News

Say No to Voluntary MORs

42 States still do not have approved Performance Based Contract Administrators (PBCAs) for the review of Section 8 properties. PBCAs in these states have no authority to conduct any type of Management & Occupancy Review (MOR)- even voluntary or "informal" reviews. However, there have been reports that several PBCAs have asked properties to participate in these informal reviews. If you are in one of the states where PBCAs are not approved to conduct MOR reviews, do not agree to any type of review by a PBCA.   Although HUD extended all PBCA existing contracts in February 2014 (including those in the 42 contested states), the U.S. Court of Appeals ruled in March that HUD is not in compliance with federal procurement laws, effectively putting existing contracts on hold. Due to this ruling, none of the PBCAs in the contested states may conduct any type of MOR - including voluntary MORs. All PBCAs have been notified of this prohibition by HUD, so they should no longer be contacting properties for informal or practice reviews.   HUD itself may conduct MOR reviews for any of its properties, at any time, in any state. Also, PBCAs in the 11 uncontested states and territories may continue to perform MORs as usual. The 11 uncontested areas are:   Iowa Maine Minnesota Montana New Hampshire North Dakota South Dakota Vermont Wyoming Puerto Rico U.S. Virgin Islands    

Promise Zones Offer Potential for Affordable Housing

In the 2013 State of the Union address, the President announced the creation of "Promise Zones. (PZ)" The goal of these zones is to provide a mechanism for a partnership between the federal government and local governments in order to create jobs, increase economic security, expand educational opportunities, increase access to quality affordable housing, and improve public safety. On January 8, 2014, the first five zones were announced. They are (1) San Antonio, TX; (2) Philadelphia, PA; (3) Los Angeles, CA; (4) Southeastern KY; and (5) the Choctaw Nation of OK. HUD selected the three urban promise zones and USDA selected the rural and tribal zone. To be selected, areas had to demonstrate an existing capacity for revitalization activities. The advantages to an area in being a Promise Zone include: enabling a partnership between federal government and localities in addressing multiple community problems; federal staff is assigned to each community to assist in accessing federal benefits; preference may be given for certain federal programs; and there may be tax incentives for businesses investing in Promise Zones or hiring residents living in a Promise Zone. A Promise Zone designation will last for then years, with possible extensions. A second round of Promise Zones is in the planning stages, with selections announcements expected in earl 2015. A total of 20 Promise Zones is expected by the end of 2016. Eligible lead applicants for Urban Promise Zone designations include: -Units of General Local Governments; -Non-profit organizations applying in partnership with local governments; -Housing Authorities applying in partnership with local governments; -School districts applying in partnership with local governments Eligible lead applicants for rural and tribal PZ designations are: -local or tribal governments; -offices/departments within local government; -non-profit organizations applying in partnership with local governments; -Housing authorities applying in partnership with local governments or -school districts applying in partnership with local governments. Eligibility Requirements: 1. PZ must encompass one or more census tracts or portions of census tracts across a contiguous geography; 2. the overall poverty rate or Extremely low-income rate (whichever is greater) of residents in the PZ must be over 33%; 3. PZ boundaries must encompass a population of at least 10,000 but no more than 200,000 residents; and 4. Local leadership, including the Mayors of jurisdictions in the PZ, must demonstrate commitment. Once the application deadline passes, there can be no substantive or technical corrections to the application. Application deadlines have not yet been announced for the 2014 Promise Zones. Local governments, non-profits, and Housing Authorities located in areas meeting the criteria noted above should look into the possibility of applying for PZ designation in the 2014 round. Additional information may be found at www. hud.gov/promisezones.

