A. J. Johnson Partners with Mid-Atlantic AHMA for December Training on Affordable Housing - April 2024

HUD Extends HOTMA Compliance Deadline for Community Planning and Development Programs to 2026

The U.S. Department of Housing and Urban Development (HUD) has announced an extension of the compliance deadline for implementing specific provisions of the Housing Opportunity Through Modernization Act (HOTMA) final rule for Community Planning and Development (CPD) programs. This extension will be official when published in the Federal Register on December 31, 2024. Key Points: The extension applies to multiple programs including HOME Investment Partnerships, HOME-American Rescue Plan, Housing Trust Fund (HTF), Housing Opportunities for Persons With AIDS (HOPWA), Community Development Block Grant (CDBG), Emergency Solution Grants (ESG), and Continuum of Care (CoC) programs. CPD grantees must comply with the HOTMA final rule by January 1, 2026, but they may choose to implement the changes earlier, starting from January 1, 2024. HUD cited delays in updating its systems and the need to provide grantees additional time to incorporate new income and asset requirements into their programs as reasons for the extension. Safe Harbor Provisions: The notice also allows certain CPD grantees to implement income safe harbor provisions before the extended compliance date: HOPWA, ESG, and CoC program grantees may use the safe harbor provision at 24 CFR 5.609(c)(3). HOME and HTF grantees can implement specific safe harbor provisions under their regulations. Grantees must update their program guidelines and establish appropriate policies before using these provisions. Background: This extension follows earlier announcements affecting other HUD programs: In September 2024, the Office of Public and Indian Housing (PIH) announced that Public Housing Agencies would not need to implement certain HOTMA provisions by January 2025. The Office of Housing issued a similar notification extending the deadline to July 1, 2025 for multifamily owners. Until their new compliance dates, CPD grantees must continue following existing regulations as they were before January 1, 2024, while having the option to implement the new safe harbor provisions described in the notice. The extension aims to ensure a smoother transition to the new requirements while reducing the administrative burden on grantees who may otherwise need to maintain two different income requirements for the same units.

Rural Development Updates Form 3560-8, Tenant Income Certification

On December 10, 2024, the Rural Housing Service (RHS) Office of Multifamily Housing (MFH) announced an updated Form RD 3560-8 Tenant Certification for the July 1, 2025, implementation of the changes to income and asset calculations due to the Housing Opportunity Through Modernization Act (HOTMA).  On October 3, 2024, RHS Multifamily Housing extended the implementation of applicable HOTMA regulations to July 1, 2025.  Effective on or after July 1, 2025, all MFH tenant certifications must comply with HOTMA requirements. Rural Development has updated Form RD 3560-8 Tenant Certification to accommodate HOTMA changes. The revised Form was published on December 06, 2024, and is available on the United States Department of Agriculture s (USDA) eForms website. Since tenant certifications can be submitted to the Agency up to 90 days before their effective date, please note the following: The updated Form RD 3560-8 is for tenant certifications with an effective date of July 1, 2025, or after. The previous Form RD 3560-8 has been renamed Form RD 3560-8A and will be used for tenant certifications effective before July 1, 2025. Both forms can be found on the eForms website. For previously published Rural Development guidance related to HOTMA, please refer to the following: Unnumbered Letter published March 4, 2024 Unnumbered Letter published August 19, 2024 MFH Stakeholder Announcement HOTMA Implementation update October 3, 2024 Unnumbered Letter published November 14, 2024 (Passbook Savings Rate update)

Trump Nominates Scott Turner as HUD Secretary

In a significant move relating to affordable housing, former President Donald Trump has nominated Scott Turner as Secretary of the U.S. Department of Housing and Urban Development (HUD). Known for his leadership and commitment to community development, Turner brings a dynamic blend of experiences to the role. Scott Turner is an American politician and former professional football player who has served in various public service roles. He played as a defensive back in the NFL from 1995 to 2003 with the Washington Redskins, San Diego Chargers, and Denver Broncos. After his NFL career, Turner entered politics in Texas. From 2013 to 2019, he served as a Republican in the Texas House of Representatives for District 33. During his time in the state legislature, he focused on economic development and education initiatives. In 2019, Turner was appointed Executive Director of the White House Opportunity and Revitalization Council under President Trump. There, he implemented and oversaw Opportunity Zones across the country, a program designed to spur economic development and job creation in economically distressed communities. Turner has been known for focusing on economic development, particularly in underserved communities, and has frequently spoken about the importance of creating pathways to prosperity through public-private partnerships. As HUD Secretary, Turner s priorities are expected to align with his previous initiatives. These include expanding affordable housing options, strengthening public-private partnerships to revitalize urban areas, and addressing systemic challenges such as homelessness and housing insecurity. His nomination comes at a critical time as the nation grapples with escalating housing costs, supply shortages, and the lingering effects of the COVID-19 pandemic on vulnerable populations. Supporters of Turner s nomination laud his hands-on approach and ability to engage with local leaders, community organizations, and private investors to drive meaningful progress. However, critics have raised concerns about the long-term impacts of Opportunity Zones, particularly regarding potential displacement and gentrification in some areas. Turner s ability to address these concerns while fostering equitable development will likely be a focal point during his confirmation hearings. Senate confirmation of Turner is expected, and no significant objections to the appointment have yet been raised.

