City of Reading HOME Investment Partnership (HOME) Program Guidelines

City of Reading HOME Investment Partnership

2015 (HOME) Program Guidelines




Thank you for your interest in developing affordable housing in the City of Reading.  Each year, the City receives an allocation of HOME Investment Partnership funds (HOME) from the U.S. Department of Housing and Urban Development (HUD).  The City’s Community Development Department administers the HOME allocation to expand the supply of quality affordable housing and to stabilize City of Reading neighborhoods. 


Purpose of this Manual:  This manual contains the basic program guidelines for the City’s HOME program. The purpose of this manual is to introduce you to the program, insure you understand the requirements of the program, and instruct you on how to apply for and administer funding.  HUD introduced draft regulations governing the program in 2012 which were finalized in 2013, so please review the following information carefully.  Please note that the information presented in these pages should not be construed as an exhaustive list of the regulations and requirements governing City of Reading financing for this program.  Developers assume all risk of any predevelopment funds expended before funding is formally approved and are ultimately responsible for compliance with all applicable regulations.  This information should be taken only as a general guideline is not a substitute for a thorough understanding of the regulations.  The City of Reading will make every effort in assisting developers and subrecipients with program compliance issues.


Upon filing an application, you acknowledge that once the grant has been accepted, you assume all risks of change in rules and regulations or policies concerning this program, together with any adverse effects upon you and any resulting costs thereof.


How to Apply for Funds: 


A.  Get an Electronic Copy of the HOME Application and HOME Development Proposal

Electronic and hard copies of the City’s HOME Application may be obtained from the City of Reading website at Questions may be directed to the Community Development Manager (phone) 610-655-6328. 


B. Before Completing an Application

1.     Read through these Program Guidelines and the application materials

2.     Talk with Crystal Edwards to discuss your project’s eligibility and feasibility.

3.     Review program information on the HUD web site at


C. Submit a Complete Application  

You must submit one original hard copy of your complete application AND an electronic version of the HOME Application and the Excel-based City of Reading HOME Program Development Proposal.  Applications, exhibits and the Development Proposal should be submitted to:




            Community Development Department

            Attn:  HOME Program Administrator

            Community Development Department

            Room 3-12

            815 Washington St.

            Reading, PA 19601



HOME Program Overview



The City of Reading HOME Program provides financing to developers for the acquisition and rehabilitation and/or new construction of homeownership and rental housing in the City of Reading for low- to- moderate-income households. The program’s primary purpose is to expand the supply of affordable housing and redevelop vacant, abandoned, and blighted buildings into safe and sanitary homeownership or rental units.


Program Goals

To improve the City’s housing stock through the rehabilitation of blighted or vacant properties and the construction or rehabilitation of rental housing to enhance the vibrancy, safety and vitality of target neighborhoods.

Target Geography

Citywide, with a focus on the Ricktown, Centre Park and Penn Street neighborhoods, and in census tracts deemed to be “tipping-point” areas.

Funding Preferences and Evaluation Criteria

·       Rehabilitation of existing structures

·      Redevelopment of properties listed by the Blighted Property review Committee

·       High-quality designs that respect historic character

·       No displacement of existing residents

·       Encourage conversion to owner-occupancy and reduce unit density

·       Demonstrated market need and project feasibility

·       Developer capacity, experience and track record of successfully completing similar development projects

·       Ability to leverage HOME funds with other financing

·       Universal design and energy-efficient/low maintenance design features

All projects funded by the HOME Program must be consistent with the City and County Comprehensive and Consolidated Plans and the City of Reading Housing Strategy as adopted November, 2011.  When identifying a project, please check with the City and County Planning Commissions or staff representatives.






Who Can Apply:


Private builders, developers, nonprofit organizations, CBDOs, CHDOs & Faith-based Organizations. Developers must demonstrate previous housing development experience and financial capacity.

Eligible Activities:

Rehabilitation and New Construction of For-Sale and Rental Housing


Households earning 80% of Area Median Income or Less if HOME funds;

Developer Assistance


Construction and/or Development Gap Subsidy

·    Construction Financing: Up to 80% LTV; rate is prime (LIBOR) + 1%

·    Development Gap Subsidy: Covers gap between appraised value & total development costs. Subsidy will be recorded as lien against the property and released upon completion and sale to an eligible buyer or expiration of rental housing affordability periods..


Gap Subsidy is determined based upon the project pro forma, not to exceed 50% of Total Development Cost; $100,000 limit on homebuyer units.  Minimum HOME assistance is $1,000.

Homebuyer Affordability Assistance


Down payment assistance, soft second mortgage.  Recorded as a deed restriction for 5-15 years, depending on the amount of subsidy to buyer

(See chart on following page.)



