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Judson Brown, City of Santa Ana March 19, 2020 <br />Westview House: Financial Gap Analysis Page 15 <br />PRELIMINARY HOME COST ALLOCATION <br />HOME regulations require projects that include HOME funds to conduct a subsidy <br />layering analysis demonstrating that the HOME assistance is required to provide <br />affordable housing. The subsidy layering review must be completed prior to formally <br />committing HOME funds, which cannot occur until all of the other funding sources have <br />been committed to the Project. <br />Given that the remaining funding sources will not be committed in the near term, the <br />City will conduct the subsidy layering review at a future date. However, the City <br />requested that KMA conduct a preliminary assessment to quantify the number of HOME <br />units that will likely be required by the HOME Program. <br />Cost Allocation (§92.205(d)) and HOME Unit Designation (Table 5) <br />HOME funds may only be used to pay eligible costs for HOME -assisted units. When <br />fewer than 100% of the units are designated as HOME assisted, the participating <br />jurisdiction must calculate the eligible costs that are allocable to the assisted units and <br />may only pay the actual costs related to those HOME assisted units, capped by the <br />maximum subsidy limits previously described. The financial gap analysis concludes that <br />the Project needs $3.90 million in total financial assistance and the City will utilize $2.0 <br />million in HOME funds as part of the assistance package. <br />HOME Assistance Cost Allocation <br />KMA used the Standard Method to determine the cost allocation. As detailed in Table 5, <br />KMA estimated that eligible project costs equate to $497 per square foot of net <br />residential area. As such, a total of nine (9) units are proposed to be designated as <br />HOME -assisted units by the City. This consists of: three (3) one -bedroom units, one (1) <br />two -bedroom unit, three (3) three -bedroom units, and two (2) four -bedroom units. <br />Therefore, per the cost allocation test, these nine HOME -assisted units justify providing <br />$3.67 million in HOME assistance. <br />There is also a maximum HOME subsidy requirement that must be met. In order to <br />commit $2.0 million to this Project, based on the 2019 maximum subsidy limits, three <br />(3) one -bedroom units, one (1) two -bedroom unit, three (3) three -bedroom units, and <br />two (2) four -bedroom units need to be restricted as HOME units. <br />2003012:SA:TRB <br />60 B-29 19090.017.022 <br />