Affordable Housing Glossary
Abatement: A reduction or decrease. Usually applies to a government-granted decrease in property taxes, but can also refer to the reduction or termination of other debt.
Abstract: A short legal history of a piece of property, tracing its ownership (title) through the years. An attorney or title insurance company reviews the abstract to make sure the title comes to a buyer free from any defects (problems).
Abutting: Having property or district lines in common.
Acquisition Financing: Funds obtained for the purpose of purchasing vacant land or properties (exclusive of any funds needed for property improvements or rehabilitation).
Acquisition Rehab: A strategy of purchasing and rehabbing substandard homes or properties for rent or for sale with affordable financing to low- or moderate-income renters or buyers.
Adaptive Reuse: The rehabilitation of an existing property to serve a new purpose.
Ad valorem taxes: Property taxes based on assessed value of property.
Affordable Housing: According to the U.S. Department of Housing and Urban Development (HUD), housing is affordable if it costs the occupant no more than 30% of their income for gross housing costs, including utilities.
Americans with Disabilities Act (ADA): A federal civil rights law that protects individuals who are physically and mentally disabled, prohibiting discrimination in employment, public services, public accommodations, and telecommunications. Entities that are covered by ADA must make reasonable accommodations, which may involve adapting programs, facilities, or work places to allow disabled individuals to participate.
Appraisal: Estimate of the real or market value of a property, that is, what the owner could reasonable expect to get upon sale. Estimates are usually made by professional real estate appraisers.
Appreciation: An increase in the value of property due to changes in market conditions or other causes.
Appropriation: A form of federal or state budget authority that permits obligations to be incurred and payments to be made.
AMI (Area Median Income): AMI is the midpoint in the income distribution within a specific geographic area. By definition, 50% of households earn less than the median income, and 50% earn more. HUD calculates AMI levels for different communities annually, with adjustments for family size. AMI is used to determine the eligibility of applicants for both federally and locally funded housing programs.
Assessed valuation: The value assigned to a property by the local government unit for real estate tax purposes. This is usually less than the market value of the property. The relationship between assessed and market value varies widely depending on location and jurisdiction.
Assessment: A levy against property for a special purpose, such as a sewer assessment.
Assessment Rolls: The public record of all taxable property within a jurisdiction.
Assessor: A public official who evaluates property values for the purpose of taxation.
B
Balance Sheet: An accounting statement of the financial position of a company showing all assets, liabilities and net worth as of a specific date.
Basic Rent: The rent charged in a subsidized housing project and computed on the basis of a maximum subsidy.
Below Market Interest Rate (BMIR): Applies to certain mortgage programs (such as from CHFA or other tax-exempt bond issuers, or direct government loans (DOH or USDA-RD)) where the interest rate on the mortgage is below that charged for conventional financing, in order to assist low-and moderate-income families rent or purchase dwelling units.
BOCA (Building Officials and Code Administrators): Refers to the basic building code manual, used nationally as a standard, and locally with certain adaptations.
Buffer zone: A strip of land, identified in the zoning ordinance, established to protect one type of land use from another with which it is incompatible. Buffer zones may either be shown on the zoning map or described in the ordinance with reference to neighboring districts.
Building Code: Local or state health and safety regulations that control design, construction, alteration, use, occupancy, etc. of any structure.
C
Capital: Money invested either in a business or property to create income.
Capital Asset: An asset of a permanent or fixed nature, or one used in carrying on a business or trade.
Capital Expenditures: The cost of an improvement made to extend the useful life of a property or to add to its value.
Capital Gain or Capital Loss: The gain or loss incurred from the sale or disposition of a capital asset (such as a property).
Capital Improvements: Improvements on a property that increase its value; also, improvement of public facilities such as streets, sewers, etc.
Cash Flow: In investment property, the actual cash the investor will receive after deduction of operating expenses and debt service (loan payment) from gross income.
Certificate/Voucher/RA: Tenant-based rental assistance provided to the tenant in the form of a certificate or voucher (HUD) or Rental Assistance (USDA-RD), See Section 8
Certificate of Compliance: Commonly used synonymously with "zoning permit" in which an official certifies that the plans for a proposed use are in conformance with the zoning ordinance.
