In Montgomery Street Housing Urban Renewal, LLC v. Sheriff (June 2021), a property owner sued to evict a resident for lease violations relating to an unauthorized occupant. The New Jersey property, Montgomery Heights Apartments, is a Low-Income Housing Tax Credit (LIHTC) property with project-based Vouchers.
The rules of both programs require that income be established based on the income of all household members. The property’s occupancy standards require a minimum of three and a maximum of six household members for three-bedroom units. The property also had a procedure in place for adding new household members after the initial household moved in. This procedure required management approval and established eligibility of the new applicant.
On December 15, 2016, the defendant applied for a three-bedroom apartment at the property, stating that she was the head of a five-person household, which included herself and four children. She stated that she was separated from her husband and that she expected no additions to the household in the next 12 months. She also stated that there were no "temporarily absent" household members.
The application was approved, and the defendant signed a lease with an expiration of April 30, 2018. The lease specified that no more than one adult and four children could live in the unit and named the authorized occupants. The lease also permitted the landlord to terminate the lease with a 30-day written notice if any unauthorized occupant lived in the apartment.
In April 2018, the lease was renewed, and the defendant certified that the same people were in the unit as were there at move-in.
On January 2, 2019, a LIHTC self-certification was completed, certifying the same household members.
On April 11, 2019, management notified the tenant that an unauthorized male had been found to be living in the unit, and it was believed to be the resident’s husband. The resident was given until April 26, 2019, to remove the unauthorized occupant.
Instead of removing her husband, on June 6, 2019, the resident delivered a letter to management asking that her husband and son be permitted to apply to be added to the lease. On June 3, 2019, her husband had submitted a change-of-address form to the United States Postal Service, indicating that his mail should be sent to a post office box instead of the defendant’s apartment, where it had been sent.
On June 10, 2019, management sent the tenant a "LOW INCOME HOUSING TAX CREDIT NOTICE TO QUIT AND DEMAND FOR POSSESSION." The tenant was advised that the lease would terminate on July 31, 2019. The reason for the termination was the unauthorized occupant.
The defendant did not vacate and on September 18, 2019, the landlord filed a complaint for possession. The defendant asserted that her apartment was large enough for herself and her five children, as well as her husband. She admitted that her 13-year-old son had moved in in August 2019 and that her husband had been "in and out" of the apartment since January 2019. On January 9, 2020, the trial court ruled in favor of the landlord, finding "there has been substantial non-compliance by unauthorized occupants."
The defendant appealed, citing in part that "family reunification" does not constitute good cause to evict, that a seven-person occupancy did not violate LIHTC or HUD regulations, and that the eviction was contrary to law.
The appeals court determined that "a continuing substantial violation of a reasonable lease term after the tenant has received a written notice to cease, is one of the statutory good causes for eviction." The court ruled that the language in the lease was "clear and unambiguous," and that the provisions of the lease were reasonable and consistent with public policy. Based on this reasoning, the appeals court upheld the eviction due to unauthorized occupancy.
Owners of affordable housing properties should carefully review the language in their property leases relating to unauthorized occupancy. Make sure it is clear and precise. Also, when unauthorized occupancy is suspected, evidence and documentation of the lease violation will go a long way to ensuring the successful pursuit of the eviction.
Census Bureau Report Shows an Aging and More Diverse Population
On June 30, 2022, the U.S. Census Bureau released the 2021 Population Estimates by Age, Sex, Race, and Hispanic Origin. The report shows that the last two decades have seen the country grow continuously older. Since 2000, the national median age - the point at which one-half the population is older and one-half younger - has increased by 3.4 years, with the largest single-year gain of 0.3 years coming in 2021. The median age in the U.S. is now 30.8. The median age for most states also increased from 2020 to 2021, indicating their populations are getting older overall. Utah remains the youngest state in the nation with a 2021 median age of 31.8 - up from 31.5 in 2020. The District of Columbia has the second-lowest median age (34.9) but had the largest increase - 0.5 years from the 2020 age of 34.4. According to the Census Bureau, "With birth rates trending downwards and the aging of the Baby Boom and Generation X cohorts, the median age will likely continue to rise in the coming years. Only one state s population - Maine - became slightly younger, as its median age decreased from 44.8 to 44.7. However, Maine remains the state with the oldest median age in the nation. Only three states have no change in median age - Montana (40.1), New Hampshire (43), and West Virginia (42.8). These are also among the oldest states in terms of median age. The median age in 57% of all U.S. counties and equivalents increased, and 74% of counties had higher median ages than the nation as a whole. Six counties had median ages greater than or equal to 60 years - Sumter County, FL (68.3); Kalawao County, HA (65.5); Catron County, NM (61.8); Harding County, NM (60.3); Charlotte County, FL (60.2); and Jeff Davis County, TX (60). The counties or equivalents with the youngest median ages in the nation were Lexington City, VA (22.2); Todd County, SD (23); Kusilvak Census Area, AK (23.7); Madison County, ID (32.7); and Radford City, VA (24.4). The median age increased in about 76% of metro areas between 2020 and 2021. The three largest increases were in Lake Charles, LA, where the median age rose from 36.5 to 37.4; Hilton Head Island-Bluffton, SC, which increased by 0.8 years to 47.8; and San Francisco-Oakland-Berkeley, CA, where the median age crossed the 40-years-of-age threshold, increasing from 39.4 to 40.1. Provo-Orem, UT was the metro with the lowest median age in 2021, and The Villages, FL, had the highest median age - 68.3. Not surprisingly, The Villages is located in Sumter County. Regionally, the Northeast was the oldest in 2021 with a median age of 40.4, followed by the Midwest (39), the South (38.6), and the West - which experienced the largest increase, 0.3 years to 37.7. In addition to aging, the nation is becoming more diverse. Nationally, all race and Hispanic origin groups experienced population increases, with the exception of the White population, which declined slightly by 0.03%. The Native Hawaiian and Other Pacific Islander population was the fastest-growing race, increasing by 1.54% between 2020 and 2021. Population breakdowns follow: White: 260,183,037 (down 79,836 since 2020);Black or African American: 49,586,352 (up 0.7%);Asian: 23,962,215 (up 1.2%);American Indian or Alaska Native: 7,206,898 (up 1.0%); andNative Hawaiian or Other Pacific Islander: 1,709,860 (up 1.5%). The Hispanic (any race) population grew by 767,907 from 2020 to 2021. California, Texas, and Florida have the largest Hispanic populations. Only New York (-1.1%) and the District of Columbia (-2.5%) experienced drops in the Hispanic population. Maine (5.4%) and Montana (5.4%) were the states with the fastest-growing Hispanic populations. There are two major takeaways from the data: The nation is growing more diverse; andIt is getting older. For affordable housing developers and housing agencies, this indicates continuing growth in the need for senior housing - especially housing that provides the amenities and services required for "aging in place. The growth in diversity serves as a reminder that discrimination based on national origin is a violation of federal fair housing law. Owners of multifamily housing must be willing to work with prospects for whom English may not be the primary language and should have policies and procedures in place for doing so.
