M-A-D Prison Ministry
M-A-D After Jail/Prison Supportive Housing Ministry
To learn more about each type of funding, click on the corresponding link. - See more at: http://www.csh.org/toolkit/supportive-housing-quality-toolkit/project-design-and-administration/financing/#sthash.Hzu21kNl.dpuf
Capital Funding
Building the Capital Budget
The Development or Capital Budget is used to project the total capital requirements of the project. It provides a detailed analysis of all development costs to be incurred to complete the project.
These usually fall into two broad categories - hard and soft costs:
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Hard costs include such terms as land acquisition, construction and rehabilitation work, and offsite improvements (such as sewers or utilities).
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Soft costs include such items as architectural services, appraisals, engineering, legal costs, fees and permits, and rent-up costs.
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Two important questions to ask in preparing or evaluating a development budget are:
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Is the budget complete? Does the budget include all of the costs that the developer/sponsor will incur to complete a fully operational project? This requires understanding the project in detail.
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Is the budget accurate and reliable? As a project gets closer to construction, it becomes possible to refine cost projections and budgets. By the time a project has an identified site, preliminary funding commitments and basic design, the development budget should be fairly refined.
Learn more about Preparing the Supportive Housing Project Proforma, a financial plan for developing and operating the project.
Learn more about Preparing a Supportive Housing Project Development Budget, including detailed descriptions of potential development costs.
Sources of Capital Financing
In addition to understanding the costs that are part of capital budget, it is also important to understand the sources of financing that can be used to fund the budget. A significant portion of capital financing originates at the federal level, including funding administered by the U.S. Department of Housing and Urban Development (HUD). HUD sources generally flow to project sponsors in one of two ways:
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Through formula grants (including block grants), in which funds flow from HUD to a local government entity (usually a county or city, and sometimes a state) and on to individual project sponsors.
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Through competitive grants, which HUD awards directly to project sponsors.
Other significant sources of financing for housing development that originate at the federal level include the Federal Home Loan Bank's Affordable Housing Program, which is administered by its District Banks, and Low Income Housing Tax Credits, which are primarily administered by state housing finance agencies. These are both competitive programs.
In addition to administering federal block grant funds for housing development, most states have developed locally generated housing sources.
Operating Funding
Operating Pro Forma
Operating funding and associated budgets and sources are relevant for all projects that build (develop) new units of housing and for some that lease existing housing units in the private market. If you are creating the units in the project through leasing, the terms of your lease will determine whether the project will require ongoing operating funding for maintenance or other expenses.
The Operating Pro Forma is the tool used to estimate the expenses of a project during operations. It provides a summary of anticipated ongoing project expenses. The three most critical aspects of evaluating the Operating Pro Forma are:
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Is it complete? Does the Pro Forma include all of the costs that the owner/property manager will incur to properly maintain and manage a successful project?
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Is it accurate? What are the underlying assumptions in establishing operating costs, and are they reasonable? The best assumptions are the actual costs of comparable projects.
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Is it realistic over time? The operating budget deals with the continuing costs of operating the project over time. Therefore, multi-year projections should be scrutinized carefully, to ensure that escalation factors are prudent, given the nature of the project and expected economic conditions.
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Forms of Operating Funding
Operating subsidies supplement the difference between what the tenant can afford to pay and a reasonable rent charged under market conditions. To determine the level of subsidy, first determine fair-market rent (the amount a landlord could charge for that unit on the open market) and then subtract the tenant’s portion (about 30% of a tenant’s income).
Operating subsidies generally take three forms:
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Project-based are those that are "attached" to particular housing units.
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Tenant-based subsidies attach to an individual or family.
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Sponsor-based attaches to a specific housing sponsor, typically a non-profit housing developer or supportive housing provider.
Supportive Services Funding
Building the Services Budget
All supportive housing projects should have a supportive services budget that is separate from the housing operations budget for the project. Most funding sources will require the clear separation of these budgets. As with all budgets, projected expenses must be matched with projected revenues.
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Expenses: The support services budget must include staffing and service activity levels adequate to assist tenants to live independently in the supportive housing project. The expense portion of a social services budget will generally consist of personnel and other than personnel expenditures.
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Revenues: A major challenge for supportive housing sponsors is to blend resources to provide ongoing support for a range of activities for the diverse tenant population. Revenue for supportive services costs is generally provided either as a fee-for-services arrangement, through a publicly funded contract in which the organization provides specified supportive services according to an established budget, or through private fundraising.
Forms of Supportive Services Funding
Services funding utilized within supportive housing is generally provided for:
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The delivery of particular services
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The utilization of a particular service strategy
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Addressing the needs of a particular population, defined by its service needs
Federal funding for services, like funding for development and operating costs, is generally distributed by formula grants (including block grants) or competitive grants.
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Formula Grants: The majority of federal service funding is allocated by formula grants, primarily block grants. Grant funds are generally allocated to states based on a distribution formula prescribed by law or administrative regulation that reflects the demographic and/or location-specific service needs.
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Competitive Grants: A competitive process for specific projects allocates project grants for services generally for fixed or known periods. Many funding programs specific to the homeless are competitive grant programs.