HUD Implementation Guidance for Housing Opportunity Through Modernization Act of 2016

person A.J. Johnson today 10/22/2016

In the October 24, 2016 Federal Register, HUD published initial implementation guidance for the Housing Opportunity Through Modernization Act of 2016 (HOTMA). President Obama signed HOTMA into law on July 29, 2016, but only certain parts of the law are currently effective. The purpose of this HUD guidance is to identify the sections of the law that are effective immediately and those that will require further action by HUD in order to become effective. This guidance is effective October 24, 2016.   Introduction   Some of the laws most significant amendments include setting a maximum income level for continued occupancy in public housing, expanding the availability of Family Unification Program (FUP) vouchers for children aging out of foster care, changes to the housing quality standards for Section 8 Voucher Units, multiple changes to the Project-Based Voucher program, modification of the requirements for mortgage insurance for condominiums, creation of a Special Assistant for Veterans Affairs in HUD, and changing the allocation formula for the Housing Opportunities for Persons with AIDS (HOPWA) program.   General Implementation Issues   HOTMA makes several of its provisions effective upon enactment (July 29, 2016). Other statutory changes made by HOTMA become effective only after the issuance of a notice or regulations by HUD, or at the start of the calendar year following the publication of a notice or regulations.   Provisions of HOTMA Effective Upon Enactment or Already in Effect - No HUD Action Required to Implement  
  1. Reasonable Accommodation Payment Standards - permits PHAs to establish a payment standard of up to 120% of the Fair Market Rent (FMR) as a reasonable accommodation for a disabled person, without HUD approval. A PHA may also establish an exception payment standard in excess of 120% as a reasonable accommodation with HUD approval.
  2. Establishment of Fair Market Rent - provides that in the Housing Choice Voucher (HCV) program no PHA is required, as a result of a reduction in the FMR, to reduce the payment standard applied to a family continuing to reside in a unit under a HAP contract at the time the FMR was reduced. Under prior law, if a reduction in the FMR caused the PHA payment standard to exceed 110% of FMR, the PHA was required to reduce the payment standard so that the payment standard was within the payment range of the new FMR. PHAs may choose, but are no longer required, to reduce the payment standard for a family who remains under HAP contract at the family’s second annual reexamination. Owners of LIHTC properties with voucher residents should make note of this change.
  3. Family Unification Program for Children Aging out of Foster Care - makes changes to the FUP, revising the length of the term that a FUP-eligible youth may receive FUP assistance from 18 months to 36 months. The change applies to youth currently receiving FUP assistance as well as any new participants. The law also revises the eligibility requirements. Previously, FUP-eligible youth had to be at least 18 years old and not more than 21 and have left foster care at age 16 or older. Under the new law, FUP-eligible youth must: Be at least 18 years old and not more than 24; have left foster care at age 16 or older or will leave foster care within 90-days; and be homeless or at risk of being homeless.
  4. Preference for United States Citizens or Nationals - this change applies only to Guam and establishes a preference or priority in receiving financial assistance for any citizen or national of the United States over aliens.
  5. Exception to Public Housing Agency Resident Board Member Requirement - provides for an exception for certain jurisdictions (Housing Authority of the County of Los Angeles or any PHA in Alaska, Iowa, and Mississippi) from the resident board member requirements.
  6. Inclusion of PHAs and Local Development Authorities in Emergency Solutions Grants (ESG) - authorizes local governments that receive ESG funds to subaward all or a portion of those funds to PHAs and local redevelopment authorities.
  7. Inclusion of Disaster Housing Assistance Program in Certain Fraud and Abuse Prevention Measures - provides that the Disaster Housing Assistance Program shall follow the rules of the McKinney Homeless Assistance Act for the purpose of income verifications.
  8. Energy Efficiency Requirements Under Self-Help Homeownership Opportunities Program (SHOP) - prohibits HUD from requiring units developed under the SHOP program to meet energy efficiency standards other than those contained in the Cranston-Gonzalez National Affordable Housing Act.
