News

Rural Development to Implement Model Lease for Section 515 Program

The Biden Administration has instructed the U.S. Department of Agriculture to institute a broad set of actions with regard to leases in the Rural Development (RD) Section 515 program. Specifically, RD is developing a "model" lease for the Section 515 program, similar to the HUD Model lease for the HUD multifamily programs. RD is also creating a tenant grievance FAQ outlining clear steps for tenants appealing management decisions and will distribute it to owners and management agents. The Agency will also ask that the FAQ be provided to tenants and tenant advocacy groups. In addition, RD is working on a Tenant Rights & Responsibilities brochure modeled after the HUD Multifamily brochure for assisted housing residents, increasing consistency between the two agencies and clarifying the rights of Section 515 residents. It is likely that RD regulations will be updated to require Section 515 borrowers to utilize the brochure. Owners and managers of RD Section 515 properties should be prepared for this upcoming change. A good starting point is a review of the current HUD Model Lease for Multifamily Housing and the HUD Rights & Responsibilities Brochure. This will give operators of Section 515 housing an idea of what may be coming down the road.

HOTMA Final Rule - Educational Assistance

The Department of Housing & Urban Development (HUD) has released a Final Rule implementing the Housing Opportunity Through Modernization Act of 2016 (HOTMA). This final rule was published in the Federal Register on February 14, 2023. With the exception of changes relating to Non-Public Housing Over Income families (which take effect on March 16, 2023), this final rule takes effect on January 1, 2024.  The Housing Opportunity Through Modernization Act (HOTMA) was signed into law on July 29, 2016, amending many aspects of Multifamily Housing programs (as well as programs administered through the Offices of Public and Indian Housing and Community Planning and Development). HOTMA was intended to streamline processes and reduce burdens on housing providers. On September 17, 2019, HUD issued a proposed rule to update its regulations according to HOTMA s statutory mandate. The final rule, published on January 9, 2023, considers public comment received on the proposed rule and provides additional guidance for implementing Sections 102, 103, and 104 of HOTMA. Which Programs will be Affected by the Final Rule?  The Section 8 PBRA (including RAD), Section 202/811 PRAC, 202/8, 202/162 PAC, Senior Preservation Rental Assistance Contract (SPRAC), and Section 811 Project Rental Assistance (811 PRA) programs will see changes due to HOTMA. This is the fourth in a series of articles I am writing on the sweeping changes that will be made to HUD affordable housing programs. This article will focus on the revised rules regarding student financial assistance. HOTMA mandates the exclusion of certain earned income for full-time dependent students and grant-in-aid or scholarship amounts for such students. The HUD proposed rule regarding HOTMA implementation was unclear regarding what constitutes financial assistance, so HUD is hoping that the final rule achieves clarity. One thing HUD has concluded is that it cannot codify through rulemaking the Section 8 student financial assistance limitations provided annually as part of HUD appropriations. While these limitations will continue to apply to funds from any year in which the limitations are enacted in an appropriations act, it will be a year-to-year determination as to what portion - if any - of educational assistance will be counted as income for students receiving Section 8 assistance. The final rule is clear that any income specifically excluded by the Higher Education Act (HEA) is excluded income for all HUD programs. The rule also excludes student financial assistance for tuition, books and supplies, room and board, and other fees required and charged to a student by an institution of higher education. Note the difference from the current rule where money for books, supplies, and room and board are not excluded. The confusion with regard to educational assistance is the result of HUD appropriations bills which for more than a decade have included a provision making an exception to the HEA exclusion of all assistance provided to students - including assistance in excess of tuition and required fees and charges. For example, the FY2022 Appropriations Act states that "for purposes of determining the eligibility of a person to receive assistance under Section 8 of the United States Housing Act of 1937, any financial assistance (in excess of amounts received for tuition and any other required fees and charges) that an individual receives under the Higher Education Act of 1965, from private sources, or from an institution of higher education, shall be considered income to that individual, except for a person