Section D: Eligible Activities

In this section...

See the Eligible Activity Expense Worksheet in Supportive Housing Program Self-Monitoring Tools for guidance on tracking eligible expenses.

The McKinney-Vento Act (Section 423 (a) and 24 CFR 583.100(a) of the regulations) authorize the use of grant funds for seven eligible activities:

Activity McKinney-Vento Act CFR Citation
Acquisition & Rehabilitation 423 (a)(1) 583.105
New Construction 423 (a)(2) 583.110
Leasing 423 (a)(2) 583.115
Operating Costs 423 (a)(4) 583.125
Supportive Services 423 (a)(5) 583.120
Technical Assistance (see below) 423 (a)(6) 583.140
Management Information Systems 423 (a)(7)

Additionally, the McKinney-Vento Act (Section 426(i)) authorizes recipients (grantees and project sponsors) to use no more than 5 percent of a grant for administrative costs. HUD has implemented this provision in the NOFAs by allowing applicants to apply for a set amount of administrative funds in each grant. However, grantees should be aware that administrative cost awards will be reduced or deobligated when the funds for the other eligible activities are unspent, reduced or deobligated in order to keep the amount of administrative cost funds at 5 percent of the total grant. (The regulation on administrative costs is found at 24 CFR 583.135.)

Funds for technical assistance have been awarded through a separate competition since the beginning of the SHP program. See Section P Technical Assistance for detailed information about technical assistance awards. The other eligible activities will be covered in this section.

Congress amended the McKinney-Vento Act in 2001 to make a homeless “Management Information System” (HMIS) an eligible activity. There are no regulations with regard to HMIS; however, HUD has implemented HMIS by funding dedicated HMIS projects as a separate component of SHP. We expect this practice to continue. See Section C Program Components for more information on funding for HMIS.

Each recipient of HUD funding must ensure compliance with all state and local housing codes, licensing requirements and any other standards regarding the condition of a structure and the operation of the housing and/or services. Specifically, each grantee or project sponsor must adhere to proper standards regarding accessibility, sanitation, security, illumination, electricity and fire safety. The habitability standards are described in the program regulations at 24 CFR 583.300(b) . Any variations from those standards proposed by the grantee/project sponsor must be approved by HUD.

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Acquisition and Rehabilitation

SHP grants for acquisition may be used to pay for the costs of purchasing a structure that will be used to provide supportive housing or supportive services. SHP grants for acquisition may also be used to pay off a current mortgage on a property (but not for periodic mortgage payments) as long as that property has not previously been used as supportive housing or for supportive services. In each project, the SHP grant for acquisition and rehabilitation is limited to between $200,000 and $400,000, per structure (e.g., per building), depending on whether the project is in a high cost area. A high cost area is a locality that HUD has determined to have high acquisition and rehabilitation costs.

Projects receiving SHP grants for acquisition and rehabilitation and new construction must be operated for not less than 20 years for the purpose specified in the application (see Section 423 of the McKinney-Vento Act ). For further guidance, see Special Topics for SHP Capital Projects below.

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New Construction

New construction (24 CFR 583.110) costs are eligible under all program components except the Supportive Services Only component. If grant funds are to be used for new construction, the applicant must demonstrate that the costs associated with new construction are substantially less than the costs associated with rehabilitation or that there is a lack of available units that could be rehabilitated at a cost less than new construction. (Demolition costs are not eligible under SHP.)

Grants for new construction are limited to $400,000 per structure (regardless of where the project is located). If the applicant is also acquiring land in tandem with the new construction, the $400,000 limit applies to both activities. Therefore, an applicant would not apply for a new construction grant and a separate grant to acquire the land, but rather new construction to cover both the land and the structure.

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Special Topics for SHP Capital Projects

Capital projects use SHP funding for acquisition, rehabilitation and/or new construction of a property. Projects using SHP assistance in these ways must fulfill additional requirements, described below.

