Annual Report: Set Aside Questions

Question:
Are the SHIP set-aside percentage calculations based only on the annual distribution and not on any recaptured funds or interest?

Answer:
No, you must include other revenue sources when calculating set-aside compliance. You calculate compliance with the Homeownership Set-aside and the Construction/Rehab Set-aside based on the sum total of Distribution plus Recaptured Funds. [Keep in mind the 2009 change to the definition of Recaptured Funds, which are now only a repayment that a SHIP jurisdiction receives if it provides SHIP funding for a housing project, but this funding is ultimately not used to assist eligible households.]
Compliance with the Income Set-aside, on the other hand, is calculated based on the total of all sources of SHIP revenue, including carry forward funds and program income.


Question:
The annual report asks for information on Extremely Low Income (ELI) households? Is there a requirement to assist a specific number of ELI applicants? I do not see a space to track ELI on the SHIP tracking spreadsheet.

Answer:
There is not a “Set-Aside” requirement to assist a specific number of ELI applicants. However, ELI households are part of the larger group of Very Low Income (VLI) SHIP recipients, and the Income Set-Aside requires at least 30 percent of all SHIP funds to be dedicated to VLI households. The Coalition has updated the SHIP tracking spreadsheet to include columns for collecting information about ELI households. The free updated version is available for download for the Coalition’s website (http://www.flhousing.org/) and directly from Florida Housing’s online reporting website.


Question:
I have a question about the section of Form 2 that addresses the homeownership and construction/rehabilitation set-asides. The amount of SHIP funds we have expended and committed to compliance with these set-asides is significant. According to the annual report, it even exceeds the amount of the Trust Fund used to calculate set-aside compliance. Do we need to add an explanation as to why this amount is greater than 100% of the Trust Fund?

Answer:
No special explanation is needed. Consider how “Trust Fund” is defined for this question: compliance with these two set-asides is calculated as a percentage of the sum total of the Distribution plus Recaptured Funds. However, several communities receive a significant amount of program income, which they also spend on homeownership and/or construction or rehabilitation activities. Therefore, it is common in many jurisdictions that this percentage exceeds 100% of the Trust Fund. This question illustrates an important lesson about Program Income, which may be expended on activities that do not comply with the homeownership and the construction/rehab set-asides. If your jurisdiction receives a significant amount of program income, you could dedicate it to a rental project, for example.


Question:
I have a Multi-Family Rental Rehabilitation project with a $650,000 SHIP funding agreement on it. SHIP pays $150,000 for acquisition and $500,000 for rehabilitation work. On my tracking spreadsheet and annual report, can I count the entire $650,000 towards compliance with the Construction/Rehab set-aside? Alternatively, should I not count the $150,000 since it pays for acquisition, not construction or repair work?

Answer:
The full $650,000 in this case should be reported towards compliance with the Construction/Rehab set-aside. SHIP funds helped finance a project that included a significant amount of rehabilitation, so the full amount of SHIP assistance counts towards compliance. There is an even more common example of SHIP assistance that follows the same rule. Consider the assistance your jurisdiction provides to help a SHIP household buy an existing house. Your jurisdiction spends only a small amount to repair this house—a majority of SHIP assistance is devoted to down payment and closing cost assistance. Yet the full amount of SHIP assistance counts towards compliance with the Construction/Rehab set-aside, since SHIP helped buy a house that was repaired. Furthermore, in this example it is not even necessary for a portion of SHIP to pay for repairs. Set-aside compliance is interpreted broadly. Compliance is achieved so long as you can document that some source of money paid for repairs, and repairs were completed during the period 12 months prior to through to 12 months after the purchase.


Question:
The Annual Report seems to contradict with the SHIP Statute when it defines what funds to count towards compliance with the homeownership and construction/rehab set-asides. The Statute indicates that only the distribution—not program income or recaptured funds—must comply with these set asides. This is different than the wording on the Annual Report for the Income Set-Aside:
(a) At least 65 percent of the funds made available in each county and eligible municipality from the local housing distribution must be reserved for home ownership for eligible persons.
(b) At least 75 percent of the funds made available in each county and eligible municipality from the local housing distribution must be reserved for construction, rehabilitation, or emergency repair of affordable, eligible housing.
(e)2. At least 30 percent of the funds deposited into the local housing assistance trust fund must be reserved for awards to very-low-income persons

Note that (a) and (b) address the “local housing distribution”. The Distribution is shown to be distinct from Program income and recaptured funds, as seen in this section of 420.9075:
(6) Each county or eligible municipality receiving local housing distribution moneys shall establish and maintain a local housing assistance trust fund. All moneys of a county or an eligible municipality received from its share of the local housing distribution, program income, recaptured funds, and other funds received

Is there a contradiction?

Answer:
The SHIP Statute does address this topic—read further down in the same section of the Statute that you reference. Subsection (k) indicates that program income is exempt from the homeownership and construction/rehab set-aside requirements. Yet this section does not mention recaptured funds, so they are not exempt from the set-aside requirements.

(k) Funds from the local housing distribution not used to meet the criteria established in paragraph (a) or paragraph (b) or not used for the administration of a local housing assistance plan must be used for housing production and finance activities, including, but not limited to, financing the purchase of existing units, providing rental housing, and providing home ownership training to prospective home buyers and owners of homes assisted through the local housing assistance plan. Notwithstanding the provisions of paragraphs (a) and (b), program income as defined in s. 420.9071(24) may also be used to fund activities described in this paragraph.

Furthermore, the SHIP Rule explicitly exempts the expenditure of program income from compliance with these set-asides, and this exemption does not include recaptured funds.

Finally, the SHIP Statute gives Florida Housing authority to clarify SHIP Rules:
420.9072(9) The corporation shall adopt rules necessary to implement ss. 420.907-420.9079.

On the subject of set-aside compliance, Florida Housing has done just that. The annual report—which is authorized by the SHIP Rule—explicitly indicates that recaptured funds must be expended in compliance with the two set-asides.


MORE: There is more to be said about set-aside compliance. Review the following videos on this topic. Each of the videos are about 7 minutes each.
To advance or back-up the video, use your cursor to click on the red dot below the video, hold down and drag it left or right.

Homeownership Set-Aside


Construction Set-Aside


Income Set-Aside