Highlighting the Project Homekey Notice of Funding Availability (NOFA)

The California Department of Housing and Community Development (HCD) announced the availability of approximately $600 million of Homekey Program (Homekey) grant funding through the NOFA to rapidly sustain and expand the inventory of housing for people experiencing homelessness or at risk of homelessness and impacted by COVID-19 by purchasing motels and a broad range of other housing types.

Of the $600 million in Homekey grant funds, $550 million is derived from the state’s direct allocation of the federal Coronavirus Aid Relief Funds (CRF) and $50 million is derived from the state’s General Fund to supplement the acquisition of and to provide initial operating subsidies for, Homekey sites.

HCD will be accepting over-the-counter applications beginning on or about July 22, 2020.

HCD will set aside a priority application period to immediately begin reviewing and awarding qualified Projects from July 16, 2020 to August 13, 2020.

All other applications received after the priority application period must be received by HCD no later than 5:00 pm PDT on September 29, 2020. HCD is reserving a priority application period to allow for geographic equity in the disbursement of funds.

Applications will be received and reviewed on a rolling, over-the-counter basis until the CRF and the state General Fund moneys are committed.

The $550 million in CRF must be expended by December 30, 2020. HCD recognizes this expenditure deadline is challenging; however, the deadline is a requirement of federal CRF funding. HCD will provide ongoing support to assist Grantees in meeting the expenditure deadline and has already developed an accelerated application and award process.

NOTE: For Projects that involve an acquisition and are receiving CRF awards, Grantees must expend the funds by the expenditure deadline and the Project escrow must be closed by December 30, 2020.

The $50 million in state General Funds must be expended by June 30, 2022.

Application Scoring Criteria:

Applications meeting the minimum program requirements will require a minimum score of 110 points to be eligible for funding out of the following 160 points:

• Ability to expend funds by December 30, 2020. (Up to 50 points)
• Demonstration of the development team’s experience and capacity to acquire and operate the Project. (Up to 40 points)
• A demonstration of how the Project will address racial equity, other systemic inequities, state and federal accessibility requirements, and serve members of the Target Population. (Up to 25 points)
• The extent to which the Eligible Applicant can demonstrate the Project’s community impact and site selection. (This category is worth 45 points)

HCD requires all Applicants to engage in a pre-application consultation with HCD and/or the Department of General Services (DGS) prior to submitting an application. The consultation will allow the prospective Applicant to discuss the proposed Project, along with other applicable programmatic considerations, including those related to site acquisition, CEQA, land use and land entitlements, and long-term financing approaches. Application consultations will be available upon the release of this NOFA and may be requested by emailing omekey@hcd.ca.gov.

HCD will sort applications into one of two tiers:

Tier One:

• Tier One applications will be those Projects that: (1) can be occupied within 90 days from the date of acquisition; and (2) are permanent housing or will result in permanent housing as indicated on the application; or
• Tier One projects include Projects that can be occupied within 90 days and used for Interim Housing, provided the project is expected to be developed into permanent housing at a later date OR Interim Housing with a coordinated exit strategy adopted by the Continuum of Care to support transitions into other permanent housing. Interim Housing projects shall submit a letter of support from the local Continuum of Care that demonstrates the coordinated exit strategy of the Target Population.

Tier Two:

• Tier Two projects are all other Projects and uses, including housing that will be used for interim only and with no expectation of development into permanent housing.
• For Projects received within the priority application period, the Department will award Tier One projects meeting the program requirements on a rolling basis, up to the regional cap, on a first-come, first-served basis. Tier Two projects meeting the program requirements will be waitlisted and awarded funding if funds are available, after the priority application period, according to the date stamp. Applications that were received after the priority application period, and that met the specified program requirements, will be awarded according to date stamp, as funds are available.

Eligible Uses:

Awarded funds must be used to provide housing for individuals and families experiencing homelessness or at risk of experiencing homelessness and who are impacted by the COVID-19 pandemic. With respect to the list of eligible uses below, an Eligible Applicant may choose to target Project Roomkey properties, or other, non-Project Roomkey properties. The list of eligible uses for the CRF $550 million allocation and the $50 million state General Fund allocation is as follows:

• Acquisition or rehabilitation of motels, hotels, or hostels.
• Acquisition of other sites and assets, including purchase of apartments or homes, adult residential facilities, residential care facilities for the elderly, manufactured housing, and other buildings with existing residential uses that could be converted to permanent or interim housing.
• Conversion of units from nonresidential to residential in a structure with a certificate of occupancy as a motel, hotel, or hostel.
• The purchase of affordability covenants and restrictions for units.
• Relocation costs for individuals who are being displaced as a result of rehabilitation of existing units.
• Capitalized operating subsidies for units purchased, converted, or altered with funds provided pursuant to Health and Safety Code section 50675.1.1.*

*Projects seeking capitalized operating subsidies for units purchased, converted, or altered will be awarded with funds from the $50 million state General Fund allocation. The $550 million in Homekey derived from the CRF is not permitted to be used for this purpose.

• Master leasing of properties.*

*The Sponsor shall have adequate site control of the property, and such control shall not be contingent on the approval of any other party.

Maximum Grant Amounts:

For acquisition projects, Homekey will generally fund up to $100,000 per door, as supported by an appraisal. “Door” refers to the number of units at the time of the acquisition, which may differ from the number of units after a future conversion. For those projects that undergo a future conversion, the number of units may need to be reduced to accommodate kitchenettes and other amenities.

HCD recognizes that some acquisitions may have a higher per-door appraised value in certain high-cost areas. Some properties may also have a higher per-door value because they need less upfront work and already have the necessary amenities to support permanent housing solutions—for example, units with kitchenettes.

To support these efforts, HCD will accept requests from Tier One projects up to $200,000 per door. However, for this $200,000 per door maximum, the following applies:

• HCD will contribute the first $100,000 per door of the Homekey proposed Project. This contribution does not require a local match.
• The Eligible Applicant will be required to contribute an identical match of $50,000 or a 1:1 local match to receive an additional $50,000 contribution from the Homekey program.
• The Eligible Applicants will be required to contribute $100,000 or a 2:1 local match to receive an additional $50,000 contribution from the Homekey program.

Operating Funds and Expenditures:

Eligible Applicants are required to demonstrate a five-year commitment to provide operating funds for the proposed project. The first two years of operating funds may include an award from the $50 million in state General Fund. Matching contributions may be obtained from any source, including any federal source as well as state, local, and private sources.

HCD can reimburse eligible Homekey expenditures that occurred prior to the release of this NOFA.

To avoid any expenditure delays, funds may be issued directly to the Applicant that is listed on the application, to the designated payee identified by successful co-Applicants, or to an escrow company that has been approved by HCD.

In view of this abbreviated timeframe for award and expenditure, as well as the specific needs and objectives of the Homekey program, the Department, in accordance with its authority under Health and Safety Code section 50675.7, subdivision (d), will not accept appeals of its award determinations.