Requirements for Acquisition, Rehabilitation and New Construction

Activity Deadline References
Site Control Within 1 year of grant award letter Section 426 of the McKinney-Vento Act (42 U.S.C. 11386 (a)(3)) and
24 CFR 583.320(a)
Construction Begin within 18 months of grant award letter
Finish within 36 months of grant award letter
NOFA timeliness standards
Supportive Services or Operating Contingent on Construction Within 3 months of completing construction NOFA timeliness standards
Activities Independent of Construction Within 1 year of grant award letter NOFA timeliness standards

Grantees should note that securing property via an “option to buy” before applying for SHP funds is permitted as long as the grantee has not used the property at application. The optioned property is subject to environmental review and the cost of acquiring the option will not be reimbursable if the environmental review concludes that the property may not be used. For more information on obtaining site control, environmental factors and zoning, see Section H Site Control and Environmental Review.

Drawdown of Capital Funds

Capital costs are acquisition, new construction and rehabilitation. As described above, the total of these costs cannot exceed $400,000 per building. The amount of funding for acquisition, rehabilitation and new construction in the approved project budget is sometimes called the capital budget because it represents housing development costs.

20-year Commitment

Projects receiving SHP grants for acquisition, rehabilitation, and new construction must be operated for not less than 20 years for the purpose specified in the application (see Section 423 of the McKinney-Vento Act (42 U.S.C 11383) ). This rule applies to all projects receiving SHP capital funds, regardless of the number of units reserved for homeless people or the level of supportive services provided. The grantee is responsible for meeting the 20-year commitment and also for monitoring compliance by project sponsors and subrecipients.

In the event that a project cannot be maintained as supportive housing, the grant must be repaid. If the project ceases to be used as supportive housing within the first ten years, 100 percent of the grant must be repaid. After the first ten years, the grant must be repaid according to the following schedule of deferred forgiveness:

Time project is operated as supportive housing Percentage of grant
to be repaid
10 years or less 100%
11 years 90%
12 years 80%
13 years 70%
14 years 60%
15 years 50%
16 years 40%
17 years 30%
18 years 20%
19 years 10%
20 years 0%

When the project is being operated by a project sponsor that wants to cease operation within the 20-year period, the grantee may replace the sponsor with another project sponsor that is willing to operate the project for the purpose stated in the initial or amended grant agreement. The new project sponsor must be at least as competitive in its capacity to operate the project as the original sponsor. Grantees should note that HUD considers changing the project sponsor a significant change that requires approval. Significant changes are outlined in Section R Grant Amendments.

Recording Restrictive Use and Repayment Covenants

Beginning in 2003, HUD decided to enforce the use and repayment requirements found in the McKinney-Vento Act section 423(b) and (c), 42 U.S.C. 11383(b) and (c) by requiring grantees and project sponsors to record a Declaration of Restrictive Covenants against the real property where grant funds are used for acquisition, construction or rehabilitation. The requirement is imposed via the NOFA and in the grant agreement. HUD’s Office of General Counsel has prepared a standard form Declaration of Restrictive Covenant, which may be obtained from your local field office and which should be recorded in first position. HUD’s field counsel must approve any deviation from the standard form before you execute and record it. Proof of recordation of the HUD form or the HUD-approved form must be provided to HUD’s field counsel before funds for rehabilitation or new construction may be drawn down. Acquisition funds may be drawn down before proof of recordation is received by HUD counsel, however, no other grant funds will be available for draw down until HUD counsel is satisfied with the form and its recordation. See the regulations at 24 CFR 583.305 for additional guidance.

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Leasing structures or individual units to provide supportive housing or supportive services during the period covered by the grant is an eligible activity under SHP. Grantees may use SHP leasing funds only when there are actual leasing costs. That is, the funds designated for leasing may only be used for the actual costs of leasing a structure/unit.

A grantee may lease portions of a building, the full building, or multiple buildings. If a grantee has a lease with an option to purchase, the grantee may use HUD leasing funds until the time the grantee purchases the property. However, SHP leasing funds may not be used to pay a project sponsor's monthly mortgage obligation or other costs of building operations.

Grantees and project sponsors should note that rental assistance, the only eligible activity under the Shelter Plus Care program, is NOT an eligible activity under SHP. Leasing activities are eligible for renewal grants as described in Section Q Project Renewals.

