Significant New Housing Law Ready for President's Signature

person A.J. Johnson today 07/20/2016

On July 14, 2016, the U.S. Senate passed HR 3700, the Housing Opportunity Through Modernization Act of 2016. It is expected that the President will sign the Act into law shortly at which time the statute will be sent to the Department of Housing & Urban Development to be placed into Regulation.   The Act contains seven Titles and makes some significant changes to some HUD housing programs, most particularly the Section 8 Multifamily Housing Program, Public Housing, and Vouchers. The seven Titles of the Act are:  
  • Title I: Section 8 Rental Assistance & Public Housing
  • Title II: Rural Housing
  • Title III: FHA Mortgage Insurance for Condominiums
  • Title IV: Housing Reforms for the Homeless and for Veterans
  • Title V: Miscellaneous
  • Title VI: Reports
  • Title VII: Housing Opportunities for Persons with Aids
  This memorandum deals primarily with Title I, since changes in this area have the greatest impact on existing multifamily housing properties. The memo outlines changes from regulations that are currently in effect.   Title I   Initial Inspections  
  • Correction of Non-Life Threatening Conditions: Units that fail to meet the inspection standard for participation in the Housing Choice Voucher program will no longer result in a withholding of assistance payments unless the failure is the result of a life-threatening condition.
    • If a life-threatening condition exists, the PHA may withhold payments beginning 30-days after the deficiency is discovered. Once the correction has been made, payments will begin again.
    • If the dwelling unit is not brought into compliance with housing quality standards (HQS) within 60-days after the unit is deemed out of compliance (or such reasonably longer period as the agency may establish, the tenant will be required to move; and
    • The PHA will provide the tenant the necessary forms to allow the tenant to move to another dwelling unit and will transfer assistance to that unit.
  • Protection of Tenants: If assistance is withheld due to the failure of a unit to pass inspection, the owner of the unit may not terminate the tenancy of the resident, but the tenant may terminate tenancy through notice to the owner.
  • Termination of Lease or HAP Contract: If the owner does not correct the noncompliance within 60-days of the determination of noncompliance, the Agency must terminate the housing assistance payments (HAP) contract for the unit.
  • Relocation: The agency must give families residing in such units 90-days (or longer) to lease a new unit. The 90-day unit begins upon termination of the HAP contract.
  • Availability of Public Housing Units: If a family is unable to find a unit within the required timeframe, the PHA shall, at the option of the family, provide such family a preference for a public housing unit that becomes available after expiration of the 90-day timeframe.
  • Assistance in Finding a Unit: Agencies will be able to provide assistance to families in finding a new residence, including the use of up to two months of any assistance payments that were withheld or abated due to the failure of the unit to meet HQS standards. Assistance may include security deposits and reimbursement for reasonable moving expenses. These provisions will not apply if the reason for the unit not meeting HQS was tenant-caused damage.
  • Effective date: This section will take effect following HUD publication of Notice or Regulation implementing the requirements.
  Income Reviews  
  • Income Reviews for Public Housing & Section 8 Programs:
    • Reviews of Family Income:
      • Annual reviews will still be required for all families, except for families with fixed income.
      • Households may request a review of income anytime the income or deductions of the family change by an amount that is estimated to result in a decrease of 10% or more in adjusted annual income (this is a change from the current $40 monthly reduction in income).
      • The income must be reexamined any time the income or deductions of the family change by an amount that will increase the annual income by 10% or more.
        • However, any increase in the earned income of a family will not require an interim recertification (this is a major change from current Section 8 rules). There will be an exception to this if the increase due to employment corresponds to a previous decrease that resulted in an interim recertification.
      • Calculation of Income:
        • Use of current year income - for purposes of initial occupancy, agencies or owners shall estimate income for the upcoming year.
        • Use of prior year income - for purposes of annual reviews, agencies or owners shall use the income of the family as determined for the preceding year, taking into consideration any interims performed during the preceding year.
        • Other Income - agencies or owners will have the authority to make other adjustments that are considered appropriate.
        • Safe Harbor - agencies or owners may use income determinations made for participation in other programs such as TANF, Medicaid assistance, and the SNAP (food stamp) program.
        • PHA & Owner Compliance - agencies and owners will not be considered out of compliance for de minimis errors made in the calculation of family incomes.
      • Adjusted Income:
        • There have been some significant changes to the determination of adjusted income:
          • Excluded amounts:
            • Income will not be imputed to assets unless the net family assets exceed $50,000 - this is an increase from the current $5,000. This amount will be adjusted by HUD annually based on the inflation rate.
            • Expenses related to the Aid and Attendance program for veterans who are in need of regular aid and attendance.
            • HUD will publish other statutory exclusions with the newly updated regulations.
            • Earned income of students - HUD will determine by regulation the amount of earned income of full-time students that is to be excluded; this amount is currently any earned income in excess of $480 per year.
              • HUD will also be able to determine the exclusion of any room and board for students.
            • The one-time deduction for an elderly family will increase from the current $400 to $525;
            • The dependent deduction will remain at $480 for the time being, but along with the elderly deduction, will be adjusted annually based on inflation, rounded to the nearest $25.
            • Health & Medical Expenses: in a major change, allowable medical expenses for an elderly or disabled family will now be the amount in excess of 10% of gross income instead of the current 3%. This will also be true for disability related expenses if such expenses enable a household member to work.
              • Hardship exemptions will be available based on the new HUD regulations.
    Housing Choice Voucher Program  
  • PHAs will be able to establish a payment standard of not more than 120% of fair market rent when required as a reasonable accommodation for a disabled person, without HUD approval.
  • Payment standards in excess of 120% of FMR will require HUD approval.
  Effective date: HUD will issue notices or regulations implementing this section of the Act. These provisions will take effect at that time, but only at the beginning of a calendar year.   The Act requires that the Secretary of HUD conduct a study on the impact of the changes on elderly and disabled individuals not later than 12-months after the Act goes into effect.   Limitation on Public Housing Tenancy for Over-Income Families   A major change for the Public Housing Program is the requirement that higher income families already in occupancy will no longer be eligible for public housing. If the income of a family in public housing exceeds the income limit for two consecutive years, the rent of the family must be raised to the applicable market rent for the geographic area and terminate the tenancy of the family in public housing not more than six months after the second income determination. The income limit that may not be exceeded is 120% of the median income for the area, so it is not the low-income limit for the area. The HUD Secretary may establish higher income limits because of prevailing levels of construction costs, or unusually high or low family incomes, vacancy rates, or rental costs. Also, this regulation will not apply to over-income families living in public housing due to a lack of qualified low-income residents.   Limitation on Eligibility for Assistance Based on Assets   With regard to the Public Housing Program, units may not be rented and assistance may not be provided to households with assets in excess of $100,000 or who own a home that is suitable for occupancy, unless the family is receiving Section 8 assistance, is a victim of domestic violence, or is offering the home for sale.   Asset Exclusions   At least for public housing, the full value of retirement accounts will be excluded as an asset - not just the value if regular distributions are being taken. We will need to wait until HUD issues regulations to see if this will apply to Multifamily Housing (e.g., Section 8) as well as Public Housing.   Self-Certifications   It does appear that for both Multifamily Housing and Public Housing, families will be able to provide a certification that net assets do not exceed $50,000 in lieu of verification. This amount will be adjusted annually based on inflation. This is clearly a major change from the current requirement that permits such an affidavit when assets are $5,000 or less for public housing and vouchers (as well as the LIHTC program).   Project-Based Vouchers   The new law permits PHAs to assign up to 20% of voucher units as project-based (up from 15%). An additional 10% of units may be authorized as project-based to house homeless families, families with veterans, supportive housing to persons with disabilities or elderly persons, or in areas where vouchers are difficult to use.   Not more than the greater of 25 units or 25% of the units in any project may be provided project-based vouchers.   PHAs may enter into HAP contracts for up to 20-years for project-based assistance, subject to the availability of Congressional funding.   Preference for United States Citizens or Nationals   The new law will give preference or priority for assistance to citizens or national of the United States prior to any alien who is otherwise eligible for such assistance. This will impact waiting list administration.   This synopsis if for informational purposes only. Agencies, Owners, and Managers should make no changes in operational procedures at this time. None of the statutory changes outlined here will go into effect until HUD issues new Notices and regulations implementing the law.    