Code Compliance: To be in accordance with required building codes (local, state, BOCA).
Code Inspection: The assessment of the design, construction, and material used in buildings in meeting required building codes.
Collateral: Property pledged as security for a debt, for example, mortgaged real estate.
Colorado Housing and Finance Authority (CHFA): A government-sponsored enterprise working to finance affordable housing, business and economic growth opportunities for Colorado. CHFA offers financing for home ownership mortgages to qualifying low- and moderate-income Colorado individuals and families, as well as rental housing loans for new construction and rehabilitation of existing rental units. CHFA also administers the Low Income Housing Tax Credit (LIHTC) program. www.colohfa.org
Colorado Housing Trust Fund Coalition (CHTFC): A broad-based coalition whose mission is to establish a statewide housing trust fund with a dedicated source of public revenue for the creation and preservation of affordable housing throughout Colorado.
Colorado Division of Housing (DOH): A division of the Colorado Department of Local Affairs which provides financial assistance and services that increase the availability of housing to residents of Colorado who can least afford it. The Division of Housing distributes federal funds and state funds, when available. www.dola.state.co.us/doh/inde
Community Development Block Grants (CDBG): A federal program administered by HUD which provides grant funds to local and state governments to develop viable urban communities by providing decent housing and expanding economic opportunities for low- and moderate-income residents. www.hud.gov/offices/cpd/commu
Community Development Financial Institutions: An array of diverse institutions that lends to low-income and, increasingly, middle-income persons, Native American reservations and community development projects, complementing the work of conventional lenders. Included are community development banks, community development credit unions, community development loan funds and micro-loan funds.
Community Investment Program: A federal program established by the Financial Institutions Reform, Recovery, and Enforcement Act through which Federal Home Loan Banks provide low-cost advances and direct subsidies to member banks for purchasing or renovating owner-occupied or rental housing for families with incomes up to 115 percent of the area median, for low- or moderate-income commercial or economic development, and for mixed-use projects combining housing and commercial or economic development activities.
Community Land Trust: A means of restricting use of land and housing through not-for-profit ownership of land with leases to the land users. It is often used to protect low-income housing from speculation.
Community Reinvestment Act (CRA): A 1977 federal law that requires banks and savings and loan associations to help meet the credit needs of their local communities, including low-income communities. www.bos.frb.org/commdev/pdf/c
Condominiums: Multifamily housing projects with individual units owned by occupants, who also own an undivided interest in the common areas and facilities of the project.
Consolidated Plan: A document written by a state or local government describing the housing needs of the low- and moderate-income residents and outlining strategies to meet those needs. The consolidated plan is required by HUD in order to receive Community Planning and Development funds.
Construction Loan: A short term loan which enables a developer to pay for land and construction costs, contractor’s bills and other expenses during the construction period. Also called interim financing.
Conventional Loan: A mortgage loan not insured by FHA or guaranteed by the VA or by USDA-Rural Development
Cooperative: A corporation where the stockholders are entitled to occupancy of real estate (i.e. apartments) through proprietary leases or other like arrangements.
CPM (Certified Property Manager): A professional certification in property management.
D
Debt Capital: Money loaned at an agreed interest rate for a fixed term of years: distinguished from equity capital.
Deed Restrictions: Clauses in a deed limiting the future uses of the property. Deed restrictions can take many forms: They may limit the density of buildings, dictate the types of structures that can be erected, prevent buildings from being used for specific purposes or used at all, and limit the resale price, etc.
Density: The ratio between total land area and the number of residential or commercial structures placed upon it. Local ordinances usually regulate density.
Department of Housing and Urban Development (HUD): A federal government agency responsible for national policy and programs that address the nation's need for fair and affordable housing for low- and moderate-income people. HUD administers several programs, including Community Development Block Grants, Section 8 certificates and vouchers, subsidized public housing, homeless assistance, and fair housing education and enforcement. www.hud.gov
Depreciation: A sum representing presumed loss (from physical wear and economic obsolescence) in the value of a building or other real-estate improvement and deducted annually from net income to arrive at taxable income.
Development Process: The process through which developed projects are conceived, initiated, analyzed, designed, financed, built and managed.
Down payment: The amount of cash a buyer is required to put up in order to purchase a piece of property; it is generally equal to the purchase price less the amount of mortgage loans used to finance the purchase.
