U.S. Department of Housing and Urban
Development![](media/image1.png){width="0.6354166666666666in"
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Community Planning and Development

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Special Attention of:

**Notice**: CPD 03-05

All Secretary\'s Representatives Issued: March 11, 2003

All State/Area Coordinators Expires: March 11, 2004

CPD Division Directors [\_\_\_\_\_\_\_\_\_\_]{.underline}

All HOME Coordinators Cross References: Supersedes CPD 94-17

All HOME Participating Jurisdictions

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Subject: Guidance on Manufactured Housing under the HOME Program

TABLE OF CONTENTS

I.
PURPOSE................................................................................
2

II\. GENERAL HOME
REQUIREMENTS.............................................. 2

III\. BACKGROUND AND ELIGIBLE
ACTIVITIES.................................. 4

IV\. UTILITY HOOK-UPS AND THE
HOMESITE..................................... 5

V. PERMANENT
FOUNDATIONS...................................................... 6

VI\. PROPERTY
STANDARDS............................................................ 6

VII\. REAL VS. PERSONAL
PROPERTY................................................. 7

VIII\. APPLICABILITY OF THE UNIFORM RELOCATION ACT.................... 7

IX\. PROJECT
IDENTIFICATION.........................................................
8

X. ELIGIBLE HOME ACTIVITY
SCENARIOS....................................... 9

Homeownership.................................................................
9

Rental
Housing..................................................................
12

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CGHP: Distribution: W-3-1

Previous Editions Are Obsolete HUD 21B (3-80)

**I. PURPOSE**

This Notice is a comprehensive revision of the last notice on this
subject, CPD-94-17, and reflects changes made to the HOME regulations
since 1996. It was developed to assist HOME Participating Jurisdictions
(PJs) to identify eligible activities involving manufactured housing.
Although the notice distinguishes between a manufactured home and a
modular home, it only addresses the use of HOME funds for manufactured
housing.

**II. GENERAL HOME REQUIREMENTS**

Manufactured housing is subject to all HOME program requirements that
apply to HOME-assisted housing. All HOME funds must be used for housing
or tenant-based rental assistance for low-income families (i.e.,
families whose income does not exceed 80 percent of the area median
income, as determined by HUD). HOME-assisted housing units are subject
to affordability requirements in §92.252 (affordable rental housing) or
§92.254 (affordable homeownership housing). For rental housing, the
rents are restricted and the housing must be rented to low-income and
very low-income families for a period of five to fifteen years,
depending on the amount of HOME assistance provided to the housing.

**HOME Rents:** Every HOME-assisted rental unit is subject to rent
restrictions designed to ensure that rents are affordable to low-income
families. HOME rents for all jurisdictions are determined by HUD and may
be obtained from the Community Planning and Development (CPD) Division
in each HUD Field Office, or online at:
*www.hud.gov/offices/cpd/affordablehousing/programs/home/limits/rent/index.cfm*.

The maximum HOME rents calculated by HUD include utility costs. If
tenants will pay utility bills, the maximum rent must be adjusted by the
amount of the PJ-determined utility allowance.

There are two HOME rents for projects with 5 or more HOME-assisted
units: high HOME rents and low HOME rents. For projects with 4 or fewer
HOME-assisted units, only the high HOME rent limits are applicable.

**High HOME Rents** are the lesser of the Fair Market Rent (FMR) for
existing housing for comparable units in the area as established by HUD
under 24 CFR 888.111; or

A rent that does not exceed 30 percent of the adjusted income of a
family whose annual income equals 65 percent of the area median income,
as determined by HUD, with adjustments for number of bedrooms in the
unit.

**Low HOME Rents** are established at §92.252(b) for projects containing
five or more HOME-assisted units. At least 20 percent of the
HOME-assisted units in the project must be occupied by very low-income
families (i.e., families whose income does not exceed 50 percent of area
median income) and meet one of the following rent limitations:

\(a\) The rent does not exceed 30 percent of the annual income of a
family whose income equals 50 percent of the area median income, as
determined by HUD, with adjustments for smaller and larger families;
**[or]{.underline}**

\(b\) The rent does not exceed 30 percent of the family's adjusted
income. If the unit receives Federal or State project-based rental
subsidy, and the very-low income family pays as a contribution toward
rent not more than 30 percent of the family's adjusted income, then the
maximum rent (i.e., tenant contribution plus project-based rental
subsidy) is the rent allowable under the Federal or State project-based
rental subsidy.