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HUD Publishes 2025 Income Limits

On April 1, 2025, HUD published the 2025 income limits for HUD programs and the Low-Income Housing Tax Credit and Tax-Exempt Bond programs. The limits are effective on April 1, 2025. The limits for the LIHTC and Bond projects are published separately from those for HUD programs. For better understanding, LIHTC and Bond properties operate under the Multifamily Tax Subsidy Project (MTSP) limits. These properties are 'held harmless' from income limit (and therefore rent) reductions. This means that these properties may use the highest income limits for resident qualification and rent calculation since the project has been in service. However, it's important to note that HUD program income limits are not 'held harmless '. HUD publishes the 50% and 60% MTSP limits alongside the Average Income (AI) limits, which are set at 20%, 30%, 40%, 50%, 60%, 70%, and 80%. Projects that began service before 2009 may utilize the HERA Special Income Limits in areas where HUD has published such limits. Projects placed in service after 2008 cannot use the HERA Special Limits. Projects in rural areas not financed by tax-exempt bonds can use the higher MTSP limits or the National Non-Metropolitan Income Limits (NNMIL). It is important to note that for 2025, HUD has made changes to the definitions of geographic areas as determined by the Office of Management and Budget (OMB). The counties or towns within certain metropolitan areas may have changed. Owners and managers should consult the HUD Area Definition Report for a list of their areas and their components. The link to the Area Definition Report can be found on the website provided below. Owners of LIHTC projects may rely on the 2024 income limits for all purposes for 45 days after the effective date of the newly issued limits, which ends on May 16, 2025. The limits for HUD programs may be found at www.huduser.gov/portal/datasets/il.html. The limits for LIHTC and Bond programs may be found at www.huduser.gov/portal/datasets/mtsp.html.

Effects of Potential Staffing Cuts on HUD Programs

As the Trump administration moves forward with plans to reduce the federal workforce dramatically, the Department of Housing and Urban Development (HUD), according to recent reporting by the Associated Press, could face potential cuts that could eliminate half of its staff approximately 4,000 positions. Widespread Impact Across Essential Services The proposed reductions would affect numerous critical HUD programs, including disaster recovery efforts, rental assistance, housing discrimination investigations, and support for first-time homebuyers. Housing advocates and former HUD officials have raised substantial concerns that these extensive staffing cuts could greatly hinder or even stop the department s ability to carry out its mission. The official HUD position is that this information "should not be considered final. However, the potential extent of these reductions aligns with the administration s broader goal of reducing government spending. Recently appointed HUD Secretary Scott Turner announced the formation of a Department of Government Efficiency task force inspired by billionaire Elon Musk, while also underscoring the identification of "$1.9 billion in misplaced funds and "$260 million in wasteful contracts. Rental Assistance Programs at Risk The proposed cuts most concerning aspect is their potential impact on the Office of Public and Indian Housing, which could lose half its workforce from 1,529 employees to just 765. This office manages rental assistance subsidies for more than 3.5 million households and supports public housing for approximately 1 million people. Georgi Banna, general counsel for the National Association of Housing and Redevelopment Officials, warns that such reductions could delay payments for the Section 8 voucher program, which provides rental assistance to millions of low-income Americans. Although tenants have certain protections as long as they pay their share of the rent, they could ultimately face displacement if landlords withdraw from the voucher program due to payment issues. Budget Challenges Compound the Problem The potential staffing cuts come at a particularly challenging time as Congress continues to navigate a contentious appropriations process for HUD programs. The House version of the spending bill would boost funding for Housing Choice Vouchers by $115 million, which sounds promising but falls far short of the estimated $4.3 billion increase needed to simply maintain current service levels, according to the Center on Budget and Policy Priorities (CBPP). If the House budget is approved, it will only meet 90% of the need, potentially causing about 283,000 households to lose voucher access what the CBPP has described as the "most severe funding shortfall in the history of the voucher program. The situation has already caused damage, with some voucher-administering agencies halting the distribution of new vouchers. Local housing authorities have been operating on constrained budgets, and many lack robust reserves to weather a potential government shutdown or significant funding cuts. Fair Housing Enforcement Under Threat Perhaps the most alarming aspect is the proposed 77% reduction in the Office of Fair Housing and Equal Opportunity, which could shrink its staff from 572 employees to only 134. As HUD s main enforcer of national fair housing laws, this office investigates discrimination complaints and works to ensure equal access to housing. Although Secretary Turner has previously committed to upholding the Fair Housing Act, which includes a statutory mandate for HUD to combat discrimination, the administration s approach to implementing the law may undergo significant changes. Turner recently announced on social media that HUD had canceled $4 million in diversity, equity, and inclusion contracts. Uncertainty for Housing Authorities and Vulnerable Populations Potential staffing cuts and budget uncertainties have come together to create a tumultuous situation for local housing authorities. Housing authorities are finding it difficult to provide clear guidance to both families and landlords while anticipating potentially "draconian consequences if significant cuts or a government shutdown happen. The months ahead may pose unprecedented challenges and uncertainty for millions of Americans relying on HUD programs for stable housing, especially those using Section 8 vouchers. As Congress decides whether to pass a bill keeping the government open, the future of these critical housing programs and the millions of Americans who rely on them hangs in the balance. In conclusion, the proposed staffing cuts at HUD pose a significant threat to the stability and effectiveness of critical housing programs that serve millions of Americans. If carried out, these reductions could disrupt essential services like rental assistance, fair housing enforcement, and disaster recovery putting vulnerable populations at greater risk of housing instability and discrimination. The potential for delayed payments, reduced voucher access, and weakened fair housing protections highlights the profound human impact of these cuts. As Congress deliberates over HUD s budget, the stakes could not be higher for the families, landlords, and housing authorities that rely on these programs for their survival and stability. The coming months will challenge the resilience of HUD s mission and the nation s commitment to providing safe, fair, and affordable housing for all. All those in the affordable housing industry must reach out to their elected representatives to stress the importance of HUD and its programs to the housing needs of America s most vulnerable populations.

