State & Local Fiscal Recovery Funds - A Source of Gap Funding for LIHTC Properties

A. J. Johnson Partners with Mid-Atlantic AHMA for December Training on Affordable Housing - February 2025

In February 2025, A. J. Johnson will partner with the MidAtlantic Affordable Housing Management Association for four live webinar training sessions for real estate professionals, particularly those in the affordable multifamily housing field. The following sessions will be presented: February 11: Basic LIHTC Compliance - This training is designed primarily for site and investment asset managers responsible for site-related asset management. It is especially beneficial to those managers who are relatively inexperienced in the tax credit program. It covers all aspects of credit related to on-site management, including the applicant interview process, determining resident eligibility (income and student issues), handling recertification, setting rents - including a full review of utility allowance requirements - lease issues, and the importance of maintaining the property. The training includes problems and questions to ensure students fully comprehend the material. February 13: Dealing with Income and Assets in Affordable Multifamily Housing - Course Overview - This live webinar provides concentrated instruction on the required methodology for calculating and verifying income and determining the value of assets and income generated by those assets. The first section of the course involves a comprehensive discussion of employment income, military pay, pensions/social security, self-employment income, and child support. It concludes with workshop problems designed to test what the student has learned during the discussion phase of the training and serve to reinforce HUD-required techniques for determining income. The second component of the training focuses on a detailed discussion of requirements related to determining asset value and income. It applies to all federal housing programs, including the low-income housing tax credit, tax-exempt bonds, Section 8, Section 515, and HOME. Multiple types of assets are covered in terms of what constitutes an asset and how they must be verified. This section also concludes with problems designed to test the student s understanding of the basic requirements relative to assets. February 18: Tenant-on-Tenant Harassment & Sexual Harassment in the Workplace - Dealing with tenant-on-tenant harassment is an evolving area of fair housing law. Landlords are generally familiar with how their actions can be construed as discriminatory. But how should they react when one resident violates another's fair housing rights? Title VII of the Civil Rights Act of 1964 prohibits discrimination based on sex in the workplace - including sexual harassment. The law applies to employers with 15 or more employees. In addition to having a written sexual harassment policy, companies should also have an effective complaint procedure. Many businesses in the United States have no policies regarding sexual harassment, and such harassment occurs in the highest levels of corporate management. However, the risk of not having such a policy far outweighs the effort required to implement one. These risks are more significant now than ever before. Victims of sexual harassment may now recover damages (including punitive damages), and the Supreme Court has made it easier to prove injury. This two-hour training is designed to help property owners and managers understand the current legal state of these two issues and establish policies to limit potential liability. The session will include a discussion of the most relevant court cases relating to tenant-on-tenant harassment and cases that outline employer risk regarding harassment in the workplace. Participants will also be provided with recommended policies to limit potential liability. February 20: Virginia Landlord Tenant Act Issues for Multifamily Housing Managers Join us for an essential three-hour webinar that provides a comprehensive overview of the Virginia Residential Landlord Tenant Act (VRLTA), critical knowledge for every multifamily housing professional. This intensive training will equip property managers with the latest legal requirements and best practices for successful property operations in Virginia. Key topics include: Essential lease provisions and prohibited practices Security deposit requirements and handling Maintenance obligations and responsibilities Proper notice requirements and tenant communications Rights of entry and property access Handling lease violations and evictions Required disclosures and documentation Tenant rights and remedies Managing emergencies and property damage Recent updates to landlord-tenant law Led by A. J. Johnson, this webinar offers practical insights and actionable guidance to help you: Minimize legal risk and avoid costly mistakes Improve operational compliance Protect your property's interests Maintain positive tenant relationships Navigate challenging situations confidently Perfect for property managers, leasing professionals, maintenance supervisors, and other multifamily housing staff. Participants will receive comprehensive materials and be able to ask questions about real-world scenarios. This opportunity will strengthen your understanding of Virginia landlord-tenant law and enhance your property management expertise. These sessions are part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA and are designed to provide affordable housing professionals with the knowledge needed to effectively manage the complex requirements of the various agencies overseeing these programs. Persons interested in any (or all) training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

