News

House 2012 Funding Bill Cuts RD Across the Board

The House passed the 2012 agriculture appropriations bill (H.R. 2112) on June 16 in which virtually all discretionary spending was cut. The effect of the amendment will result in a reduction in funding for the Section 515 Program of $457,080, down to $58.1 million. The bill also cuts $6,942,000 from the rental assistance program, and provides no money for the Section 538 guaranteed multifamily loan program.

Draft Legislation Would Transfer Rural Housing Service to HUD

The House Financial Services Committee has released draft legislation that would transfer the Rural Housing Service to HUD. The proposed legislation would create a new position at HUD of deputy assistant secretary for rural housing. The new department would be part of HUD s Office of Housing. If passed, the law will require that all functions, personnel, assets, and liabilities of the RHS be transferred to HUD within 18 months of the date of enactment. This would include all housing programs. This draft is in a very early stage and there is no clear read yet on whether it has generated any widespread support.

HUD Relaxes Restrictions on ex-Criminals in Public Housing

HUD Secretary Shaun Donovan has issued a letter to public housing agencies clarifying that ex-criminals may live in public housing under certain conditions. HUD outlines only two explicit circumstances under which ex-criminals are prohibited from public housing or issuance of a housing choice voucher: (1) lifetime ban on individuals discovered producing methamphetamine on public housing premises, and (2) sex offenders subject to lifetime registration under a state sex offender registration program. A ban may be initiated if a PHA determines that any household member is engaged in illegal drug use, or the PHA has reasonable cause to believe that a household member s drug of alcohol use could threaten the health, safety or enjoyment of the premises by other residents. A three-year ban is required if a household member has been evicted from federally assisted housing for drug related activity. The letter from Donovan stresses that PHAs have discretion with regard to such bans, and that mitigating circumstances, such as participation in drug rehab programs or that circumstances that led to the eviction no longer exist.

HUD Raises Civil Penalty for Failure to Disclose Lead-Based Paint Hazards

HUD has raised the maximum penalty for failure to disclose lead-based paint hazards from $11,000 to $16,000. This is the first increase since 1996. A final rule increasing the penalty goes into effect on July 22, 2011.

Congress Unveils New Section 8 Proposals

The House Housing Subcommittee has released a modified version of an earlier Section 8 Voucher Reform proposal, and chances for passage this year look to have improved over what they were earlier. The bill, entitled the Section 8 Savings Act, eliminates the work requirements for public and assisted housing tenants and a time limit on assistance that were included in the earlier proposals. Once the bills go to markup, it is possible that both requirements will be reintroduced. The draft bill also does not include the Moving-to-Work demonstration program, which is currently active at 33 public housing agencies (PHAs). This could be a sticking point in final negotiations since many Republican members of Congress favor the program. One provision of the new bill would change the definition of "extremely low income" to the higher of 30% of area median income or the federal poverty line published by the Department of Health & Human Services. One goal of the measure is to streamline the calculation of incomes by increasing the annual standard deduction for an elderly or disabled family from $400 to $675, and increasing the dependent child deduction from $480 to $525. Also, income would only have to be recertified every three years for families with fixed incomes. The bill would also give PHAs discretion to conduct inspections for units with voucher residents every two years instead of annually and would allow the inspections of other state or federal affordable housing programs to substitute for the PHA inspection. This is just a proposed bill - owners and managers should continue to follow current HUD guidance in all these areas.

HUD Provides Guidance Regarding The Counting Of Cents In Income

The Department of Housing & Urban Development recently issued a clarification regarding whether or not to count the "cents" that show up as part of the gross amount of Social Security income on Social Security Award Letters. The clarification was made in the Multifamily Housing Rental Housing Integrity Improvement Project Listserv #256. The issue arose because Section 8 properties using the Enterprise Income Verification (EIV) system were finding that while the Award letter was showing the cents, the EIV verifications were not. Per the HUD guidance, HUD Notice 2010-10 states the Income Report identifying the Social Security benefit information in EIV must be used as third party verification of the tenant s income and will be used to calculate the tenant s income. Additionally, the owner/agent (O/A) must confirm with the tenant that the current benefit amount in EIV is correct. If the tenant agrees that the EIV information is correct, the O/A must use the gross benefit reported in EIV for calculating the tenant s income by annualizing the gross benefit amount projected forward for the next 12 months. This permits the use of the amount shown in EIV (even if no cents are included) to calculate income. When a SSA award letter is used to calculate income (e.g., tenant disputes the EIV report or LIHTC properties), the amount shown on the award letter should be used to calculate income, including any cents that are shown. HUD also confirms that the award letter must not be older than 120-days.

HUD Streamlining Inspection & Subsidy Layering Review of LIHTC Properties

HUD is launching two pilot programs to test the feasibility of streamlined physical inspections and subsidy layering reviews for projects with low-income housing tax credits and rental assistance. The pilot programs are the result of an interagency task force involving HUD, the IRS, the Treasury Department, and the Rural Housing Service that has been developing uniform requirements for the LIHTC and other affordable housing programs. The programs are scheduled to be launched in mid-summer in six states. The initial program will involve testing streamlined physical inspection requirements in order to reduce or eliminate redundant inspections. The program will allow HUD REAC inspections to meet the physical inspection requirements of the LIHTC program for tax credit properties that also have project-based Section 8 assistance. The second program will examine ways to improve the efficiency of subsidy layering reviews for projects with tax credits and project-based rental assistance.

IRS Hardens Position on Loss of Credits for Violation of Rent Limits Due to Utility Allowance Errors

During a meeting of the National Council of State Housing Finance Agencies (NCSHA) in June, an IRS official made it clear that violation of Section 42 gross rent limits because of a utility allowance error will result in a loss of credits for an entire tax year. The issue was raised due to some inconsistency between provisions in Chapter 11 of the 8823 Guide dealing with gross rents, and Chapter 18, which deals with utility allowance requirements. In Chapter 18, the IRS says that state agencies should consider a unit back in compliance and a violation corrected as of the date when an owner reduces the rent and it correctly reflects the utility allowance. This however, does not appear to necessarily represent official IRS thinking. Paul Handleman, IRS branch chief of passthroughs and special industries in the Office of General Counsel, questioned why a rent violation due to a utility allowance error should be treated any differently than any other type of gross rent violation, such as the charging of impermissible fees. Handleman indicated that the IRS would probably revise the Guide to make clear that the penalty for a gross rent violation due to a utility allowance error is the loss of credit for the year.