over the age of 23 with dependent children." So, for any year that this language appears in HUD appropriations, it requires that certain assistance, including assistance under Title IV of the HEA, in excess of tuition and other required fees and charges, be included in income calculations for Section 8 students who are age 23 and under or without dependent children. HUD has interpreted this limitation as applying when the student is the head of household or spouse, but not when the student resides with parents in a Section 8 unit. The result of all this is that for any funds from a year where HUD s appropriations acts include Section 8 student financial assistance limitations similar to those in FY2022, those limitations will still apply with respect to Section 8 participants, even if the appropriations contradict the HEA. This requirement is going to create significant difficulty for owners and PHAs who are likely to be unaware of the provisions of any particular annual appropriations act. For this reason, HUD plans to issue guidance regarding how to treat student financial assistance in income calculations. Adding to the complexity of this issue is the fact that student financial assistance can take a variety of forms and come from a variety of sources to both full and part-time students. For example, not all assistance provided to students is assistance covered by the HEA or through the Bureau of Indian Affairs. So, the final rule provides that student financial assistance means a grant or scholarship received from the federal government, a State, Tribal, or local government, a private foundation registered as a Section 501(c)(3) nonprofit, a business entity (such as a corporation, general partnership, limited liability company, limited partnership, joint venture, business trust, a public benefit corporation, or nonprofit entity), or an institution of higher education. A grant would include a qualified tuition payment, reduction, waiver, or reimbursement (i.e., amounts received as reimbursement for the student s paid costs of tuition, books, and fees, etc.) by the educational institution, such as for an employee of the institution or an eligible family member of that employee. A grant would also include assistance provided by an employer as part of an employee educational assistance program or tuition reimbursement program. The final rule makes clear that assistance provided under the HEA or Bureau of Indian Affairs student assistance programs is automatically excluded. The final rule clarifies that student financial assistance that is excluded from income must be for educational expenses and does not include payments obtained through work-study, money from friends or family, or funds that exceed the actual education expenses to the student. Amounts received under work study may still be excluded if provided under Title IV of the HEA or if the work-study is being performed by a dependent full-time student. Student loans are not considered student financial assistance. In the final rule, amounts in excess of actual educational assistance will no longer be excluded from income - even for persons over age 23 with dependent children. This means that such income will now be counted for everyone - regardless of whether the household receives Section 8. In other words, this income will now be counted for non-Section 8 households (such as LIHTC). Keep in mind - all assistance under the HEA is excluded from income, regardless of whether those amounts exceed actual educational costs. This new rule is so cumbersome, examples are warranted. Example #1 Assume a student received $26,000 in assistance, all of which was excluded under the HEA, and another $5,000 from a scholarship that is not excluded under the HEA. If the student s actual educational expenses were $25,000, the entire $26,000 in assistance excluded under the HEA would still be excluded from income. However, the $5,000 from the other scholarship would not be considered student financial assistance because it is assistance in excess of actual covered costs and would not be excluded from income. Example #2 Assume the same facts as example #1, but the assistance excluded due to the HEA is less than the student s actual covered costs. In this case, some or all of the other scholarships and grants would be excluded from income. Bottom Line - clearly this is a complex and intricate rule. Since the rule does not go into effect until January 1, 2024, owners and managers should continue to exclude all educational assistance for any student other than students receiving Section 8 assistance. When Section 8 assistance is received unless the student is (1) a dependent of the household, or (2) over 23 with dependent children, the educational assistance in excess of tuition and mandatory fees should be counted as income. Hopefully, between now and 2024, HUD will publish an update to Handbook 4350.3 and provide additional clarity on this issue.