Failure to Spot Unauthorize Occupants Can Lead to HUD and IRS Problems

A recent court case (Matthews v. Housing Authority of Baltimore City, March 2014) shows the importance of keeping track of who is living in your HUD assisted or tax credit units. Both HUD and the IRS have strict requirements relative to unauthorized occupants. In the case of HUD properties, owners may be required to repay excess subsidy; in a LIHTC property, failure to properly document additional household members can lead to a loss of credits.   In the noted case, the Baltimore Housing Authority terminated the voucher of a resident after learning that her husband had listed her unit as his mailing address - he was not approved by the Authority as a member of the household. According to the resident, she and her husband had separated in 2002. In December 2011, the resident asked the Authority to add her husband to her voucher because they had reconciled. The husband signed the required forms allowing the Authority to run the required background checks.   Three of the background checks showed the husband s address as the resident s address, and the Authority notified the resident that her voucher would be terminated for permitting an unauthorized occupant. All the background checks showed the husband s address as being that of the resident prior to the date she requested he be added to her voucher.   During a hearing on termination of the voucher, the resident stated that her husband used her address to receive mail from child support and veterans affairs because he did not have a regular address. The husband stated that he did not live in the unit and had been living on and off with his son for the prior ten years. The site s visitor policy stated, "use of the unit address as the visitor s current residence for any purpose that is not explicitly temporary shall be construed as permanent residence." Based on this, the hearing officer considered the husband to be an unauthorized occupant and terminated the voucher. The resident appealed.   The Maryland Appeals Court reversed the hearing officer decision and ruled for the resident. The court ruled that the hearing officer improperly applied the visitor policy in concluding that the husband was an unauthorized household member. The visitor policy states that any adult, who has been in the unit more than 14 consecutive days without PHA approval, or a total of 90-days in a 12-month period, will be considered to be living in the unit as an unauthorized household member. One factor used in the determination of whether the person is living in the unit is the use of the unit address as a mailing address.   The court ruled that in order for the Authority to rely on the visitor policy as the basis for termination of the voucher, the entire policy had to be considered - not just the section on use of the address for mail purposes. At no time, before or during the hearing, did the Authority establish that the husband had been in the unit more than 14 consecutive days or a total of 90-days in a 12-month period. The Authority used only the issue of the mailing address as reason for termination. The court ruled that this did not prove that the husband actually resided in the unit.   This case illustrates the importance of owners knowing who is living in units at all times. One of the best ways to do this is through regular inspections - or walk-throughs - of all units (I recommend doing this on a quarterly basis). Another tool in the prevention of unauthorized occupants is the registering of automobiles at the property, and a requirement that overnight visitors obtain windshield passes. Regardless of the techniques used, management must constantly be aware of who is living at the property.

Requiring Adult Supervision of Children May Cross the Line to a Fair Housing Violation

A recent fair housing court case (Dumas v. Sunview Properties, February 2014) has clarified that while it is OK to have property rules relating to the safety of children, rules relating to behavior and rules requiring unreasonable supervision of children may not be acceptable.   In this case, one rule of the property stated that all children must be supervised by an adult who will be responsible for any damage caused by the children, such as destroying plants. This was known at the property as the "adult supervision rule." Another rule stated, "No playing with balls, bicycles, roller blades, and other toys on the property." This was known as the "no playing rule."   The plaintiff in this case alleged discrimination five different times between 2006 and 2013, all involving her son playing outside until he was told not to do so. In at least one of these cases, the property took action because there was no adult supervision of the child.   In February 2014, the court dismissed the mother s discrimination claim based on the No Playing Rule, but allowed further proceedings regarding the Adult Supervision Rule.   The reasoning was that the No Playing Rule prohibited play by anyone - not just children, and thus was not discriminatory. However, the Adult Supervision Rule applied only to families with children, and could therefore be discriminatory.   In general, courts take issue with rules requiring adult supervision of all children because such rules are not the least restrictive way to accomplish the purpose of the rules. However, rules requiring supervision of young children during specific activities, such as swimming or bicycle riding, have been found to be justified because of the safety issues involved and the younger age of the children. Policies requiring adult supervision of all children - regardless of age - have been found to be overly broad.   The key here is not to implement rules relating to the behavior of children. Safety rules are fine, but must be reasonable. For example, while it may be reasonable to require the supervision of children age six and younger when playing outside, requiring constant adult supervision of children of all ages could be hard to defend.

