State of North Carolina Community Development Block Grant
Individual Development Account Application
North Carolina Department of Commerce
Division of Community Assistance
A governing or management official, from the local government, must attend one of the workshops to be eligible to apply for any of the CDBG programs.
Individual Development Accounts Program
Summary
In order to further the importance of homeownership, the Division of Community Assistance (DCA) is providing funds to local governments for the purpose of setting up Individual Development Accounts (IDA) programs in areas that they serve. IDAs are a new approach to asset building and self-sufficiency that have the potential to be a significant tool in the process of social reform. At the core of this approach is the hypothesis that home ownership, entrepreneurship, improved skills and enhanced education will provide low-income residents with jobs, hope, self-esteem and a future that for some has not materialized. This program will support development of home ownership not just through the incentive and assistance of building assets, but also data that will inform future asset-building policy and programs.
Generally, IDAs are restricted savings accounts whose proceeds may be used by poor and working poor families and individuals for one of three asset-building purposes: saving for the down payment on a new home, starting or further developing a small business, or acquiring education and training. In IDAs, participant savings are matched by public and private investment. In 2009, funding under DCA’s program will only be available for first-time homeownership. Each program site should plan on three (3) months of planning and condition removal from the day a grant agreement is delivered, and up to 33 months of account operation.
This Request for Proposals (RFP) provides background on IDAs and the Program. The accompanying Application Packet contains application instructions and forms. Only local governments may apply for CDBG funds.
The grant cycle for 2009 is open on a first come, first serve basis, for qualifying applications, from May 1 to September 30, 2009. No applications will be accepted after 5:00 p.m. on September 30, 2009. Those wishing to participate in the Program should submit their proposals to Gloria Nance-Sims, Director, Division of Community Assistance, 4313 MailServiceCenter, Raleigh, NC27699-4313.
A governing or management official, from the local government, must attend one of the workshops to be eligible to apply for any of the CDBG programs.
The North Carolina IDA Program
Background
What Is an IDA?
Individual Development Accounts are dedicated savings accounts, similar in structure to Individual Retirement Accounts (IRAs), that can only be used for purchasing a first home, education or job training expenses, or capitalizing a small business (DCA’s IDA program is restricted only to first-time home ownership). They are managed by community organizations and accounts are held at local financial institutions. Contributions for lower income participants are matched using both private and public sources. Additionally, all participants receive economic literacy training that shows them how to clean up their credit, set up a budgeting and savings schedule, and teaches them the basics of money management.
Current income maintenance policy raises people to the poverty line, leaving them only one sickness, one accident, or one divorce away from poverty. While providing food, shelter and clothes to low-income families is imperative, this aid alone will not produce viable escapes from poverty. Washington University Professor Michael Sherraden notes, "Income may feed people's stomachs, but assets change their heads."
Why an IDA Program?
Sherraden, who introduced the concept of IDAs in his 1991 book, Assets and the Poor, explains that the distribution of assets in this country is much less equal than income distribution. While the top 10% of Americans command 40% of national income, the top 1% control 90% of assets. Fully one-third of American households have no or negative investable assets, more than half have negligible amounts. National policy reinforces asset inequality. Asset acquisition for the non-poor is subsidized by over $200 billion annually in the form of home mortgage deductions, preferential capital gains, and pension fund exclusions. Meanwhile, welfare recipients have been denied eligibility if they exceeded the $1,000 asset limitation and thus were prohibited from acquiring the piece of business machinery that could enable them to create their own job, or saving for their own or their children's college education, or purchasing a first home.
Owning assets gives people a stake in the future -- a reason to save, to dream, to invest time, effort, and resources in creating a future for themselves and their children. Sherraden pinpoints nine effects of asset building:
- Improves household stability.
- Psychologically connects people with a viable, hopeful future.
- Stimulates development of other assets, including human capital.
- Enables people to focus and specialize.
- Provides a foundation for risk-taking.
- Increases personal efficacy.
- Increases social influence.
- Increases political participation.
- Enhances the welfare of offspring.
IDAs address the deficiencies of the current system by returning to the asset-based policies responsible for America's greatest periods of economic growth and prosperity. Our long history of asset-building policies includes the Homestead Act of the 19th Century and the GI Bill of the 20th Century. The former provided land on the frontier to stimulate economic growth. The latter subsidized college tuition for war veterans, who in turn, drove our post-war economic expansion.
Why IDAs in North Carolina?
