# COMAR Title 05 — Department of Housing and Community Development

## Subtitle 05 — Rental Housing Programs

### Chapter 09 — Shelter and Transitional Housing Facilities Grant Program

**Authority:** Housing and Community Development Article, §2-102(a)(7), Annotated Code of Maryland;Ch. 396, Acts of 2011; Ch. 444, Acts of 2012; Ch. 424, Acts of 2013; and Ch. 463, Acts of 2014

**Administrative History:** Effective date: November 7, 1994 (21:22 Md. R. 1873)

**Administrative History:** Regulations .01—.07 and .09—.16 amended effective October 5, 1998 (25:20 Md. R. 1527)

**Administrative History:** Chapter revised effective September 7, 2009 (36:18 Md. R. 1380)

**Administrative History:** Regulation .03B amended effective June 22, 2015 (42:12 Md. R. 761)

**Administrative History:** Regulation .04C amended effective June 22, 2015 (42:12 Md. R. 761)

**Administrative History:** Regulation .08 amended effective April 19, 2010 (37:8 Md. R. 614)

**Administrative History:** Regulation .11B amended effective June 22, 2015 (42:12 Md. R. 761)

**Administrative History:** Regulation .12 amended effective June 22, 2015 (42:12 Md. R. 761)

**Administrative History:** Regulation .13A amended effective June 22, 2015 (42:12 Md. R. 761)

**Administrative History:** Regulation .16 amended effective March 16, 2015 (42:5 Md. R. 485)

#### Regulation .01 General.

*COMAR 05.05.09.01*

This chapter describes the policies, procedures, and authorizations for providing capital grants funded with State moneys for shelter, transitional, or other housing facilities for homeless households, and administering the Shelter and Transitional Housing Facilities Grant Program.

#### Regulation .02 Objective.

*COMAR 05.05.09.02*

The objective of the Program is to provide capital financing for local governments and nonprofit organizations to develop shelter, transitional, or other housing facilities for homeless individuals and families.

#### Regulation .03 Definitions.

*COMAR 05.05.09.03*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Applicable codes and standards” means the zoning, construction, health, safety, fire, occupancy, and other codes and standards applicable to the project in the political subdivision in which the project is located.

  (2) “Capital assistance” means Program funding provided to a sponsor to finance the development costs of a project.

  (3) “Capital assistance documents” means all documents either executed or supplied by a sponsor in connection with the application for and closing of capital assistance financing.

  (4) “Capital equipment and furnishings” means permanently affixed equipment or other equipment, machinery, fixtures, and furnishings necessary to operate a shelter, transitional, or other housing facility for homeless households, including HVAC systems, stoves, refrigerators, washers, dryers, and playground equipment.

  (5) “Department” means the Department of Housing and Community Development of the State of Maryland.

  (6) Development Costs.

    (a) “Development costs” means those costs incurred for the acquisition, new construction, reconstruction, or rehabilitation of shelter, transitional, or other housing facilities for homeless households that are eligible for financing under the Program in accordance with Regulation .05 of this chapter.

    (b) “Development costs” includes the value of any labor provided by the sponsor for the project.

    (c) “Development costs” does not include the costs of off-site improvements.

  (7) “Homeless” means a household without permanent housing and lacking the resources to obtain permanent housing, or a household in imminent danger of homelessness.

  (8) “Household” means an individual or group of individuals who occupy or intend to occupy a shelter, transitional, or other housing facility unit for homeless households in a project.

  (9) “Housing Finance Review Committee” means the Housing Finance Review Committee established under Housing and Community Development Article, §4-208, Annotated Code of Maryland.

  (10) “Local government” means any municipal corporation in Maryland subject to the provisions of Article XI-E of the Constitution, the Mayor and City Council of Baltimore, any of the 23 counties in Maryland, and any housing authority authorized under Housing and Community Development Article, Annotated Code of Maryland.

  (11) “Nonprofit organization” means a corporation, foundation, or other legal entity no part of the net earnings of which inures to the benefit of any private shareholder or individual holding an interest in the entity.

