News

Timing of Income Eligibility Determinations on HUD Properties with Revised Income Limits

HUD has published Rental Housing Integrity Improvement Project Listserv #293 clarifying the HUD policy regarding timing of applicant eligibility determinations on HUD properties when income limits change after an applicant on a waiting list has been deemed eligible. The issue at hand is whether an applicant at a HUD property is eligible to be housed from the waiting list if they have been determined to be eligible based on the prior year s income limits and, just before housing the applicant, new income limits are published which would make the applicant ineligible. HUD Handbook 4350.3 states "Owners determine income eligibility prior to approving applicants for tenancy. Owners compare the family s annual income to the appropriate income limit prior to placing an applicant on the waiting list. However, owner s may wait until a unit is available to verify the applicant s income eligibility." Following this guidance in the Handbook, HUD indicates that if a unit becomes available and an applicant is selected from the waiting list, is processed for eligibility, and meets all eligibility requirements at the time of processing, the applicant is eligible to move into the project even if new income limits have been published. What this means for owners is that if you selected an applicant from your waiting list, and processed them for eligibility and determined that they were eligible prior to the issuance of the 2013 income limits, they will be considered eligible. This will be the case even if the 2013 income limits are lower than the income limits under which the applicant was qualified, and they had not moved in at the time of publication of the 2013 limits. Please feel free to contact me with any questions on this HUD ruling.

Secondhand Smoking Study in Apartments Issued by CDC

If you are in the process of transitioning your apartment complexes to non-smoking - or, if you are already doing so - you may be interested in the findings of a recent study by the Center for Disease Control and Prevention ("CDC"). The study was published in December 2012 and found that up to 44 million residents living in multifamily housing are affected by secondhand smoke and that nearly 29 million of these are involuntarily subjected to secondhand smoke, since they do not smoke in their own apartments. The smoke is entering the units through insulation, cracks, and power outlets. Based on the report, even the best filtration systems will not protect apartment dwellers from involuntary exposure to secondhand smoke. What this essentially means is that there is no way for landlords who allow smoking in their buildings to prevent tenants from being involuntarily exposed to secondhand smoke, which contributes to lung cancer and heart disease and kills approximately 43,000 people each year. Millions more get bronchitis and ear infection from secondhand smoke. The only way to prevent the harm caused by secondhand smoke in apartment buildings is a building-wide smoking ban. Census data from 2006-2009 shows 79.2 million Americans live in multifamily housing, and of these, 62.7 million do not smoke. In surveys relating to the study, 44%-46.2% of apartment dwellers report being exposed to secondhand smoke, and approximately 26 million are either children or seniors. This study should be taken seriously by all landlords, due to the potential liability from allowing smoking in apartments. Many of you may be familiar with the Maryland Appeals Court decision in 2011 that found Pit Bulls to be an inherently dangerous breed of animal, and that landlords who permit such animals in their property are liable for any injuries caused by those animals. It is not a stretch to imagine a case being brought before the courts making the same argument as it pertains to secondhand smoke. Such smoke is inherently dangerous, and landlords have the power to address the issue by banning smoking at complexes they own. Failure to do so could lead to findings of liability in the future.

Proposed Sandy Relief Legislation Includes Additional Low-Income Housing Tax Credits

On December 10, 2012, Senators Charles Schumer (D-NY) and Robert Menendez (D-NJ) introduced legislation to give tax relief to victims of Superstorm Sandy. The provisions apply to victims of Sandy, as well as any state that has suffered from a FEMA-declared major disaster in 2012. Following are some of the major provisions of the proposed legislation:   v Full tax deductions for expenses relating to disaster cleanup; v Waiving of penalties for early withdrawal from retirement plans; v Additional exemptions for those who provide free housing to displaced individuals; v Tax credit for businesses with over 200 employees that continued to pay wages even though the business could not operate; v Accelerated depreciation for business equipment purchased as a result of the disaster; v Increased limitation on charitable contributions for disaster relief (no limit as to the percentage of adjustable income that can be donated); v Expanded availability of, and reduced limitations for, casualty loss deductions; v Extended Net Operating Loss carryback; v Relaxed mortgage revenue bond rules regarding eligible purchasers; v Increased business expensing allowances; v Increase in New Market Tax Credit for CDEs in disaster areas; v Exempts all disaster mitigation payments from taxable income; v Additional Mortgage Cancellation Relief; v Work opportunity tax credit for businesses that hire people who lived in the disaster area; v Look back rule for Earned Income Tax Credit and Child Tax Credit; v Increased rehab tax credits; v Recovery Zone bonding authority; v Tax-exempt advanced refunding; v Increased depreciation allowance v Enhanced Medicaid assistance to states; and v Increased availability of the Low-Income Housing Tax Credit. Key elements of this last provision include: For 2013, 2014, and 2015, affected states will be able to allocate up to $8.00 per capita in tax credits (as opposed to the regular $2.25 for 2013); and Increased credit value for areas hit by Hurricane Irene in 2011.   Keep in mind that this is proposed legislation. If it becomes law, we will provide an overview of the details.

