© 2002 Corporation For Enterprise Development Leveraging Funds for IDAs: Strategies for Linking to Existing State Programs Friday, November 8, 2002 State IDA Policy Conference St. Louis, MO Carl Rist, Program Director Corporation for Enterprise Development

© 2002 Corporation For Enterprise Development Funding Environment  Vast majority of states facing budget deficits.  New funding for IDAs likely to face stiff challenges.  Existing funds in danger of being withdrawn or re-captured.  How can states leverage related sources of funds for IDAs in a time of scarcity?

© 2002 Corporation For Enterprise Development IDAs and Housing  Most common use of IDAs: –61% of participants in ADD demonstration intend to save for home purchase or repair. –80% of participants used IDAs for homeownership in NC (according to recent evaluation).

© 2002 Corporation For Enterprise Development Options for Leveraging Housing Funds for IDAs 1.Community Development Block Grant (CDBG) funds 2.Federal Home Loan Bank 3.Family Self-Sufficiency Program 4.State Housing Trust Funds 5.Low-Income Housing Tax Credits

© 2002 Corporation For Enterprise Development CDBG Funds  Why CDBG? –One of the largest sources of funds for community development. –Funds a broad range of c.d. activity.  What CDBG funds can be used for: –Match for first-time homebuyers (or small business start-up) –Administrative costs

© 2002 Corporation For Enterprise Development CDBG Funds  Models: NC, OK, TN, VA  Pros: –Funds match and admin –Available in every state –Considered non-federal for purposes of matching federal dollars  Cons: –Regs –Restrictive funding categories –Only small towns and rural areas qualify –Applicants must be unit of local government

© 2002 Corporation For Enterprise Development Federal Home Loan Bank  Why FHLB? –Affordable Housing Program (AHP) – matched savings program for low-income families.  What FHLB funds: –Up to 3:1 match for downpayment assistance.

© 2002 Corporation For Enterprise Development Federal Home Loan Bank  Models: Many  Cons: –Have to apply through FHLB member bank –Account must be held by member bank  Pros: –Good source of funds for downpayment assistance –Mortgage does not have to be with member bank

© 2002 Corporation For Enterprise Development HUD Family Self-Sufficiency Program (FSS)  Why FSS? –Structured saving program for public housing residents with earned income –Many FSS savers have used escrow accounts to purchase homes  What FSS escrow accounts fund: –Downpayment or other uses.

© 2002 Corporation For Enterprise Development HUD Family Self-Sufficiency Program (FSS)  Models: Many  Cons: –Not additional source of funds –FSS programs also not always well staffed  Pros: –Existing system for structuring saving for key target population –Economies of scale in linking FSS and IDAs

© 2002 Corporation For Enterprise Development State Housing Trust Fund  Why Housing Trust Funds? –Own-source stream of funds for states –Dedicated to affordable housing  What Housing Trust Funds fund: –Housing development –Housing rehab –Downpayment assistance –Low-interest financing

© 2002 Corporation For Enterprise Development State Housing Trust Fund  Model: NC DOL-HFA collaboration –“Virtual” match from Housing Trust Fund provides non-federal match for AFIA grant  Pros: –Source of state funds for asset-building as appropriations and tax credits dry up –Leverages housing funds at a time when many states are not reinvesting in their Trust Funds  Cons: –Not every state has a Housing Trust Fund –Feds approved NC application, but nothing in writing

© 2002 Corporation For Enterprise Development Low-Income Housing Tax Credits (LIHTC)  Why LIHTC? –One of most significant sources of funds for low-income housing development –LIHTC continue to be in great demand on part of housing developers  What LIHTCs fund: –Housing construction

© 2002 Corporation For Enterprise Development Low-Income Housing Tax Credits (LIHTC)  Models: None  Modest proposal: –Give extra credit to applicants for LIHTC if they set up IDA programs for their tenants.

© 2002 Corporation For Enterprise Development IDAs and Small Business Development  Second most common use of IDAs: –18% of participants in ADD demonstration intend to save for microenterprise or small business start-up.

© 2002 Corporation For Enterprise Development Options for Linking Small Business Development Funds and IDAs 1.Integrating microenterprise development products and services and IDAs

© 2002 Corporation For Enterprise Development Integrating Micro and IDAs  Why integrate micro and IDAs? –Both share common goals – accumulation of wealth by poor.

© 2002 Corporation For Enterprise Development Integrating Micro and IDAs  Models: FSCLF in Delaware (“high integration” model); others  Pros: –Minimize program costs (economies of scale) –Establishing ability to save can increase credit- readiness and credit-worthiness –IDA “equity” valued as a credit enhancement during consideration for loan  Cons: –Not new money, rather cost savings

© 2002 Corporation For Enterprise Development 123 W. Main St. 3rd Floor Durham, NC Tel: Fax: Website: Visit the Internet IDA Learning Network at Carl Rist Corporation for Enterprise Development THE END