The Community Development Division is required by federal regulation to commit 15 percent of its annual U.S. Department of Housing and Urban Development (HUD) HOME allocation funds to a Community Housing Development Organization (CHDO) for affordable housing development purposes. The City of Billings entered into a Development Agreement with NeighborWorks Montana to build two townhomes in the Riverfront Pointe Subdivision in August 2017. At that time, only $75,000 was available for award to NeighborWorks for the Riverfront Pointe II Project. 
 
With the new 2018-2019 federal fiscal year, an additional $56,710 must be allocated to a qualified CHDO project to meet the 15% threshold for HUD requirements. Staff recommends allocating this additional funding to the NeighborWorks Riverfront Pointe II project in order to maintain HUD compliance and to ensure affordability for two additional low income households. The new funding allocation would total $131,710. The City of Billings previously dedicated $175,000 to a similar NeighborWorks Riverfront Point project, which was completed in May 2017.

City Council may:

• Approve additional funding for the proposed project, with or without conditions. A funding allocation to support this new construction project would assist the City in meeting affordable housing needs while ensuring compliance for CHDO allocations through FY18-19; or
• Not approve additional funding for the project. NeighborWorks Montana would need to secure additional conventional financing to complete the project, increasing costs passed on to the buyer. The City also would need to find another CHDO to award funds so that it would meet its HUD requirements.

NeighborWorks Montana is currently one of two CHDOs certified by the City of Billings. If additional funding is not committed to the proposed NeighborWorks Montana project, it could become too difficult for NeighborWorks Montana to move forward with the project and would put the City in jeopardy of noncompliance with federal housing development funding allocation requirements.

The Community Development Board recommends the City Council approve an additional HOME funding allocation of $56,710 to NeighborWorks Montana and approve the modification to NeighborWorks Development Agreement increasing the total funding allocation to $131,710.