Revised 2013 Section 8 and MTSP Income Limits Released

(Update 12/26/13) The 2014 income limits have been released. More information can be found here. HUD has revised and released the 2013 income limits. These new income limits supersede the limits released on 12/4/12. The revision is due to an underestimation in the creation of the 12/4/12 limits. To download the FY2013 Income Limits, select the appropriate link below: FY2013 Section 8 Income Limits(PDF) Section 8, Section 221(d)(3) BMIR, Section 235 and Section 236 FY2013 MTSP Income Limits(PDF) Section 42 (LIHTC) and projects financed with tax exempt housing bonds issued to provide qualified residential rental development under section 142 of the Code should use the Income Limits. For additional information regarding income limits, including area definitions and FY2013 Income Limit Briefing Material, visit http://www.huduser.org/portal/datasets/il.html

GAO Study of HERA and the LIHTC Program

As required by the Housing and Economic Recovery Act of 2008 (HERA), the General Accountability Office (GAO) of Congress has conducted a study of the impacts of HERA on the Low-Income Housing Tax Credit Program. Findings of the study were generally positive, with the most significant criticism in the area of HUD data collection relating to the LIHTC program. Following are the general conclusions of the study.   The LIHTC program is the largest federal program for building and rehabilitating affordable rental housing and provides billions of dollars in tax credits each year. Through HERA, Congress made a number of changes to the program and sought analysis of credit allocations made before and after the Act s implementation. However, limitations in available program data hamper this type of analysis and potentially other research that could be useful to policymakers. HUD is not required to collect data on LIHTC projects and has no administrative responsibility for the program, but it has collected information for some HFAs for many years. The information has been used to examine important issues, such as the extent to which subsidized housing remains affordable over the long-term and the potential for coordinating requirements across federal housing programs. However, the GAO was critical of the completeness of HUDs database and the lack of follow up to obtain complete information. For this reason, GAO believes that the federal government s ability to evaluate basic program outcomes - such as how much housing was produced - and other aspects of federal housing policy may suffer.   The GAO recommendation stated that the importance of the LIHTC program to federal housing policy underscores the need for continued attention to data quality and completeness. For this reason, GAO recommended that HUD (1) evaluate options for improving the completeness of the LIHTC database; and (2) take additional steps to improve the data.   While the GAO was critical of some aspects of data collection efforts relating to the LIHTC program, it is noteworthy that GAO stressed the importance of the program to overall federal housing policy. Program participants, especially HFAs, developers and management agents, should work to educate their Senators and Representatives - as well as locally elected officials - on the value of the program. It is especially important to stress that the LIHTC is the most effective and efficient model for providing the number of affordable rental housing units necessary to come close to affordable housing needs.

Setting Up a Home Visit Program

One of the best practices to assist a management company in determining whether an applicant will be a good resident is a home visit program. Before considering the establishment of such a program, management should be aware of the difficulties with administering a home visit program, and ensure that such a program is properly established. Following are suggested guidelines for the establishment of a Home Visit Program.   1. Maintain a written policy. This policy should require home visits for all applicants, with only two exceptions: (1) Distance - establish a geographic radius in which home visits are made. I recommend making 50 road miles the maximum travel distance; and (2) Credit Report or Letter from Previous Landlord is Unavailable - home visits should be conducted only on those without either a credit history or a landlord reference. 2. Set a policy regarding when the visit will take place. Home visits should be conducted only when the applicant reaches the top of the waiting list, has provided all required information, and has passed all other screening criteria. All applicants should sign a statement agreeing to an unscheduled home visit. Then, call no more than one hour ahead of time. 3. What to look for: v Other occupants; v Pets; v Housekeeping; and v Criminal Activity When conducting the inspection, apply the same standards as the HUD Uniform Physical Conditions Standards (UPCS). Therefore, ensure that inspecting staff have at least a basic understanding of these standards.   When conducting the inspection, staff should look specifically for: v Soiled surfaces in bathrooms; v Severely stained carpets; v Four odors; v Damaged appliances; and v Holes in ceilings/walls/floors   If applicants have roommates, be sure only the area under the control of the applicant is evaluated.   Always give applicants a chance to explain substandard conditions, keeping in mind that conditions could be the fault of the landlord.   If you are considering the adoption of a home visit program, be sure to implement the program on a consistent basis. If you have questions, or would like assistance in establishing such a program, please feel free to give me a call.  