North Carolina has one of the best broad-based coalitions in North Carolina’s extensive community economic development network, the North Carolina IDA and Asset Building Collaborative. The Collaborative is composed of key human services providers, state agencies, policy makers, and the private philanthropic and corporate sectors, and has already assembled significant support behind IDAs and asset-based policies. Having attracted the investment of not only the private philanthropic sector, but also state and federal funds, North Carolina has a great opportunity to help its under-served populations build assets and promote self-sufficiency. The Collaborative is headed by Shayna Simpson-Hall. The Collaborative can be contacted at: Shayna Simpson-Hall, Executive Director, North Carolina IDA and Asset Building Collaborative, Post Office Box 27386, Raleigh, NC27611, via email at , or via phone at (919) 875-3685.
North Carolina’s CDBG IDA Program
The Program
Structure and Purpose
The Division of Community Assistance (DCA) will provide funding, while resources last, for community-based partnerships that have established track records and trusting relationships in serving disadvantaged constituencies. Although IDAs may be used for different purposes, this program will only support homeownership for first-time homebuyers with low-to-moderate incomes. Sites must be able to support at least 20 accounts.
For those sites that are awarded funds from DCA, in addition to the technical assistance provided by DCA staff, the Collaborative will support the sites through ongoing training, technical assistance, and peer exchanges, design of economic literacy curriculum and other materials, mobilization of a statewide funding pool for IDA matches and program costs, assistance with local fundraising, and a vigorous policy advocacy and public education campaign.
In the event that more organizations apply to participate in the program than will be able to be selected as full participants, the Collaborative is able to provide technical assistance to continue asset-building activities with all interested parties. Education, technical assistance, tools and materials developed will be made available to all organizations interested in asset-building strategies, even if not funded at this time. Our ultimate goal is to build a high-performing, interlinked network of community-based partnerships offering IDAs and support for other asset-building activities.
North Carolina Department of Commerce, Division of Community Assistance
DCA has set aside $200,000 of the State of North Carolina Community Development Block Grant Funds (from the U.S. Department of Housing and Urban Development) from the Housing Development category for use in establishing IDAs. In addition, de-obligated funds from the Housing Development category will be applied to IDAs in 2009. These funds will be awarded to approved applicants supporting homeownership IDA programs. Partnerships receiving these funds will be subject to all CDBG regulations and requirements. To be eligible for any CDBG program, the lead applicant must be a non-entitlement municipality or non-urban county. Entitlement cities and urban counties receive their CDBG funds directly from the federal government and are not eligible for funds through the State CDBG program.
Individual Development Account Program
IDA Program Guidelines
These guidelines have been prepared to assist local governments applying for State of North Carolina Community Development Block Grant (CDBG) funds to support Individual Development Account projects (IDAs).
A. Award Amounts
The maximum award for an IDA project is $70,000 for single applicants or for consortia applications. The minimum award amount is $30,000.
B. Eligible Activities and Budget Amounts
There are three eligible activities for the state’s CDBG IDA program: housing services, down payment assistance, and administration. The budget for each line item is dependent upon the number of proposed participants to complete the program. At the time of application, the applicant must specify the number of program participants expected to complete the program (complete all educational and counseling requirements and purchase a home) in the three-year time frame. The minimum number of proposed completions is twenty (20); the maximum is thirty (30).
Housing services funds are available to pay for the four educational/counseling requirements of the grant (see part E of this section for further details). Up to $1,000 per proposed completed participant may be budgeted for this activity (i.e. $20,000 for 20 proposed completions, $30,000 for 30 proposed completions).
DCA will provide $1,000 in down payment assistance for each participant that completes the IDA program. These funds will be available at the time of closing on the home. CDBG funds used as matching funds must be used as down payment assistance or to cover closing costs when purchasing a home. The purchasing household must be a first-time homebuyer (or not owned a home in the previous three years), meet HUD LMI guidelines, and the home purchased must be the primary residence of the purchaser. The applicant must budget $1,000 of CDBG funds per proposed completed participant for this activity (i.e. $20,000 for 20 proposed completions, $30,000 for 30 proposed completions).
Up to $10,000 may be budgeted by the grantee for administration of the program, regardless of the number of participants.
C. Ineligible Activities
CDBG funds may not be used to finance IDAs for purposes other than homeownership. All homes purchased using CDBG IDA funds must meet North Carolina residential building codes for residential construction. Mobile homes are not eligible to be purchased using CDBG IDA funds; homes must be modular or stick-built. All homes purchased must also meet local building codes.