In addition, §92.253 provides tenant and participant protections. The
term of the lease must be for not less than one year, unless by mutual
agreement by the tenant and owner. The lease cannot include any of the
terms prohibited under §92.253(b) and the tenancy may only be terminated
in accordance with §92.253(c). The owner must have written tenant
selection criteria that meet the criteria in §92.253(d).

For homeownership housing, the family must be low-income and the housing
must be occupied as the family's principal residence. The housing
acquired by homebuyers is subject to recapture or resale restrictions to
ensure the family continues to occupy the housing as its principal
residence for a period of five to fifteen years, depending on the amount
of HOME assistance, or the HOME assistance is recaptured or the housing
sold to another low-income family. The PJ must impose either recapture
or the resale requirements which it establishes consistent with the
standards in §92.254. HOME-assisted homeownership housing must be modest
housing.

For acquisition of housing by a homebuyer with or without rehabilitation
of the housing, the HOME Program requires the housing to:

-   be a single family (1-4) housing unit;

-   have a sales price or an after-rehabilitation value that does not
    exceed 95 percent of the median purchase price for single family
    housing in the area;

-   be purchased by a family that qualifies as low-income, and that will
    occupy the property as its principal residence;

-   remain affordable for a period of five to fifteen years, as
    described at §92.254(a)(4);

-   be subject to either the resale or recapture provisions described at
    §92.254(a)(5).

For rehabilitation not involving acquisition of the housing (i.e.,
rehabilitation of owner-occupied housing):

-   The estimated value of the property, after rehabilitation, must not
    exceed 95 percent of the median purchase price for single family
    housing in the area;

-   The housing must be the principal residence of an owner whose family
    qualifies as a low-income family at the time HOME funds are
    committed to the housing

There are no continuing affordability requirements for owner-occupied
rehabilitation projects.

For a detailed description of the affordability requirements, consult 24
CFR Part 92, the Building HOME manual, and other resources available
online at:
*www.hud.gov/offices/cpd/affordablehousing/programs/home/index.cfm.*

All housing assisted with HOME funds is subject to per-unit HOME subsidy
limits and to subsidy layering review by the PJ. All HOME-assisted
housing must meet the property standards in §92.251.

**III. BACKGROUND AND** **ELIGIBLE ACTIVITIES**

The HOME Program offers broad flexibility in the types of single family
(one to four unit) housing that may be assisted. Manufactured homes and
manufactured housing lots (also called "homesites" in this Notice)
qualify as housing under the HOME Program.

The Manufactured Home Construction and Safety Standards (MHCSS)
established by HUD (24 CFR Part 3280) define a manufactured home in
§3280.2 to be \"a structure, transportable in one or more sections
which, in the traveling mode, is eight body feet or more in width or
forty body feet or more in length, or, when erected on site, is three
hundred twenty or more square feet, and which is built on a permanent
chassis and designed to be used as a dwelling with or without a
permanent foundation when connected to the required utilities, and
includes the plumbing, heating, air-conditioning, and electrical systems
contained therein.\"

**A** **mobile home** **is** **a manufactured home.** \"Mobile home\"
and \"trailer\" were commonly used terms before 1976 when Congress
adopted legislation using the term \"manufactured home\" to take their
place. This Notice uses the term manufactured home to refer to all types
of non-motorized manufactured housing units (thus excluding recreational
vehicles) that meet the definition in 24 CFR 3280.2.