Lease Arrangements

Grant funds may be used by the grantee or project sponsor to pay the rental cost of an individual unit for a program participant. Grant funds may be used to pay up to 100 percent of the rent charged by a property owner who is not the grantee or project sponsor or their parent, subsidiary or affiliated organization (24 CFR 583.115 (a) (2) 8(b) and 84.24 and 85.25). The rent paid must be an actual cost, must be reasonable in relation to rents being charged for comparable units, may not exceed rents currently charged by the same owner for comparable unassisted units and the amount paid with grant funds may not exceed HUD-determined fair market rents (FMRs). Pursuant to 24 CFR 583.320(a)(2) , the grantee/project sponsor may eventually assign the lease for the individual housing unit to the program participant who resides there.

Grant funds may also be used to pay the landlord for any damages to the leased units by homeless participants. Up to one month's rent may be used for this purpose.

Leasing assistance is subject to the requirements of the Lead-Based Paint Poisoning Prevention Act (42 USC 4821-4846). For residential structures constructed before 1978, there are requirements and procedures for addressing the hazards of lead-based paint. See 24 CFR Subpart A 35.80.

Grantees or project sponsors may not use grant funds to pay leasing costs for a property that they own or a property that is owned by a parent or subsidiary organization. Any lease arrangement must be at arm's length and include the following items in the contract:

  • Names of tenant and owner;
  • Unit address;
  • Rent amount;
  • Term of the lease;
  • Who supplies utilities; and
  • Renewal provisions.

An actual copy of the lease must be submitted to HUD to document all leasing costs.

Reasonable Rents

Whenever a grantee/project sponsor uses grant funds for leasing, the rent paid may reflect only actual costs, and must be reasonable in relation to rents being charged for comparable units. In determining comparability, you should consider location, size, type, quality, amenities, facilities, and management services. If the owner has both assisted and unassisted housing units, rents for the assisted units may not exceed rents being charged for that owner's comparable unassisted units. The grantee must keep on file documentation showing reasonableness, such as advertisements for similar units or buildings.

Fair Market Rents

The rents paid with SHP grant funds may not exceed HUD-determined fair market rents. FMRs are published annually in the Federal Register, and should be used in estimating how much of the grant funds may be used to lease property. FMRs are available on HUD's web site, at The published FMRs are gross rent estimates, and include shelter rent and the cost of necessary utilities (except telephone). The FMRs in effect at the time the grant agreement is signed are used to determine rent. For new projects, the FMRs in effect at the time of grant award are used.

Grantees may need – and are allowed – to reduce the number of units that can be supported by their projects if actual rents have increased substantially.

Beginning with the 2006 Continuum of Care Homeless competition, if actual rents have increased substantially from the time of the initial application to the time of the first renewal, the grantee or project sponsor may need – and is allowed – to reduce the number of units that can be supported by the project since the overall level of SHP funding cannot be increased. If grantees reduce the number of units (reflected in the Continuum of Care Homeless application under the Point In Time Housing and Participants Chart, they will be required, at the grant execution phase, to submit a written explanation that identifies the number of units that can be leased at the current fair market rent.

Grantees should note that a reduction in the number of participants might result in a corresponding decrease in the other funded budget categories. If grantees propose to reduce the number of units leased in their renewal application, they must include a written summary in the Technical Submission that provides the number of units currently leased using the current fair market rates, the reduced number of units to be leased using the fair market rates, and a proposed revised budget reflecting the associated cost reductions, if applicable. Grantees may proportionately reduce or eliminate any other elements of the project and the SHP budget. However, be aware that this project, as well as all projects, must meet all project threshold requirements as identified in the NOFA.

Keep in mind that grantees may be able to maintain the same number of units if they are able to rent units below the fair market rent.

The current FMRs can be found at See Section R Grant Amendments for guidance on decreasing funded budget categories and when an amendment is necessary.

