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HUD Releases Study on Worst Case Housing Needs

The Department of Housing & Urban Development (HUD) has presented a report to Congress titled "Worst Case Housing Needs." The report provides national data and analyzes the critical problems of low-income renting families. The report primarily draws on data from the 2021 American Housing Survey (AHS), which is a comprehensive housing survey conducted by the U.S. Census Bureau since 1973. Households with worst-case housing needs are very low-income renters households with incomes at or below 50 percent of area median income who do not receive government housing assistance and who pay more than one-half of their income toward rent, live in severely inadequate conditions, or both. The 2023 report finds that in 2021, during the COVID-19 pandemic, 8.53 million households had worst-case housing needs. This is an increase in worst-case needs from the record high of 8.48 million in 2011 and 70 percent greater than the 5.01 million households with worst-case housing needs in 2001. These figures reflect the declining supply of units that are both affordable and available to very low-income renters at a time when demand is rising. Although the AHS data collection does not capture the effect of the one-time COVID-19 stimulus payments or the Emergency Rental Assistance program, government relief measures provided over the pandemic have helped to offset the dire needs of many families with worst-case needs. This very low-income renter population accounts for about 15 percent of U.S. households. The study makes it clear that increasing affordable housing through both more supply and more rental assistance is the key to decreasing these numbers. This report finds that in 2021, only 57 affordable units (including those with rental assistance) were available for every 100 very low-income renter households. Only 36 affordable units were available for every 100 extremely low-income renter households. According to the study s authors, the serious scarcity of housing units affordable to the most vulnerable households and hard-working families makes it essential to prioritize the production of affordable units, reducing regulatory barriers to affordable housing production and providing technical assistance to local governments to assist in removing barriers that drive up housing costs. Providing income support to very low-income renters can also help address worst-case needs. As these longer-term strategies take effect and as the nation emerges from the pandemic, increasing access to rental assistance may be essential to sustain affordable housing and prevent homelessness. Details of the Study The prevalence of worst-case needs was 52.6 percent among Asian households, 47.4 percent among Hispanic households, 44.1 percent among non-Hispanic White households, 41.6 percent among Native Hawaiian or Other Pacific Islander households, 39.3 percent among non-Hispanic Black households, and 36.4 percent among American Indian or Alaska Native households. Between 2019 and 2021, the prevalence of VLI renters with severe problems increased by 3.2 percentage points for non-Hispanic Blacks, by 2.3 points for Hispanics, by 0.4 points for non-Hispanic Whites, and by 12.2 points for other races or other ethnicities. More than 8.5 million renter households had worst-case needs in 2021, of whom 3.17 million lived in the South, 2.25 million lived in the West, 1.62 million lived in the Northeast, and 1.48 million lived in the Midwest. This report includes a new analysis of the intersection between worst-case needs and the related but less prevalent problem of housing overcrowding. Overcrowding is defined as having more than one person per room, counting only rooms that are finished and used on a regular basis.In 2021, about 948,000 very low-income renter households, or 4.9 percent, were overcrowded. Of these, 390,000 households also experienced worst-case needs. The study concludes by pointing out that reductions in worst-case needs generally result when economic growth improves household incomes, when the production of affordable housing is sufficient to reduce market rents, or, alternatively, when the availability of rental assistance increases. Rental housing assistance such as that offered by HUD programs, other federal programs, states, or localities helps many vulnerable renter households who have such limited incomes. A broad strategy at the federal, state, and local levels has long been needed to continue to grow the economy, support market production and access to affordable homes, and provide rental assistance to the most vulnerable households. With the impact of the COVID-19 pandemic and associated economic difficulties in 2020 and 2021, worst-case housing needs have increased substantially, reaching a new record high and highlighting more than ever the need for a comprehensive approach to addressing the affordable housing crisis. However, based on current Congressional priorities, it is unlikely that any meaningful steps to address this affordability crisis will be taken anytime soon. Congress will almost certainly - as it always does - take a band-aid approach to the crisis.

