![](media/image1.wmf){width="0.5986111111111111in"
height="0.5965277777777778in"} **U.S. Department of Housing and Urban
Development**

> **Office of Public and Indian Housing**

Notice **NOTICE PIH-2005-19 (TDHEs)**

Special Attention of:

Administrators, Offices of Native

American Programs; Tribal Government Issued: June 21, 2005

Leaders; Tribally Designated Housing

Entities Expires: June 30, 2006

SUBJECT: Limiting Housing to Indian Families or Tribal Members when
using Indian

> Housing Block Grant (IHBG) Funds

**1.** **Purpose**

This Notice explains when tribes or tribally designated housing entities
(TDHEs) (referred to in this Notice as 'Tribe') may limit housing
assistance to Indian families or tribal members. This notice outlines
how the requirements are different if only IHBG funds are used or if
IHBG funds are leveraged or combined with funds from other sources.

**2.** **Background**

The IHBG program, created by the Native American Housing Assistance and
Self-Determination Act (NAHASDA), authorizes annual formula block grants
to Indian tribes for affordable housing activities, to primarily benefit
low-income Indian families. Section 201 (b) (5) of NAHASDA permits a
preference to serve tribal members.

In general, housing recipients of federal funds (such as housing
authorities) may not discriminate against program beneficiaries (renters
or homebuyers) on the bases of race, color, or national origin. In
addition, other laws prevent most housing providers from discriminating
against renters or homebuyers based on religion, sex, familial status,
or disability.

However, Section 201 (b) (6) of NAHASDA states that Title VI of the
Civil Rights Act of 1964, and the Fair Housing Act "shall not apply to
actions by federally recognized tribes and the tribally designated
housing entities of those tribes under this Act." This provision also
applies to recipients established under the Alaska Native Claims
Settlement Act and to State-recognized tribes that receive grants under
NAHASDA.

**3.** **Definitions**

*Affordable housing:* Housing that meets the requirements of Title II of
NAHASDA, including housing units developed under the United States
Housing Act of 1937, housing units developed under NAHASDA, and other
housing units that are not assisted under NAHASDA, but which meet the
requirements of Title II of NAHASDA.

*Combined Funds:* For purpose of this notice, funds are considered
combined when IHBG funds are used with other funds for both eligible
affordable housing for low-income Indian families and other housing that
may not meet the requirements of NAHASDA.

*Fair Housing Act:* Title VIII of the Civil Rights Act of 1968, as
amended, is also called the Fair Housing Act. It prohibits
discrimination in the sale, rental, and financing of dwellings, and in
other housing-related transactions, based on race, color, national
origin, religion, sex, familial status, or disability.

*Indian Area:* The area within which an Indian tribe or its TDHE, as
authorized by one or more Indian tribes, provides assistance under
NAHASDA for affordable housing as stated in its Indian Housing Plan
(IHP).

*Leveraging Funds:* Leveraged funds, in the context of section 102(c)(3)
of NAHASDA, are additional resources used with IHBG funds for affordable
housing activities under NAHASDA for low-income Indian families.

*Low-income family:* A family whose income does not exceed 80 percent of
the median income for the area, as determined by the Secretary with
adjustments for smaller and larger families, except that the Secretary
may, for purposes of this paragraph, establish income ceilings higher or
lower than 80 percent of the median for the area on the basis of the
findings of the Secretary or the agency that such variations are
necessary because of prevailing levels of construction costs or
unusually high or low family incomes.

*NAHASDA:* The Native American Housing Assistance and Self-Determination
Act of 1996 (25 U.S.C. 4101 *et seq.*), as amended.

*Sovereignty/civil jurisdiction:* Authority to exercise governmental
powers within a limited area.

*Title VI of the Civil Rights Act of 1964 (Title VI):* This law
prohibits discrimination against beneficiaries of federally assisted
programs based on race, color, or national origin (42 U.S.C. 2000 (d)).

**4. Summary**

In summary,

**Under NAHASDA, IHBG recipients do not violate Title VI of the Civil
Rights Act or the Fair Housing Act when limiting assistance to
low-income Indian families or providing preference to tribal members
if:**

-   the affordable housing project is on land where the tribe has
    sovereignty/civil jurisdiction regardless of any other funding that
    may have been used; or,

-   the affordable housing project is funded solely with IHBG funds and
    is located on land subject to State or local law.