  (12) “Nonprofit sponsor” means a:

    (a) Nonprofit organization; or

    (b) Limited partnership formed for the purpose of undertaking a project which is eligible in whole or in part for federal programs or incentives, including low-income housing tax credits, if:

      (i) Each of the general partners qualifies as a nonprofit organization, or

      (ii) The general partner of the limited partnership is a wholly owned subsidiary of the nonprofit organization and a nonprofit organization manages the development of the project or will be the recipient of net cash flow of the residual sale proceeds upon sale of the project.

  (13) “Program” means the Shelter and Transitional Housing Facilities Grant Program.

  (14) “Project” means any undertaking for the acquisition, construction, reconstruction, or rehabilitation of buildings or improvements or any portion of them, financed by the Program, which will be occupied by homeless households, except for any units occupied by management personnel.

  (15) “Secretary” means the Secretary of Housing and Community Development.

  (16) “Service provider” means a sponsor or a person or entity that contracts with a sponsor to provide services to a shelter, transitional, or other housing facility for homeless households.

  (17) Shelter, Transitional, or Other Housing Facility for Homeless Households.

    (a) “Shelter, transitional, or other housing facility for homeless households” means a housing facility, including apartments, condominiums, townhouses, single-family homes, single-room occupancy facilities, and shared housing facilities which:

      (i) If a shelter facility, provides sleeping accommodations and support services for homeless households on a short-term basis, but for a period not to exceed 6 months, while other arrangements are being explored;

      (ii) If a transitional facility, provides housing for up to 24 months, and support services to help homeless households achieve stable, permanent housing; or

      (iii) If another type of housing facility for homeless households, provides housing with no length of stay requirement, and support services as appropriate to help homeless households.

    (b) “Shelter, transitional, or other housing facility for homeless households” includes improvements directly related to providing shelter, transitional, or other housing facilities for homeless households, including but not limited to:

      (i) Community spaces;

      (ii) Maintenance work areas;

      (iii) Administrative and support service offices;

      (iv) Laundry; and

      (v) Units occupied by management and service personnel.

  (18) “Shelter, transitional, or other housing facility units for homeless households” means the shelter, transitional, or other housing units in a shelter, transitional, or other housing facility for homeless households that are financed with capital assistance.

  (19) Support Services.

    (a) “Support services” means services that help the household achieve as high a level of self-sufficiency as possible.

    (b) “Support services” may include case management, child care, life skills assistance, and linkage to services in the community.

#### Regulation .04 Eligible Sponsors.

*COMAR 05.05.09.04*

A. Nonprofit sponsors and local governments are eligible to receive capital assistance for shelter, transitional, or other housing facilities for homeless households.

B. Each nonprofit sponsor or local government shall meet all of the following requirements that are applicable:

  (1) If the nonprofit sponsor is a business entity, the entity shall be in good standing and be qualified to do business in Maryland;

  (2) The sponsor shall:

    (a) Own the property in fee simple or under a lease acceptable to the Department, or

    (b) Have a valid purchase contract to acquire the property and secure acceptable title before or upon receipt of the capital assistance;

  (3) The sponsor shall have all necessary legal and corporate authorizations to incur the obligations of the capital assistance;

  (4) Sponsors shall be in good standing and may not be under suspension or debarment from the Department of Human Services or from any of the Department's programs.

C. Each sponsor shall agree in writing:

  (1) That all of the shelter, transitional, or other housing facility units for homeless households financed with the capital assistance shall be maintained for homeless households for not less than 15 years;

  (2) To abide by all nondiscrimination requirements set forth in Regulation .16 of this chapter;

  (3) To monitoring by the Department during the term of the capital assistance of:

    (a) The physical condition of the project,

    (b) Occupancy information and records for the project, and

    (c) Management and operational activities at the project.

D. Each sponsor shall provide evidence acceptable to the Department that any financing being obtained outside the Program is assured and acceptable to the Department.