Casual Statements Can be Deemed Discriminatory

Leasing staff and others working at apartment communities should be warned about making small talk with applicants at their properties. A Massachusetts real estate broker recently learned the hard way that even a casual remark - with no ill intent - can lead to fair housing trouble. The case at hand is Linder v. Boston Fair Housing Commission, February 2014.   During a meeting with a married couple (the wife was from Brazil), the broker - just making conversation - asked the wife where she was from. There was no way the broker could have known, but another realty company had allegedly denied the couple an apartment due to the wife s national origin. Fearing the same thing was about to happen again, she answered that she was from Venezuela.   A month after this, the couple were given a unit at the complex; so clearly, the landlord had no discriminatory intent when he asked the question. Unfortunately, the woman claimed to have suffered extreme anxiety and sleepless nights - which continued for years - even though the landlord rented them a unit.   The couple filed a complaint with the Boston Fair Housing Commission, which ordered the broker to pay more than $60,000 in damages, penalties and attorney s fees. The Commission found that the broker s question contributed to the wife s "stress, fear, and anxiety," during two periods of time: for the month right after the question until they rented a unit, and for the year they lived there until they moved again.   The broker appealed, and in February 2014, the Massachusetts high court upheld the Commission s decision, but reduced the damage award. The Court indicated that the broker did in fact violate fair housing law by asking about the woman s national origin. This was the case even though there was no discriminatory intent and he did not discriminate against the couple. The Court reduced the damages by stating that the broker had to pay for emotional distress during the month prior to rental of the unit, but not for the year the couple lived at the property.   Bottom line: Managers should stick to the script when interviewing prospects for housing. Even a small deviation, and a casual comment or question, can lead to fair housing trouble. It s a shame things have gotten to the point where we cannot even have a casual conversation with our prospects, but while this case is unusual, it is also instructive.

HUD Releases 2014 HOME Income and Rent Limits

HUD has released the 2014 Income and Rent limits for the HOME program. The new limits will be effective May 1, 2014. To obtain the new limits go to www.onecpd.info/news/2014-home-income-and-rent-limits-published/. Keep in mind that if HOME funds are combined with another program, such as the LIHTC program, the lower of the income and rent limits for the various programs should be used.