Applicant and Resident Rights Under the Fair Credit Reporting Act

Screening for credit and rental history are common in multifamily rental housing - including affordable housing. The Fair Trade Commission recently issued new guidance for owners who use background checks to screen prospective residents. This guidance is intended to assist owners in complying with the requirements of the Fair Credit Reporting Act (FCRA). Many apartment communities run screening checks through third-party companies that compile background information. If adverse action is taken against an applicant due to a background check - also known as a consumer report - there are specific steps required of management. Consumer reports contain a variety of information about people. This may include rental history, credit history, and criminal history. Examples of such reports include - A credit report from a credit bureau such as Trans Union, Experian, and Equifax; A report from a tenant screening service that describes an applicant s rental history based on reports from prior landlords or court records; A report from a reference checking service that describes an applicant s rental history; and A report from a background check company about an applicant or resident s criminal history. There are some companies that provide all these services under one umbrella request. In order to obtain a consumer report, the permission of the person being investigated is required, and the report may be used for housing purposes only. Under the FCRA, there are certain requirements that must be followed when using credit reports or other consumer reports to make decisions about housing applications. Here are some key points to consider: Adverse Action Notice: If you decide to reject an applicant s housing application based on information from a consumer report, you are required to provide them with an "adverse action notice." This notice informs the applicant that their application was denied or negatively affected due to information in their consumer report. Contents of Adverse Action Notice: The adverse action notice must include specific information, including (i) the name, address, and phone number of the consumer reporting agency that provided the report; (ii) a statement that the agency did not make the decision and cannot explain why the decision was made; (iii) the applicant s right to obtain a free copy of the report from the reporting agency within 60 days; and (iv) the applicant s right to dispute the accuracy or completeness of information in the report. The adverse action notice is required even if information in the report is not the primary reason for the decision. The FTC provided examples of when adverse action notices are required: An owner orders a consumer report from a Credit Reporting Agency (CRA). Information contained in the report leads to further investigation of the applicant. The subsequent investigation led to a denial of the applicant. Since the information in the report led to the investigation, an adverse action notice must be sent to the applicant. An owner hires a reference checking service to verify information included on a rental application. The service reports that the applicant does not work for the employer listed on the application and the rental application is denied. An adverse action notice is required. An owner orders a criminal history report on a prospective tenant, and the report shows a felony conviction. If the landlord denies the applicant due to the felony conviction, an adverse action notice is required. Don t forget that in the case of applicant rejection due to a criminal record, applicants must also be informed of their right to an individual assessment. After using a consumer report for its intended purpose, it must be securely disposed of. Options for disposal include: Burn, pulverize, or shred papers containing consumer report information so that the information cannot be read or reconstructed. Destroy or erase electronic files or media containing consumer information. We still see credit and other consumer reports in tenant files that we review. Landlords should be aware of the fact that maintaining such reports in tenant files is a violation of the law. DO NOT KEEP THESE REPORTS IN TENANT FILES! Bottom Line: The Fair Trade Commission has issued new guidance for owners of multifamily rental housing, including affordable housing, regarding background checks on potential residents. These checks, often conducted by third-party companies, involve credit, rental, and criminal history. If adverse action is taken based on these checks, specific steps must be followed, including the provision of an adverse action notice with details about the reporting agency and the applicant s rights. Such notices are required even if the report is not the primary reason for rejection. After use, consumer reports must be securely disposed of, and landlords must not keep them in tenant files to comply with the law.

Take Care When Using Artificial Intelligence (AI) for Marketing Purposes

There is an emerging trend within the real estate sector involving the utilization of Artificial Intelligence, exemplified by tools like ChatGPT, Bard, Bing, and other similar products commonly referred to as chatbots, all for the purpose of enhancing marketing strategies. Numerous companies are harnessing the potential of AI to formulate advertising approaches, conduct market analysis, shape advertising content, and create social media posts. While AI does have certain benefits, it also brings forth certain drawbacks. These chatbots, in particular, exhibit vulnerabilities that introduce a level of risk when employed in marketing and advertising endeavors. One significant concern pertains to the concept of "hidden bias." In certain instances, the algorithms integrated into chatbots incorporate the subtle prejudices of their creators. Moreover, these bots can internalize biases from their interactions. A notable case in 2018 involved Amazon discontinuing the use of an AI-driven recruitment system due to its demonstrated preference for male candidates over female candidates. This bias stemmed from the system s analysis of historical resumes submitted to Amazon over a decade, which were disproportionately skewed toward male applicants. Consequently, AI developed a preference for male candidates. Though AI has the potential to stimulate creative thinking, exercising caution is paramount before deploying it for advertising and marketing purposes. It is advisable that individuals well-versed in fair housing regulations and possessing relevant experience assess the AI-generated content to ascertain its lack of inadvertent bias. Furthermore, it is unwise to solely rely on AI for determining advertising avenues. Throughout history, instances abound of landlords intentionally advertising solely on platforms that were unlikely to be accessed by minority groups. Both the Department of Housing & Urban Development (HUD) and the legal system construe discriminatory advertising to encompass media or locations chosen for advertising that effectively withholds housing information from specific segments of the market. Illustrative instances include scenarios such as exclusively displaying billboards in predominately white neighborhoods or featuring ads in publications predominately consumed by a white audience. As a prudent approach, it is advisable to implement a policy wherein the use of AI for marketing and advertising is contingent upon adherence to a set of guidelines. If such a policy is not already in place, considering the prohibition of AI use for these purposes might be wise. In any case, an explicit and comprehensive written policy should be established, clearly outlining acceptable and prohibited applications of AI in marketing and advertising efforts.