  9. Formula and Terms for Allocations to Prevent Homelessness for Individuals Living with HIV or AIDS - makes several changes to the HOPWA program, including (1) alterations to the allocation formula, (2) continued eligibility of FY 2016 grantees, and (3) authorization to award funds to alternative grantees.
    Provisions That Require HUD Guidance or Rulemaking   For these provisions, PHAs, multifamily owners, or grantees may not use the provisions of HOTMA until HUD issues a rule or notice.  
  1. Initial Inspections of Section 8 Voucher Units - authorizes assistance payments for up to 30-days if an annual inspection reveals non-life-threatening defects and to authorize occupancy of units prior to an inspection by a PHA if the property has met the requirements of an alternative inspection (e.g., LIHTC inspection) in the previous 24-months. HUD is considering the appropriate method for implementation.
  2. Enforcement of Housing Quality Standards (HQS) for Section 8 Voucher Units - outlines timeframes for correcting deficiencies discovered by inspections. The law requires life-threatening deficiencies to be corrected within 24 hours and sets the time for correcting other deficiencies at 30-days unless the PHA determines otherwise. It also provides families with 90-days to relocate to a new unit if an owner fails to correct the defaults and permits PHAs to use up to two months of any assistance amounts withheld or abated for costs directly associated with relocation. HUD is developing regulations relative to this change.
  3. Income Reviews - revises the frequency of family income reviews and the calculation of income. The law requires that the reviews of family income must be conducted upon admission and annually thereafter, depending on certain decreases or increases in annual adjusted income. It also changes the definitions for the public housing and Section 8 programs of income and adjusted income for each member of the household who is 18 years or older and unearned income for each dependent who is less than 18. HUD is considering the best method for implementation.
  4. Income Review for Project-Based Housing - the law eliminates the requirement that reviews of family income shall be made no less frequently than annually. HUD is considering the best method for implementation.
  5. Limitation on Public Housing Tenancy for Over-Income Families - sets the maximum amount of annual adjusted income for continued occupancy in public housing at 120% of area median income (AMI). If a family’s annual adjusted income exceeds the maximum amount for two consecutive years the family will not be eligible for public housing. PHAs will have the option of terminating the family’s tenancy or allowing them to remain at a higher rent. HUD will issue additional information on this requirement in the future.
  6. Limitation on Eligibility for Assistance Based on Assets - the law sets limits on the assets that families residing in assisted housing may have. This requirement must be put in place by rulemaking.
  7. Units Owned by PHAs - provides that the term ‘owned by a public housing agency’ refers to units in projects that are owned by a PHA, by an entity wholly controlled by a PHA, or by a limited liability company or limited partnership in which a PHA (or PHA controlled entity) holds a controlling interest. PHAs should continue their current practices until HUD issues additional guidance.
  8. PHA Project Based Assistance - the law makes several statutory changes to the Project Based Voucher (PBV) program. HUD is considering the appropriate implementation method.
  9. Public Housing Capital & Operating Funds - HUD will issue new rules regarding use of capital funds for establishing replacement reserves.
  10. Use of Vouchers for Manufactured Housing - the law extends the definition of "rent" for vouchers to include monthly payments for purchasing a manufactured home, tenant-paid utilities, and monthly rent for real property. This is not effective until HUD issues an implementation notice.
  Other elements of the law that also require HUD implementing regulation include (1) Modification of FHA Requirements for Mortgage Insurance for Condominiums; (2) Definition of Geographic Area for Continuum of Care Program; and (3) HOPWA Allocations.   Most changes to the Project-Based Section 8 Program made by the new legislation will not take effect until HUD publishes implementing regulations or notices. Many of these may not occur until 2017 or 2018.