HUD Issues MOR Rule and Notice
On June 27, 2022, the Department of Housing & Urban Development (HUD) published the Management and Occupancy Review (MOR) Rule and Notice in the Federal Register. The rule becomes effective on September 26, 2022. This final rule follows the 2015 publication of a proposed rule on MOR scheduling. The Rule and Notice apply to properties covered under project-based Section 8 Housing Assistance Payments (HAP) Contracts for the following programs: New ConstructionSubstantial RehabilitationNew Construction or Substantial Rehabilitation financed by State Housing AgenciesNew Construction financed under Section 515 of the Housing Act of 1949 (Section 8/515 projects)Loan Management Set Aside ProgramDisposition of HUD-Owned ProjectsSection 202/8 HUD conducts MORs to ensure that owners and agents (O/As) comply with HUD requirements. The MOR rule establishes a frequency for the completion of MORs based upon a project s prior MOR score and the project s rating under HUD s risk-based asset management model. HUD believes that moving to a risk-based MOR schedule will enhance HUD oversight of the Section 8 HAP program and improve overall program effectiveness. Beginning on September 26, 2022, Contract Administrators (CAs) will establish MOR schedules as follows: Properties with a previous MOR rating of Unsatisfactory or Below Average will be reviewed within 12 months of the prior MOR;Properties with a previous MOR rating of Satisfactory will be reviewed within 12 months of the prior MOR if the Risk Classification of the property was Troubled or Potentially Troubled. If the Risk Classification was Not Troubled, these properties will be reviewed within 24 months of the prior MOR;Properties with a previous MOR rating of Above Average or Superior will be reviewed within 12 months of the prior MOR if the Risk Classification of the property was Troubled or Potentially Troubled. If the Risk Classification was Not Troubled, these properties will be reviewed within 36 months of the prior MOR. Owners and Agents should remember that MORs are different than the physical inspections conducted by HUD s Real Estate Assessment Center (REAC). The MOR Rule and Notice do not affect REAC s inspections of Section 8 HAP properties. O/As operating any of the property types noted above should obtain a copy of the MOR Rule and Notice at https://www.federalregister.gov/documents/2022/06/27/2022-13426/streamlining-management-and-occupancy-reviews-for-section-8-housing-assistance-programs?utm_medium=email&utm_source=govdelivery.
A. J. Johnson Partners with Colorado Housing on Average Income Webinar
A.J. Johnson will be presenting Average Income Minimum Set-Aside: Requirements and Best Practices on July 19, 2022, at 11:00 am (EST). This class will be offered through Colorado Housing and Finance Authority s chfareach educational programming for affordable housing property owners and managers. The one-hour live webinar will review the requirements of the Average Income Minimum Set-Aside Test (AI), discuss the risks of this set-aside, and provide best practice recommendations for implementation of the Average Income test. It will also cover the current IRS guidance relating to the AI set-aside and recent industry requests made to the IRS. The webinar will be presented by A. J. Johnson, a nationally recognized expert on affordable housing who has provided compliance oversight on multiple properties using the AI set-aside To register, please visit the chfareach webpage at this link.
A. J. Johnson to Host Live Webinar on Criminal Screening Policies
A. J. Johnson will be conducting a webinar on June 29, 2022, on Criminal Screening in Multifamily Housing - Recommended Policies & Procedures. The Webinar will be held from 1:00 PM to 2:30 PM Eastern time. Property owners may (and should) screen applicants for criminal behavior but must be careful when doing so - and must have transparent and defensible policies relative to screening for past criminal conduct. This 1.5-hour webinar will assist owners and property managers in understanding what is required when implementing a criminal screening policy. The training will outline the HUD guidance relative to criminal screening and will review the type of policies that are - and are not - acceptable. The discussion will center on (1) the types of crimes that are appropriate for screening; (2) the HUD policy regarding the use of arrest records in criminal screening; (3) dealing with convictions for non-dangerous crimes; and (4) the use of individual assessments for rejected applicants. Following the session, participants will be better prepared to develop a criminal screening policy that will not run afoul of fair housing law. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule.