By Suzanne Anarde, RCAC chief executive officer

Earlier this year, the impacts of increased building material costs became very apparent for our Mutual Self-Help (MSH) families and their sponsors on the ground. I wanted to share some of the data that Dick Kempke at RCAC, along with other MSH intermediaries, put together. It is another indication of how COVID-19 has disproportionately impacted rural communities and the families that inspire our work in those communities.

The National Rural Self-Help Housing Association (NRSHHA) sent out a voluntary survey regarding cost overruns during the pandemic to its members (approximately 100 current grantees) in January 2021. Twelve responses were received. The assumption is that if grantees were not experiencing the problem, or have already identified a solution, they would be less apt to complete a survey.

Cost overrun survey results were as follows:

• 10 respondents (83%) had cost overrun experiences with homes under construction during 2020.
• 114 homes were affected (average of 11 units per grantee).
• 6 respondents (60%) of those with cost overruns say they have no resources to cover the overage.
• 10 respondents (83%) said that home values have increased during the pandemic in their market.
• $8,650* was the average cost overrun of homes affected.

*The range of cost overruns was between $3,500 and $15,000 per house.

RCAC’s Loan Fund and Housing teams are working on an interesting subsidy solution for self-help construction owner builders in our region, with cost overruns, who do not qualify for a 502 supplemental loan. We can possibly use Capital Magnet Funds (CMFs) to provide a subsidy. While every MSH 523 grantee/organization is not a CDFI, there may be CDFIs in their region that have access to CMFs, which might be available to help fill the cost overrun gaps. RCAC is using these funds as a grant with a 10-year compliance period and Deed Restrictions. The maximum grant amount averages $15,000, so we may have some that are higher and others lower, but we will stay within an average of $15,000, based on the CMF guidelines associated with our CDFI award. The MSH 523 grantee would select the families based on need and provide the family calculations, sign a Regulatory Agreement, be responsible for annual compliance reporting and enter into a Deed Restriction agreement with the family. The MSH 523 grantee would be integrally involved in the process and would be the applicant, on behalf of their owner/builders, to RCAC for the CMFs. If a family is in violation of their Deed Restriction (10-year period from date of occupancy) then the MSH 523 grantee would be responsible for collecting the CMF grant amount made to the family, and either providing a replacement family in the same income category or repaying the amount to RCAC.

If the home sells, is refinanced or the original owner no longer occupies it as their permanent residence within the 10 years, the owner will have to pay back the full amount, unless the funds are recaptured and used for another eligible homeowner in the same income bracket (low- or very low-income). These funds are designed to enhance affordability and are secured by a Regulatory Agreement and Deed Restrictions. We are encouraging MSH 523 grantees to provide basic project information for review and preliminary determination of eligibility before submitting a formal application.

We are excited to see these two RCAC departments brainstorm together on how to leverage these valuable resources to help resolve a very relevant and current challenge!

If you are interested in learning more about this program, please contact Robert Longman at RCAC (rlongman@rcac.org) or your T&MA contractor.