Buyers shall receive sufficient direct subsidy as needed to enable them to purchase the home with a mortgage that requires no more than 20% downpayment and have a housing-to-income (PITI) ratio that is less than 33% and the back-end (total debt) no more than 45%.  Minimum HOME assistance is $1,000.


Total household income to service PITI – 35%

Total Household income for all housing costs – 45%

Qualified Mortgage Standards

·      Lender fees and points are to be a maximum of 3% for loans over $100,000.

·      Closing costs should be reasonable, including origination fees, points, and other lender charges.

·      Interest rates on loans should not exceed 1.5% above the Federal Financial Institutions Examination Council (FFIEC) index as updated.

·      Mortgages should not allow for any prepayment penalties.

·      Mortgages must not be for a term longer than 30 years.

·      Mortgage products must require escrows for taxes and home insurance

Homebuyer Counseling

HOME-assisted homebuyers must participate in and complete a HUD-approved homebuyer counseling course.

Factors that help a project move through the process

·       High quality site plans, construction drawings & specs

·       Evidence of agreements and site control

·       Reasonable construction costs

·       Familiarity with all requirements outlined in this manual

·       Timely submission of required documents

Definition of Subrecipient and Developers

The City of Reading accepts applications from developers and subrecipients.

·      Developers are for-profit or nonprofit agencies that apply for and receive funds from the City for a specific project. The Developer is directly responsible for performing the work and signs a Developer Agreement with the City


·       Subrecipients may be any non-profit or for-profit agencies that apply for and receive an allocation of HOME funds to administer activities on behalf of the City such as housing rehabilitation and homebuyer down payment and closing costs activities.

Site and Neighborhood Standards; Market Analysis

The City of Reading requires all applicants for HOME funds to demonstrate how their proposed projects address the City’s goals to eliminate blight and upgrade neighborhoods. Applicants should address their approach to meeting site and neighborhood standards in the Narrative section of the HOME Application.  Beginning in 2012, all proposed projects much adhere to the City’s guidelines for market need analysis and feasibility.  This requires demonstrating market need and viability for the proposed project through market and sales data and a well-developed, targeted marketing strategy.  We recommend that you review Appendix B on page 15 and Reading’s Market Value Analysis.




Regulatory Compliance


Because the City of Reading is utilizing Federal funds for the HOME Program, a number of regulations and requirements apply.  Following is a list of the key compliance areas you should understand before applying for funding. 


A.    Type & Amount of Assistance

Funds may be utilized to assist with acquisition, construction financing, development gap subsidy (difference between appraised value and development costs), and homebuyer assistance to insure affordability. The City will conduct a subsidy layering analysis to determine the amount of HOME financing for the project and to ensure the project is financially feasible.



Type of Assistance

Maximum ($1,000 minimum)

Affordability Subsidy: Direct assistance to buyer

Down Payment, Deferred 2nd Mortgage, Closing Costs

20% of sale price or the amount needed to achieve a 90% loan-to-value ratio; $15,000 limit.  Buyer’s housing-to-income ratio must be less than 33%.

Development Subsidy: Assistance to developer for

Construction Financing & Development Gap Subsidy

Up 50% of Total Development Costs, but no more than is required to achieve fair market value for properties constructed or rehabilitated with HOME funds

Note:  CHDO projects may not use more than 10% of the total HOME investment in the unit for closing costs.


B.    Eligible Activity and Homebuyers

Funds under this program may be used for the rehabilitation and/or new construction of homeownership units that must be sold to households earning incomes at or below 80% of Area Median Income (AMI) for HOME as determined using Section 8 Part 5 calculations as detailed in the Technical Guide for Determining Income and Allowances for the HOME Program, third edition.  Income must be verified no more than 6 months prior to beneficiary occupancy.

The current income limits for the City of Reading are as follows:



Household Size (persons)

100% AMI (Approximate)

HOME 80% HUD AMI Income Limit




















                                    (HUD issued: March, 2015)




C.    Term of Assistance

Units developed with HOME funds must remain affordable to income-qualified individuals for varying lengths of time depending upon the amount of HOME funds provided as assistance. All homebuyer assistance loans will be secured by a lien on the property coinciding with the HOME Period of Affordability. If a homebuyer unit is no longer the buyer’s primary and principal residence, some or all of the homebuyer assistance may be recaptured by the City, subject to available proceeds.


Direct Assistance to Homebuyer

Per HOME-Assisted Unit

Period of Affordability

(Secured via Lien)

Less than $15,000

5 years

$15,000 to $40,000

10 years

More than $40,000

15 years

New Rental Housing

20 years


For homebuyer projects, the amount of the HOME assistance subject to the affordability period is the difference between the fair market value of the unit and the amount of the first mortgage.  HUD requires that a resale restriction be placed on each home for the period of affordability limiting resale to income eligible buyers.  However, the City is covered by a “presumed affordability” study that indicates homes in target neighborhoods will remain affordably to persons who meet the income eligibility guidelines eliminating the need for individual resale restrictions.