E
Easement: A right to the limited use or enjoyment of land held by another. An easement is an interest in land – such as to enable sewer or other utility lines to be laid, or for access to a property.
EDA (Economic Development Administration): An agency of the Department of Commerce that provides planning, technical assistance and financial resources to qualifying programs.
Eminent Domain: The right of governmental bodies, public utilities and public service corporations to take private property for public use (e.g., schools, roads, sewer, power line towers) on payment of its fair market value.
Encumbrance: An outstanding claim or lien on a property. A property with a mortgage is said to be "encumbered" by that mortgage.
Energy Audit: A building evaluation to assess the condition and efficiency of heating units and to identify locations of heat loss.
Equity Capital: Money invested by owners or others who share in profits or tax breaks.
F
Fair Market Rent (FMR): Rent guidelines determined by HUD to be the cost of modest, non-luxury rental units in a specific market area for various size units (1 bedroom, 2 bedroom, etc.). With certain exceptions, it is the highest rent chargeable for that market under the Section 8 program. FMR’s are revised annually and are different for each community.
Fair Market Value: The price at which property is transferred between a willing buyer and a willing seller, based on accurate appraisals, and and neither party is under compulsion to buy or sell.
Family Homeless Prevention and Assistance Program: A program that provides grants to encourage and support innovations at the county, region, or local level in redesigning the existing homelessness support system or in establishing a comprehensive system. Funds are used for a broad range of purposes aimed at preventing homelessness, shortening the length of stay in emergency shelters, and/or assisting families with securing transitional or permanent affordable housing.
Feasibility Study: A detailed investigation and analysis conducted to determine the financial, economic, technical, or other advisability of a proposed project.
Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac): A government sponsored enterprise that purchases mortgages into the secondary mortgage market from insured depository institutions and HUD-approved mortgage lenders.
Federal Housing Administration (FHA): A federal agency (a part of HUD) designed to encourage private housing financing through the insurance of mortgages.
Federal National Mortgage Association (FNMA, or Fannie Mae): A government sponsored enterprise – a private corporation chartered to provide a secondary market for residential mortgages.
Foreclosure: A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower’s debt.
Forgivable Loan: A loan given with conditions which, when met, allow the loan to be forgiven. Such loans are often used to reduce the debt on lower-income housing, and assure the project’s affordability for a specified period of time.
Front-End Money (Front Money): Funds required to start a project and generally advanced by the developer or equity owner as a capital contribution to the project, also called "seed money."
G
Gap Financing: A loan required by a developer to bridge the gap i.e. to make up a deficiency between the amount of mortgage loan due on project completion and the expenses incurred during construction.
Government-Sponsored Entity (GSE): A federally chartered enterprise that performs specific credit functions and, generally, is privately owned. Examples include Freddie Mac, Fannie Mae and Federal Home Loan Banks.
Grandfathered: Zoning use that, once allowed, may be continued even though other zoning is changed, e.g., a prior commercial use on a lot may be continued even after residential zoning has been instituted on surrounding property.
Grant: Funds given for a specific purpose, which do not have to be repaid.
Guaranteed loan: Loan in which a private lender is assured repayment by the Federal Government of part or all of the principal, interest or both, in the event of default by the borrower. Unlike an insured loan, no insurance fund exists and no insurance premiums are paid.
Guaranty: An agreement where one party pledges to perform a service or repay an obligation to another.
H
Hard Cost: The cost of land acquisition and improvement.
HOME Program: The HOME Investment Partnerships (HOME) program, operated by HUD, is a federal housing block grant program that allows states and local governments the flexibility to fund a wide range of low-income housing activities, including moderate and substantial rehabilitation, new construction, tenant-based rental assistance and other housing-related activities.
Housing Authority: An agency charged with housing for low-income citizens; it often owns and/or operates public housing units.
Housing Development Corporation: A private (for-profit or nonprofit), single-family or multifamily housing corporation established to serve a specific geographic area (neighborhood, city, state, region). Develops housing, provides technical assistance, lends seed money, and directly sponsors housing developments. Generally, community residents, local business people and government officials have representation on its board of directors.