Generally Allowable Medical Expenses

Generally Allowable Medical Expenses   The rent calculation for many affordable housing programs, including HUD Section 8 and Rural Development Section 515, is based on the "adjusted" income of households. Adjusted income is the "gross" income of a household, minus certain permitted deductions. These deductions are (1) a dependent deduction; (2) a deduction for disability related expenses; (3) a childcare deduction; (4) a deduction for elderly households; and (5) a deduction for unreimbursed medical expenses, which is available only to elderly households. Of these five possible deductions, one of the most confusing and difficult to properly verify and determine is the deduction for medical expenses.   Elderly households (62 + or handicapped/disabled) may deduct medical expenses in excess of 3 percent of gross income. These are unreimbursed medical expenses expected to occur during the 12-month period following the effective date of the certification.   Based on recent discussions with HUD, the following are "examples" of medical expenses that are deductible and nondeductible. (Keep in mind - this is not an exclusive list).   Examples of Deductible Medical Expenses Services of recognized health care professionals, including physicians, nurses, dentists, opticians, mental health practitioners, osteopaths, chiropractors, Christian Science practitioners, and acupuncture practitioners. Services of health care facilities, laboratory fees, x-rays, and diagnostic tests, blood and oxygen. Such fees include hospitals, HMOs, laser eye surgery, outpatient medical facilities, and clinics. Alcoholism and drug addition treatment. Medical insurance premiums, including expenses paid to an HMO, Medicaid insurance payments that have not be reimbursed, and non-prorated long-term care premiums. Prescription and non-prescription medicines (aspirin and antihistamine may be deducted only if prescribed by a physician for a specific medical condition. Also, any other medically necessary service, apparatus or medication, as documented by third party verification. Transportation to and from treatment and lodging based on actual cost (e.g., bus fare). If driving a car, a mileage rate based on IRS rules (currently $.23 per mile). Medical cost of permanently institutionalized family members if his or her income is included in annual income. Dental treatment, such as fees paid to a dentist, x-rays, fillings, braces, extractions and dentures. Eyeglasses, contact lenses. Hearing aid and batteries, wheelchair, walker artificial limbs, Braille books and magazines, oxygen and oxygen equipment. This includes the purchase and upkeep of such equipment, including additional utility costs to the tenant because of an oxygen machine. Attendant care or periodic medical care, such as nursing services, assistance animal and its upkeep. Payments on accumulated medical bills (scheduled payments only).   Examples of Nondeductible Medical Expenses Cosmetic surgery, if unnecessary, such as surgery to improve a person s appearance and not meaningfully promoting the proper function of the body or prevent or treat illness or disease. Procedures such as face-lifts, hair transplants, hair removal (electrolysis), and liposuction generally are not deductible. However, if one of these procedures results in medical complications, such as infections, that require medical treatment, the treatment expense would be an eligible deduction. Amounts paid for cosmetic surgery to improve a deformity arising from, or directly related to, a congenital abnormality, an injury from an accident or trauma, or disfiguring disease, may be deducted. Health club dues, such as membership in any club organized for business, pleasure, recreation, or other social purpose, such as YMCA dues, or amounts paid for steam baths for general health or to relieve physical or mental discomfort not related to a particular medical condition. Household help, even if such help is recommended by a doctor. However, persons providing nursing type services may be deducted. Certain maintenance or personal care services provided for long-term care may be deducted. Medical savings account, such as a Archer MSA. Nutritional Supplements, vitamins, herbal supplements, and natural medicines. These may be deducted if recommended in writing by a medical practitioner licensed in the locality where practicing. These items must be recommended as treatment for a specific medical condition diagnosed by a physician or other health care provider licensed to make a diagnosis in the locality where practicing. When taken to maintain ordinary good health, these items are not deductible. Personal use items. Items ordinarily used for personal, living or family purposes may not be deducted, unless it is used primarily to prevent or alleviate a physical or mental defect or illness (this is why HUD will not generally permit the cost of medical alert devices to be deducted). However, the cost of a wig purchased upon the advice of a physician for the mental health of a patient who has lost all of his or her hair from disease can be deducted, as could incontinence supplies. Non-prescription medicines. These may not be deducted unless they are recommended in writing by a licensed medical professional. The item(s) must be recommended as treatment for a specific medical condition.   While this is not a complete list of every conceivable deduction, it should provide comprehensive guidance on the type of medical expenses that may be deducted. Also, since most rules have exceptions, some items which may not have their costs deducted could, under some circumstances, be deducted.   If you have questions, or would like to discuss a specific situation, please feel free to contact me directly.    