Treasury Posts Support of HFA Disincentives for Qualified Contracts

In a December 12, 2024 post, the U.S. Department of Treasury expressed strong support for Housing Finance Agency (HFA) attempts to prevent or limit qualified contract requests for LIHTC projects. According to recent Harvard Joint Center for Housing Studies data, the United States is facing an unprecedented housing affordability crisis. Record numbers of renters spend over 30% of their income on housing and utilities. As housing costs continue to climb in the wake of the pandemic, preserving existing affordable housing stock has become increasingly critical. The Low-Income Housing Tax Credit (LIHTC) program is the federal government's primary tool for expanding the affordable housing supply. Between 2000 and 2019, it supported approximately 25% of new apartment construction. However, a provision known as the Qualified Contract option threatens to prematurely remove thousands of units each year from the affordable housing inventory. Understanding the Qualified Contract Challenge The Qualified Contract provision, introduced in 1989, was designed to encourage private investment in affordable housing by offering property owners an early exit option. After 14 years, owners can request their state housing agency find a buyer willing to pay a statutorily defined price. If no qualified buyer emerges within a year, the property can convert to market-rate housing despite the original 30-year affordability commitment. This mechanism has led to significant losses in affordable housing stock. Current estimates indicate that 6,000-10,000 low-income units are lost annually through Qualified Contracts, with cumulative losses reaching approximately 115,000. The problem has intensified recently as the statutory pricing formula often exceeds market value, making it difficult for agencies to secure buyers willing to maintain affordability restrictions. State-Level Solutions State housing agencies have implemented various strategies to address this challenge: Mandatory Waivers Many states now require LIHTC applicants to waive their Qualified Contract rights as a prerequisite for receiving tax credits. North Dakota and Nevada exemplify this approach, making such waivers mandatory for new applications. The Treasury Department strongly endorses these policies and encourages their application across 4% and 9% LIHTC programs. Incentive-Based Approaches Some states have adopted point-based systems to encourage longer affordability commitments. Georgia's program, for instance, awards developers incremental points based on the duration of their Qualified Contract waiver: one point for a 5-year waiver, two points for 10 years, and three points for a complete waiver. Deterrence Measures States have also implemented policies discouraging Qualified Contract requests from existing LIHTC property owners. These measures include: Disqualifying applicants with a history of Qualified Contract requests (Maine, North Carolina) Assigning negative points to applicants who have previously pursued Qualified Contract exits (Indiana, Kansas, New Hampshire) Awarding bonus points to applicants who have never requested a Qualified Contract (South Carolina) Federal Support and Coordination Federal agencies are aligning their policies to reinforce these state-level efforts: HUD has proposed restricting FHA Multifamily and Risk Share insurance access to owners who waive Qualified Contract rights. The Federal Housing Finance Agency now prohibits Fannie Mae and Freddie Mac from investing in properties that retain Qualified Contract options. The USDA's Rural Housing Service is developing complementary measures. Looking Forward The Treasury Department strongly supports state and federal initiatives to limit the use of Qualified Contracts and preserve affordable housing. These coordinated efforts are a crucial component of the administration's comprehensive strategy to address the housing affordability and supply challenges facing American families. As housing costs strain household budgets nationwide, preserving existing affordable units through Qualified Contract restrictions becomes increasingly vital. State agencies' innovative approaches to this challenge demonstrate the potential for policy solutions that balance private sector participation with long-term affordability goals. This article reflects the Treasury's position on best practices in LIHTC administration as of December 2024. Please consult your state housing agency for the most current guidance and requirements.