A. J. Johnson Partners with Mid-Atlantic AHMA for September Affordable Housing Training

During the month of September 2023, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association for two training sessions intended for real estate professionals, particularly those in the affordable multifamily housing field. Both of the sessions will be presented via live webinars. The following sessions will be presented: September 27: The Basics of Low-Income Housing Tax Credit Management -  This training is designed primarily for site managers and investment asset managers responsible for site-related asset management and is especially beneficial to those managers who are relatively inexperienced in the tax credit program. It covers all aspects of credit related to on-site management, including the applicant interview process, the determination of resident eligibility (income and student issues), handling recertification, setting rents - including a full review of utility allowance requirements - lease issues, and the importance of maintaining the property. The training includes problems and questions designed to ensure that students are fully comprehending the material. September 28: The Verification and Calculation of Income and Assets on Affordable Housing Properties (live webinar)- This five-hour live webinar (there will be a 1.5-hour lunch break) provides concentrated instruction on the required methodology for calculating and verifying income, and for determining the value of assets and income generated by those assets. The first section of the course involves a comprehensive discussion of employment income, along with military pay, pensions/social security, self-employment income, and child support. It concludes with workshop problems designed to test what the student has learned during the discussion phase of the training and serve to reinforce HUD-required techniques for the determination of income. The second component of the training focuses on a detailed discussion of requirements related to the determination of asset value and income and is applicable to all federal housing programs, including the low-income housing tax credit, tax-exempt bonds, Section 8, Section 515, HOME, and HOPE VI. Multiple types of assets are covered, both in terms of what constitutes an asset and how must they be verified. This section also concludes with a series of problems, designed to test the student s understanding of the basic requirements relative to assets. 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 needed to effectively manage the complex requirements of the various agencies overseeing these programs. Both sessions will include the changes brought about by the new HUD Final Rule on HOTMA. Persons interested in any (or all) of these training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

A. J. Johnson to Conduct Live Webinar on Liability Protection Policies for Affordable Housing Properties

A. J. Johnson will be conducting a webinar on August 23, 2023, on Liability Protection Policies for Affordable Housing Properties. The Webinar will be held from 1:00 PM to 3:30 PM Eastern Time. As important as it is to understand the program rules for affordable housing programs, it is equally as important to have sound protection and liability policies in place. This 2.5-hour live webinar reviews the critical protection policies that every affordable housing property should have. A full discussion of the following policies is included: Sexual Harassment Policy, Criminal Screening, Reasonable Accommodations, VAWA, and Fraud Prevention & Detection. The training is intended for site staff as well as supervisory and compliance personnel. Written course material with sample policies will be provided to participants. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."

A. J. Johnson to Conduct Live Webinar on Multifamily Occupancy Standards

A. J. Johnson will be conducting a webinar on August 29, 2023, on Occupancy Standards for Multifamily Housing. The Webinar will be held at 1:00 PM Eastern Time and will last approximately one hour. Owners and managers of multifamily housing developments must create and implement many types of policies, governing everything from how to collect the rent to the handling of work orders. One of the most important policies for any property is its "occupancy standard." In simple terms, an occupancy standard is a policy that outlines how many people may live in each unit at a property.Overcrowded housing is dangerous and unsanitary, as well as being hard on the building systems such as water, sewer, and HVAC. However, occupancy standards that are too strict may violate fair housing laws by limiting the ability of families with children to find housing. In short, occupancy standards must be "reasonable." But, determining what is reasonable can be complex. This training is designed to assist owners and managers in navigating this complex and difficult area of fair housing liability. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."

Rural Development Income Limits Released

The Rural Development Service of the United States Department of Agriculture has released the 2023 income limits for the Rural Development Multifamily Housing (Section 515) program. The limits were effective on July 13, 2023, and may be found at RD-MFHLimitMap.

A. J. Johnson to Conduct Live Webinar on Average Income Minimum Set-Aside

A. J. Johnson will be conducting a webinar on August 10, 2023, on Requirements & Best Practices Relating to the Average Income Minimum Set-Aside for LIHTC properties. The Webinar will be held at 1:00 PM Eastern Time. The Average Income Minimum Set-Aside Test ("AI") was added to the LIHTC program in March 2018. While it is being implemented successfully on many properties, there remains a good deal of industry-wide confusion about the use of the AI set-aside and the risks involved. This one-hour live webinar will review the requirements of AI, discuss the risks of this set-aside, and provide best practice recommendations for implementation of the Average Income test. We will also cover the final IRS guidance relating to the AI set-aside. The Webinar will be presented by A. J. Johnson, a nationally recognized expert on affordable housing who has already provided compliance oversight on multiple properties using the AI set-aside. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."