A manufactured home is built in sections in a factory, possesses a
permanent chassis (defined at 24 CFR 3280.902 (a)), and must be designed
and manufactured in compliance with the MHCSS. A modular home is built
in sections in a factory to meet state, local or regional building
codes. Once assembled, the modular unit becomes permanently fixed to one
site. **Because this Notice pertains to manufactured homes, the
discussions and scenarios that follow exclude modular homes, which are
treated the same as site-built housing** **for the purposes of the HOME
Program.**

HOME funds can be used in a number of ways to assist manufactured homes.
The manufactured housing may be rental or homeownership housing. The
eligible activities applicable to manufactured homes are set forth in
the HOME regulations at 24 CFR 92.205(a)(4) and 92.2 (definition of
"reconstruction"). HOME funds can be used to:

-   acquire manufactured housing;

-   acquire land for a homesite for manufactured housing;

-   rehabilitate manufactured housing;

-   replace an existing substandard manufactured home with a new or
    standard manufactured home; and

-   provide tenant-based rental assistance to tenants to rent
    manufactured housing or to rent the homesite on which a family's
    manufactured home is located.

Because manufactured homes are constructed at the factory and
transported to the site, new construction is not an applicable activity
for manufactured housing projects. Such activities are designated as
acquisition projects.

**Allocation of Costs:** HOME funds can be used to assist some or all of
the housing units in a multi-unit project (§92.205(d)). HOME funds may
only be used to pay for the actual eligible costs of the HOME-assisted
housing. If the housing units are comparable in terms of size, amenities
and number of bedrooms and the development costs are the same, HOME
funds can pay, within the maximum per-unit subsidy limits, a percentage
of the total HOME eligible costs equal to the proportion of
HOME-assisted to total units. When units are not comparable, the PJ must
allocate the HOME costs on a unit-by-unit basis, allocating actual costs
for each unit to the HOME Program. To allocate these costs, the PJ must
designate the HOME-assisted units, develop a pro forma for the assisted
units, and track the costs for each unit. Common costs attributable to
HOME-assisted units are determined by calculating the total square feet
in HOME units as a percentage of the total square feet in the project.
HOME funds can pay for that percentage of common costs.

**I** **V. UTILITY HOOK-UPS AND** **THE HOMESITE**

Utility hook-ups are on-site, permanent, public or private utility
sources (for example, electric, water, sewer/septic, natural gas) for
use by individual manufactured home units. The HOME regulation at
§92.205(a)(4) requires manufactured homes assisted with HOME funds
(except for existing, owner-occupied manufactured homes that are
rehabilitated with HOME funds) to be connected to permanent utility
hookups.

The HOME regulations also require the manufactured home to be located on
land that is owned by the manufactured home owner or on land for which
the manufactured home owner has a lease for a period at least equal to
the applicable period of affordability.

**V. PERMANENT FOUNDATIONS**

The manufactured home regulations (24 CFR 3282.12) define a site-built
permanent foundation as \"a system of supports, including piers, either
partially or entirely below grade,\" and that meets the criteria as
further defined in §3282.12. HUD Handbook 4930.3G, *Permanent
Foundations Guide for Manufactured Housing*, further defines a permanent
foundation as one that \"must be constructed of durable materials at the
site, with attachment points to receive a manufactured home.\"

The HOME final rule published on September 16, 1996, eliminated the
requirement that HOME-assisted manufactured housing units rest upon a
permanent foundation. This change was based on comments citing the
significant additional cost of providing a permanent foundation as an
obstacle to providing affordable housing, primarily in rural areas. The
regulation at §92.251(a)(4) defers to State and local standards
regarding permanent foundations. However, HUD strongly encourages HOME
PJs to construct or improve permanent foundations when assisting
manufactured housing and recommends PJs follow the guidance in HUD
Handbook 4930.3G, *Permanent Foundations Guide for Manufactured Housing*
available online at:
*www.huduser.org/publications/destech/permfound.html*.

The foundation type may affect the ability of a homebuyer to obtain FHA
mortgage insurance. For example, to receive FHA Title II mortgage
insurance, manufactured homes are *required* to be anchored to a
permanent foundation. Other requirements for FHA mortgage insurance are
found in HUD Handbook 4145.1, Revision 2, *Architectural Processing and
Inspections for Home Mortgage Insurance*, paragraph 3-4.

**VI. PROPERTY STANDARDS**

All manufactured housing assisted with HOME funds must meet the property
standards at §92.251(a)(4), which states that the construction of all
manufactured housing must meet the Manufactured Home Construction and
Safety Standards. These standards pre-empt State and local codes
covering the same aspects of performance for such housing. PJs providing
HOME assistance to install manufactured housing units must comply with
applicable State and local laws or codes. In the absence of such laws or
codes, the PJ must comply with the manufacturer's written instructions
for installation of manufactured housing.

