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HOTMA Required Revisions to Tenant Selection Plans and EIV Policies and Procedures

person A.J. Johnson today 11/04/2023

On October 2, 2023, HUD published a list of Discretionary Policies the owners participating in HUD Multifamily Housing Programs must set in Tenant Selection Plans (TSPs) and EIV Policies and Procedures. These documents must be updated by March 31, 2024.

  1. HOTMA Provision: De Minimis Errors in Income Determinations.
    1. Required HOTMA Policy: Owners must take corrective action to credit or repay a family if the family was overcharged tenant rent because of de minimis errors (no more than $360 annually) in calculating family income. If a family is undercharged for rent due to an owner miscalculation of income, families may not be required to repay.
    1. Owner’s Discretionary Policies: Owners must include in the TSP how they will repay or credit a family the amount that the family was overcharged retroactive to the effective date of the action for which the error was made, regardless of the dollar amount associated with the error.
  2. Self-Certification of Net Family Assets Equal to or Less Than $50,000 (adjusted annually for inflation).
    1. Required HOTMA Policy: Owners must determine if the family’s total net family assets are equal to or less than $50,000, and they must determine the actual income earned from the assets.
    1. Owner’s Discretionary Policies: (1) Owners may accept a family’s self-certification of net family assets if the assets are no more than $50,000 and anticipated income earned from assets without taking additional steps to verify accuracy, at admission and reexamination; (2) Accepting a family’s self-certification at admission may reduce the initial burden on applicants and speed up the lease-up process. In deciding whether to accept a self-certification of assets at admission, Owners are encouraged to consider the local needs and priorities in their communities along with the potential risks of accepting self-certification of assets, including the requirement to repay funds for participants/tenants who are later found to be ineligible for assistance; (3) Owners who choose to accept self-certification of assets of no more than $50,000 at reexamination are required to fully verify net family assets every three years; (4) Owners who choose not to accept self-certification must verify net family assets every year (5) Owners must include in their TSPs whether they will accept a family’s self-certification of assets of $50,000 or less at admission (only for new admissions effective on or after 1/1/24) and/or at reexamination.
  • Hardship Exemptions for Health/Medical Care Expenses & Reasonable Attendant Care & Auxiliary Apparatus Expenses (General Relief):
    • Required HOTMA Policy: (1) Owners must provide hardship relief to any family that demonstrates its eligible health and medical care expenses, or disability-related expenses exceed 5% of the family’s annual income; (2) An increase in medical or disability-related expenses constitutes a qualifying eligibility factor so long as it exceeds 5% of the family’s annual income; (3) to meet the requirement for a medical expense hardship exemption, the family’s expenses must qualify as medical expenses under HUD regulation; and (4) to meet the requirements for a disability related exemption, the family’s disability related expenses must meet the HUD definition of a disability related expense.
    • Owner’s Discretionary Policies: (1) Owners must develop written policies in their TSPs defining the changes in circumstances that are required for a family to qualify for a hardship exemption. These are hardships that would not otherwise trigger an interim reexamination; (2) Owners may extend the hardship relief for one or more 90-day intervals, while the family’s hardship condition exists;  and (3) Owners must state in the TSP whether hardship exemption extensions are allowable, and the maximum number of 90-day extensions (if establishing a maximum policy) families may receive.
      • Note - MFH owners are not limited by HUD to a maximum number of 90-day extensions.
      • Third-party verification of the hardship is required of the file must be documented as to why third-party verification was not available. Attempts to obtain verification must be obtained prior to the end of the 90-day period.
  • Hardship Exemptions for Health/Medical Care Expenses & Reasonable Attendant Care & Auxiliary Apparatus Expenses (Phased-in Relief):
    • Required HOTMA Policy: (1) All families who received a deduction for medical or disability-related expenses based on their most recent income review prior to January 1, 2024, will begin receiving the 24-month phased-in relief at their next annual or interim reexamination, whichever occurs first on or after the date the MFH Owner complies with HOTMA. (2) Families who receive phased-in relief will have eligible expenses deducted as follows: (i) First 12 months: in excess of 5% of annual income; (ii) second 12 months: in excess of 7.5% of annual income; and (iii) after 24 months: in excess of 10% threshold will phase in and remain in effect unless the family qualifies for General Relief. (3) Once a family chooses to obtain general relief, a family may no longer receive the phased-in relief.
    • Owner’s Discretionary Policy: MFH Owners may continue the phased-in relief for a new admission who was receiving the phased-in relief at their prior assisted housing at the time that the family was admitted to their current unit. This discretion should be stated in the TSP.