HOTMA Final Rule - New Rules on Hardship Exemptions

The Department of Housing & Urban Development (HUD) has released a Final Rule implementing the Housing Opportunity Through Modernization Act of 2016 (HOTMA). This final rule was published in the Federal Register on February 14, 2023. With the exception of changes relating to Non-Public Housing Over Income families (which take effect on March 16, 2023), this final rule takes effect on January 1, 2024.  The Housing Opportunity Through Modernization Act (HOTMA) was signed into law on July 29, 2016, amending many aspects of Multifamily Housing programs (as well as programs administered through the Offices of Public and Indian Housing and Community Planning and Development). HOTMA was intended to streamline processes and reduce burdens on housing providers. On September 17, 2019, HUD issued a proposed rule to update its regulations according to HOTMA s statutory mandate. The final rule, published on January 9, 2023, considers public comment received on the proposed rule and provides additional guidance for implementing Sections 102, 103, and 104 of HOTMA. Which Programs will be Affected by the Final Rule?  The Section 8 PBRA (including RAD), Section 202/811 PRAC, 202/8, 202/162 PAC, Senior Preservation Rental Assistance Contract (SPRAC), and Section 811 Project Rental Assistance (811 PRA) programs will see changes due to HOTMA. This is the third in a series of articles I will write on the sweeping changes that will be made to HUD affordable housing programs. This article will focus on the revised hardship exemptions made by the final rule. HUD received many comments on the proposed rule relating to hardship exemptions for unreimbursed health and medical care, attendant care, auxiliary apparatus expenses, and childcare expenses. The final rule has been revised to provide clarity to these exemptions and ease burdens on families experiencing financial hardship. Medical/Disability Expenses Current regulations permit the deduction of medical expenses from annual income for elderly households if the expenses (1) will not be reimbursed by insurance or another source, and (2) when combined with any disability assistance expenses are in excess of three percent of annual income. The new regulation does not permit the deduction until the medical expenses exceed 10 percent of gross income. This will clearly have a negative impact on many elderly/disabled households. To help ease this burden, the final rule provides two types of hardship exemptions to the ten percent threshold for health and medical care expenses (for elderly and disabled families) and reasonable attendant care and auxiliary apparatus expenses (for families that include a person with disabilities). The first category is for families eligible for and taking the unreimbursed health and medical care expenses and reasonable attendant care and auxiliary apparatus expenses deduction in effect prior to this rule (i.e., the 3% rule). The second category is for families that can demonstrate that the family s health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses increased, or the family s financial hardship is a result of a change in circumstances that would not otherwise trigger an interim reexamination. HUD is adding this second category in the final rule in recognition that the change from the three percent threshold to the new ten percent threshold for unreimbursed health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses may result in financial hardship for families, including those families who were not receiving the deduction or may not even have been receiving housing assistance at the time the final rule goes into effect. These families may receive temporary hardship relief if their health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses exceed five percent of the family s income. Under the first category (families taking the deduction based on the three percent rule), owners must deduct eligible expenses exceeding five percent of the family s income for the first year, 7.5% for the second year, and 10% for the third year. Under the second category, a family may qualify for hardship exemptions for health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses if the family can demonstrate that the expenses increased, or the family s financial hardship is a result of a change in circumstances (as determined by the project owner). For these families, the deduction will be for expenses in excess of five percent of family income for up to 90 days. This may be extended for additional 90-day periods at the discretion of the owner, based on family circumstances. Owners may also terminate the hardship exemption if it is determined that the family no longer needs the exemption. In some circumstances, families receiving the deduction under the first category may request relief under the second category of hardship relief. During the second year of transition, the owner deducts expenses exceeding 7.5 percent of family income if relief is being obtained under the first category. If the family can demonstrate that the health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses increased or the family s financial hardship is a result of a change in circumstances, and not just due to the transition to the 7.5% threshold, the family may be granted relief under the second category. In this case, expenses exceeding five percent of the family income will be deducted (instead of 7.5%). However, this relief will last only for 90 days (unless extended by the owner), and the family is no longer eligible for relief under the first category. In other words, at the end of the relief period for the second category, the family will be subject to the regular health and medical care expenses or reasonable attendant care and auxiliary apparatus expenses deduction threshold of ten percent, regardless of whether they fully transitioned to the ten percent threshold under the first category. Childcare Deduction Hardship Relief Under the final rule, property owners may extend a deduction for unreimbursed childcare expenses for 90-days, with extensions for additional 90-day periods if the family can demonstrate that they are unable to pay their rent due to loss of the childcare expense deduction, and the childcare expense is still necessary even though the family member is no longer employed or furthering his or her education. The following example illustrates how this relief could work: A family that was claiming the childcare deduction no longer qualifies because the care is no longer necessary to enable a family member to work or go to school. The family member who was employed had to leave their job in order to provide uncompensated care to an elderly friend who is very ill and lives across town. The family may continue to claim the childcare deduction for 90 days, with 90-day extensions as approved by the owner. Bottom Line The hardship exemptions outlined here apply only to HUD projects that allow for deductions from gross income and will not go into effect until January 1, 2024. Owners of such projects should familiarize themselves with the details of these exemptions so that they will be ready to implement them in 2024.