Using Leasing Funds

Leasing a structure or individual unit(s) would not require additional operating costs because the cost of leasing would include the landlord's expenses for maintenance, repair and utilities. Whether or not a tenant is responsible for maintenance, repair and property management costs depends on the type of property (apartment unit, single family home or commercial building) as well as on the prevailing practice in the community. If such costs are anticipated, the amount and proposed use should be documented in the original project proposal.

Fair Market Rents include the cost of utilities. Landlords accepting the FMR should include utilities as part of the rent. If the grantee is the leaseholder of a building that houses residents and utilities are not included as part of the lease, then the grantee can include utility expenses as a separate budget line item in the operating budget. Grantees receiving operating costs for these utility expenses must submit a copy of the lease to HUD to establish that they are responsible for those payments.

Although it may not be possible for grantees to anticipate if landlords will include the cost of utilities as part of the rent, grantees should consider the costs associated with paying for utilities separately when planning their leasing and operating budgets. Thinking about these costs up front will help to avoid problems in program implementation.

Leasing, Operating and Project-Based Assistance (PBA)

Projects/structures that receive SHP leasing or operating assistance cannot also receive project-based assistance from any other duplicative federal, State, or local housing program as determined by HUD. Project-based assistance includes the costs of leasing and operating housing and therefore, is duplicative of the SHP assistance provided for these costs.

However, SHP funds for acquisition, new construction, rehabilitation, or supportive services are not duplicative of project-based assistance and therefore can be combined with project-based funding.

An SHP grantee that receives project-based assistance for the same project that receives leasing and operating funding under SHP must return the SHP leasing and operating funds to HUD. HUD will look carefully at requests that ask to shift funds to replace existing sources of funding.

Acquisition of a Property Receiving Leasing Funds

If SHP grant funds are used for leasing assistance, the grantee may not request assistance for acquisition, rehabilitation or new construction for the same property.

As described above, the grantee/project sponsor may eventually assign the lease for the individual housing unit to the program participant who resides there (see 24 CFR 583.320(a)(2)). However, if a family or individual has been assisted through leasing, and remains in that housing without further assistance, the grantee or project sponsor may not request additional SHP funding for acquisition, rehabilitation or new construction for that property.

Move-In Expenses & Security Deposits

Leasing funds may only be used to pay rent. Move-in expenses associated with moving a transitional housing client into permanent housing are not allowed under leasing but may be covered under supportive services (see Supportive Services section below).

Grantees may use SHP leasing funds in an amount of up to one month’s rent to pay a security deposit to a landlord for any damages to the leased units by homeless participants (see 24 CFR 583.115).

Leasing Costs and the Technical Submission

Applicants conditionally selected for funding for a new project, or a renewal project with changes, will include in their Technical Submission information about leasing that corresponds to the activities described in their original application. The Technical Submission should cover:

  • Leasing costs for supportive housing provided in individual residential units, including group homes, supported by fair market rent information from the applicable Federal Register;
  • Comparable cost data, as appropriate, to show that the SHP request is within the FMR limits; and
  • For facility leasing costs (not classified by bedroom size), comparable cost data to show that the SHP request is reasonable.

More guidance on completing the Technical Submission is in Section F Important Dates and Section G Conditional Approval and Program Cycle.

Charging Clients Fees in Addition to Rent

Participants may be charged up to 30 percent of their income for rent. The regulations (24 CFR 583.315(c)) allow grantees to charge an additional fee for services not paid for with SHP grant funds.

Fees charged in excess of the 30 percent rent calculation are considered program fees and must be used only for services not covered by match or SHP funds, if there are such costs. Program fees may not be used to supplement operating costs.

Charging fees is optional. If the grantee chooses to charge participants a fee for supportive service(s), the grantee must maintain written documentation of the actual costs of providing the supportive service(s) for which clients are being charged. They must show that participants are not paying for a service for which SHP is already paying. The grantee or sponsors must also maintain written documentation of the following:

  • That the activity for which the fee is being charged is an actual supportive service;
  • That SHP grant funds are not being used to pay for that portion of the service;
  • How the supportive service charge was determined;
  • That the fee is reasonable; and
  • The participants are aware of how the fee is used.