      • For example, a family is admitted to a new MFH property, but they would have still been receiving the 24-month phased-in hardship exemption had they continued to reside in their previous unit at a different MFH property. Owners may establish a policy to continue the phased-in hardship exemption for the family’s remaining months in the 24-month phase-in period.
  • Hardship Exemption to Continue Child Care Expense Hardship:
    • Required HOTMA Policy: (1) MFH Owners must develop written policies to define what constitutes a hardship, which includes the family’s inability to pay rent, for the purposes of the childcare expense hardship exemption. (2) Owners must include this policy in the TSP. (3) Owners must obtain third-party verification of the family’s inability to pay rent or must document in the file the reason third-party verification was not available. Owners must attempt to obtain third-party verification prior to the end of the 90-day period.
    • Owner’s Discretionary Policy: (1) Owners may, pursuant to their own discretionary policies, extend the hardship relief for one or more additional 90-day periods while the family’s hardship condition continues. (2) Owners must include in their TSP whether they will permit extensions of the 90-day hardship period and the maximum number of 90-day extension periods (if establishing a maximum policy) that a family may receive.
      • Note: Owners are not limited by HUD to a maximum number of 90-day extensions.
  • Interim Reexaminations - Decreases in Adjusted Income:
    • Required HOTMA Policy: (1) Owners are required by HUD to process interim reexaminations for all decreases in adjusted income when a family permanently moves out of a unit. (2) Owners are not permitted to establish a dollar figure threshold amount instead of a percentage threshold of less than 10 percent.
    • Owner’s Discretionary Policy: (1) Owners may decline to conduct an interim reexamination of family income if the Owner estimates that the family’s adjusted annual income will decrease by an amount that is less than ten percent of the family’s annual adjusted income, or such lower threshold established by the Owner. (2) Owners must identify in their TSPs the percentage threshold they will use for conducting interim reexamination for decreases in a family’s adjusted income. (3) Owners may establish policies to round calculated percentage decreases up or down to the nearest unit (e.g., a calculated decrease of 9.5% may be rounded up to 10%).
  • Interim Reexaminations - Increases in Adjusted Income:
    • Required HOTMA Policy: (1)Owners must conduct an interim reexamination of family income when they become aware that the family’s annual adjusted income has changed by an amount that would result in an estimated increase of ten percent or more in annual adjusted income or another amount established through HUD notice, except Owners may not consider any increases in earned income when estimating or calculating whether the family’s adjusted income has increased unless the family has previously received an interim reduction during the same reexamination cycle. (2) Owners may not establish a different threshold to conduct interim reexaminations for increases in adjusted income.
    • Owner’s Discretionary Policy: (1) Owners may choose not to conduct an interim reexamination if a family reports an increase in income within three months of their next annual reexamination effective date. (2) Owners may choose not to include earned income increases in determining whether the ten percent threshold is met in adjusted income when the family previously had an interim reexamination performed for a decrease in annual adjusted income (earned, unearned, or combined) since the last annual reexamination. (3) Owners must describe these policies in their TSPs.
  • Interim Reexaminations - Reporting Changes & Effective Date:
    • Required HOTMA Policy: (1) Families must report household composition changes and changes to adjusted income consistent with HOTMA’s requirements; however, Owners determine the timeframe in which reporting must occur to be considered "timely." (2) If the Owner has adopted a retroactive rent decrease policy, it may not be applied prior to the later of:
      • The 1st of the month following the date of the actual decrease in income; or
      • The 1st of the month following the most recent previous income examination.
      • Note - Owners must clearly communicate to the family how a retroactive adjustment will affect the family’s responsibility for rent.
    • Owner’s Discretionary Policy: (1) Owners must develop policies that describe when and under what conditions families must report changes in household composition and adjusted income consistent with HUD’s requirements for processing interims or other non-interim reexamination transactions. (2) Owners have the discretion to develop specific reporting policies that describe which changes must be reported and the timeline for reporting the change to be considered timely. (3) Owners may adopt a policy to apply rent decreases retroactively and establish additional criteria to describe the conditions under which retroactive decreases will be applied. (4) Owners must describe these policies in their TSPs.
  • Revocation of Consent Form (Revocation of consent or refusal to sign the consent form prohibits the owner from requesting and accessing  income information and financial records, including pulling any EIV reports and using EIV data to verify income):