Federal Court Rules that Applicant May Request Reasonable Accommodation on Behalf of Roommate

In McClendon v. Bresler, the Ninth Circuit affirmed a district court decision that statements made in an email by a rental co-applicant to an apartment owner supporting the need for a reasonable accommodation (a support animal) suffice as a request for a reasonable accommodation and that the co-applicant had standing to sue for the landlord s refusal to grant the accommodation. The landlord had a "no dogs" policy and would not waive it for an assistance animal. The applicant presented evidence that her dog was verified as a support animal and requested the accommodation. To succeed in a reasonable accommodation fair housing claim, a plaintiff must prove: (1) plaintiff has a disability; (2) the defendant knew or reasonably should have known of the disability; (3) an accommodation may be necessary to afford the disabled person an equal opportunity to use and enjoy the dwelling (4) the requested accommodation is reasonable, and (5) the defendant refused to make the requested accommodation. In this case, only number 2 was in dispute. When the roommate informed the landlord via email that the applicant had a "verified support animal," used the terms "reasonable accommodation, "and "discrimination," the landlord was notified of the potential disability. As to whether the claim could be brought by the roommate and not the disabled applicant, the court stated that the FHA permits any "aggrieved person" who "claims to have been injured by a discriminatory housing practice" to bring a housing discrimination suit." The co-applicant was equally harmed by the denial of the reasonable accommodation. Bottom Line: This case serves as a reminder that requests for reasonable accommodations do not have to be made by a disabled person. The request may be made by someone acting on behalf of that person. In addition, action against housing providers who refuse to grant needed reasonable accommodations may be brought by anyone who is harmed by the landlord s action - even if it is not the disabled person.