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Understanding Tariffs and Their Impact on Construction Costs

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Multifamily Construction Impact For multifamily construction specifically, with 46% of materials sourced from these countries and 35-50% of project costs tied to finished materials, tariffs could increase material costs by 7.5%, potentially raising total construction budgets by 3-4%. Broader Effects Beyond core construction materials, reciprocal tariffs may also influence other building-related imports, such as carpeting, electrical outlets, security equipment, furniture, and tools. Projects that have already been awarded but are not yet started are likely to experience the most significant impact. Industry forecasts suggest the construction industry will feel the brunt of tariff policy changes in late 2025 and early 2026. Meanwhile, due to tariff-related inflation concerns, the Federal Reserve is expected to maintain stable interest rates through most of 2025. Recent Developments Homebuilders have been relieved, as Canada and Mexico were exempted from the latest round of tariffs, protecting key lumber and drywall component imports. Additionally, a carveout exists for lumber and copper imports. These tariff developments are challenging the U.S. housing market, which is already struggling with supply constraints and affordability issues. Developers with affordable multifamily housing projects in the pipeline or underway but for which materials have not yet been purchased should prepare for these possible increases. Developers facing this uncertainty should take a proactive, strategic approach. Here are some of the steps they should consider: 1. Lock in Pricing Where Possible Negotiate Early Procurement Contracts: Secure pricing and delivery timelines now for materials that may be subject to tariffs. Bulk Purchasing: If financially feasible and storage is available, purchase critical materials before the tariff is implemented. 2. 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Monitor Policy and Industry Updates Stay Informed: Watch for updates on tariff decisions and industry responses through trade associations (e.g., NAHB, NMHC). Engage in Advocacy: Support efforts to exempt affordable housing materials from tariffs or seek policy carve-outs. 6. Build Schedule Flexibility Buffer Time for Delays: Tariffs often disrupt supply chains, so build in extra time for procurement and delivery to avoid construction slowdowns. 7. Document Impacts Track Cost Changes: Keep records showing cost increases due to tariffs this can be useful when requesting additional funding or extensions from oversight bodies. Being proactive can help developers manage risk rather than be blindsided by rising costs. In this environment, a smart developer remains nimble, communicates clearly, and plans for the worst while hoping for the best.

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

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The Available Unit Rule (AUR): Why this often-overlooked rule can lead to credit loss even on properties that no longer recertify. Tenant Selection Plans (TSPs): What every property manager must know about layered program requirements, lottery procedures, and legal screening standards. Affirmative Fair Housing Marketing Plans (AFHMPs): How to structure your outreach to comply with HUD requirements and avoid costly fair housing violations. Whether you're a developer, property manager, or compliance officer, this training will give you actionable strategies to keep your project on track and in full regulatory compliance. Who Should Attend - LIHTC developers, compliance specialists, property managers, syndicators, and housing agency staff responsible for acquisition, rehabilitation, and oversight of layered programs. May 21: HOTMA - Update on HUD Requirements On January 9, 2023, HUD published a final rule implementing The Housing Opportunity Through Modernization Act (HOTMA), signed into law on July 29, 2016. This final rule was published in the Federal Register on February 14, 2023, and has yet to become effective for HUD programs. Virtually all HUD programs are impacted by the rule, as are the Low-Income Housing Tax Credit (LIHTC) Program and the Rural Development Section 515 Program. Since publishing the final rule in February 2023, HUD has provided additional guidance in implementing the rule, including extensions regarding implementation. 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Crime-Free Ordinances: When Local Laws Conflict with Federal Fair Housing Protections

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This conflict stems from the fact that these ordinances may violate four major federal laws: 1. The Fair Housing Act Crime-free ordinances often have a disproportionate impact on protected classes. For example: When these ordinances require eviction based on arrests rather than convictions, they disproportionately affect Black and Hispanic tenants, who statistically face higher rates of police interaction regardless of criminal activity. Blanket policies requiring eviction of an entire household due to one member s criminal activity can discriminate against families with children, female-headed households, and certain cultural groups where extended family living arrangements are common. 2. Title VI of the Civil Rights Act of 1964 Title VI prohibits discrimination in programs receiving federal funds. When municipalities with crime-free ordinances receive federal housing funds, they may violate Title VI if: Their ordinances have disparate impacts on protected classes Implementation decisions are influenced by discriminatory intent or stereotypes about certain neighborhoods or demographic groups 3. The Americans with Disabilities Act (ADA) Crime-free ordinances may discriminate against individuals with disabilities in several ways: Automatic eviction for behavior related to mental health conditions without consideration of reasonable accommodations Policies that penalize multiple emergency service calls, which may disproportionately impact those with chronic health conditions requiring frequent medical assistance Exclusions of individuals with past substance use disorder convictions, despite recovery and treatment 4. The Violence Against Women Act (VAWA) VAWA specifically protects victims of domestic violence, dating violence, sexual assault, and stalking from housing discrimination. Crime-free ordinances often violate these protections by: Requiring eviction when police are called to a property multiple times, discouraging victims from seeking help Failing to distinguish between perpetrators and victims when criminal activity occurs Treating domestic disturbances as "nuisances rather than recognizing them as situations where victims need protection Problematic Practices in Crime-Free Ordinances Collective Punishment: Holding Entire Households Accountable One of the most troubling aspects of many crime-free ordinances is the requirement to evict entire households based on one individual s actions. This approach: Punishes innocent family members who had no knowledge of or participation in criminal activity Creates homelessness risks for vulnerable household members, including children, elderly relatives, and individuals with disabilities Disproportionately impacts communities where multi-generational or extended family living arrangements are cultural norms. Blanket Exclusions Based on Criminal Records Many ordinances include overly broad exclusions for individuals with criminal records: Lifetime bans for certain offenses, regardless of rehabilitation or time elapsed Failure to consider the nature, severity, or relevance of the criminal conduct to tenant suitability No individualized assessment of actual risk to property or other tenants Exclusion Based on Arrests Rather Than Convictions Some ordinances allow or require action against tenants based merely on arrests: Violates the presumption of innocence It has a disparate impact on communities of color, which experience higher rates of arrests that do not lead to convictions Creates housing instability based on unproven allegations rather than established facts Automatic Exclusion for Any Criminal Conviction Overly broad policies that automatically deny housing based on any criminal history: Fail to distinguish between violent crimes and minor offenses Ignore evidence of rehabilitation and the age of convictions Create permanent barriers to housing for individuals who have served their sentences and are working to reintegrate into society. Penalizing Emergency Service Calls Particularly problematic are provisions that treat emergency calls as "nuisances : Discourages tenants from seeking emergency medical assistance Forces vulnerable individuals to choose between needed help and keeping their housing Creates dangerous situations where tenants delay calling for assistance during genuine emergencies. Punishing Victims of Domestic Violence Perhaps most concerning is how these ordinances often penalize victims: Treating domestic violence incidents as "nuisance activities requiring eviction Failing to distinguish between calls made by victims versus perpetrators Creating a situation where victims must choose between enduring abuse in silence or risking homelessness. Legal Protections and Ongoing Developments The legal landscape around crime-free ordinances continues to evolve. In states like Illinois, legislation has been enacted to protect survivors of domestic or sexual violence and individuals with disabilities from being penalized due to calls to police for assistance. The Illinois Department of Human Rights and the UIC Law School Fair Housing Legal Support Center and Clinic have developed a guidebook addressing the fair housing implications of nuisance and crime-free ordinances. In 2024, additional cases have further clarified the legal boundaries of these ordinances: A case against a municipality alleged violations of both the Americans with Disabilities Act and Fair Housing Act for enforcing crime-free housing ordinances that denied tenants with mental health disabilities equal access to emergency response services. The consent decree required the municipality to revise its program rules and enforcement practices and adopt non-discrimination policies. The Department of Justice has increased enforcement actions against localities with discriminatory housing policies, particularly those that disproportionately affect racial minorities, women, and people with disabilities. Recommendations for Landlords If your municipality has implemented a crime-free ordinance that may conflict with federal protections, consider the following steps: 1. Review your lease agreements and policies to identify provisions that may violate federal law, even if required by local ordinance. 2. Consult with a housing attorney familiar with fair housing law and local regulations to understand your specific obligations and risks. 3. Implement individualized assessments rather than blanket policies when evaluating potential tenants with criminal histories. 4. Document all housing decisions with clear, non-discriminatory business justifications. 5. Create explicit exceptions in your policies for domestic violence victims and emergency service calls. 6. Engage with local government by attending city council meetings and advocating for amendments to problematic ordinances. 7. Join or form landlord associations to collectively address concerns with local officials. 8. If necessary, consider seeking a declaratory judgment in court to resolve the conflict between federal and local requirements. 9. Stay informed about new legal developments in this rapidly evolving area of law. Navigating this legal minefield is challenging; however, landlords should prioritize compliance with federal civil rights laws. When local ordinances and federal protections conflict, federal law generally prevails. By taking proactive steps to ensure fair housing practices, landlords can protect themselves from liability while also supporting safe, stable housing for all community members.

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.

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