Rental projects will require that the affordability period be secured by a deed restriction on the property.  The term of the affordability period is equal to the full amount of HOME funds invested in the property.


D.    HOME Program Development and Loan Agreement

Successful applicants will be required to enter into a HOME program agreement that incorporates Regulatory Compliance, Disbursements, Affordability, and project-specific information. In addition, restrictive covenants may be filed on any property acquired with HOME funds as loan collateral or to secure affordability.


E.    CHDO Set-Aside

The HOME requirements at 24 CFR Part 92.300 requires the City to set-aside at least 15 percent of the City’s annual HOME allocation for projects sponsored, owned, or developed by CHDOs. The City may allocate more funds for CHDOs should they choose to.


The City allocates at least 15% of its CHDO set-aside funds for affordable housing programs/projects which serve households under 80% AMI.  Within 24 months of receipt of HOME funds from HUD, the City will identify, certify the CHDO and formally commit CHDOs set aside funds for eligible HOME projects. If the required funds are not reserved for CHDO use within this time period, they will be reallocated to another eligible HOME CHDO activity.


A certified CHDO must serve as the developer or owner of a HOME-eligible project when using funds from the 15 percent CHDO set-aside. A CHDO may serve in one of these roles for several projects or it may undertake projects in which it combines roles, such as being both an owner and developer. Definitions of each of these roles may be found in the appendix to this document.


HOME CHDO Operating Funds in Conjunction with Producing Units

HOME funds may be provided as general operating assistance to CHDOs receiving or which are eligible to receive CHDO set-aside funds for projects or programs that will result in a HOME eligible housing unit. Certified CHDOs may receive funds from the City to be used for operating expenses. The City has the option of allocating up to 5 percent of their HOME allocations to provide funds for CHDO operating expenses. This allocation does not count toward the required 15 percent CHDO set-aside funds that are to be used by CHDOs for projects.


It is the policy of the City that CHDO operating expenses can be allocated to newly formed or existing CHDO’s. The amount of operating expenses for any fiscal year cannot exceed 50% or $50,000, whichever is greater, of the CHDOs total operating expenses for the fiscal year. Eligible operating expenses for which CHDOs may use the funds allocated by City can include:


§  Salaries, wages, benefits, and other employee compensation;

§  Employee education, training and travel;

§  Rent and utilities;

§  Communication costs;

§  Taxes and insurance;

§  Equipment, materials and supplies.


CHDO Proceeds / Program Income

The HOME agreement for each HOME assisted project will contain specific provisions as to what constitutes CHDO proceeds and/or HOME program income. The HOME/CHDO agreements will also provide specific instructions as to how CHDO proceeds and HOME Program Income shall be treated. CHDO proceeds can only be generated by a CHDO funded project and program income is generated by HOME funded projects implemented by HOME subrecipients. 


If authorization is given by the City for a CHDO to retain project proceeds, then proceeds must still be used for HOME-eligible activities or other low-income housing activities. The City will determine how the proceeds can be used in the written agreement with the CHDO. CHDO project proceeds are not considered HOME program income and are not subject to program income requirements. However, CHDO project proceeds that are returned to City are considered program income and are subject to HOME program income requirements.


HOME funds recaptured because housing no longer meets affordability requirements are not considered proceeds and are subject to requirements of program income.


If a CHDO is acting as a subrecipient, the funds generated from HOME-assisted activities are program income and are subject to HOME program income requirements.


Once CHDO project proceeds are used by the CHDO for eligible activities there are no further HOME requirements. Funds generated from the use of CHDO proceeds are not considered CHDO proceeds. CHDOs may be authorized to retain some or all of the proceeds generated from an activity. At the discretion of City, a CHDO may retain some or all of the proceeds from a CHDO development activity.


The City will stipulate in its written agreement with the CHDO whether the CHDO may retain project proceeds or return them to the City.


F.    Faith Based Organizations:

Please note that faith-based organizations are eligible for HOME and other HUD funding on an equal footing with any other organization. Organizations competing for HUD funding, including faith-based organizations, will be assessed on their merits and how well they perform eligible activities, not on their religious or secular character.


Organizations funded with HOME funds may not engage in inherently religious activities, such as worship, religious instruction, or proselytization, as part of the assistance funded under this part of the HOME program. If an organization conducts such activities, the activities must be offered separately, in time or location, from the assistance funded under this part, and participation must be voluntary for the beneficiaries of the assistance provided.


The organization funded with HOME funds, if faith or religious based, will retain its independence from federal, state, and local governments, and may continue to carry out its mission, including the definition, practice, and expression of its religious beliefs, provided that it does not use direct HOME funds to support any inherently religious activities, such as worship, religious instruction, or proselytization. Among other things, faith-based organizations may use space in their facilities, without removing religious art, icons, scriptures, or other religious symbols. In addition, a HOME-funded religious organization retains its authority over its internal governance, and it may retain religious terms in its organization’s name, select its board members on a religious basis, and include religious references in its organization’s mission statements and other governing documents. The organization shall not, in providing HOME program assistance, discriminate against a program beneficiary or prospective program beneficiary on the basis of religion or religious belief.


The organization agrees that HOME funds may not be used for the acquisition, construction, or rehabilitation of structures to the extent that those structures are used for inherently religious activities. HOME funds may be used for the acquisition, construction, or rehabilitation of structures only to the extent that those structures are used for conducting eligible activities under this part. Where a structure is used for both eligible and inherently religious activities, HOME funds may not exceed the cost of those portions of the acquisition, construction, or rehabilitation that are attributable to eligible activities in accordance with the cost accounting requirements applicable to HOME funds in this part. Sanctuaries, chapels, or other rooms that a HOME-funded religious congregation uses as its principal place of worship, however, are ineligible for HOME-funded improvements.





A.  Development & Property Standards

All developments to be funded with HOME funds must, at the time of completion, comply with all local building codes, rehabilitation standards, ordinances, zoning and federal regulations regarding hazardous materials.  Energy Star certification is also required for all new construction as certified by a RESNET energy auditor. Rehabilitation and development activities shall incorporate noise attenuating windows in the construction standards to the extent feasible.  Also, all units shall be tested for hazards related to lead, radon and asbestos.  Any issues that are identified shall be addressed consistent with federal and state standards.


Each rehabilitation must comply with the requirement that all major systems have a minimum five (5) year life-expectancy upon completion of rehabilitation.


The City’s goal is to provide efficient, affordable housing that respects neighborhood context and provides enhancement of property values and quality of life.  The City will review development proposals to ensure that projects meet these site and neighborhood standards.



B.  Developer Capacity

The 2013 HOME regulations require the City of Reading to assess and certify the capacity of all developers participating in the program.  New developers will be required to provide the documents specified in the attached Exhibit A, which will be review according to the criteria outlined in the document.


C.  Market Analysis

The 2013 HOME regulations require the City of Reading to assess and verify the market viability of all proposed HOME projects.  Please see the attached Exhibit B for more details on the required market analysis.


D.  Environmental Review

In accordance with HUD regulations, the environmental effects of each activity carried out with federal funds must be assessed. The City of Reading is responsible for conducting an environmental review of projects selected for funding. Compliance with environmental review requirements is mandatory prior to the applicant entering into any choice-limiting agreements or taking any physical action on a site. The selected applicant(s) shall be responsible for providing information and relevant documents necessary to accomplish the environmental review.  For some projects the City will require a Phase I environmental assessment conducted in accordance with standards developed by the American Society for Testing and Materials, and if applicable, a follow-up Phase II assessment.


E.   Historic Preservation

Section 106 of the National Historic Preservation Act of 1966 (revised) requires that all federally funded agencies consider the effect of the proposed project on existing historic resources.  Any rehabilitation or new construction project subsidized by the City must be reviewed under the Section 106 procedures established by the Federal Advisory Council on Historic Preservation. 


F.   Utilities and Energy Efficiency Review

The City of Reading encourages building and rehabilitating ENERGY STAR qualified homes.  These homes are independently verified to be at least 30% more energy efficient than homes built to the 1993 national Model Energy Code or 15% more efficient than state energy code, whichever is more rigorous. These savings are based on heating, cooling, and hot water energy use and are typically achieved through a combination of:

  • building envelope upgrades

  • high performance windows

  • controlled air infiltration

  • upgraded heating and air conditioning systems

  • tight duct systems and

  • upgraded water-heating equipment

  • specify ENERGY STAR qualified products

G.  Lead-Safe Housing

Any project involving the rehabilitation of a property built before 1978 must comply with the Residential Lead-Based Hazard Reduction Act of 1992 and the EPA’s Lead Renovation, Repair, and Painting Program.  Residential developments funded with HOME funds must result in lead-safe housing. Depending on the amount of Federal funds used on a project, lead requirements range from lead-safe work practices to testing and clearance procedures through full lead abatement.  Please make certain that you are familiar with lead-based paint requirements before beginning ANY work in a pre-1978 building!

H.    Handicap Accessibility

HOME funding requires that projects meet the accessibility requirements of the Fair Housing Act of 1968 and Section 504 of the Rehabilitation Act of 1973. Projects of five (5) or more units are required to have a minimum of 5% of total units (or at least one unit) accessible to the physically handicapped and an additional 2% of total units equipped for those with hearing or visual impairments. The 2009 International Building Code also contains accessibility requirements for all buildings and structures.


I.    Outreach to Minority and Women Owned Businesses

The City of Reading requires developers to make a good faith effort to utilize minority- and women-owned businesses in all City- assisted housing projects. All recipients of City funds will be required to keep records of participation by certified MBEs & WBEs.