HOTMA Final Rule - Revised Exclusions to Income

The Department of Housing & Urban Development (HUD) has released a Final Rule implementing the Housing Opportunity Through Modernization Act of 2016 (HOTMA). This final rule was published in the Federal Register on February 14, 2023. With the exception of changes relating to Non-Public Housing Over Income families (which take effect on March 16, 2023), this final rule takes effect on January 1, 2024.  The Housing Opportunity Through Modernization Act (HOTMA) was signed into law on July 29, 2016, amending many aspects of Multifamily Housing programs (as well as programs administered through the Offices of Public and Indian Housing and Community Planning and Development). HOTMA was intended to streamline processes and reduce burdens on housing providers. On September 17, 2019, HUD issued a proposed rule to update its regulations according to HOTMA s statutory mandate. The final rule, published on January 9, 2023, considers public comment received on the proposed rule and provides additional guidance for implementing Sections 102, 103, and 104 of HOTMA. Which Programs will be Affected by the Final Rule?  The Section 8 PBRA (including RAD), Section 202/811 PRAC, 202/8, 202/162 PAC, Senior Preservation Rental Assistance Contract (SPRAC), and Section 811 Project Rental Assistance (811 PRA) programs will see changes due to HOTMA. This is the second in a series of articles I will write on the sweeping changes that will be made to HUD affordable housing programs. This article will focus on the revised income "exclusions" made by the final rule. PHAs, owners, and grantees are not required to calculate and may not include imputed income on assets when a household s net family assets are valued at or below $50,000. This amount will be adjusted annually for inflation. The actual income from assets continues to be included in income, regardless of the amount of assets. For an irrevocable trust or a revocable trust outside the control of any member of the household, the final rule excludes from income distributions of the principal or the property that was transferred into the trust. Distributions of income (e.g., interest earned) from the trust when the distributions are used to pay the cost of health and medical care expenses for a minor are also excluded. For a revocable trust or trust that is under the control of the household, distributions from the trust are excluded from income, but any actual income earned by the trust (i.e., interest, dividends, rent), regardless of whether it is distributed, shall be considered income to the family. Income received for the care of foster children or adults has long been excluded. This final rule expands the exclusion to State or Tribal kinship or guardian care payments. Payments and settlements from insurance for personal or property loss are excluded, as are payments through health insurance, motor vehicle insurance, and worker s compensation. Payments from training programs funded by HUD or qualifying Federal, State, Tribal, or local employment training programs (including training programs not affiliated with a local government) and payments from training of a family member as a resident management staff are excluded from income. Since the $480 dependent deduction will be adjusted annually based on inflation, the final rule clarifies that for full-time students age 18 and over who are dependents of the household, any income in excess of the dependent deduction is excluded from income. I.e., only the amount of the dependent deduction will be counted as income. All payments from State Medicaid agencies for in-home support are excluded from income. Payments made or authorized by a Federal agency for this purpose are also excluded from income. Amounts paid directly to a member of an assisted family by a State Medicaid agency (including through a managed care entity) or other State or Federal agency (or entities authorized by the agencies to make such payments) to enable a family member who has a disability and wishes to remain in the unit are excluded from income. This applies only when the payments to the family member are for the care of another member of the family living in the unit. HUD is clarifying the general exclusion for "nonrecurring income," by defining nonrecurring income as income that will not be repeated in the coming year, based on information that the family provides. The exclusion specifically states that income earned as an independent contractor, day laborer, or seasonal worker does not count as "nonrecurring" income and is therefore included as income. The wording of this exclusion indicates that in order to be recurring, income must be received on an "annual" basis - it need not be received monthly, quarterly, etc. Examples of nonrecurring income provided by HUD include: (1) payments from the U.S. Census Bureau for work on the decennial Census or the American Community Survey that is less than 180 days and does not result in a permanent position; (2) direct Federal or State payments intended for economic stimulus or recovery; (3) amounts received directly by a family as a result of State or Federal refundable tax credits or refunds at the time they are received; (4) gifts for holidays, birthdays, or significant life events or milestones; (5) non-monetary, in-kind donations from food banks or similar organizations; and (6) lump-sum additions to assets such as lottery or other contest winnings. HUD is adding a new income exclusion that broadly excludes any income a family receives from civil rights settlements or judgments regardless of how the settlement or judgment is structured (i.e. whether by a lump-sum or payment schedule). However, the settlement or judgment amounts will be counted toward a family s net assets if deposited into an account that would otherwise be considered an asset. The interest from such accounts will be considered asset income. Any income received from any account under a retirement plan recognized by the IRS, including IRAs, employer retirement plans, and retirement plans for self-employed individuals shall be excluded. However, any distribution of periodic payments from these retirement accounts shall be considered income. The final rule also makes changes to the exclusion of income relating to student financial assistance. However, this section of the rule is complex and will be discussed in the next article in this series.