#### Regulation .05 Eligible Uses.

*COMAR 05.05.09.05*

A. Program funds may be used for:

  (1) The cost of acquiring land and buildings;

  (2) Necessary studies, surveys, plans, specifications, appraisals, compaction tests, test borings, construction cost estimates, and environmental impact reports;

  (3) Site preparation;

  (4) Cost of labor and materials, including reasonable overhead and profit, for construction, rehabilitation, and installation of improvements as set forth in approved proposals or plans and specifications;

  (5) Acquisition of capital equipment and furnishings to be installed at the project; or

  (6) Fees and premiums normally incurred in real estate development including indemnity and surety bonds, hazard and liability insurance, legal and closing costs, and other costs and fees acceptable to the Department.

B. Program funds may not be used:

  (1) To refinance existing debt on projects;

  (2) To finance the costs of any portion of a building or undertaking that does not provide shelter, transitional, or other housing units for homeless households and the necessary space and facilities required to operate the project;

  (3) For transaction costs associated with the offering and syndicated sale; and

  (4) For replacement of capital equipment and furnishings, such as beds, furniture, and floor coverings, and noncapital items in existing shelter, transitional, or other housing facilities for homeless households except under certain circumstances.

#### Regulation .06 Eligible Projects.

*COMAR 05.05.09.06*

A. To qualify as an eligible project for capital assistance, the project shall meet the following requirements:

  (1) Be located within the State;

  (2) When the project is complete:

    (a) Be in compliance with zoning requirements and applicable codes and standards; and

    (b) Be in compliance with the Minimum Livability Code required in COMAR 05.02.03;

  (3) Be owned by a nonprofit sponsor or local government; and

  (4) When complete, provide a shelter, transitional, or other housing facility for homeless households.

B. If a project includes uses other than shelter, transitional, or other housing for homeless households, such as traditional rental housing or nonresidential uses, the number of transitional housing units may not be less than the amount of capital assistance provided to the project divided by the total development costs of the project multiplied by the total number of units in the project.

#### Regulation .07 Terms and Conditions — Repayment.

*COMAR 05.05.09.07*

A. Conditional Repayment Obligation. Repayment of capital assistance may not be required unless the project ceases to be owned by a sponsor or operated in accordance with the requirements of this chapter and the terms and conditions of the capital assistance documents.

B. Conditions for Repayment. The Department may recover capital assistance from the sponsor if:

  (1) The sponsor terminates the project before completion; or

  (2) Within 15 years following completion of the project:

    (a) The sponsor refinances, assigns, conveys, sells, or transfers an interest in all or some portion of the project or property:

      (i) To any person, agency, or organization without the prior written consent of the Department; or

      (ii) For use other than as a shelter, transitional, or other housing facility for homeless households;

    (b) The sponsor ceases to operate all or a portion of the project as a shelter, transitional, or other housing facility for homeless households; or

    (c) The sponsor encumbers or permits any other lien against the project or the property without the prior written consent of the Department.

C. Amount of Repayment. If the conditions in either §B(1) or (2) of this regulation exist, the Department shall recover from the sponsor:

  (1) The amount of capital assistance provided to the project divided by the total development costs of the project, multiplied by the fair market value of the project at the time the condition for repayment occurs; and

  (2) All costs and reasonable attorney fees incurred by the Department in recovery proceedings.

D. Notice of Repayment.

  (1) Before the payment of any capital assistance, the sponsor shall record notice, in the form acceptable to the Department, in the land records of the jurisdiction in which the project is located, of the Department's right to repayment.

  (2) The sponsor shall provide evidence of the recordation to the Department.

#### Regulation .08 Terms and Conditions — Property, Liability, and Other Insurance.

*COMAR 05.05.09.08*

A. At or before closing of a loan, and at such other times as required by the Department, the sponsor shall provide evidence that the sponsor, contractor, and other parties, have obtained and maintained the following insurance:

  (1) Owner's liability;

  (2) Owner's property or hazard or contractor's builder's risk;

  (3) Contractor's liability;

  (4) Architect's errors and omissions;

  (5) Engineer's errors and omissions; and

  (6) Flood insurance, if the project is located in a flood hazard zone.

B. All insurance required under §A of this regulation shall meet the following requirements:

  (1) Be written by a company registered with the Maryland Insurance Administration;

  (2) Be in force at the time of closing;

  (3) Not be terminable without prior notification to the Department; and

  (4) Contain such other terms and coverage satisfactory to the Department.