HUD Strengthens Tenant Protections in New HOME Rule

The U.S. Department of Housing and Urban Development (HUD) has published the Final Rule for the HOME Investment Partnerships Program, which will take effect on February 5, 2025. The new rule significantly enhances tenant protections and lease requirements, establishing a robust framework for tenant rights and landlord responsibilities. Enhanced Lease Requirements The Final Rule mandates that property owners provide written leases with a minimum one-year term, though shorter periods are permissible if mutually agreed upon. These leases must incorporate a HOME tenancy addendum and include multiple communication methods for tenant-owner interaction. The participating jurisdiction's contact information must also be clearly stated in the lease agreement. Physical Condition Standards Property owners face stricter property maintenance and repair requirements under the new rule. They must: Maintain units and projects in compliance with property standards and local codes Provide written timeframes for maintenance and repairs Refrain from charging tenants for normal wear and tear Relocate tenants to suitable housing if life-threatening deficiencies cannot be immediately addressed Tenant Rights and Protections The rule significantly expands tenant rights, including: Use and Occupancy Rights Exclusive use and occupancy of their units Reasonable access to common areas Right to organize tenant associations Protection against unreasonable entry, requiring advance notice except in emergencies Legal and Administrative Protections Right to independent legal representation Access to jury trials and appeals Protection against unauthorized seizure of personal property Safeguards against retaliation for exercising tenant rights Confidentiality of personal information Notice Requirements The rule strengthens notification requirements, mandating that owners: Provide written notice before any adverse actions Notify tenants of ownership or management changes Give at least 30 days' notice before property sales or foreclosures Issue written notices specifying grounds for adverse actions Security Deposits and Termination Security Deposit Regulations Deposits cannot exceed two months' rent Must be fully refundable Owners must itemize any charges against the deposit Unused portions must be promptly refunded Termination Procedures Termination is permitted only for serious lease violations, legal infractions, or good cause. Minimum 30-day notice required for termination Exception for immediate threats to safety or property Non-Discrimination and Equal Opportunity The Final Rule reinforces compliance requirements with all applicable non-discrimination and equal opportunity regulations, ensuring fair treatment of all tenants regardless of protected characteristics. Compliance Timeline Property owners and participating jurisdictions must implement these enhanced protections by February 5, 2025, when the Final Rule takes effect. This timeline ensures adequate preparation for the new requirements while maintaining continuous tenant protections during the transition period.

HUD Publishes Final Rule Updating HOME Regulations

HUD's HOME Investment Partnerships Program (also known as the HOME program or HOME) provides formula grants to states and local government units to support various activities to produce and maintain affordable rental and homeownership housing. The program also offers tenant-based rental assistance for low-income and very low-income households. This final rule updates the current HOME regulations to enhance, simplify, and streamline requirements, better align the program with other federal housing programs, and implement recent amendments to the HOME statute. Additionally, this final rule includes minor revisions to the regulations for the Community Development Block Grant and Section 8 Housing Choice Voucher Programs, consistent with the changes to the HOME program. This final rule follows the publication of a proposed rule on May 29, 2024, and incorporates the feedback received regarding that proposed rule. This final rule will be effective on February 5, 2025. The rule changes for the HOME program have been made in the following general areas: Tenant Protections and Lease Requirements: Enhanced tenant protections, including requirements for lease contents, notice provisions, tenant rights, prohibitions on unreasonable interference or retaliation by owners, and ensuring tenants' rights to organize and access common areas. Property Standards and Inspections: Updated property standards for new construction, rehabilitation, and ongoing property conditions, including requirements for carbon monoxide and smoke detection, disaster mitigation, green building standards, and revised inspection procedures and frequency requirements. Affordability and Income Determinations: Adjusted periods of affordability based on the amount of HOME funds invested, updated income determination methods, streamlined income determination processes, and provisions for accepting income determinations from other Federal or State programs. Tenant-Based Rental Assistance (TBRA): Revised requirements for rental assistance contracts, including terms, amendments, renewals, and income determinations, with enhanced tenant protections and lease addendum requirements. Community Housing Development Organizations (CHDOs): Revised CHDO qualification requirements, roles in owning, developing, and sponsoring housing, and provisions for capacity building and operating expenses. Homeownership Assistance: Updated homeownership value limits, resale and recapture provisions, requirements for lease-purchase programs, and adjusted periods of affordability for homeownership assistance. Environmental, Health, and Safety Hazards: Requirements for notifying tenants and participating jurisdictions of environmental, health, or safety hazards affecting projects or units. Program Administration and Compliance: Changes to the closeout process, recordkeeping requirements, corrective and remedial actions, and adjustments to the applicability of uniform administrative requirements and provisions for reallocations by formula. Security Deposits and Fees: Prohibitions on using surety bonds or security deposit insurance in lieu of security deposits, and requirements for refundable security deposits and allowable fees. Green Building and Resiliency: Incentives for projects meeting green building standards, allowing jurisdictions to exceed maximum per-unit subsidy limits for such projects. Utility Allowances and Rent Limits: Flexibility in determining utility allowances using HUD-approved methods and aligning rent limits with other Federal and State rental assistance programs. Financial Oversight: Annual examination of the financial condition of projects with 10 or more HOME-assisted units to ensure continued economic viability. Tenant Selection and Marketing: Requirements for written tenant selection policies, affirmative marketing, and nondiscrimination compliance. Project Costs and Eligible Activities: This section clarifies eligible project costs, including pre-development costs, environmental assessments, and using HOME funds for acquisition through ground leases. Administrative and Planning Costs: Provisions reimbursing administrative and planning costs, including project inspections and monitoring costs. While the changes are essential and must be fully understood by Participating Jurisdictions, since my practice focuses on affordable rental housing, I will also focus on that in the articles I post about them. Due to the complexity of the final rule, which is more than 500 pages, I will provide articles on the changes affecting multifamily housing complexes using HOME funds. Over the next few weeks, I will post articles on the following areas of the final rule. (1) Tenant Protections & Lease Requirements, (2) Property Standards & Inspections, (3) Affordability and Income Determinations, (4) Security Deposits & Fees, (5) Utility Allowances & Rent Limits, and (6) Tenant Selection & Marketing. These articles will assist owners and managers of rental properties with HOME funds to understand the new rules that will impact projects that obtain HOME funding beginning on February 5, 2025. If you know of an industry professional who may benefit from these articles, please encourage them to log into our website and sign up to receive automatic notification of future articles. They can subscribe to our articles by visiting our website (ajjcs.net), clicking "news, and then "subscribe in the lower right corner.