In addition, manufactured housing that is rehabilitated using HOME funds
must meet the requirements set forth in §92.251(a)(1). Each PJ must
develop written rehabilitation standards that establish the required
methods and materials for the rehabilitation work that will bring the
substandard housing into compliance with the property standard. Further
guidance on written rehabilitation standards and property standards can
be found at:
*www.hud.gov/offices/cpd/affordablehousing/library/homefires/volumes/vol13no1.cfm*.

Existing manufactured housing that is acquired with HOME funds must meet
the property standards at §92.251(a)(2).

**VII. REAL VS. PERSONAL PROPERTY**

Section 92.254(c) of the HOME regulations requires that affordable
homeownership units assisted with HOME funds meet the definition of
homeownership at §92.2, which requires "ownership in a fee simple title
or a 99-year leasehold interest in a one- to four-unit dwelling or in a
condominium unit, or equivalent form of ownership approved by HUD. For
purposes of housing located on trust or restricted Indian lands,
homeownership includes leases of 50 years."

When a manufactured home is purchased, the buyer receives title (like
title to a motor vehicle). Generally, once the manufactured home is set
on a permanent foundation, it is treated as real property and ownership
then is evidenced through title to the real property. However, in some
states, manufactured housing is considered to be personal property,
rather than real property. Manufactured housing meets the HOME Program
definition of homeownership through fee simple title to the real
property or title to the manufactured home.

**VIII. APPLICABILITY OF THE UNIFORM RELOCATION ACT**

The regulations for the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (URA) at 49 CFR Part 24, Subpart F
expressly deal with manufactured homes. PJs should consider these
regulations when assessing potential HOME projects. Several important
areas of consideration include:

1\. [Displacement]{.underline}. Displacement as a result of the
acquisition, rehabilitation or demolition of a manufactured home for a
HOME-assisted project is subject to the URA and HUD Handbook 1378,
*Tenant Assistance, Relocation and Real Property Acquisition*. See
especially Paragraph 3-8 of Handbook 1378. The URA relocation provisions
apply whether or not the manufactured home is classified as real or
personal property under State law.

2\. [Cost Effective Acquisition \-- Undesignated Sites]{.underline}.
Paragraph 5a of HUD Handbook 1378 discusses acquisition programs that do
not involve pre-selected sites. To comply with the URA *and* carry out
cost-effective programs, HUD recommends that, where possible, the PJ
limit acquisition under such programs (e.g., a low-income homebuyer
program) to arm\'s-length, voluntary transactions where, *before the
seller executes the final contract of sale*, the seller is informed of:

-   the fact that the property will not be condemned if negotiations
    fail to result in an amicable agreement, and,

-   the estimated fair market value of the property. (This does not
    preclude the buyer from negotiating a sale at a lower price.)

If these timely disclosures are made, the purchase is exempt from the
real property acquisition requirements of the URA and a seller-occupant
of the property is not eligible for URA relocation assistance. To
prevent misunderstanding, the purchase offer and the contract of sale
should contain an acknowledgment that the sale is not made under the
threat of taking by eminent domain and the seller will not receive any
relocation assistance under the URA. However, any tenant-occupant
displaced by acquisition, rehabilitation or demolition for a
HUD-assisted program is covered by the URA relocation requirements and
is entitled to relocation assistance to help rent (or buy) and move to a
comparable replacement dwelling.

3 [Coordination with CPD Relocation/Realty Staff]{.underline}.
Acquisition and relocation issues are often highly technical. This is
especially the case with manufactured homes where the owner of the unit
may not own the site and a displaced occupant may buy a replacement unit
but rent the site, or vice-versa. Accordingly, program staff are urged
to consult with CPD relocation/realty staff and to encourage
participating jurisdictions to consult with such staff about URA issues
that may arise in connection with an assisted manufactured home program.
Discussion during the early planning stages can prevent unnecessary
expense. PJs are encouraged to refer to HUD Handbook 1378, *Tenant
Assistance, Relocation and Real Property Acquisition,* when assessing
potential HOME projects and their relocation assistance implications.

**IX.** **PROJECT IDENTIFICATION**

The HOME Program provides flexibility for providing assistance for
manufactured housing and the manufactured housing homesite \-- both
homeownership and rental. Because the homesite is not always owned by
the owner of the manufactured home, confusion may arise over
identification of project type (i.e., rental, existing homeowner,
homebuyer) and occupancy requirements. Here are some basic guidelines:

-   When HOME assistance is used only with respect to the homesite
    (i.e., acquisition, site improvements, rehabilitation of the
    homesite), whether for rental or ownership, and the manufactured
    homes are owned by the residents, the project is designated as an
    **existing homeowner** project.

-   When HOME assistance is used to rehabilitate an existing
    owner-occupied manufactured home or to replace a substandard
    manufactured home, the project is designated as an **existing
    homeowner** (homeowner rehabilitation) project.

-   When HOME assistance is used to acquire a manufactured home and land
    for homeownership, the project is designated as a **homebuyer**
    project.

-   When HOME assistance is used for projects in which the manufactured
    housing is offered for rent, the project should be reported as a
    **rental** project.

-   When HOME assistance is used to acquire a new or existing
    manufactured home for homeownership (but not to replace an existing
    unit) that is set on a rented homesite, the project should be
    reported as a **homebuyer** project.

It may be possible to have more than one type of project on one site.
That will be the case if a PJ uses HOME funds to assist the development
of a manufactured housing community and to assist the acquisition of
manufactured housing for rental to be placed on some of the homesites so
that some of the homesites will have the rental manufactured housing and
some of the homesites will be rented by the homeowners of manufactured
housing. In that case, the PJ must set up two projects in the Integrated
Disbursement and Information System (IDIS), a rental project for the
rental units and an existing homeowner project for the existing
homeowners whose manufactured housing will occupy the homesites. As
discussed above, affordability requirements are differentiated between
renters and homeowners.

One family may also be represented under two different projects. If a
family is assisted to acquire a manufactured home and the manufactured
home is then placed on a rental lot which was also assisted with HOME
funds, the family would be associated with both a homebuyer project and
assistance to existing homeowners.

**X. ELIGIBLE HOME ACTIVITY SCENARIOS**

**A. Assisting Existing Homeowners and Homebuyers:** **HOME Affordable
Housing Requirements (§92.254)**

HOME funds can be used for owner-occupied housing rehabilitation as well
as homebuyer assistance.

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1\. [Existing Homeowner Scenarios]{.underline}

Rehabilitation of owner-occupied manufactured housing is an eligible
activity under the HOME Program. HOME funds can pay for rehabilitation
of the manufactured housing, the construction or rehabilitation of a
permanent foundation, acquisition of land for the permanent placement of
the manufactured housing, and costs associated with moving the
manufactured housing.

***QUESTION: Can the PJ fund this project with*** ***HOME*** ***dollars?
If so, what requirements apply?***

***ANSWER:*** A PJ may use HOME funds for this project, if the
manufactured home meets property standards in §92.251(a)(1) after
rehabilitation is complete. While manufactured housing units are not
required to rest on permanent foundations to receive HOME assistance,
the Department encourages the use of HOME funds to construct permanent
foundations for manufactured units acquired, rehabilitated, or otherwise
assisted with HOME.

***QUESTION: If the*** ***Joneses*** ***[rent]{.underline} their***
***homesite, can the PJ*** ***use*** ***HOME funds*** ***for this
project?***

***ANSWER:*** A PJ may use HOME funds for this project provided that all
of the previously mentioned requirements are met. This project is a
homeowner rehabilitation project.

***QUESTION: What if rehabilitation of the manufactured housing unit is
not cost-effective (i.e., rehabilitation costs more than
replacement)?***

If replacement of the Joneses' unit would be more cost-effective, the PJ
may assist the Joneses in acquiring a new manufactured home. This
activity is reconstruction and the project is classified as a homeowner
rehabilitation project. Homeowner rehabilitation projects do not have
any recapture or resale requirements.