However,

> IF the tribe uses NAHASDA funds for a housing activity **in
> combination with other funds,**
>
> AND, the project is on land where the tribe has **no sovereignty/civil
> jurisdiction,**
>
> AND, **some** of the housing units in the project **do not** meet
> NAHASDA affordable housing requirements,

THEN, the tribe can only designate a proportionate percentage of the
housing units in the project (the NAHASDA-assisted housing units) for
Indian families or tribal members only.

> If the funds used with NAHASDA are federal program funds that have
> program-specific nondiscrimination requirements in the program statute
> (such as HOME funds and CDBG funds), then these other federal funds
> must be **combined** with NAHASDA and only the NAHASDA-assisted
> housing units in the project can be limited to Indian families or
> tribal members.

**5.** **Role of the IHBG Recipient**

The tribe and/or its TDHE must comply with NAHASDA requirements and all
other applicable federal requirements, whether its housing programs are
funded solely with IHBG funds under NAHASDA, or with IHBG funds and
other funding sources.

**6.** **Tribal Sovereignty**

There exists a unique relationship between the United States and Indian
tribes. Indian tribes have sovereignty and exercise jurisdiction over
their territory and their members.

**On lands where an Indian tribe exercises sovereignty, the tribe can
limit housing to Indian families or tribal members regardless of the
funds used to construct or otherwise assist the housing.**

HUD recognizes tribal sovereignty/civil jurisdiction over tribal trust
land within a reservation, other tribal trust land, individual trust or
allotted land, and fee land reacquired by the tribe within the
boundaries of the reservation.

**7.** **Location of Housing Funded with IHBG Funds under NAHASDA**

NAHASDA authorizes affordable housing activities in Indian areas.
Assistance is not limited to reservations. Essentially, an "Indian area"
under NAHASDA is anywhere a tribe undertakes affordable housing
activities.

**8.** **Ownership of Housing Assisted under NAHASDA**

NAHASDA encourages the involvement of the private sector in affordable
housing activities. NAHASDA's requirement to primarily limit
beneficiaries to low-income Indian families applies to all housing
assisted with IHBG funds, regardless of who or what entity owns the
housing.

**9.** **Leveraged Funds**

NAHASDA encourages using IHBG funding with other funds for affordable
housing activities. When IHBG funds and other funds are used for
affordable housing in accordance with NAHASDA requirements, the funds
are said to be "leveraged."

When housing is located on land where the tribe has sovereignty/civil
jurisdiction, and the housing is funded with IHBG and other federal
funds (such as HOME and USDA Rural Housing Development funds), the
housing can be limited to Indian families or tribal members without
violating nondiscrimination requirements.

However, when housing is located on land where the tribe **does not**
have sovereignty/ civil jurisdiction, and such housing is funded with
IHBG and other federal funds, tribes are limited in their authority to
designate such housing as Indian-only, if the other federal funds have
program-specific nondiscrimination requirements in their program
statute, i.e., CDBG and HOME programs.

If this is the case, the funds are combined funds and the tribe must
determine which units are funded by each program, and can only designate
the NAHASDA-assisted units as restricted to Indian families or tribal
members. (If the units are similar in size and features, the number of
units funded by each source can be determined on a pro-rata basis.
Pro-rating examples can be found below.)

**10. Combined Funds**

If other funds are combined with IHBG funds but are not used for
eligible affordable housing for low-income Indian families, the tribe
must determine how it will meet the requirements of NAHASDA to serve
only Indian families and also meet the requirements of the other
programs which may require that all families must be served. The housing
units funded under each program must be determined. If the housing units
are located on land where the tribe has sovereignty/civil jurisdiction,
there is no need to be concerned about different program requirements
because the housing may be limited to Indian families or tribal members
and there is no violation of Title VI of the Civil Rights Act or the
Fair Housing Act.

**11. Leveraged or Combined Funds**

If the housing is located on land where the tribe does not have
sovereignty/jurisdiction, and the tribe will use other funds for the
project, it must determine if the other funds will be leveraged funds or
combined funds. However, because the HOME and CDBG program statutes have
program-specific nondiscrimination requirements, the HOME and CDBG funds
must be combined funds. In all other cases -- i.e., where the federal
funds do not have statutory program-specific nondiscrimination
requirements, but are instead subject to Title VI and the Fair Housing
Act -- the tribe and the source of the other funds must determine if the
funds will be combined or leveraged. (Private funds for Low Income
Housing Tax Credit projects and the credits themselves are not federal
funds and are not subject to Title VI.)

This decision will generally be based on the goals of the housing. For
example, where due to great need, all housing units in a rental project
will be occupied by low-income Indian families in accordance with
NAHASDA requirements, the funds will be leveraged. Or where the goal is
to not isolate Indian families from non-Indian families and the rental
project will be occupied by both low-income Indian and non-Indian
families, the funds will be combined. Where the goal is to integrate
families of different incomes and the housing in a rental project will
be occupied by both low-income Indian families and families who are not
low income (mixed income project), the funds will be combined. Of
course, the use of the other funds will be subject to whatever
requirements apply to the funds, but at minimum, the housing will be
subject to the Fair Housing Act.

**12.** **Allocating Costs and Identifying NAHASDA-Assisted Units in
Rental and**

**Homeownership Projects.**

Following are instructions on how to use IHBG funds, in combination with
other funds, to develop housing projects that meet the requirements of
each program. The examples show how to determine the minimum number of
NAHASDA-assisted units in a project and how to allocate costs to the
IHBG program. The tribe can start with either the number of housing
units it wants to assist with IHBG funds (and determine the total amount
of IHBG funds for the housing) or start with the total amount of IHBG
for the housing (and determine the minimum number of NAHASDA-assisted
units).

The IHBG program distinguishes between those units in a project that
have been assisted with IHBG funds and those that have not.

IHBG funds may only be expended for units that are or will be occupied
by low-income Indian families. Therefore, IHBG funds may be used in a
mixed-funding project to assist the units in the project that will be
occupied by low-income Indian families.

A. "Fixed" and "Floating" NAHASDA Designations for Housing Units

> A tribe must determine the minimum number of units that will be
> designated NAHASDA-assisted. In general, this designation must be
> based on the actual NAHASDA investment in a unit or project. A tribe
> may choose to require that a greater number of units be designated as
> NAHASDA-assisted to maximize the number of affordable units in the
> jurisdiction over time. A tribe may, on a project-by-project basis,
> choose to use either a fixed or a floating NAHASDA-assisted
> designation to track housing units.
>
> A "fixed designation" means that the tribe determines from the outset
> which housing units are NAHASDA-assisted. For instance, in a 10-unit
> housing project, if the tribe designates units 1, 2, 3, 4, and 5 as
> the NAHASDA-assisted units, these specific units (1 through 5) remain
> NAHASDA-assisted units throughout the useful life and must be occupied
> by NAHASDA income-eligible families.
>
> A "floating designation" gives a tribe the flexibility to maintain a
> certain number of NAHASDA-assisted units throughout the useful life,
> although the specific units so designated may vary with availability.
> For example, the tribe could designate five units as NAHASDA-assisted
> units, and at any given point in time throughout the useful life, five
> units must have the NAHASDA-assisted designation, and be occupied by
> NAHASDA income-eligible families. Substituted units must be comparable
> in size and features to the originally designated units.
>
> A system of floating units is advantageous when a tribe wants to
> ensure that assisted units are indistinguishable from and
> interchangeable with market-rate units. In addition, the system of
> floating units provides consistency with the system required in
> projects developed with Low Income Housing Tax Credits.
>
> B. NAHASDA Project Rules
>
> NAHASDA projects are subject to rent/homebuyer payment and occupancy
> requirements. A recipient shall not charge a low-income tenant or
> homebuyer rent/homebuyer payments that exceed 30 percent of the
> adjusted income of the family.
>
> Noncompliance with the project income-targeting requirement is
> permissible when the non-compliance is caused by an increase in a
> family's income. For example, in rental housing, if a unit is made
> available for occupancy by a family that is a low-income family, and
> the tribe's policies and the tenant's lease require the family to move
> out if they are no longer low-income, then the family would have to
> move. Otherwise, the family would be permitted to stay in the unit. In
> a lease-purchase agreement for existing housing or housing to be
> constructed, if the family is low-income at the time the agreement is
> entered into and the family's income increases, the family may stay in
> the unit.
>
> When a project has floating NAHASDA-assisted designations, the next
> comparable unit that becomes available in the project must be provided
> to a NAHASDA income-eligible family. That unit then becomes the
> NAHASDA-assisted unit, and the rent/homebuyer payment must be
> structured accordingly. When the income of a family in a
> NAHASDA-assisted unit rises above 80 percent of the area median, that
> family may be required to pay more than 30 percent of its income for
> the monthly payment, except that, in projects where NAHASDA units
> float, the family's monthly payment may not exceed the fair market
> rent or the value of the unit.