J.     Section 3: Employment and Economic Opportunity for Low and Very Low Income Persons

The City of Reading requires developers to make good faith efforts to comply with the federal Section 3 requirements and to take steps to ensure employment and other economic opportunities are directed to low- and very low-income persons.  Reporting will be required on the use of certified minority-owner and women-owner businesses, and the City encourages the use of City-based contractors and vendors whenever possible.


K.  Audit Requirements

Applicants for HOME funds may be subject to the audit requirements of OMB Circular A_133.


L.   Bonding and Insurance

The Developer/Subrecipient/CHDO shall carry sufficient insurance coverage to protect assets from loss due to theft, fraud and/or undue physical damage, and as a minimum shall purchase a blanket fidelity bond covering all employees in an amount equal to cash advances from the Grantee.  The Developer/Subrecipient/CHDO shall comply with the bonding and insurance requirements of OMB Circular A-110, and 24 CFR Part 84.




A.  Applying for State Tax Credits & Local Abatement

Local tax abatements may be available for certain rehabilitation and new construction of residential properties.  See section G below, or inquire in the Community Development office for additional information.

B.  Debarment

An applicant may not receive City funds if any affiliated entity, board member, or member of the development team (including consultants) has been debarred and listed on EPLS (Excluded Parties List System), available at

C.    Prevailing Wage Requirement

Developments of twelve (12) units or more financed with HOME funds are required to pay at rates not less than the prevailing wages as determined by the Secretary of Labor.  For more information contact the Community Development department.  A wage determination will be issued by the department prior to the biding and award of any contract covered by Davis-Bacon wage requirements.

D.   Citizen Participation Plan

This plan describes how the City of Reading will involve the residents of the community in the

planning, implementation, and monitoring of the Action Plan.   Citizens will be consulted during the development of the Plan.  There will be three (3) general venues of pub_lic involvement:


·       public hearings;

·       community meetings and committees; and

·       individual citizen contact in the form of comments, complaints, or inquiries submitted directly to the Community Development Department.

Any awards made under the HOME program will be subject to the provisions of this plan, a complete copy of which is available in the Community Development office.


E.   Tax Abatement

The City of Reading has two tax abatement programs that are available to developers in the City: 

LERTA, which stands for Local Economic Revitalization Tax Assistance Program, applies to owners of industrial, commercial, or residential properties of 6 or more units that are contemplating repair, construction, or reconstruction of such property within the City of Reading.  Owners can receive a pro-rata ten (10) year tax abatement on the assessed valuation of the improvements to the real property.

ReTAP is the Reading Residential Tax Abatement Program, which applies to residential property owners that are contemplating repair, construction, or reconstruction of properties located in “deteriorated areas” within the City of Reading.  Owners can receive a pro-rata ten (10) year tax abatement on the assessed valuation of the improvements to the residential real property, or a three (3) year 100% tax abatement on the construction of new residential dwelling units.   This program currently applies to City of Reading property taxes only.

F.   CHDO Certification

Organizations must be certified or re-certified as Community Homeownership Development Corporations (CHDOs) at the time of commitment of funds to a site specific activity.  All CHDOs are required to submit a copy of the City’s certification documenting the basis for being a CHDO.  Submission of such information is required with an application.



A.  Affirmative Fair Housing Marketing Plan

All developments of five (5) units or more financed with HOME funds are required to submit an Affirmative Marketing Plan to the City outlining methods for providing information and otherwise attracting eligible persons in the market area to the available housing without regard to race, color, national origin, sex, sexual orientation, religion, familial status or disability. 


The Affirmative Marketing Plan must include methods to be used by owners to inform and solicit applications from persons not likely to apply for the housing unit without special outreach (e.g., use of community organizations, places of worship, employment centers, fair housing groups, or housing counseling agencies).


B.  Nondiscrimination Against Rental Assistance Subsidy Holders

The owner cannot refuse to lease HOME assisted units to a certificate or voucher holder under Section 8 Tenant-Based Assistance based on the status of the prospective tenant as a holder of such certificate, voucher or comparable document.


C.  Management and Maintenance Service Standards

All rental housing developments financed with City funds must provide management and maintenance services to the housing provided.  The developer will be required to submit a Management Plan and Agreement for review and approval.


D.  Annual Re-Certification

Projects funded by the City are audited each year for compliance in the following areas:

·       Certification of tenant income

·       Rent and utility allowances

·       Compliance with Local building codes and Housing Quality Standards

·       Owner's Written Agreements including Affirmative Fair Housing Marketing Plan, Management Plan and Management Agreement.

All units will be inspected upon completion.  Rental units will be inspected every three years at a minimum.  Buildings with more than 10 units must submit annual audited financial reports to document that the project is financially viable.