C. In addition to the requirements of §A of this regulation, owner's liability insurance shall:

  (1) Name the Department as an additional insured; and

  (2) Remain in force for the duration of the loan.

D. In addition to the requirements of §A of this regulation, contractor's liability and contractor's builder's risk insurance shall:

  (1) Name the Department as an additional insured; and

  (2) Remain in place through final closing or such later date as the Department requires.

E. In addition to the requirements of §A of this regulation, owner's property or hazard insurance shall:

  (1) Name the Department as an additional insured, loss payee, and mortgagee; and

  (2) Remain in force for the duration of the loan.

F. For local governments, the Department shall:

  (1) Evaluate any self-insurance program to determine if adequate coverage and terms acceptable to the Department can be provided; and

  (2) Accept coverage under the self-insurance program subject to the determination.

#### Regulation .09 Terms and Conditions — Amount of Capital Assistance.

*COMAR 05.05.09.09*

A. General Rule. Except as provided in §B of this regulation, total capital assistance to a project may not exceed 50 percent of the total development costs of the shelter, transitional, or other housing facility for homeless households.

B. Exceptional Rule. Capital assistance may be in an amount equal to 75 percent of the total development costs of the project if:

  (1) The sponsor demonstrates to the satisfaction of the Department that all available sources of funds have been sought and insufficient funds are available to the project;

  (2) The sponsor agrees in writing to serve households who upon initial occupancy in the shelter, transitional, or other housing facility for homeless households have annual incomes that do not exceed 30 percent of the area median income as determined by the Department of Housing and Urban Development and adjusted for household size; and

  (3) The Department determines that the project cannot support repayment of loans offered by the Department or other public lenders.

C. Calculation of Amount.

  (1) The amount of capital assistance for a project shall be determined based on an analysis of the financial feasibility of the project and the availability of resources to repay other sources of funds.

  (2) Within the limitations established in §§A and B of this regulation, the capital assistance may not exceed total project costs, less the sum of other resources provided by the applicant and less the amount of any loan the Department determines the project can support without impacting the financial feasibility of the project or the capability of the sponsor to provide the services proposed in the application.

#### Regulation .10 Capital Assistance Documents.

*COMAR 05.05.09.10*

A. The Department shall provide the sponsor with copies of standard form capital assistance documents.

B. The capital assistance documents may include the following:

  (1) A conditional financing agreement with conditions for repayment;

  (2) A notice of the Department's right to repayment which shall be filed in the land records of the jurisdiction in which the project is located;

  (3) A regulatory agreement, which is an agreement covering the administrative and occupancy requirements of the capital assistance;

  (4) A disbursement agreement, which is an agreement setting forth the terms and conditions for the disbursement of capital assistance funds over the course of construction or rehabilitation of the project;

  (5) Contractor's letter and certification, which is an agreement provided to the Department by the project's general contractor in which the general contractor agrees not to amend the construction or rehabilitation contract without the Department's consent and, in the event of default by the sponsor, to cooperate with the Department in the completion of the project;

  (6) Assurance of compliance with equal employment, civil rights, fair housing, and drug-free workplace requirements, which is an agreement committing the sponsor to comply with State and federal provisions governing employment and housing in force in the State; and

  (7) Other documents as may be required by the Department.

#### Regulation .11 Making an Application.

*COMAR 05.05.09.11*

A. Applications for capital assistance shall be made upon standard forms required by the Department.

B. Each application shall include the following information or items:

  (1) A site map that identifies the location of the property;

  (2) Evidence that the sponsor owns the site or has control of the site, such as a deed, contract of sale for the site, site option agreement, or other instrument satisfactory to the Department;

  (3) A general description of the site and project and the plan of action for construction, reconstruction, rehabilitation, general improvements, or purchase of capital equipment and furnishings;

  (4) Evidence of the sources and availability of all financing which is not provided by the Program and which is necessary to complete a project;

  (5) A management plan including:

    (a) A description of the proposed services to be provided to residents of the shelter, transitional, or other housing facility for homeless households;

    (b) Descriptions of the service provider and management agent, if different from the sponsor;

    (c) A set of proposed administrative and maintenance procedures; and

    (d) A copy of the proposed lease or leases;

  (6) A description of the households expected to be served, including projected income levels and proposed rents;

  (7) Evidence of compliance with any applicable zoning;

  (8) Preliminary plans and specifications or a proposed scope of work, an estimate of development costs, and an estimate of any additional expenses necessary to complete the project;

  (9) A proposed operating budget for the project;

  (10) Other information the Department requires which may be set forth in the application package or requested in writing by the Department.

