Can a nonprofit hire a for-profit consultant or developer to run its affordable housing program?

A nonprofit agency must demonstrate that it maintains control over its homeownership program and cannot rely upon a business partner(s) to operate the program for which it seeks FHA approval.
 
The nonprofit’s operations must be independent of the influence, control, or direction of the consultant or any other outside party, particularly those seeking to derive profit or gain from a proposed project (including landowners, real estate brokers, bankers, contractors, builders, or consultants). Consultant services must be provided on an arm’s length basis.
 
Consultant services – administrative, management, financial, or otherwise – provided under an independent contractor relationship (as opposed to an employer-employee relationship) shall not constitute more than half of the nonprofit’s activities throughout the duration of the approval period. This measurement will be calculated by evaluating the ratio of nonprofit staff to contracted or consultant staff; the ratio of hours devoted to the implementation of the Affordable Housing Program Plan (AHPP) by nonprofit staff versus contracted or consultant staff; and the funds devoted to paying nonprofit staff compared to those paying contracted or consultant staff. The nonprofit must have the in-house resources and capacity to operate its own programs, and contract for services only on a temporary and supplementary basis.
 
For additional information see Handbook 4000.1 I.B.4 at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
 
The  FHA-Approved Nonprofits web page is available at https://www.hud.gov/program_offices/housing/sfh/np
 

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-04850