D. Grant Limitations
Local governments may not receive more than a total of $1,250,000 in combined awards from the 2009 allocation of CDBG funds in the following categories: Community Revitalization (Concentrated Needs and Revitalization Strategies), Economic Development (including Urban Redevelopment), Housing Development (including IDAs), Infrastructure (including Hook-Ups), Scattered Site Housing, and Contingency; nor may they have applications requesting more than $1,250,000 under active consideration at any given time in the these same categories. Funds awarded for Urgent Needs projects are not included in this combined cap.
For consortia applicants, only the grant awards received by the lead applicant will be considered.
E. Basic Requirements
Housing Services Program Components
Grantees must provide the following services to participants as part of their provision of Housing Services (these are the services that the Housing Services CDBG funds are designed to pay for):
1)Credit Reporting and Counseling – This should be done as soon as possible upon intake of the participant into the program in order to avoid enrolling participants who are not eligible for home loans due to poor credit. At least one visit with a credit counselor is required in order to review the participant’s credit report. Future counseling sessions can be offered on an as-needed basis. Use of a certified credit counselor is required.
2)Financial Literacy - A minimum of twenty-one (21) hours of financial literacy are required for each participant, consisting of class time and homework. Such topics to be covered include, but are not limited to, understanding of asset building and the importance of saving, budgeting and financial decision-making, credit management, and introduction to financial services. DCA reserves the right to review the proposed curriculum.
3)Homeownership Education – A minimum of eight class hours of homeownership education are required for each participant. Such topics to be covered include, but are not limited to, the home buying process, understanding interest rates and mortgages, insurance, taxes, and basic home maintenance.
4)Housing Counseling – A certified housing counselor is required to meet with each participant so that the participant most fully understands the rights and responsibilities of homeownership and to help ensure that the home being purchased meets affordability principles.
Matching Funds
The Division of Community Assistance will provide matching funds for no fewer than 20 accounts per IDA program. Participants’ savings must be matched with at least two dollars for every dollar saved. Up to one dollar of the match will come from CDBG, the remaining match is to be provided by a locally obtained source. The maximum amount of CDBG matching funds for any individual participant within a program is $1000, for a total expected account balance of $3000: $1000 saved by the participant, $1000 CDBG match, and $1000 match provided locally. The locally provided match may come from any source provided it isnot from state government funds (Housing Trust Fund, e.g.). It must be firmly committed at the time of application, but does not have to be “in-hand”. If a higher local match can be raised, the program is free to increase the local match or otherwise supplement the matching incentive.
To qualify for a match, participants’ savings must come from their earned income (i.e., no gifts from friends or family members, deposits made from past savings, or transfer or entitlement payments). The minimum time period for a participant to be enrolled in the program is six months.
There is no match requirement for Housing Services funds. Administrative funds must be matched 1:1 by a local source, but that match can be in-kind and may be applied to housing services activities.
Lead Entity
Each applicant must name a lead entity to lead the IDA project. This lead entity may be a governmental department, local non-profit, consultant, or some other organization. As such, the lead entity accepts responsibility for day-to-day operations and administrative duties for the grant. If the lead agency is not a branch of the local government applicant, a legally binding commitment or sub-recipient agreement between the local government and the lead entity will be required.
F. Access to CDBG Funds
Local governments may not make lump-sum drawdowns of CDBG funds for matching purposes. Funds must be drawn account-by-account for matching purposes, and used at the time of closing on the home. CDBG funds can make up no more than one-third of the total down payment assistance or closing costs. IDA participants must be first-time homebuyers (have not owned a home in the previous three years). Account holders will not have direct access to CDBG funds (i.e. CDBG funds will not be placed in an IDA account nor given directly to participants).
G. Partnerships
IDA funds are intended to be used in conjunction with other contributions. The most successful projects will establish partnerships with financial institutions, community groups, and other agencies for funding and administration. Besides general administration and management of the program, the following roles will need to be identified at the time of application:
1)Provider(s) of Housing Services
2)Financial Institution/Account Holder/Potential Lender(s)
3)Partners for Marketing and Promotion of IDA Program
H. Application Development Process
Applicants are encouraged to consult with DCA during the application development process to ensure the application meets all requirements and contains the minimum required information. Applicants should also involve community residents and stakeholders in the application development process and planning process to ensure community input into the project design.