USDA Updates Audit Requirements for Rural Housing and Community Facilities Programs

On December 6, 2024, the U.S. Department of Agriculture's Rural Housing Service (RHS) issued a final rule updating audit and financial statement requirements for its Multi-Family Housing and Community Facilities programs. These changes align the agency's regulations with recent revisions from the Office of Management and Budget (OMB) regarding federal financial assistance guidance. Key Changes in Audit Thresholds The final rule implements several significant modifications to audit requirements: Community Facilities: The audit threshold for Community Facilities program participants has increased from $750,000 to $1,000,000 in federal financial assistance per fiscal year. Multi-Family Housing: Non-profit borrowers receiving $1,000,000 or more in combined federal financial assistance must now adhere to OMB audit requirements, which have been raised from the previous $750,000 threshold. For-profit borrowers and smaller non-profits: Organizations receiving less than these thresholds may submit alternative financial reports, with specific requirements based on funding levels. Financial Reporting Requirements For organizations below the audit thresholds, the rule maintains flexibility in financial reporting: Non-profit borrowers receiving less than $1 million and for-profit borrowers receiving less than $500,000 in federal assistance can submit annual owner-certified prescribed forms using the accrual method of accounting. These reports must comply with the Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants (AICPA). Organizations may engage a CPA to prepare compilation reports of the prescribed forms. Administrative Updates The rule also includes technical modifications to align with current federal guidance: - Removes specific CFR issue dates to allow flexibility for future updates. - Updates terminology to replace "applicant" with "recipient" or "subrecipient" where applicable. - Streamlines references to OMB guidance throughout the affected regulations. Impact and Implementation These changes are expected to lessen the administrative burden for smaller organizations while ensuring appropriate oversight of federal funds. The updated thresholds account for inflation adjustments and modern federal grant management practices. The final rule impacts multiple USDA Rural Development programs, including: - Farm Labor Housing (Section 514) - Rural Rental Housing (Section 515) - Community Facilities Programs - Rural Business-Cooperative Service initiatives Organizations receiving USDA Rural Development funding should review these new requirements to ensure compliance with the appropriate audit and financial reporting standards based on their federal assistance levels. For more information, affected organizations can contact Julie Felhofer, chief of the Policy & Budget Branch, at 715-295-4069, Julie.felhofer@USDA.gov, or Nathan Chitwood, Director of Community Facilities at USDA Rural Development, at 573-876-0965, Nathan.chitwood@USDA.gov. This rule is part of the USDA's ongoing efforts to modernize its regulations, align them with government-wide standards for federal financial assistance programs, and ensure effective oversight of federal funds.