IRS Publishes Sandy Disaster Relief Notice

Low-Income Housing Credit Disaster Relief for Hurricane Sandy   The IRS issued Revenue Notice 2012-68 on November 5, 2012, effective after October 22, 2012, providing emergency housing relief as a result of Hurricane Sandy. The Notice allows State Housing Agencies in states with areas that were declared major disaster areas by President Obama as a result of Hurricane Sandy. The Notice permits housing agencies to provide approval to project owners to provide temporary emergency housing for displaced individuals. "Displaced individuals" are people who resided in a jurisdiction designated for individual disaster assistance and who has been displaced because his or her residence was destroyed or damaged by Hurricane Sandy. Such persons may be accepted as residents in any LIHTC project in the United States - not just in disaster designated areas.   Suspension of Income Limits   Projects approved by the State Agency may suspend the use of the LIHTC income limits when renting units to displaced individuals. Each Agency will determine the period of time during which the temporary housing may be provided, but in no case will it extend past November 30, 2013 (temporary housing period).   Status of Units   A displaced individual temporarily occupying a unit during the first year of the credit period will be deemed a qualified low-income tenant for purposes of determining qualified basis, and for purposes of meeting the project s elected minimum set-aside (20/50 or 40/60). After the end of the temporary housing period established by the Agency, the displaced individual will no longer be considered a qualified low-income tenant. At that point, to preserve the credits for the unit, the displaced individual will either need to be qualified or replaced by a qualified low-income resident.   Vacant units, or units never previously occupied after the first year of the credit period that are temporarily occupied by a displaced individual will maintain the status the unit had before move-in of the displaced individual. In other words, a vacant unit that was previously qualified by a low-income household will continue to be treated as a qualified vacant unit, and a unit that has never been occupied will continue to be treated as a unit never occupied. If there are occupants in the building with income in excess of 140% of the applicable income limitation, the move-in of a non-income eligible displaced person will not cause application of the Available Unit Rule. While the displaced individuals are housed, the project owner is not required to attempt to rent the units to low-income tenants.   It should be noted that the neither the student status nor the income of the displaced resident will effect their eligibility under this Notice.   Suspension of Non-Transient Requirements   The non-transient requirements of Section 42 shall not apply to units providing temporary housing, meaning that six-month leases are not required for displaced individuals.   All other rules and requirements of the 42 program will continue to apply during the temporary housing period approved by the applicable Agency. At the end of the temporary housing period, all rules relative to the Section 42 Program will resume, including the applicable income limits, the available unit rule, the non-transient requirements, and the requirements of the Vacant Unit rule. Any individual rented to after the temporary housing period will be required to meet the requirements of the 42 program in order for the unit to be considered low-income.   To qualify as a displaced individual, the person must have resided in a jurisdiction designated for individual assistance by FEMA as a result of Hurricane Sandy.   Certifications & Recordkeeping   Project owners are required to maintain and certify information on each displaced individual, including: Name Address of damaged residence Social Security Number Statement signed under penalties of perjury by the displaced individual that, because of damage to the individual s residence in a jurisdiction designated for Individual Assistance by FEMA as a result of Hurricane Sandy, the individual requires temporary housing. The owner must notify the Agency that vacant units are available for rent to displaced individuals, and once occupied by a displaced individual, the date the individual began temporary occupancy and the date the project will discontinue providing temporary occupancy as established by the Agency.   Rent Restrictions   Rents for low-income units that house displaced individuals may not exceed the existing rent-restricted rates for the low-income units in accordance with 42. In other words, the maximum rent allowable under 42 may be charged for the units housing the displaced individuals.   Existing Tenants   Existing residents of occupied low-income units cannot be evicted or have their tenancy terminated as a result of efforts to provide temporary housing for displaced individuals.   Interested owners should contact the appropriate Housing Finance Agency for information in making units available as housing for displaced persons.