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

In April 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: April 15: Pets/Pot/Service Animals: Navigating Fair Housing A Comprehensive 90-Minute Webinar for Housing Professionals Join us for an essential training session that tackles three of the most challenging areas in fair housing compliance today. This practical webinar will equip affordable housing providers with clear guidance on: Service and Emotional Support Animals: Learn the crucial legal distinctions between pets and assistance animals, proper verification procedures, and how to handle accommodation requests while complying with FHA regulations. Pet Policy Development: Explore effective strategies for creating and enforcing fair pet policies that address resident needs while considering property management concerns. Medical Marijuana Considerations: Explore the intricate relationship between federal and state laws concerning medical marijuana use in housing, including the requirements for reasonable accommodation. Through case studies, interactive discussions, and expert analysis of recent court decisions, you will gain actionable strategies for confidently addressing these challenging issues. This tool is perfect for property managers, leasing agents, compliance officers, and housing administrators who want to minimize legal risk while creating inclusive communities. April 16: VAWA with Tips on Communicating with Victims - The Violence Against Women (VAWA) Reauthorization Act of 2013 expanded VAWA protections to many different affordable housing programs, including the Low-Income Housing Tax Credit (LIHTC) Program. While HUD has provided detailed requirements on VAWA implementation at HUD properties, there has been no uniform guidance for LIHTC owners and managers. A proposal before Congress would legislate that LIHTC Extended Use Agreements contain VAWA requirements. The IRS has not provided guidance, and while many state agencies are requiring VAWA plans, they are not providing information on what the plans should look like. This two-hour training, when combined with the course materials, will review VAWA requirements and recommend best practices for developing VAWA plans at LIHTC and other non-HUD properties. The session will be presented by A. J. Johnson, a recognized expert in the affordable housing field and the author of "A Property Manager s Guide to the Violence Against Women Act. April 24: Preparation for Physical Inspections - Agency inspections of affordable housing properties are required for all affordable housing programs, and failure to meet the required inspection standards can result in significant financial and administrative penalties for property owners. This four-hour training focuses on how owners and managers may prepare for such inspections, with a concentration on HUD NSPIRE inspections and State Housing Finance Agency inspections for the LIHTC program. Specific training areas include (1) a complete discussion of the most serious violations, including health & safety; (2) how vacant units are addressed during inspections; (3) when violations will be reported to the IRS; (4) the 20 most common deficiencies; (5) how to prepare a property for an inspection; (6) strategies for successful inspections; and (7) a review of the most important NSPIRE Standards as they relate to the three inspectable areas [Units/Interior/Exterior]. The training will summarize the HUD Final Rule on NSPIRE with a discussion of (1) the new Self-Inspection Requirement and Reports; (2) Timeline for Deficiency Correction; (3) New Affirmative Requirements; and (4) Tenant Involvement. At the end of the training, attendees will have a blueprint they can use to prepare their properties for agency-required physical inspections, regardless of the program under which they operate. April 29: Understanding and Managing Hoarding in Residential Properties: A Fair Housing Compliance Workshop - In May 2013, the American Psychiatric Association (APA) confirmed that Compulsive Hoarding is a mental disability and a protected class. More than 15 million Americans suffer from the mental health problem of hoarding and potential problems from hoarding include noxious odors, pest infestation, mold growth, increased risk of injury or disease, fire hazards and even structural damage. Hoarding is the one class of disability that requires landlords to offer an accommodation even if an accommodation is not requested! This 1.5-hour live webinar is designed to assist multifamily managers in understanding how to deal with hoarding problems in a way that will prevent liability under fair housing law. The session will define hoarding and provide detailed recommendations on how to deal with a hoarding problem. It will outline examples of accommodations for hoarding, how to engage in the "interactive process with residents who hoard, and the steps necessary to remove uncooperative residents. Finally, a recent court case regarding hoarding will be reviewed as an illustration of the potential difficulties managers face in hoarding situations. This is an evolving area of fair housing law, and this webinar will provide the guidance necessary to approach the problem in a systematic way that will give multifamily operators the best chance at avoiding the legal traps that exist when dealing with this unique disability. 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 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.