Hoarding is Now Considered a Disability

The American Psychiatric Association (APA) has recently announced that compulsive hoarding is now considered a mental disability, and is therefore protected under the nation s various disability related laws; this includes the fair housing laws under The Civil Rights Act of 1968 and various state and local fair housing laws. The effectively means that tenants with hoarding issues must now be considered eligible for reasonable accommodations under fair housing law, and automatic lease termination for such households is not permitted.   Mental health experts say that about 15 million Americans suffer from the mental health problem of hoarding. Some interesting facts about hoarders: They make up 2-5% of the population; Anyone can be a hoarder - men, women, and even children as young as 13; Elderly women are the most likely hoarders; Hoarders are not lazy, nasty or defiant; The behavior usually has occurred for a long time and there is no quick fix; Hoarders are usually very intelligent; Hoarders may have a mental disability and must be given the opportunity for a reasonable accommodation, even if they do not specifically request one; The accommodation may be in the form of more time to bring the dwelling unit up to code before termination of the lease agreement; Early intervention is the best plan; and Trying to solve the problem without the individual s cooperation will usually make the problem worse.   Potential problems from hoarding include noxious odors, pest infestation, mold growth, increased risk of injury or disease, fire hazards, and even structural damage.   Clinical hoarding is defined as: The acquisition of, and failure to discard, a large number of possessions that appear to be useless or of limited value; Living spaces that are cluttered enough that they cannot be used for the purpose for which they were designed; and Significant distress or impairment in functioning caused by the hoarding.   This level of hoarding usually involves a mental impairment, such as obsessive-compulsive disorder or chronic depression. Many hoarders suffer from multiple issues, such as Major depression (53%); General anxiety disorders (24%); Social phobia (24%); Attention Deficit Hyperactivity Disorder - ADHD (28%); or Obsessive-Compulsive Disorder - OCD (18%)   As owners and managers, we cannot ignore the many potential hazards from hoarding, including: Increased risk of fire Combustible materials, when ignited, create extremely hot, fast spreading fires; Escape routes may be blocked; Access to the unit by fire fighters may be blocked.         Increased risk of structural damage Sagging floors and ceilings; Cracked floor joists or roof trusses; Compromised bearing walls; and In extreme cases, partial structural collapse. Increased risk of disease, injury, and infestation Lack of regular maintenance can result in the lack of running water, heat or refrigeration; Toilets or sinks may be unusable or inaccessible; Stacked items are a falling or tripping hazard, which can injure occupants, staff or public safety personnel; and Accumulated garbage can lead to rat and insect infestation.   Property staff should stay alert for signs of a hoarding problem. Once detected, do not put off investigation of the issue. Listen for and promptly respond to reasonable accommodation requests, and, in the case of hoarding, management should be proactive is seeking to assist the resident in resolving the issue. This is one area where waiting for the tenant to request assistance may not be the best approach. However, keep in mind that a landlord has no obligation to make an accommodation that a tenant actively resists.   The lease of a hoarding resident may be terminated if: The hoarding is a threat to the health and safety of others and the health and safety issues cannot be addressed through a reasonable accommodation; and/or The hoarding causes significant damage to a unit and the resident will not reimburse the landlord for the repairs. It is also possible to terminate the lease if the tenant will not participate in any dialogue about the hoarding or will not cooperate with efforts to bring the tenant into compliance with lease requirements.   We are beginning to see court cases affirming that hoarders may be disabled, and are therefore entitled to consideration with regard to reasonable accommodations. One court decision from 2010 ruled that a Washington D.C. cooperative violated the Fair Housing Act by failing to accommodate a resident who hoarded due to severe mental disorders. The ruling indicated that the owner must make a concerted effort to provide a reasonable accommodation before termination of residency (Rutland Court Owners, Inc., v. Taylor, July 2010).   Owners and managers of multifamily properties must now develop procedures on how they will deal with potential hoarding issues. The key is to be proactive - have a plan on how to deal with the issue before it occurs.

HUD to Ease PHA Income Verification Requirements

HUD is in the process of preparing new rules that will allow public housing authorities (PHAs) to drastically alter the income verification requirements for public housing and Section 8 Voucher tenants. These changes could impact owners of Low-Income Housing Tax Credit properties that house public housing and voucher residents.   The purpose of the new rules is to provide administrative relief to PHAs that have suffered more than a 30% cut in administrative fees in recent years. The planned changes that may affect tax credit properties include:   Simplification of the earned income disregard, which permits tenants who have been out of work to avoid a rent increase for some time after obtaining new employment. This is important because the exclusion of such income in not permitted for project-based Section 8 properties and tax credit projects; and Permits PHAs to charge owners a fee if re-inspection of a voucher unit shows that a housing quality standard violation has not been fixed. Also, HUD is likely to give PHAs more discretion in accepting applicant s words regarding sources of income, rather than strictly requiring verifications. While the details of this are unclear, this would have a significant impact on owners who rely on PHA verifications of income for tax credit residents.   HUD has already implemented a number of changes for PHAs in their implementation of the public housing and voucher programs, including the following:   Assisted households may self-certify when assets are $5,000 or less (this ability already exists for the LIHTC program); Less frequent recertifications for elderly families and families with fixed incomes (every three years).   Other areas that HUD is looking to make changes in include:   Establishing a threshold for processing changes in family income; Permitting self-certification of community service; Modifying utility reimbursements; Simplifying prorated rent calculations for families with members who cannot demonstrate legal status in the country; Removal of the obsolete designated housing rule (a rule where a property could have areas designated as elderly and other areas as family); Permit PHAs to set exception payment standards to 120 percent of the Fair Market Rents for reasonable accommodation purposes; and Base utility allowances on the size of each unit - not on the type of unit.   These changes are almost certain to be implemented, although the timeframe remains uncertain. Owners of properties involved with local PHAs should stay abreast of any new regulations in these areas and be aware that any changes will impact the day-to-day operations of some LIHTC projects.