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

During the month of March 2023, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association for four training sessions intended for real estate professionals, particularly those in the affordable multifamily housing field. All four sessions will be presented via live webinars. The following sessions will be presented: March 7: Developing Smoke-Free Policies for Multifamily Housing - A smoke-free policy in your apartment community will help protect your property and residents from smoke damage and reduce the risk of fires. You will save money on turnover expenses because apartments will cost less to clean, repair, and repaint. Living in a smoke-free environment promotes healthier hearts and lungs. What are the other benefits of smoke-free housing? Your family, guests, pets, and building staff will all find the air more pleasant to breathe. This three-hour training will assist owners in understanding the steps necessary to go "smoke-free." It will include (1) a discussion of the legal issues relating to prohibiting smoking; (2) the advantages of smoke-free housing; and (3) the steps to implementing such a policy, including details on what to include in the policy. This session is a must for any property looking to go smoke-free and will provide much-needed reinforcement and guidance for those that already have. March 9: Implementing Criminal Screening Policies for Multifamily Housing - Property owners may (and should) screen applicants for criminal behavior but must be careful when doing so - and must have transparent and defensible policies relative to screening for past criminal conduct. This 1.5-hour webinar will assist owners and property managers in understanding what is required when implementing a criminal screening policy. The training will outline the HUD guidance relative to criminal screening and will review the type of policies that are - and are not - acceptable. The discussion will center on (1) the types of crimes that are appropriate for screening; (2) the HUD policy regarding the use of arrest records in criminal screening; (3) dealing with convictions for non-dangerous crimes; and (4) the use of individual assessments for rejected applicants. Following the session, participants will be better prepared to develop a criminal screening policy that will not run afoul of fair housing law. March 28: Intermediate LIHTC Compliance - Designed for more experienced managers, supervisory personnel, investment asset managers, and compliance specialists, this program expands on the information covered in the Basics of Tax Credit Site Management. A more in-depth discussion of income verification issues is included as well as a discussion of minimum set-aside issues (including the Average Income Minimum Set-Aside), optional fees, and use of common areas. The Available Unit Rule is covered in great detail, as are the requirements for units occupied by students. Attendees will also learn the requirements relating to setting rents at a tax-credit property. This course contains some practice problems but is more discussion oriented than the Basic course. A calculator is required for this course. March 29: Advanced LIHTC Compliance - This full-day training is intended for senior management staff, developers, corporate finance officers, and others involved in decision-making with regard to how LIHTC deals are structured. This training covers complex issues such as eligible and qualified basis, applicable fraction, credit calculation (including first-year calculation), placed-in-service issues, rehab projects, tax-exempt bonds, projects with HOME funds, Next Available Unit Rule, employee units, mixed-income properties, the Average Income Minimum Set-Aside, vacant unit rule, and dealing effectively with State Agencies. These sessions are part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA that is designed to provide affordable housing professionals with the knowledge needed to effectively manage the complex requirements of the various agencies overseeing these programs. Persons interested in any (or all) of these training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