#### Regulation .12 Application Processing Procedures.

*COMAR 05.05.09.12*

A. Local Governments.

  (1) For each project for which an application is received under this chapter, the Department shall provide written notice and reasonable opportunity to comment on the project to the chief executive officer or the equivalent officer and the head or president of the legislative body of the political subdivision in which the proposed project is located.

  (2) If a proposed project is in a municipal corporation, the notice required under §A(1) of this regulation shall be sent to the chief executive officer and the head or president of the legislative body of the municipal corporation, not the surrounding county.

  (3) The notice provided under §A(1) of this regulation shall contain the following information about the proposed project:

    (a) Date of application;

    (b) Name and description of project;

    (c) Address of project;

    (d) Sponsor of the project and sponsor’s contact information;

    (e) Amount of funding requested;

    (f) Amount, type, and provider of other sources of funding;

    (g) Total number of units; and

    (h) Such other information as the Department deems relevant.

B. Notification Letter to Sponsor.

  (1) Upon receipt and analysis of all documentation necessary to assess the feasibility of a project, the Program shall issue a written notification letter to the sponsor that details conditions that shall be met in order for the Program to recommend approval of capital assistance, including:

    (a) Final plans, specifications or scope of work, and firm costs for the acquisition, construction, rehabilitation, and capital equipment and furnishings;

    (b) A minority business participation plan that complies with the Department's Minority Business Enterprise Program;

    (c) Evidence of the commitment of any other necessary financing; and

    (d) Other documentation required by the Department and included in the notification letter.

  (2) An expedited analysis of whether to recommend approval of capital assistance may be conducted and recommendation of approval or disapproval made under §C of this regulation without the intermediate step of a notification letter, if all necessary documentation is provided with the initial application.

C. Approval.

  (1) Upon satisfaction of all terms and conditions of the notification letter, the Program shall undertake an analysis of each application to determine the final recommended amount of capital assistance and any recommended special terms and conditions for the project.

  (2) Except in the case of an emergency when urgent action is required, all capital assistance in amounts greater than the minimum amount set forth in COMAR 05.01.07 shall be submitted to the Housing Finance Review Committee for review and recommendation to the Secretary for modification, approval, or disapproval of the capital assistance and the terms under which it shall be provided.

  (3) Upon receipt of a recommendation of the Housing Finance Review Committee, the Secretary shall approve or disapprove the capital assistance and the terms under which the capital assistance shall be provided. In an emergency when urgent action is required, the Secretary, or the Secretary's designee, may approve the capital assistance without the recommendation of the Housing Finance Review Committee.

  (4) For capital assistance in amounts at or below the minimum amount set forth in COMAR 05.01.07, the Department's Director of the Division of Development Finance may approve the capital assistance without the recommendation of the Housing Finance Review Committee.

D. Commitment Letter. Upon approval of the capital assistance under §C of this regulation, the Department’s Director of the Division of Development Finance or the Division’s Director of Multifamily Housing is authorized to issue a commitment letter setting forth the amount of the capital assistance and the terms and conditions under which the capital assistance shall be made.

E. Expiration of Commitment.

  (1) The Department shall specify in the commitment letter a time within which the execution of the commitment letter and the capital assistance documents shall occur, which time limits may be extended in the Department's sole discretion.

  (2) If execution of the commitment and capital assistance documents does not occur within the time limits specified by the Department, the commitment shall expire, and upon written notification to the sponsor, the Department may withdraw the moneys encumbered for the project and use them for any other project authorized by the regulations.

F. Rejection of Applications. If the Department determines not to recommend approval of a project for capital assistance, the Program shall issue a written notice of rejection.

