ELIGIBLE USES OF INVESTMENT.

SEC. 212. [42 U.S.C. 12742] ELIGIBLE USES OF INVESTMENT. (a) Housing Uses.— (1) In general.—Funds made available under this subtitle may be used by participating jurisdictions to provide incentives to develop and support affordable rental housing and homeownership affordability through the acquisition, new construction, reconstruction, or moderate or substantial rehabilitation of affordable housing, including real property acquisition, site improvement, conversion, demolition, and other expenses, including financing costs, relocation expenses of any displaced persons, families, businesses, or organizations, to provide for the payment of reasonable administrative and planning costs, to provide for the payment of operating expenses of community housing development organizations, and to provide tenant-based rental assistance. For the purpose of this subtitle, the term “affordable housing” includes permanent housing for disabled homeless persons, transitional housing, and single room occupancy housing. (2) Limitation.—The Secretary may not restrict the choice by a participating jurisdiction of rehabilitation, substantial rehabilitation, new construction, reconstruction, acquisition, or other eligible housing uses authorized in paragraph (1) unless the restriction is explicitly authorized under section 223(2). (3) Tenant-based rental assistance.— (A) In general.—A participating jurisdiction may use funds provided under this subtitle for tenant-based rental assistance only if— (i) the jurisdiction certifies that the use of funds under this subtitle for tenant-based rental assistance is an essential element of the jurisdiction's annual housing strategy for expanding the supply, affordability, and availability of decent, safe, sanitary, and affordable housing, and specifies the local market conditions that lead to the choice of this option; and (ii) the tenant-based rental assistance is provided in accordance with written tenant selection policies and criteria that are consistent with the purposes of providing housing to very low- and low-income families and are reasonably related to preference rules established under section 6(c)(4)(A) of the United States Housing Act of 1937. (B) Fair share not affected.—A jurisdiction's section 8 fair share allocation shall be unaffected by the use of assistance under this title. (C) 24-month contracts.—Rental assistance contracts made available with assistance under this title shall be for not more than 24 months, except that assistance to a family may be renewed. (D) Use of section 8 assistance.—In any case where assistance under section 8 of the United States Housing Act of 1937 becomes available to a participating jurisdiction, recipients of rental assistance under this title shall qualify for tenant selection preferences to the same extent as when they received the rental assistance under this title. A rental assistance program under this title shall meet minimum criteria prescribed by the Secretary, such as housing quality standards and standards regarding the reasonableness of the rent. (E) Security deposit assistance.—A jurisdiction using funds provided under this subtitle for tenant-based rental assistance may use such funds to provide loans or grants to very low- and low-income families for security deposits for rental of dwelling units. Assistance under this subparagraph does not preclude assistance under any other provision of this paragraph. (4) Infrastructure improvements in nonentitlement areas.— (A) In general.—A participating jurisdiction may use funds provided under this subtitle for infrastructure improvements, including the installation or repair of water and sewer lines, sidewalks, roads, and utility connections if— (i) such participating jurisdiction does not receive assistance under title I of the Housing and Community Development Act of 1974 (42 U.S.C. 5310); and (ii) such improvements are directly related to, and located within or immediately adjacent to— (I) housing assisted under this subtitle; or (II) housing assisted under section 42 of the Internal Revenue Code of 1986. (B) Application of labor standards.—The labor standards and requirements set forth in section 110 of the Housing and Community Development Act of 1974 (42 U.S.C. 5310) shall apply to any infrastructure improvement conducted using funds provided under this subtitle. (C) Rule of construction.—Nothing in this paragraph may be construed to impose any requirements of the HOME Investment Partnerships program on housing that benefits from an infrastructure improvement conducted using funds provided under this subtitle but was not otherwise assisted under the HOME Investment Partnerships program. (5) Lead-based paint hazards.—A participating jurisdiction may use funds provided under this subtitle for the evaluation and reduction of lead-based paint hazards, as defined in section 1004 of the Residential Lead-Based Paint Hazard Reduction Act of 1992. (b) Investments.—Participating jurisdictions shall have discretion to invest funds made available under this subtitle as equity investments, interest-bearing loans or advances, noninterest-bearing loans or advances, interest subsidies or other forms of assistance that the Secretary has determined to be consistent with the purposes of this title. Each participating jurisdiction shall have the right to establish the terms of assistance. (c) Administrative Costs.—In each fiscal year, each participating jurisdiction may use not more than 10 percent of the funds made available under this subtitle to the jurisdiction for such year for any administrative and planning costs of the jurisdiction in carrying out this subtitle, including the costs of the salaries of persons engaged in administering and managing activities assisted with funds made available under this subtitle. (d) Prohibited Uses.—Funds made available under this subtitle may not be used to— (1) defray any administrative cost of a participating jurisdiction that exceed the amount specified under subsection (c), (2) provide tenant-based rental assistance for the special purposes of the existing section 8 program, including replacing public housing that is demolished or disposed of, preserving federally assisted housing, assisting in the disposition of housing owned or held by the Secretary, preventing displacement from rental rehabilitation projects, or extending or renewing tenant-based assistance under section 8 of the United States Housing Act of 1937, (3) provide non-Federal matching contributions required under any other Federal program, (4) provide assistance authorized under section 9 of the United States Housing Act of 1937, (5) carry out activities authorized under section 9(d)(1) of the United States Housing Act of 1937, or (6) provide assistance to eligible low-income housing under the Emergency Low Income Housing Preservation Act of 1987 or the Low-Income Housing Preservation and Resident Homeownership Act of 1990. (e) Cost Limits.— (1) In general.—The Secretary shall establish limits on the amount of funds under this subtitle that may be invested on a per unit basis. The limits shall be established on a market-by-market basis, with adjustments made for number of bedrooms, and shall reflect the actual cost of new construction, reconstruction, or rehabilitation of housing that meets applicable State and local housing and building codes and the cost of land, including necessary site improvements. Adjustments shall be made annually to reflect inflation. Separate limits may be set for different eligible activities. (2) Criteria.—In calculating per unit limits, the Secretary shall take into account that assistance under this title is intended to— (A) provide nonluxury housing with suitable amenities; (B) operate effectively in all jurisdictions; (C) facilitate mixed-income housing; and (D) reflect the costs associated with meeting the special needs of tenants or homeowners that the housing is designed to serve. (3) Consultation.—In calculating cost limits, the Secretary shall consult with organizations that have expertise in the development of affordable housing, including national nonprofit organizations and national organizations representing private development firms and State and local governments. (f) Certification of Compliance.—The requirements of section 102(d) of the Department of Housing and Urban Development Reform Act of 1989 shall be satisfied by a certification by a participating jurisdiction to the Secretary that the combination of Federal assistance provided to any housing project shall not be any more than is necessary to provide affordable housing. (g) Limitation on Operating Assistance.—A participating jurisdiction may not use more than 5 percent of its allocation under this subtitle for the payment of operating expenses for community housing development organizations.