The definition of reconstruction includes the replacement of an existing
substandard manufactured housing unit with a new or standard
manufactured housing unit. The decision of replacement versus
rehabilitation is left to the PJ\'s discretion based upon the condition
of the manufactured home and the feasibility of rehabilitation.

The HOME regulation allows the \"reconstructed\" unit to be placed
anywhere on the existing lot. This flexibility allows PJs to meet
current zoning requirements that might affect the reconstruction site.
Thus, when a manufactured home is acquired to replace a substandard
manufactured housing unit, it may be placed anywhere on the existing
lot.

When a HOME project involves the replacement (via acquisition) of a
manufactured housing unit, PJs should be cognizant of the \"trade-in\"
or \"scrap\" value, if any, of the unit being replaced when determining
the amount of HOME assistance being provided. For example, if the
manufactured housing unit owner receives payment for \"trade-in\" of the
unit, that amount should be used toward replacement costs and subtracted
from the HOME assistance provided.

***QUESTION: If the*** ***Joneses' manufactured housing unit was located
on a rented*** ***homesite, could the PJ assist them to purchase the
land? Would this be homeowner rehabilitation or homebuyer assistance?***

***ANSWER:*** The land acquisition is eligible for HOME assistance. A PJ
may assist an existing homeowner to acquire the land on which the
manufactured housing sits or land to which the manufactured housing can
be relocated. Because the family owns the manufactured housing, the
project is a homeowner rehabilitation project. The HOME regulations do
not impose resale or recapture requirements or ongoing affordability
requirements on homeowner rehabilitation projects.

Many manufactured housing land-lease communities contain a mix of
families with incomes ranging above and below 80 percent of area median
income. Accordingly, it is necessary to examine how HOME funds can be
used in such situations. For example:

***QUESTION: Can a PJ assist this association? If so, what requirements
apply?***

***ANSWER:*** A PJ may assist this association to acquire the land and
undertake site improvements of the homesites for low-income families
(and a pro rata share of any common areas). Only the actual HOME
eligible costs of the homesites for low-income families may be charged
to the HOME Program. In the situation described above where 50 percent
of the families are low-income, HOME funds could assist 50 percent of
the total acquisition and improvement costs, if the lot sizes are the
same. The HOME project would assist the 50 low-income families, and pay
50 percent of the acquisition and improvement costs (if the lot sizes
were the same). Because the HOME-assisted homesites would be sold to
low-income families that own their manufactured housing units, no resale
or recapture requirements would apply. This project would be a homeowner
rehabilitation project. The sale price of the homesites should be
negotiated between the PJ and the association based on the amount and
form of HOME assistance provided.

2\. [Low-Income Homebuyer Scenario]{.underline}

Manufactured homes provide affordable homeownership opportunities to
low-income families who wish to buy a home. Costs associated with
acquisition of the manufactured housing unit and the site, and site
improvements may be paid as a low-income homebuyer project, provided
that all requirements in §92.254 are met, including the resale or
recapture requirements.

Mr. and Mrs. Smith qualify as a low-income family. They wish to buy a
new manufactured home for use as their principal residence. The Smiths
have found a parcel of land that can accommodate the home with available
utility hook-ups. The land is vacant and does not have a permanent
foundation. The PJ has determined that the cost of the manufactured
home, land, permanent foundation, and improvements will not exceed the
maximum housing limit established at §92.254(a)(2)(i).

3

***QUESTION:** **Can the PJ use HOME funds to assist the Smiths? If so,
what requirements apply?***

***ANSWER:*** HOME funds may be used to buy the manufactured home,
acquire the parcel of land, pay for the necessary site improvements,
provide a permanent foundation, and pay all necessary costs to secure
the manufactured housing to the foundation and hook-up the utilities. In
accepting the HOME assistance, the Smiths would be required to occupy
the home as their principal residence and comply with the PJ's resale or
recapture requirements.

Low-income families may enter into lease-purchase agreements (that is, a
lease with an option to buy the unit and land) with a PJ, non-profit or
for-profit owner, even though the use of HOME funds does not immediately
result in homeownership. The HOME regulations require the purchase to
occur within 36 months of entering into the lease-purchase agreement.
The homebuyer must qualify as low-income at the time the lease-purchase
agreement is signed.

