yet been published, however, it appears that the new loan program would provide funds to applicants at 3 percent interest with a variable term. The max- imum loan and income amount would be $6,000 with loan payments being based solely on the applicant's ability to pay after a review of their indebtedness has been completed. The loan program would recover and recycle monies that could then be utilized for addi- tional loans. Formal guidelines should be available in November. The attached guidelines for administering CDBG rehabilitation grants define eligible properties, improvements and recipients. The following changes are being recommended: -The maximum grant and maximum income limit should be increased to $7500 The increasing cost of repairs has made a $6,000 grant inadequate for completing necessary home repairs. An average Richfield house, with deferred maintenance and a resident with insufficient house- hold income to initiate repairs, needs work in generally six areas: furnace replacement, electrical system update, plumbing repair/re- placement, roof replacement, insulation and weather proofing, and exterior painting/finishing. • The $6,000 grant has often been insufficient for insuring that required Section 8 minimum housing standards have been met at work completion. If the property is transferred within 7 years of under- taking the work, the homeowner is still required to repay all or a portion of the grant amount. For the HRA to have the ability to assist the elderly and low income family applicants, there is a need to increase the maximum income level to $7,500. Social security benefits, for instance, now raise an elderly person`s income beyond $6,000 unless excessive medical expenses can be used as a deduction. In addition a number of telephone callers seeking assistance have income which is only slightly over $6,000. In this case, funds must be denied and needed house repairs cannot be made. -Applicants will now have to provide a minimum income consid- ered adequate to maintain a household Periodically, applicants declare income that is very minimal and causes doubt as to their ability to cover household expenses. The applicant would then be requested to demonstrate that expenses, such as: mortgage, utilities, food, clothing, insurance, health and transportation are sufficiently covered by the declared income. In cases where an income is found inadequate for maintaining a household, the applicant must demonstrate other financial resources such as: personal gifts, .loans, or other sources not usually understood to be income by the applicant. The process would HRA Letter No. 32 _3_ September 15, 1981 assure that applicants with very low declared income have accur- ately reported all their income sources to the HRA. -The cost of improvements on a property should not exceed 50 percent of the estimated market value of the property. A grant should not be funded if the total cost of repairs exceed 50 percent of the assessor's estimated market value on the property. In addition, if the grant monies are not sufficient to bring the structure up to minimum Section 8 standards, the applicant must demonstrate that additional funds will be sought and used to finance that portion of the work. For example, a property valued at $30,000 would be ineligible for a grant if necessary repairs exceed $15.000. Repairs costing $14,000 would require the applicant to demonstrate availability of funds for $6500 of the repairs in order to be eligible for a $7.,500 grant. All other sections of the guidelines remain as previously adopted. The maximum flood grant amount would remain at $6,000 because no flood grant repairs r!a~Te exceeded that amount. It is recommended that the attached resolution modifying the Hennepin County CDBG rehabilitation grant program guidelines be adopted by the HRA. • Respectfully submitted, _,~ ,. ~ ~y ~. Karl Nollenberger Executive Director cc: Community Development Director Housing and Redevelopment Coordinator KN/eja HRA RESOLUTION NO. • APPROVING MODIFICATIONS TO THE PROCEDURAL GUIDELINES FOR THE RICHFIELD HOME REHABILITATION GRANT PROGRAM WHEREAS, the Housing and Redevelopment Authority of Richfield (HRA) has established the Richfield Home Rehabilitation Grant Program for rehabilitation of single family owner-occupied housing in Richfield; and WHEREAS, The Richfield Home Rehabilitation Grant Program consists of several rehabilitation programs including the Community Development Block Grant (CDBG) program, the Minnesota Housing Finance Agency (MHFA) grant program, and the Flood Grant Program which were first adopted in present form by the HRA on September 15, 1980; and WHEREAS, the HRA in cooperation with the funding agencies has established administrative guidelines for the disbursement of funds from the various rehabilitation programs and these agencies recommend changes from time to time; and WHEREAS, the recommended changes to the guidelines by Hennepin County have been reviewed by the HRA and found to be effective in serving Richfield residents. • NOW, THEREFORE, BE IT RESOLVED BY THE HOUSING AND REDEVELOPMENT AUTHORITY OF RICHFIELD, MINNESOTA: that the Richfield Home Rehabilitation Grant program passed September 15, 1980, has been revised September 15, 1981~and is hereby adopted. Passed by the Housing and Redevelopment Authority of Richfield, Minnesota this 15th day of September, 1981. Thomas E. Harms, Chairman ATTEST: Michael Freeman, Secretary