Housing Finance Agency (HFA): Generally a state agency which is responsible for the financing of lower-income homeownership and rental housing and the administration of Tax Credits and subsidized housing programs. (see CHFA)
Housing Trust Fund: Distinct funds established by cities, counties and states that permanently dedicate a source of public revenue to support the production and preservation of affordable housing.
HUD: See Department of Housing and Urban Development.
HUD Income Guidelines: Income levels used for determining eligibility for HUD assistance programs, typically expressed as a percentage of the area median income.
Very Low Income: Households whose income does not exceed 50% of the area median income.
Low Income: Generally, a household whose income does not exceed 80% of the area median income.
Moderate Income: Generally, households whose incomes range between 80% and 100-120% of the area median income.
I
Income Limits: Family income limits established by law for admission into low-and moderate-income housing projects, or to qualify for rent supplement assistance. Based on family size and geographic location.
Infrastructure: Facilities and services of a community as they relate to providing transportation, water, sewer and recreation or community services.
Individual Developments Accounts (IDAs): IDAs are matched savings accounts that enable low-income families to save for home ownership, post high-school education and business capitalization. Qualified participants receive financial training and establish savings goals. When they achieve these goals, their savings are matched by funds provided by private and public donors.
Insured Loan: Loan in which a private lender is assured repayment by the Federal Government of part or all of the principal or interest, or both, and for which the borrower pays insurance premiums.
J
Joint Venture: An agreement between two or more parties to invest in a business or property.
L
Land Contract: An agreement to transfer title to a property once the conditions of the contract have been fulfilled. Usually the buyer does not receive title to the property until the final payment is made.
Land Loan: A loan for the purchase of property, which is held pending zoning or financial approval.
Land Trusts or Leases: A technique popular in England, and recently popular with affordable housing groups in the United States, in which a trust or other nonprofit developer sells a building to the residents, but retains ownership of the land on which it is located and provides a long-term lease. This technique reduces the cost of acquisition (since the buyer need not purchase the land) and helps the nonprofit to retain future control over disposition of homestead property.
Land survey: measurement of a specific parcel of land to ascertain area, corners, boundaries, topography, and divisions with distances and directions of such parcel.
Land Use Plan: Policy for the use of land that is intended to serve the general welfare.
Lead-Safe Housing: a new standard for cleaning up lead-contaminated housing that recognizes that lead paint that is intact is not hazardous to children while lead paint that is deteriorating can cause a child to become lead poisoned. Under this standard, education about lead hazards and safe clean-up, are seen as critical to preventing children from becoming lead poisoned. Lead-safe clean-up is much less costly, much more practical, and more child-protective than "lead-free" (also called abatement) clean-up.
Lessee: The tenant.
Lessor: The landlord.
Lien: A legal claim on a property for payment of a debt either secured by the property or some other financial obligation, e.g., mortgage taxes, unpaid repair or construction bill.
Limited Partnership: A partnership consisting of one or more general partners and limited partners. The general partner manages the business, while the limited partner(s) contribute(s) cash. The limited partner's liability is limited to the amount he or she has invested.
Low-Income Housing Tax Credit: A tax credit allowed for investors as an incentive for the development and preservation of multifamily rental housing affordable to low- and very-low-income households, sometimes referred to as Section 42. www.hud.gov/offices/fheo/liht
M
Manufactured Home: Any of a number of categories of factory-built or pre-fabricated housing including mobile homes.
Market Rent: Rental rates in the private market place., or rents that would be charged by an owner if the owner were paying conventional market –rate, unassisted financing rates for the project.
Market Study: A projection of future demand for a specific type of project, usually with a recommendation for a number of units to be developed, to be sold or rented, and a sale or rental price.
Market Value: The price at which a property could be sold on the open market, with buyer and seller free from abnormal pressure.
Mortgage Banker: A lender who originates loans for sale to other investors. The mortgage banker generally continues to service the loans.
Mortgage Revenue Bond: Bonds issued by a public entity payable from revenues derived from repayments of principal and interest on mortgage loans which were financed from the proceeds of the bonds.
N
Net Operating Income (NOI): In rental properties, this is the gross income from rents and other sources minus the vacancy allowance and operating expenses. The net operating income is the amount available for making loan payments (debt service) and paying investors (cash flow).