Fees charged in excess of the 30% rent calculation are considered program fees and must be used only for services.

Special Guidance on Charging Fees

Fees for services: Participants may be charged fees for food and other services, such as cleaning, in addition to rent, but the fees should be reasonable and not conflict with the goal of helping residents achieve the highest level of independent living possible.

Sliding scale fees:Fees may be based either on a sliding scale according to the resident's income or on a fixed basis as long as those fees reflect the actual cost of providing the service. Grantees and project sponsors using sliding scales must prove that the cost to the client is equitable. In other words, the sliding scale fee must be based on income and the specific service(s) received.

Fees applied to some residents but not others: If there is a reasonable basis to charge only some residents, such as only charging residents for services they actually use, then fees can be selectively applied. However, in most cases if a fee is charged, it would be applied to all residents.

Fees cannot have a negative impact on participants’ abilities to become self-sufficient.

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Operating costs are those costs associated with the day-to-day physical operation of supportive housing facilities. They also include the actual expense that a recipient incurs for conducting on-going assessments of the supportive services needed by residents and the availability of these services.

Operating costs differ from supportive services costs in that operating costs support the function and the operation of the housing project while supportive services costs cover the actual costs of new or increased services. Only operating costs for a new project or the expanded portion of an existing project are eligible for SHP funding.

SHP funds may not be used for the cost of operating a supportive services only facility.

Eligible Operating Costs

The expense incurred by the grantee to operate a supportive housing facility is an eligible SHP activity. Some examples include:

  • Maintenance and repair
  • Operations staff
  • Utilities
  • Equipment
  • Supplies
  • Insurance
  • Relocation
  • Furnishing

Sometimes operations staff also carry out supportive services activities. To the extent a staff person does both, their costs must be split between the two categories. The grantee will need documentation, such as time sheets, to show how the costs were assigned.

The costs associated with displacing persons in order to use a structure are included under operational costs, even though such payments may be a one-time occurrence.

Examples of Eligible and Ineligible Operating Costs for a Supportive Housing Facility

Eligible operating costs Ineligible operating costs
Salaries of staff not delivering services, such as the executive director, project manager or security guard Mortgage payments (may be eligible as Acquisition)
Utilities costs: gas, heat, electric, etc. Recruitment or on-going training of staff
Desks, computers, telephones used by staff involved in operating the housing Rent (may be eligible as real property leasing)
Furnishings (beds, chairs, dressers, etc.) for participants Depreciation
Equipment (refrigerators, ranges, etc.) Costs associated with the organization rather than the supportive housing project (fund raising efforts, pamphlets about organizations, etc.)
Relocation Assistance Cable TV costs for participants


Further Examples of Eligible Operating Expenses

Type of Expense Eligibility under SHP
Real estate taxes and legal fees SHP funds can be used to pay real estate taxes – but only for those projects that have to pay taxes. The legal fees would have to be spelled out and approved by HUD. For example, if the legal fees are incurred as part of evictions, then they would be acceptable operating costs. But if the legal fees are to keep an attorney on retainer, then they would not be allowed.
Landscaping SHP funds can be used for maintenance and repair costs, including hardscaping, walkways, and grading. Landscaping for beautification is not eligible.
Purchase of a vehicle to move furniture, appliances, and maintenance equipment To be considered an operating cost, the vehicle must be used to support the function and operation of the housing project. Purchase of a vehicle for supportive services (e.g. for outreach, and to transport participants) remains an eligible supportive services cost.
Playground SHP funds can be used to pay for a playground. The cost would fall under operating costs, since the playground structure is a piece of equipment.
Workers compensation and employers liability insurance SHP funds can be used to pay for insurance, which is a normal expenditure associated with management of a business with employees. The only issue would be whether the employees are 100% dedicated to the homeless project. If the proposed annual insurance cost covers staff not directly or only partially involved with the homeless grant, then grant funds should only pay the prorated portion of the annual expenditure. OMB Circulars A-122 and A-87 under fringe benefits state that “fringe benefits determined to be allowable if granted under established written policies include: (1) employer contributions or expenses for social security, (2) employee life, (3) health, (4) unemployment, (5) workers compensation, pension plan costs, (6) severance payments associated with normal turnover."

