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How Housing Grants Work

Housing grants are designed to assist low-income households purchase or rent affordable homes, or to help them make home modifications and repairs. Funds for such grants are made available to local and state governments by the U.S Department of Housing and Urban Development (HUD). The amounts that are made available to each jurisdiction varies and depends to a certain extent on the amount of funds that are set aside for housing grants annually by the federal government.

One of the largest federal housing grant programs is a HUD initiative called HOME which distributes an average of nearly $2 billion annually among each of the states and hundreds of local communities. According to HUD, state governments can receive a maximum of $3 million annually while local communities are eligible for at least $500,000. The funds are designed solely to help state and local governments develop affordable homes for purchase for low-income households or to make available HOME-assisted rental housing units for them.

Strict rules attach to such grants. To qualify for a HOME-assisted rental property for instance, a household’s total income should not exceed 60% of the median household income for that area. Households seeking to purchase a home using a housing grant cannot have incomes exceeding 80% of the median household incomes for the area. The rent for a HOME-assisted housing unit can also not exceed certain previously set limits for that area. The program also establishes maximum home purchase price limits. In addition, the jurisdiction receiving the funds also needs to put up at least 25 cents for every dollar of housing grant money they spend on an eligible project.

Housing grants can also be used to make home modifications and repairs. For instance, housing grants can be used to weatherize a home or for renovations that make it more energy efficient. Local jurisdictions too have considerable leeway in how they spend their grants. In addition to using grant money on affordable homes for purchase and for rent, a local government could use the money to acquire or improve sites, to rehabilitate rundown properties or to demolish totally dilapidated ones.