NIMBY: Not In My Back Yard.
Nonprofit Sponsor: A group organized to undertake one or more housing projects for reasons other than making a profit. Generally groups are incorporated as 501 ( C) 3 corporations to enable tax-free charitable contributions for their operation.
Non-recourse Loan: A type of mortgage loan in which the lender’s remedies in the event of the borrower’s default are limited to foreclosing the mortgage; the borrower is not personally liable.
Notice of Funding Availability (NOFA): A notice by HUD, USDA-RD or other agency to inform potential project sponsors of contract authority by a funding agency.
O
Occupancy Regulations: Regulations limiting the number of people who are allowed to live in a housing unit and the kinds of activity permitted on the premises. The most prevalent form of occupancy regulation is the requirement that each housing unit be occupied by only one family.
Operating Subsidies: Payments to public and nonprofit housing agencies to assist the payment of operating expenses of public housing or to the owners of certain multifamily projects serving low-income families.
Origination Fee: The fee charged by a lender to prepare loan documents, make credit checks, inspect and underwrite a property; usually computed as a percentage of the face value of the loan.
P
Participation Loan: A mortgage loan in which one institution makes the original loan in which one or more other institutions purchase an interest.
Partnership: An association of persons joined by contract to combine their property, resources, labor or skills, to provide for sharing of profits or losses in a pre-determined and proportionate manner. The profits and losses are passed through to the partners who report them on their individual income tax returns. The partnership itself pays no taxes.
Permanent Financing: Mortgage loan covering the total development cost of a project. It is a long term obligation which generally goes in place after the project is constructed and open for occupancy.
PITI: Stands for principal, interest, taxes and insurance -- the components of a monthly mortgage payment.
PITI Ratio: The principal, interest, tax and insurance payment-to-income ratio that is used in mortgage-lending decisions.
Planning Commission: A local or regional organization, normally a government agency, responsible for preparing and adopting comprehensive, long-term general plans for the physical development of property within its jurisdiction.
Pro Forma: A statement showing the projected annual income and operating expenses of a project.
Project Cost: Total cost of a project including professional compensation, land costs, construction costs, furnishings and equipment, financing ,and all other charges necessary for the successful completion of the project.
Public Housing Authority (PHA): A public agency created by a state or local government to finance or operate low-income housing.
Purchase agreement: a written proposal by a buyer to purchase real estate that becomes binding upon acceptance by the seller.
Q
Quitclaim deed: A deed relinquishing all interest, title, or claim in a property by a grantor, but not representing that such title is valid, nor containing any warranty or covenants for title.
R
Rental Assistance (RA): Tenant-based rental assistance generally provided by USDA-Rural Development to low-income families in rural areas (see Certificates/vouchers).
Rental Assistance for Family Stabilization: Provides rent assistance to families on public assistance who are involved in a self-sufficiency effort. The program is administered jointly by a local housing agency and local self-sufficiency provider.
Reserves: Cash or letter of credit held to fund future liabilities. Typical reserves include replacement reserve for major repairs, operating reserve for covering negative cash flow and contingency fund.
Reverse Annuity Mortgage (RAM): A form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as security.
S
Second mortgage: A mortgage that has rights secondary to the first mortgage, i.e., the proceeds from a foreclosure sale must pay the first mortgage before any funds can go to repay the second mortgage.
Section 8: A federal housing assistance program in which participants pay a portion of their adjusted gross income (i.e. income after standard deductions) for rent and the remainder of the rent is paid by HUD. Section 8 is either project based or tenant based. www.hud.gov/offices/pih/progr
Section 8 Project-Based Assistance: This form of assistance is linked to a particular property so that a tenant moving into the building pays 30% of their adjusted gross income in rent and the remainder is subsidized. The tenant receives the rental assistance as long as they live in the building and remain income eligible.
Section 8 Tenant-Based Assistance: This form of assistance is issued to the tenant in the form of a certificate or voucher, which the tenant can use to rent from a landlord who participates in the program.
Section 8 Certificate: A rent subsidy that allows a tenant to rent a unit priced at or below the fair market rent (FMR) set by HUD. The rental property owner is paid for the difference between 30% of the renter's income and the unit's rent.