Operating Costs vs. Mortgage Payments

Grantees may not consider mortgage payments as an operational cost because SHP allows grantees to repay outstanding debt on a loan to purchase the structure under the acquisition activity. This means that when the operating budget is calculated, mortgage payments should not be included. Grantees should consider this provision when planning their budgets.

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Supportive Services

Supportive services assist homeless participants in the transition from the streets or shelters to permanent or permanent supportive housing. SHP funds may be used to pay for the actual costs of new or increased supportive services to homeless persons, including salaries paid to providers and other costs directly associated with providing such services. According to the McKinney-Vento Act (section 425(a)), to the extent practicable, each project shall provide supportive services for residents of the project and homeless persons using the project, which may be designed by the recipient or participants.

Eligible Supportive Service Costs

Services aimed at moving homeless participants to independence are eligible for SHP support. Some examples of eligible supportive services include:

  • Salary of case manager or counselor for time spent providing services to participants;
  • Salary of case management supervisor when he/she is working with clients or working with a case manager on issues regarding clients;
  • Desks and/or computers used by clients and their trainer in employment training programs;
  • Food, clothing and transportation;
  • Outpatient medical/dental or other healthcare for clients and assistance in obtaining benefits or medical assistance from other Federal, State or local sources;
  • First and last month's rent, security deposits and credit checks for participants moving from transitional housing to permanent housing;
  • Clothing, tools, and similar items needed by participants for jobs or job training;
  • Cellphones for outreach workers;
  • Mileage allowance for service workers to visit participants; and
  • Vehicle lease and operation (gas, insurance, maintenance) when used for transporting clients.

Eligible Supportive Services listed in the McKinney-Vento Act (Section 425 (c))

  • Establishing and operating a child care services program for homeless families;
  • Establishing and operating an employment assistance program;
  • Providing outpatient health services, food and case management;
  • Providing assistance in obtaining permanent housing, employment counseling and nutritional counseling;
  • Providing security arrangements necessary for the protection of residents of supportive housing and for homeless persons using the housing or project;
  • Providing assistance in obtaining other Federal, State and local assistance available for such residents (including mental health benefits, employment counseling and medical assistance, but not including major medical equipment); and
  • Providing other appropriate services.

Grantees/project sponsors should note that any staff members mentioned above (case managers, counselors, etc) who work on multiple SHP-funded projects must track time spent on each project. Put differently, case managers who work on several SHP grants must track and record hours spent serving clients under each grant separately.

Participants in transitional housing, permanent housing and SSO projects may receive supportive services while they are part of the project. In transitional housing, participants may also receive services after they leave the project for up to six months. These six months are not included in the 24-month time limit for transitional housing and are intended to assist the participant in adjusting to independent living (24 CFR 583.120(b)).

Certain activities that would not be eligible in transitional or permanent housing projects are eligible in SSO projects, but only to the extent that these costs are part of the project, and the project is classified as SSO. These include: staffing, utilities, equipment and supplies, furnishings, repairs and maintenance, transportation, insurance and security. Please check with your field office if you need clarification.

The McKinney-Vento Act requires that SHP grantees conduct an annual assessment of participants’ supportive service needs. Grantees can pay for this assessment using their SHP operating funds (see 24 CFR 583.125).