Requesting Payment, Fund Disbursement, and Record Keeping

A.  Requesting Payment


Requests for disbursement of funds:

·       Disbursement of funds will only occur under this agreement at such time as funds are needed for reimbursement of eligible costs

·       Project draws available for acquisition, lead abatement and clearance, rough-in inspection and issuance of a Certificate of Occupancy by the City

·       Completion reports are to be submitted and verified by City staff or contractor prior to payment

·       Retainage of 10% to be held until project is occupied and completion data submitted


When an applicant has completed a project, the City requires developers to submit the following items when requesting HOME funds:

1.Homebuyer Completion Report

2.Owner Occupancy Certification

3.Income Certification

4.Deed with HOME Deed Restrictions

5.HUD-1 Form

6.Property Closing Statement

7.Job Ledger Report

8.LBP Clearance Test

9.Contractor Agreement to use Lead Safe Practices

10.      If applicable, inspection report documenting lead has been removed

11.      Certificate of Occupancy


B. Project File Materials/Record Keeping

HOME recipients will be required to maintain the following items about each HOME-funded project and have these items available upon request from the City of Reading:


1.Development proposal

2.Beneficiary application

3.Counseling certification

4.Income determination documentation

5.Homebuyer underwriting

6.Pre-acquisition appraisal

7.Work write-up

8.Bid specifications

9.Contractor bid submittals

10.      Bid tabulation and notice of award

11.      Contractor eligibility certification

12.      Construction Contract(s)

13.      Notice to proceed

14.      Progress payment requests, inspection reports and authorizations

15.      Change order documentation and approval

16.      Final inspection and punch list

17.      Certificate of Occupancy

18.      Waiver of Liens

19.      Warranty information (if applicable)

20.      Affirmative marketing agreement and questionnaire

21.      Completed File checklist


The City of Reading will maintain the following items about each subrecipient and HOME-funded project:

1.Environmental Review

2.Application with exhibits

3.Development Proposals with attachments

4.Written Agreements

5.Monitoring and compliance reports



C.  Compliance Monitoring

Subrecipients and developers will be monitored by the City for compliance with the regulations of 24 CFR 92 for the period specified in the HOME agreement based on the affordability period of the project.  This will include monitoring of both the acquisition, procurement and construction process, as well the homebuyer eligibility, income verification and sales process.


D.  Record Keeping

Subrecipients and developers will maintain records and reports and allow access to project files as requested by the City during the PROJECT and for Five (5) years after completion and closeout of the agreement and end of the associated affordability period.



Evaluation Criteria

Applicants will be evaluated under the following criteria. These are not stringent requirements, but fulfilling one or more may increase the likelihood that a project is funded and is ready to close more promptly by the City.

A.    Readiness to Proceed

Proposals will be evaluated on the overall status of the project and likeliness to proceed smoothly during the current construction season.  Specific items that work in an applicant’s favor include:

1.         Firm funding commitments

2.         Applications made in response to a current City Request for Proposals

3.         Clear title to property if not publicly owned

4.         Reasonable timeline showing that work can commence promptly upon receipt of award


B.    High Quality Site Plans, Construction Drawings, and Specifications

Applications with professionally-prepared design and construction documents will move more quickly through the design and construction review processes and will therefore be given preferential treatment.




C.    Market Needs Assessment and Marketing Plan

As of 2012, all HOME projects must submit a market needs assessment that evaluates demand for the proposed units based on sales or rental data in that specific area and/or market category.  Reading’s Market Value Analysis will be released in fall or 2012 to assist in assessing sales activity, pricing and occupancy trends in neighborhoods throughout Reading.


A marketing plan must be developed for the units that delineates how the marketing will be targeted and how underserved individuals will be encouraged to apply.  Please see the attached Exhibit B for more details about the market analysis requirements.


D.    Developer Capacity

The developer must demonstrate both the financial and technical capacity to successfully complete the proposed project. This can be accomplished through resumes demonstrating the accomplishments and successes of organization principals, projects completed by the development team, or the employment of professionals or consultants who possess the requisite skills and experience to ensure a successful project.


The developer also must demonstrate the financial capacity to complete the project through financial statements, analysis of project cash requirements and commitments for interim financing.


Prior to allocating funding for the project, new HOME developers will be required to complete the capacity assessment and certification process as outlined in section B under General Regulations and Requirements above and documentation must be submitted and review per the requirements in Exhibit A, attached.


E.    Financial Feasibility

Proposals will be measured by the extent to which the applicant has demonstrated the overall soundness of the financial assumptions and that the request from the City is limited to the minimum required gap funding/financing.

1.     Leverage of other funding sources.  Combining other public and/or private funds to minimize the amount requested from the City is encouraged.

2.     Financial viability.  A sources and uses, pro forma, and construction budget will be submitted electronically and in hard copy utilizing the Excel-based “City of Reading Development Proposal.”  All costs and assumptions must be consistent with industry standards and standards outlined in the next section of this guide.