If the potential homebuyer does not purchase the housing, it may be sold
to another eligible homebuyer. A subsequent lease-purchase agreement
will not be permitted for this same housing, unless the purchase can be
completed within the original 36-month period. If no eligible homebuyer
is found, the housing must be made available for rent in accordance with
all HOME rental requirements.

**B. Rental Housing:** **HOME Affordable Housing** **Requirements
(§92.252)**

Manufactured housing can be used to increase rental opportunities for
low-income families. PJs may use HOME funds to undertake activities such
as land acquisition, acquisition of the manufactured housing, site
improvements and/or rehabilitation, rehabilitation of the manufactured
housing, and demolition associated with manufactured housing rental
projects. If both the homesite and manufactured housing unit are under
common ownership, the project would be treated the same as any other
HOME rental project. A manufactured housing rental project will qualify
as affordable housing provided that it meets the requirements of
§92.252.

[]{.mark}

1 . [Rental Housing Scenarios]{.underline}

***QUESTION: Can a PJ*** ***use HOME funds*** ***for this project? If
so, what requirements***

***apply?***

***ANSWER:*** The costs of acquiring the land and manufactured housing,
demolishing the structure, making site improvements, constructing
permanent foundations, and hooking up utilities are eligible HOME costs,
in an amount that does not exceed the maximum per-unit subsidy limit.
The PJ may use funds for the non-profit\'s project provided that all the
manufactured housing meets the rent limitations contained at §92.252
(a)-(c); will remain affordable for a period of time based on the amount
of HOME funds used per unit (§92.252(e)); is rented to families that
meet the income requirements; and meets the property standards in
§92.251.

2\. [Homesite-only Rentals]{.underline}

Questions often arise in homesite-only rental situations concerning the
methodology used for determining the rent for the homesite. Where the PJ
is providing rental assistance, HUD recommends, but does not require,
PJs to use a standard that has been developed through HUD's Section 8
Program. The Department has established the homesite manufactured home
payment standard at 40 percent of the 2-bedroom FMR. For manufactured
home owners who rent their homesite, utility costs are included as part
of the rent calculation. The homesite rental/utility costs are normally
set as a percentage of the FMR, but exceptions are issued for local
areas that supply data requesting higher homesite rentals.

Rents based on 40 percent of the FMR are a reasonable to slightly high
for many areas. This figure is traditionally too low for rural areas
with significant heating degree-days where liquid propane gas is used
for heating and where the more accurate percentage may be as high as 60
or 70 percent of the FMR. PJs providing homesite-only rental assistance
are strongly encouraged to adhere to this standard, where appropriate.
PJs that establish rent limits substantially higher than the HUD
standard must document the basis for this standard in their files.

HOME funds can be used to assist with the acquisition, development, or
rehabilitation of a manufactured home land-lease community where the
homesites are rented to low-income owner-occupants of manufactured
housing. Note that because a homesite-only project is considered
assistance to existing homeowner housing, CHDO set-aside funds may not
be used.

***QUESTION:** **Can HOME funds be used to assist this developer? If so,
what requirements apply?***

***ANSWER:*** HOME funds can be used to pay for the costs of acquisition
and improvements to the homesites occupied by low-income homeowners. The
costs that may be charged to the HOME program may be determined as a
percentage of the cost of land and improvements equal to that proportion
of the total number of homesites occupied by low-income families (i.e.,
eligible HOME units) provided the homesites are the same size.

For each HOME-assisted homesite, the owner of a manufactured unit must
qualify as low-income; the unit must be connected to utility hook-ups;
and the value of the unit must not exceed the maximum property value
limit in §92.254(a)(2)(i). The developer must sign a written agreement
to ensure that the assisted homesites will be rented to low-income
families for a reasonable period of time (e.g., the affordability period
under §92.254(a)(4)), based on the amount of HOME assistance. Rents
charged during this period should be negotiated between the PJ and the
developer based on the amount and form of HOME assistance provided (in
no case should the negotiated rent exceed the HOME rent limits).

This Notice has reviewed the basic requirements of the HOME Program and
the various ways funds can be used to support manufactured housing.
Additional questions should be directed to the Community Planning and
Development Division of the appropriate HUD Field Office.