HOTMA Final Rule - Overview of Program Changes

The Department of Housing & Urban Development (HUD) has released a Final Rule implementing the Housing Opportunity Through Modernization Act of 2016 (HOTMA). This final rule has not yet been published in the Federal Register. Publication in the Federal Register will establish the effective dates of the rule.  The Housing Opportunity Through Modernization Act (HOTMA) was signed into law on July 29, 2016, amending many aspects of Multifamily Housing programs (as well as programs administered through the Offices of Public and Indian Housing and Community Planning and Development). HOTMA was intended to streamline processes and reduce burdens on housing providers. On September 17, 2019, HUD issued a proposed rule to update its regulations according to HOTMA s statutory mandate. The final rule, published on January 9, 2023, considers public comment received on the proposed rule and provides additional guidance for implementing Sections 102, 103, and 104 of HOTMA. Which Programs will be Affected by the Final Rule?  The Section 8 PBRA (including RAD), Section 202/811 PRAC, 202/8, 202/162 PAC, Senior Preservation Rental Assistance Contract (SPRAC), and Section 811 Project Rental Assistance (811 PRA) programs will see changes due to HOTMA. This is the first in a series of articles I will write on the sweeping changes that will be made to HUD affordable housing programs. This article will focus on some of the "definitional" changes made to the programs, with follow-up articles on specific areas, including income, assets, HOME program changes, Housing Trust Fund changes, and changes that affect HOPWA, Section 202 and 811, public housing, and general requirements. This final rule implements a number of definitional changes. One particularly important change is the definition of "earned income." In this final rule, HUD is expanding the definition of "earned income" to explain that "transfer payments" (which are not included in earned income) mean payments made or income received in which no goods or services are being paid for. This will include welfare, social security, and certain governmental subsidies. HUD has also provided a precise definition of "unearned income," which is essentially any income other than income from employment. The final rule specifies that the term "unearned income" is broad, encompassing any annual income that is not earned income. HUD is revising the definition of "medical expenses" to be "health and medical care expenses" consistent with the language used in HOTMA, and to reflect the IRS definition of the term. The final rule adds "long-term care premiums" as an example of what is included in the definition of health and medical care expenses. This conforms the final regulation to guidance that was already in the HUD Handbook 4350.3, which states that "long-term care premiums" are examples of deductible health and medical care expenses. With regard to assets, HUD clarifies that net family assets do not include the value of "non-necessary" items of personal property with a total combined value of $50,000 or less, to be adjusted annually by an inflation factor. HUD will issue formal guidance - possibly in Change 5 of 4350.3 - to assist owners/agents (O/As) in determining whether an item is a "necessary item of personal property" or whether the value of the item should be included in calculating the value of all non-necessary items of personal property for the $50,000 threshold. The definition of net family assets also excludes Federal tax refunds or refundable tax credits for a period of 12 months after receipt by the family. The final rule also indicates that non-revocable trusts will not be included as an asset as long as the Trust is not within the control of a member of the household. This indicates that voluntarily setting up a non-revocable trust may no longer be considered an asset disposed of for less than fair market value. Finally, HUD is excluding as an asset the value of any "baby bond" account created, authorized, or funded by Federal, State, or local government. HUD is also narrowing the definition of "nonrecurring income." Since this type of income is excluded, HUD is including definitions for "day laborer," "independent contractor," and "seasonal worker," to assist owners in better determining what income must be included. HUD provides more detail relating to the status of foster children and adults. While foster adults and foster children are members of the household (and therefore will be considered when determining appropriate unit size and utility allowance), they are not considered members of the family for purposes of determining either annual and adjusted income or net family assets, nor are the assets of foster adults or children considered for purposes of the asset limitations in HUD programs. Since the HUD Office of Multifamily Housing has treated foster children and adults as family members, this revised definition will change the treatment of foster children and adults. In other words, these individuals will not count as household members for income purposes, similar in nature to the treatment of a live-in aide. This change eliminates the program quirk that allowed a family with a child in foster care and the foster care family to both claim the child as a household member. Handbook 4350.3 will be updated to reflect this new rule. The new rule provides additional guidance relative to over-income families in public housing. Such families will be permitted to remain in public housing as long as they pay an "alternative non-public housing rent." Such families will no longer be considered public housing program participants. Obviously, these changes are complex and far-reaching. Future articles will go into detail on the major elements of the final rule in order to simplify what is likely to be a year-long transition to the new rules.

HUD Announces Move to NSPIRE Protocol

The Department of Housing & Urban Development (HUD) has published a notice that effective April 1, 2023, HUD-assisted sites enrolled in HUD s NSPIRE demonstration program will change from receiving "advisory" housing safety inspections to receiving "inspections or record." NSPIRE stands for "National Standards for the Physical Inspection of Real Estate." This will replace HUD s current REAC protocol for inspecting HUD affiliated housing projects. The NSPIRE process is designed to create a new simplified inspection system that more accurately reflects the physical conditions of housing units and places greater emphasis on issues like lead-based paint hazards and mold. The NSPIRE demonstration program will end for Public Housing participants on June 30, 2023, the day before HUD intends to begin inspections under NSPIRE for Public Housing. The demonstration will end for Multifamily Housing participants on September 30, 2023, and the NSPIRE final rule is anticipated to take effect for those projects on October 1, 2023. Impact on LIHTC Projects The jury is still out on the impact changing from the UPCS protocol to NSPIRE will have on LIHTC properties. Treasury Regulation 1.42-5 requires a physical inspection of LIHTC properties. Some Housing Finance Agencies may rely on REAC inspections for purposes of the HFA required inspection of tax credit properties. Since NSPIRE will replace the current UPCS standard, this will change the manner in which these properties are inspected. The impact on Agency inspections that are not done as part of the REAC protocol is unclear. HFAs will be examining their procedures relative to the upcoming change in CFR 5.703, which governs the HUD inspection process. Since this requirement will not go into effect until October 1, 2023, Agencies and owners have time to determine how this change will impact specific inspections.