G. Reconsideration.

  (1) Sponsors may request reconsideration of a rejection by submitting a written request to the Director of the Division of Development Finance, to be received within 30 days following the date of the Program's rejection notice. The request for reconsideration shall address each reason for the rejection and provide documentation supporting reasons for reconsideration of the issues.

  (2) The Director shall respond in writing to the sponsor's request for reconsideration within 30 days of receipt of the request for reconsideration.

  (3) Sponsors may request reconsideration of the written response of the Director by submitting a written request for reconsideration to the Secretary to be received within 30 days of the date of the written response of the Director. This request shall be referred to the Housing Finance Review Committee for review and recommendation to the Secretary, who shall take final action regarding the request.

  (4) An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01.02.

#### Regulation .13 Allocation of Funds.

*COMAR 05.05.09.13*

A. Priority.

  (1) It is the intent of the Department that Program funds be made available throughout the State.

  (2) Funds generally shall be available on a first-come, first-served basis based upon the readiness of projects to initiate acquisition, construction, rehabilitation, or purchase of capital equipment and furnishings, and provided that the Department has the right, in its sole discretion, to deny funding to any project.

  (3) If a project application is submitted but funding is not then available under the Program, the Program in its discretion may continue to process the application until such time as funding is available, and then may authorize the capital assistance without the necessity of a new application.

B. Funding Availability.

  (1) The Department may from time to time publicize the availability of moneys to provide capital assistance.

  (2) The Department may at any time consider applications for capital assistance or may establish beginning and ending dates for the receipt of applications.

#### Regulation .14 Fund Administration.

*COMAR 05.05.09.14*

A. Funds shall be maintained in the State Treasurer's account and may be withdrawn by the Department upon the request of the Director of Multifamily Housing or the Director's designee to reimburse or pay for development costs.

B. Sponsors shall requisition funds on forms required by the Department in accordance with the terms of the capital assistance documents for approved development costs.

#### Regulation .15 Program Administration.

*COMAR 05.05.09.15*

A. Guidelines. The Program may establish from time to time detailed Program guidelines containing underwriting standards, processing requirements, and other requirements or matters relating to providing capital assistance.

B. Delegation. The Secretary may delegate to the Director of the Department's Division of Development Finance, or to any other official or employee of the Department or Program, the authority to execute or approve any capital assistance documents or other documents governing capital assistance, except waivers under Regulation .18 of this chapter.

#### Regulation .16 Nondiscrimination; Drug and Alcohol Free Workplace.

*COMAR 05.05.09.16*

A. A sponsor or contractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, sexual orientation, or physical or mental disability, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in leasing or otherwise providing dwelling accommodations or in any other aspect of the development, administration, or operation of any project financed or assisted under the Program, or in any aspect of employment by any sponsor, developer, or contractor in the construction, reconstruction, and rehabilitation of any project financed or assisted under the Program.

B. Each sponsor or contractor shall comply with all applicable federal, State, and local laws and department policies and programs regarding discrimination and equal opportunity in employment, housing, and credit practices, and drug and alcohol free workplaces, including:

  (1) Titles VI and VII of the Civil Rights Act of 1964, as amended;

  (2) Title VIII of the Civil Rights Act of 1968, as amended;

  (3) The Fair Housing Amendments Act of 1988, as amended;

  (4) State Government Article, Title 20, Annotated Code of Maryland, as amended;

  (5) The Americans with Disabilities Act of 1990, as amended;

  (6) The Department’s Minority Business Enterprise Program, as amended; and

  (7) Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order.

C. Covenants implementing the requirements in this regulation, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties.

#### Regulation .17 Books and Accounts.

*COMAR 05.05.09.17*

A. Sponsors, developers, contractors, and subcontractors shall maintain such books, accounts, and records and shall file with the Department such financial and other reports as the Department may from time to time require.

B. The books, accounts, and records shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours.

C. Books, accounts, and records of contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the contractor and the sponsor.

#### Regulation .18 Waiver.

*COMAR 05.05.09.18*

The Secretary may waive or vary particular provisions of these regulations to the extent that the waiver is consistent with the legal authorizations for the Program, if:

A. In the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Program; and

B. The Secretary's determination is approved for form and legal sufficiency by the Office of the Attorney General.