    • Required HOTMA Policy: (1) An executed consent form will remain effective until the family is denied assistance, the assistance is terminated, or the family provides written notification to the Owner to revoke consent. (2) Families have the right to revoke consent by notice to the Owner; however, revoking consent can result in termination or denial of assistance if the Owner has established an admission and occupancy policy that the revocation of consent will result in termination of assistance or denial of admission. (3) Owners may not process interim or annual reexaminations of income, including when a family’s income decreases and the family requests an interim reexamination to decrease tenant rent, without the family’s executed consent form(s). (4) Owners must explain to families the consequences, if any, of revoking their consent. (5) Owners must notify their local HUD office when an applicant or participant family member revokes their consent.
    • Owner’s Discretionary Policy: (1) Owners may establish in a written policy that revocation of consent will result in termination of assistance or denial of admission. (2) When Owners do not establish a policy such that revoking consent will result in termination of assistance, participant families will be required to sign a new consent form by the next regularly scheduled reexamination or interim reexamination, whichever occurs first. (3) Owners may establish policies to deny admission but allow existing participant families to continue to receive assistance after revoking their consent until the next interim or annual reexamination, whichever is sooner. (4) Owners must describe these policies in their TSPs.
  • Determination of Family Income Using Other Means-Tested Public Assistance, i.e., "Safe Harbor:"
    • Required HOTMA Policy:
      • (1) Owners may determine the family’s income prior to the application of any deductions based on income determinations made within the previous 12-month period for purposes of the following means-tested forms of Federal public assistance:
        • The Temporary Assistance for Needy Families Block Grant ("TANF").Medicaid.The Supplemental Nutrition Assistance Program ("SNAP").The Earned Income Tax Credit.The Low-Income Housing Tax Credit.The Special Supplemental Nutrition for Women, Infants, and Children ("WIC").Other programs administered through HUD.Other means-tested forms of Federal public assistance for which HUD has established a memorandum of understanding.Other Federal benefit determinations made by other means-tested Federal programs that the HUD Secretary determines to have comparable reliability and announces through a Federal Register Notice.
        (2) Owners are not required to accept or use determinations of income from other Federal means-tested forms of assistance.(3) Safe Harbor verification must be obtained by means of third-party verification and must state the family size, must be for the entire family (i.e., the family members listed in the documentation must match the family’s composition in the assisted unit, except for household members) and must state the amount of the family’s income.(4) Safe Harbor verification must not be mixed and matched with other income verifications, including other Safe Harbor income determinations.
    • Owner’s Discretionary Policy: (1) Owners that choose to implement Safe Harbor income determinations must:
      • Establish in a written policy when they will accept Safe Harbor income determinations (e.g., at reexamination only or at admission and reexamination), including which programs from which they will accept income determinations; and
      • Create policies that outline the course of action when families present multiple verifications from the same or different Safe Harbor programs (e.g., Owners could establish policies to accept the most recent income determination).
      • Owners must describe these policies in their TSPs.
  • Enterprise Income Verification (EIV) Usage:
    • Required HOTMA Policy: (1) MFH Owners must use HUD’s EIV system in its entirety. (2) Owners must update their EIV policies and procedures to reflect their discretionary use of EIV reports (e.g., Income Report, zero Income reports, New Hires Report, etc.) under HOTMA.
    • Owner’s Discretionary Policy: (1) Owners are not required to use EIV during interim reexaminations. (2) Owners who adopt policies to not include earned income increases in determining whether the 10 percent threshold is met for increases in adjusted income when the family previously had an interim reexamination performed for a decrease in annual adjusted income (earned, unearned, or combined) since the last annual reexamination, are not required to use the EIV New Hires report between annual reexaminations. (3) Owners who have a policy to consider earned income increases in calculating whether the ten percent threshold has been met for an interim reexamination are required to review the EIV New Hires report at least quarterly, for the remainder of the reexamination period after the interim reexamination to decrease rent occurs. (4) Owners are not required to use the Income Report at annual reexamination if they use Safe Harbor verification to determine the family’s income. (5) Owners are not required to use EIV Income Discrepancy Report at annual reexamination if they used Safe Harbor verification to determine the family’s income at the last reexamination. (6) Owners must describe these policies in their EIV policies and procedures.

Bottom Line

            As outlined in this article, MFH owners have a good deal of discretion regarding the implementation of a number of HOTMA provisions. Important discretion exists with regard to (1) Self-Certification of family assets; (2) Hardship exemptions for medical and disability-related expenses, as well as child care expenses; (3) the handling of interim reexaminations; (4) Means tested determination of family income {i.e., the "Safe Harbor"}; and (5) use of EIV. Owners who wish to apply any of these discretionary measures must ensure that such policies are reflected in Tenant Selection Plans (TSPs) and EIV Policies and Procedures no later than March 31, 2024.

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