3.     Funding sources are documented, indicating exact level of commitment, conditions and time frame for expending funds. This may also be evaluated based on experience of applicant(s) in obtaining these commitments. 


F.    Other Considerations

1.     Developments that create mixed-income housing environments.

2.     Materials and construction standards exceeding Energy Star standards.

3.     Projects developed in coordination with other targeted neighborhood investments





Development Cost Standards


The following table and descriptions delineate the City’s guidelines and requirements for development costs.  Unless indicated as a “recommendation only,” standards below should be interpreted as requirements.



Minimum Required

Maximum Allowed


Construction Contingency




New Construction



of Total Development Costs (TDC) recommendation only




Developer Fee




New Construction



of  Construction costs




Contractor's Fees







of TDC




General Conditions




Construction Contingency: Contingency should be 5%-7.5% of the total construction costs for new construction and 7.5% to 10% for rehabs.  Numbers outside of those ranges require an explanation for the variance.


Developer Fee:  For new construction projects, the developer's fee and overhead, including any consultant fees, may not exceed 12% of the construction costs.  For rehabilitation projects, the developer's fee cannot exceed 15% of construction costs.


Contractor Fees:  The City may allow a maximum of 8% contractor's profit, 2% builder overhead and 6% general requirements.  Contractor's profit, builder overhead, and general requirements may not exceed 16% of the total construction costs less the sum of the contractor profit, builder overhead, and general requirements.  General requirements must include the cost of builder's risk insurance, all bonding costs, and temporary utilities.


Maximum Allowable Sales Price:  Units rehabilitated with HOME assistance for low and moderate income home purchasers must be sold at prices not exceeding current HUD purchase price limits listed for Berks County (Reading MSA) as shown below.


# of Units in Home

Maximum Sale Price

1 Family


2 Family


3 Family


4 Family


Last updated:

March 2015





         Newly constructed unit sale prices may be not exceed:


# of Units in Home

Maximum Sale Price

1 Family


2 Family


3 Family


4 Family


Last updated:

March 2015


Ineligible Costs:

a.         Bad debts: any losses arising from uncollectable accounts and other claims, and related costs.

b.         Contributions and donations.

c.         Entertainment: costs of amusements, social activities and incidental costs such as meals, beverages, lodging and gratuities relating to entertainment, or any political or lobbying activity.

e.         Fines and penalties: costs resulting from violations of or failure to comply with Federal, State, and local laws and regulations.

f.          Interest and other financial costs: interest on borrowing (however represented), bond discounts, cost of financing and refinancing operations, and legal and professional fees paid in connection therewith.

e.         Membership expenses: costs of membership in any organization which devotes a substantial part of its activities to influencing legislation.

f.          Non-competitive subcontracts: payments under a subcontract not obtained under competitive bidding procedure, unless the requirement for such a procedure is specifically waived by the City.

 g.        Any expenditure that does not lead to or produce a HOME eligible housing unit.


Conclusion: Thank you for your interest in the City of Reading’s HOME program!  Please feel free to contact the CD office or HOME program specialist with any questions or concerns.  We stand ready to assist you with the successful development of affordable housing in Reading.



Exhibit A

Assessment of Developer Capacity


1.    Experience and Capability

a.    Documentation required

                                              i.     Name of Organization, list of principals or owners, organizational chart and resumes of key staff members

                                             ii.     List of recent similar projects described in detail including budgets, scope of work and photos of project

                                           iii.     References with contact information for buyers, tenants and industry partners to verify experience, quality and integrity

                                           iv.     List of current project commitments

b.    Criteria reviewed

                                              i.     Resumes of principals must demonstrate successful experience with similar projects

                                             ii.     Recent projects will be reviewed to determine development quality, ability, integrity, and resolution of project challenges

                                           iii.     References will be checked and current commitments reviewed

                                           iv.     A vested interest in a property may be considered (i.e. ownership of an adjacent property)


2.    Financial Capacity

a.    Documentation required

                                              i.     Balance sheet or statement of net worth

                                             ii.     Income and expense statements, cash flow projections or tax returns providing proof of income to cover ongoing costs

                                           iii.      Trade account and financial institution references

                                           iv.     Letter of credit or statement detailing sources of funds

b.    Criteria reviewed

                                              i.     Balance sheet must demonstrate liquidity to fund project(s) and maintain acceptable leverage ratios (Available cash or LoC 1.5x all pending project commitments; Debt to Equity ratio of 2 or less)

                                             ii.     Statement of cash flows or proof of income must demonstrate ability to handle ongoing costs and cover overhead and debt service (1.5 debt coverage ratio)

                                           iii.     Project value cannot exceed 20% of total net worth


3.    Compliance record

a.    Documentation required

                                              i.     List of all properties owned in the City of Reading directly or through other entities

                                             ii.     List of loans, grants or assistance received from the City of Reading or other government agencies

                                           iii.     Copies of current Business Privilege Licenses in the City of Reading

b.    Criteria reviewed

                                              i.     Current on all property taxes

                                             ii.     Current and compliant on all rental housing permits

                                           iii.     No open Code violations or unpaid Quality of Life fines

                                           iv.     Acceptable record of compliance with Building and Trades permits and inspections

                                             v.     No delinquencies or compliance issues on City grants or loans

                                           vi.     Current Business Privilege Licenses and taxes

                                          vii.     Not owner of any properties previously certified as blighted










Appendix B


City of Reading


HOME Program


Market analysis requirements for single-family housing


To comply with new 2012 HOME program regulations, a market analysis must be conducted which answers the Key Questions below.  The analysis must review/consider the Demand Indicators as outlined.  As an alternative, developers may rely on the Market Value Analysis recently conducted by the Reading Redevelopment Authority.  To be eligible, projects must be in area identified as “Transitional”, with an owner-occupancy ratio of at least 50%, a median sales price of at least $50,000, and a vacancy rate at or below 10%.  Projects may be located in blocks adjacent to Transitional areas in an effort to reduce the spread of blight and help serve as a buffer between the Transitional market area and deteriorated areas.  There are currently two areas identified as “Transitional” and designated as eligible for the investment of HOME funds.   Those areas include the Penn’s Common Historic District adjacent to and near City Park and the Centre Park neighborhood as identified in the 2012 City of Reading Housing Strategy available at


Projects in an identified Neighborhood Revitalization Strategy Area (NRSA) are also eligible.  The area known as “Ricktown” is eligible as an NRSA and is bounded by Washington Street on the south; Front St. on the west; Buttonwood on the north and N. 4th St. on the east.  Facing properties on adjacent blocks are also eligible.  More details about this NRSA are available in the City of Reading’s Housing Strategy.


Key Market Analysis Questions

• Has a need for the type and number of housing units been convincingly demonstrated?

• Will developer/program be able to sell the planned homebuyer units prior to the six-month deadline?

• Will developer/program be able to lease-up the planned rental units as expected, e.g. within the time frame specified in the project pro-forma?

• Will the development adversely impact existing affordable housing developments?


Housing demand indicators

• Demographic trends

• Housing supply

• Construction trends

• Vacancy rates

• Market context

– Project area/neighborhood

– Metropolitan wide

– County wide

– Other broad market area


The Market Value Analysis is available at


 A detailed map of the MVA data can be found at . Select the “TRF Analytics” tab, then select “Pennsylvania” and “Reading 2011” in the menu.



 Homeownership Underwriting Requirements


HOME assisted homeownership projects, must include the following elements:

§  An analysis must be completed to insure that the initial purchase price and the after rehab value of the unit do not exceed 95% of the area median purchase price. The determination of median purchase must use the HUD published data sets for either newly constructed houses or existing houses based on the type of project.

§  If a homeownership unit does not sell within 9 months following issuance of Certificate of Occupancy, the unit must be converted to a rental unit. Only an executed sales contract is sufficient to demonstrate a sale of a unit. If conversion of a homeownership unit to a rental unit occurs, a new subsidy/underwriting document must be prepared for the project to analyze the project from a rental underwriting perspective to insure compliance with HOME program requirements.

§  A homeownership unit can only become a lease-purchase unit if a formal lease-purchase program has already been established and an agreement with the potential homebuyer is executed prior to the start of the unit construction or rehabilitation.

§  If a lease purchase program is proposed by a developer, program guidelines must be prepared and approved by the PJ prior to the investment of HOME funds.

§  As part of the subsidy/underwriting preparation, insure that homebuyer counseling is required. The counseling must be completed prior to the homebuyer closing the project and must be carried out by a HUD certified counselor. Evidence of the HUD certified counselor and experience should be included each project file.  The homebuyer counseling must be completed by the buyer within 6 months of the closing. This is an eligible program soft cost and can be incorporated into the project development budget if necessary.

§  For homebuyer projects that involve rehabilitation, an assessment must be completed to insure that units/buildings major systems have a useful life of at least five years following rehabilitation.

§  As part of the underwriting of each project, an evaluation of the homebuyer must be done to include the following:

§  Evaluation of housing debt and overall debt as shown in the guidelines.

§  Monthly expenses of the family.

§  Financial resources available to sustain and maintain housing

§  Evaluation of the terms, for all loans to which HOME funds are subordinated, to insure that they are reasonable and sustainable.

§  The City will require a minimum cash investment from the buyer towards the home purchase based on their income and assets. 

§  The City will review the buyer’s assets as part of direct homeownership assistance to determine if they can afford an additional contribution towards the purchase of the unit.  The maximum investment required of the homebuyer, based on existing assets, is $5,000.