Further Examples of Eligible and Ineligible Supportive Services

Type of Service Eligibility under SHP
A life skills program or other type of service program with a religious component SHP supportive service funds cannot be used for services that have an inherently religious component, for example, that involve worship, religious instruction, or proselytization (24 CFR 583.150). Further, a client’s receipt of services cannot be contingent upon his participation in any religious component of the program. Any inherently religious activities, such as worship, religious instruction, or proselytization must be offered separately in time or location from the programs or services funded by SHP.
Purchase of computers with internet connection to be placed in clients’ rooms SHP supportive service funds cannot be used to purchase computers for individuals. However, computers (and internet) purchased for a common space or to be used for program purposes are eligible supportive services expenditures. For example, computers placed in a common space and used for job training, job search, or housing search are eligible. Personal computers in residents’ rooms are ineligible.
Drug testing of clients SHP supportive service funds can be used to pay for drug tests if the tests are part of a program of treatment. For example, drug tests are eligible if they are used to maintain compliance with rules in programs that have a substance abuse treatment component.
Criminal background checks of prospective clients SHP supportive service funds cannot be used for criminal background checks.
Recreational activities SHP supportive service funds cannot be used for recreational activities.
Match for client savings in an individual savings account SHP supportive service funds cannot be used to match individual savings in permanent housing or supportive services only programs. SHP funds can be used to assist residents of transitional housing in moving to permanent housing.
The purchase or repair of a car for a client in areas lacking public transportation SHP supportive service funds cannot be used to pay for the purchase of a car for a client.

Requiring Clients to Participate in Supportive Services

Supportive housing programs may require supportive services, such as addiction treatment, mental health stabilization, etc., as part of the occupancy agreement in order to support programmatic goals. It should be noted, however, that there are no regulatory provisions that require grantees to condition continued residency on participation in services in the Supportive Housing Program.

Previous guidance from HUD suggested that permanent housing programs could not impose service requirements on clients. This policy has now been rescinded; therefore both transitional and permanent supportive housing programs may impose supportive service requirements as part of program enrollment. Note that the program must follow appropriate local laws, including landlord tenant laws, as part of establishing and enforcing this type of requirement. Participants entering the program must be made aware of this requirement.

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Administrative Costs

Up to five percent of any grant awarded under SHP may be used for the purpose of paying costs of administering the assistance.

24 CFR 583.135 (b) defines administrative costs as the costs associated with accounting for the use of grant funds, preparing reports for submission to HUD, obtaining program audits, similar costs related to administering the grant after the award, and staff salaries associated with these administrative costs. They do not include the costs of carrying out acquisition, rehabilitation, new construction, leasing, supportive services or operating costs.

Splitting Administrative Funds

Beginning with the 2000 NOFA, HUD had required grantees to split administrative funds with the project sponsor. This applies to States and units of general local governments that are the applicants for SHP funding for individual projects that will be operated by nonprofit organizations. If SHP funds for administrative costs are awarded to a State or unit of general local government where the projects will be operated by nonprofit organizations, some of these funds must be passed on to the nonprofit organization(s).

Administrative funds provided as part of the SHP grant should be split with the nonprofit organization(s) in proportion to the administrative burden borne by them for the SHP project(s). However, HUD will consider States or units of general local government that pass on at least 50 percent of the administrative funds as having met this requirement. Applicants and project sponsors must work together to determine a plan for dividing administrative funds between them.

Eligible Administrative Costs

  • Preparation of Annual Progress Report
  • Audit of Supportive Housing Program
  • Staff time spent reviewing/verifying invoices for grant funds, drawing money from Treasury, and maintaining records of the use of those funds

Ineligible Administrative Costs

  • Preparation of application and Technical Submission
  • Conferences, fund raising activities, and training in professional fields (such as social work or financial management)
  • Salary of organization's executive director (except to the extent he/she is involved in carrying out eligible administrative functions as shown under eligible administrative costs list)

See the table below for examples of eligible and ineligible administrative expenses in the SHP program.

Types of Administrative Costs Eligibility Under SHP
General bookkeeping & recordkeeping Eligible
Audit expense Eligible
Staff time to help participants identify housing units Ineligible
Staff time to conduct housing inspections Ineligible
Staff time to conduct annual tenant income and rent certifications Ineligible
Staff time to process landlord rent payments Ineligible
Staff time to document service match requirements Eligible
Staff time to prepare HUD APRs and HUD LOCCS draws Eligible
Portion of Program Director time spent directly serving clients Ineligible
Portion of Program Director time spent overseeing program – but not involved directly in client care Eligible

Some of the items listed above may be eligible as supportive services or operating costs under SHP. Check with your local field office for specific guidance.

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