Impact of Trump Administration's Regulatory Restructuring on HUD and IRS

The Trump administration's recent executive order on federal regulations, "Ensuring Lawful Governance and Implementing the President's 'Department of Government Efficiency' Deregulatory Initiative," signals significant changes for federal agencies. The order has particularly notable implications for the Department of Housing and Urban Development (HUD) and the Internal Revenue Service (IRS). The New Regulatory Framework On February 19, 2025, President Trump signed this executive order as part of a broader deregulatory agenda aimed at reducing what the administration views as bureaucratic overreach. The directive mandates that federal agencies conduct a comprehensive 60-day review of their regulatory frameworks to ensure alignment with both legal requirements and administration policies. The order targets explicitly regulations considered: Unconstitutional Based on improper delegations of legislative power Imposing excessive costs without clear public benefits Harmful to national interests Hindering development across various sectors This order is part of a series of regulatory rollbacks, including directives like "Ensuring Accountability for All Agencies" and "Unleashing Prosperity Through Deregulation," which expand upon the administration's previous deregulatory efforts. Specific Impacts on the IRS The IRS faces several significant challenges under this new directive: Continued Hiring Freeze: The executive order maintains an existing hiring freeze at the IRS, which will remain in effect until the Treasury Secretary, in consultation with the Office of Management and Budget (OMB) Director, determines that lifting it serves the national interest. Increased White House Oversight: IRS regulations will once again be subject to White House review through the Office of Information and Regulatory Affairs (OIRA), reinstating a policy from Trump's first term that adds another layer of scrutiny to IRS rulemaking. "10-for-1" Deregulation Mandate: The IRS must eliminate ten existing guidance documents for every new rule or guidance it issues, significantly constraining its ability to update tax regulations and provide new guidance. These measures could substantially impact the IRS's capacity to uphold compliance and maintain operational efficiency, potentially affecting tax administration and enforcement nationwide. Implications for HUD For the Department of Housing and Urban Development, the executive order brings equally significant changes: Comprehensive Program Review: The order requires a review of hundreds of HUD programs, potentially leading to significant restructuring or budget cuts. Grant Funding Uncertainty: Although a federal court temporarily blocked a separate memo seeking to freeze federal grants, the administration's intent to reassess HUD funding remains evident. "10-for-1" Rule Application: Like the IRS, HUD must adhere to the requirement of eliminating ten existing regulations for every new one proposed, which could significantly impact housing policy implementation and program management. These changes may affect HUD's ability to administer housing assistance programs, enforce fair housing regulations, and support community development initiatives. Legal and Procedural Challenges The administration's deregulatory push faces potential legal obstacles: Agencies seeking to rescind or modify rules must generally follow a new rulemaking process, including issuing a Notice of Proposed Rulemaking, collecting public comments, and finalizing the new rule. Failure to adhere to these procedural requirements could expose regulatory rollbacks to legal challenges under the Administrative Procedure Act (APA). The APA requires agencies to engage in reasoned decision-making when modifying or rescinding regulations, and courts may overturn agency decisions if this standard is not met. Outlook As the 60-day review period progresses, the IRS and HUD must navigate competing demands: implementing the administration's deregulatory agenda while maintaining their core functions and avoiding legal challenges. The outcome will likely reshape how these agencies operate and could have lasting implications for the United States s tax administration and housing policy. The full impact of these changes will become more evident as agencies determine which regulations to target and how to implement the administration's directives while fulfilling their statutory obligations.

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