Section 8 Voucher: A rent subsidy that allows a tenant to rent a unit that is above the fair market rent (FMR) set by HUD. The rental property owner is paid for the difference between 40% of the renter's income and the FMR. The tenant pays the amount of rent over the FMR.
Section 202: A HUD housing subsidy program for elderly, handicapped or disabled.
SRO (Single-Room Occupancy) Housing: One of the country's oldest forms of affordable housing for single and elderly low-income people. Typically, an SRO room will have a sink and a closet. Bathroom, shower, kitchen and other rooms are usually shared.
Standard Metropolitan Statistical Area (SMSA): A term describing a central city area and its surrounding suburbs and other smaller jurisdictions.
Subsidy: Generally any funds provided from a source (generally a unit of local, state or the federal government) that reduces the cost of one or more housing component (land, labor, materials, financing, or other costs) in order to lower the cost to the occupant, or that provides support payments that allow low-income people to afford to live in housing that would otherwise be unaffordable or unavailable.
Supportive Housing Program (SHP): A federal program, authorized by Title VI of the Stewart B. McKinney Homeless Assistance Act of 1987, that provides financial assistance toward the development and operating cost of transitional housing for the homeless and permanent housing for the homeless and disabled. Grants may only be used to provide long-term housing opportunities.
Sweat equity: Equity created through the performance of labor on a property by its intended owner.
Syndication: The sale of equity interests (shares) in real-estate projects to investors other than the original developers. The concept extends generally to any group of investors who have contributed funds for the common purpose of carrying out a real-estate project requiring concentration of capital. It can take several business forms, but the most common is the limited partnership.
T
Targeted HOME Fund: A flexible fund for rental or single family affordable or supportive housing which meets federal HOME requirements.
Tax abatement: Exemption or reduction of local taxes of a project for a specific period of time.
Tax Credit: A dollar-for-dollar reduction against income tax payments that would otherwise be due. Contrasted with tax deductions that reduce taxable income.
Tax-exempt bond: A bond on which the interest payments are not subject to federal and/or local taxation.
Tax Increment Financing (TIF): A public financing tool used to assist economic development projects by capturing the projected property tax revenue stream to be created by the development and investing those funds in improvements associated with the project.
Title insurance: Insurance through a title company to protect the owner or lender from loss if the title proves imperfect.
Transitional Housing: Shelter for homeless individuals and families for six months to two years in an environment of security and support designed to help residents progress toward self-sufficiency. A middle point between emergency shelter and permanent housing.
Transitional Housing Program: Provides funds for the construction, acquisition, or rehabilitation of residential housing for low-income individuals and families having an immediate need for temporary or transitional housing.
Trust: A fiduciary relationship whereby legal title to a property is transferred to a trustee with the intention that such property be administered for the benefit of another (beneficiary) who holds equitable title to such property.
U
UBC (Uniform Building Code): The basic building code in which minimum standards are set for building construction (see also BOCA).
Underwrite: Analysis of the extent of risk assumed in connection with a loan: the process of preparing the conditions of a mortgage and the subsequent decision to approve or disapprove a loan application.
V
Vacancy Rate: The ratio between the number of vacant units and the total number of units in a multi-tenant building or development.
Valuation: Estimation of value or price through appraisal.
Variance: An approved special change in construction codes, zoning requirements, or other property use restrictions.
W
Waiver of lien: A written evidence in many states from contractor (or supplier of material or service) surrendering the right of lien to enforce collection of debt against property.
Weatherization: Modifying a building to reduce energy loss, e.g., adding insulation or installing storm windows.
Working Capital: The excess of current assets over current liabilities.
Write-Down: In low-income housing development, it generally means an up-front subsidy provided by a government agency or other owner of property that reduces the asking price of a property to make it affordable to low-income people.
Y
Youthbuild Program: A federal program that provides resources to educate, train and provide stipends for economically disadvantaged young adults to construct and rehabilitate housing for low-income and homeless persons.
Z
Zero Lot Line: A system of subdividing that permits building on lot lines, e.g., row houses.
Zoning: A division of a city into districts to control land use, i.e., residential, commercial or industrial.
Zoning Variance: A deviation from the zoning ordinance that is supposedly granted because strict enforcement would result in undue hardship on a property owner.