C. Allocating costs to NAHASDA-Assisted Units

> IHBG funds may only pay actual costs of NAHASDA-assisted housing.
>
> If the units in a project are comparable (in terms of size, features,
> and number of bedrooms), then the actual costs can be determined by
> pro-rating total (NAHASDA-eligible) development costs. IHBG funds can
> only pay the pro-rated share of the NAHASDA-assisted units.
>
> When units are not comparable, the tribe must allocate the NAHASDA
> costs on a unit-by-unit basis, charging only actual costs to the IHBG
> program, as described below. Because units in projects with the
> floating NAHASDA designation must be comparable, a tribe should always
> pro-rate costs in these projects.
>
> When units are generally comparable but vary slightly in size or
> amenities, a combination of the two approaches may be used.
>
> The basic considerations for allocation costs to NAHASDA-assisted
> units are as
>
> follows:
>
> \(1\) *Comparability in Unit Size.* Comparability in size is defined
> by the bedroom count and square footage of individual units. Not all
> units with the same number of bedrooms are comparable in size. If
> there is a substantial difference in the square footage of two units
> with the same number of bedrooms, the units are not considered
> comparable.
>
> \(2\) *Amenities.* Comparability in amenities means similar fixtures,
> appliances and other features. In many mixed-income projects, to
> demand varying rents, the quality and types of amenities may vary
> among units. For instance, a project manager can demand a higher rent
> for a unit with wall-to-wall carpeting, garbage disposal, dishwasher
> and finer fixtures than for a unit without these amenities. This type
> of project does not typically have comparability of units, unless
> there is an equal distribution of assisted and non-assisted units that
> have these amenities.
>
> \(3\) *Common Costs.* Common costs are costs incurred for acquisition
> of improved or unimproved real property that benefit all residents of
> units in a project; rehabilitation or construction of shared systems
> (heating, plumbing, roofing) or shared facilities (community rooms,
> laundry facilities located in residential buildings); and on-site
> improvements. Costs associated with a project's on-site management
> office or the apartment of a resident manager may also be counted as
> common costs. The manner in which the costs for common elements of a
> project may be charged is dictated by the method chosen for allocating
> costs.
>
> D. Pro-Rating Cost Allocation Method
>
> To use the pro-rating method of allocating costs, there must be
> comparability between the total inventory of NAHASDA-assisted and
> non-assisted units in a project.
>
> For example, consider a 12-unit building in which 6 of the units have
> one bedroom and 6 have two bedrooms. The one-bedroom units are all
> comparable to each other and the two-bedroom units are all comparable
> to each other. Half of the building is NAHASDA-assisted. In this case,
> there should be an equal proportion of one- and two-bedroom units
> designated as assisted and non-assisted---three one-bedroom units, and
> three two-bedroom units.
>
> Another example: consider the same 12-unit building in which one-third
> of the units are NAHASDA-assisted. You would need a total of four
> units designated (one-third of 12), so you must designate two
> one-bedroom units, and two two-bedroom units.
>
> When assisted and non-assisted units are comparable, total eligible
> development costs (including acquisition, development hard costs to
> construct or rehabilitate the unit, and project soft costs), may be
> pro-rated to determine the NAHASDA share of the total costs.
>
> Thus, all eligible project costs may be distributed between the IHBG
> program and other funding sources, provided that the NAHASDA share
> does not exceed the maximum per unit limit. This means NAHASDA can pay
> any eligible cost, and the tribe can pro-rate the NAHASDA share in
> relation to the total eligible costs to determine the minimum number
> of NAHASDA-assisted units.
>
> For example, consider a tribe that buys land with \$100,000 in IHBG
> funds. Then, that tribe uses \$900,000 of private funds to construct a
> housing project on that land. The total cost of the project is \$1
> million. A minimum of one-tenth of the units in the project must be
> designated as NAHASDA-assisted, because IHBG funds provided one-tenth
> of the total funding. If the assisted and non-assisted units are
> comparable in size and distribution, a prorated share of the cost of
> common elements attributable to the NAHASDA-assisted units may be paid
> with IHBG funds.
>
> For example, consider a tribe with a 24-unit building with 8
> NAHASDA-assisted units (one-third of the units). The assisted units
> are comparable to the non-assisted units. The tribe replaces the
> heating system and the roof. In this case, the tribe may pay one-third
> of these total common costs with NAHASDA funds because one-third of
> the units are NAHASDA-assisted.
>
> The ratio of the NAHASDA investment to the total eligible development
> cost is equivalent to the ratio of the minimum number of units that
> must be NAHASDA-assisted to the total number of units.
>
> For example, a tribe buys and rehabilitates a 60-unit vacant building.
> The units are comparable. Total acquisition and development costs are
> \$1 million, and the tribe uses \$200,000 of IHBG funds. The IHBG
> investment, \$200,000, is one-fifth of the total, \$1 million; so,
> one-fifth of the units must be designated as NAHASDA-assisted.
> One-fifth of 60 units is 12 units. Therefore, 12 units must be
> designated as NAHASDA-assisted and 48 can be designated as
> non-assisted.
>
> E. Unit-by-Unit Cost Allocation Method
>
> When NAHASDA-assisted and non-assisted units in a project are NOT
> comparable, the tribe must determine and charge the IHBG program for
> the actual costs incurred for the acquisition and development of the
> NAHASDA units, plus any common costs that can be attributed to the
> NAHASDA portion of the project.
>
> To allocate these costs, the tribe must designate the NAHASDA-assisted
> units and track the costs for each unit.
>
> Common costs attributable to NAHASDA-assisted units are determined by
> calculating the total square feet in NAHASDA units as a percentage of
> the total square feet in the project. IHBG funds can pay for that
> percentage of the common costs.
>
> The actual cost for each unit is charged to the IHBG program. The
> actual cost is charged, regardless of whether it is more or less than
> the pro-rated cost would be.
>
> For example, a tribe proposes to construct a new 60-unit, mixed-income
> development:

-   One-third, or 20, of the units will be deluxe units, with total
    development costs of \$2 million.

-   Another third, 20 upgraded units, will be marketed to middle-income
    families (between 100 and 120 percent of the area median income),
    with total development costs of \$1.5 million.

-   The final third will be 20 basic units with few amenities and will
    be marketed to low-income families; the total development costs are
    \$1 million.

> Because the units in this project are not comparable, the tribe may
> only use IHBG funds for the cost of the units that will meet the
> NAHASDA requirements. Therefore, it may invest up to \$1 million in
> IHBG funds to construct the 20 units for eligible low-income families,
> provided that the tribe's per unit limit equals at least \$50,000. All
> 20 units will be designated as NAHASDA-assisted.
>
> In another example, a tribe proposes to use IHBG funds and local funds
> to rehabilitate a 15-unit building it already owns. Ten units are
> two-bedroom and are non-assisted; five units are efficiencies and are
> NAHASDA-assisted. In this case, NAHASDA can only pay the actual
> rehabilitation costs, up to the per unit limit, of the units
> designated as NAHASDA-assisted.
>
> F. Maximum Per Unit Cost Limit

Housing developed, acquired, or assisted under NAHASDA is subject to
limitations on cost or design standards. IHBG-assisted housing must meet
the moderate design requirements.

**13. Additional Information**

If you have any questions, or require further information, please
contact your Area Office of Native American Programs (ONAP).

> [/s/]{.underline}

Paula O. Blunt, General Deputy Assistant Secretary

> for Public and Indian Housing