News

A. J. Johnson to Host Live Webinar on Interviewing Skills for Affordable Housing Managers

A. J. Johnson will be conducting a webinar on September 29, 2022, on Interviewing Skills for Affordable Housing Managers.  The Webinar will be held from 1:00 PM to 4:00 PM Eastern time. One of the most important skills any affordable housing manager can possess is the ability to interview applicants and residents and obtain the information required to determine eligibility - this is also one of the greatest weaknesses of most affordable housing managers. This training has been developed to address that weakness. This three-hour session focuses on the interview process and provides concepts and tools that will aid managers as they conduct their interviews. Techniques apply to all interview settings including initial eligibility interviews, interim certifications, and annual recertifications. The primary emphasis is on the initial eligibility interview since it is so critical to the housing process. The skills taught during this session will also assist managers in detecting fraud and in dealing with third parties when resolving discrepancies. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

IRS Final Regulation on Average Income Set-Aside Nearing Release

The IRS has sent final regulations relating to the Average Income (AI) test to the U.S. Office of Management & Budget for review. The final regulations were received by OMB on September 12, 2022. This is the final step before the publication of the regulation by the IRS. The Treasury Department and IRS first proposed these regulations in October 2020, and parts of the proposed reg faced harsh criticism from the LIHTC industry. It is hoped that the industry recommendations relative to the rule will be incorporated in the final regulation. OMB has provided no timeframe for their review, but it is hoped that the final regulation will be published shortly, and we can move forward with more certainty on exactly what will be required relative to AI compliance. OMB typically reviews proposed regulations within 60 days, which would mean final publication sometime in November. However, since the Biden Administration has committed to finalizing the proposed rules for the AI set aside as part of its Housing Supply Action Plan, a shorter timeframe is possible.

Court Rules Against Landlord and Will Not Dismiss LEP Case

A fair housing non-profit organization is suing two DeWitt, New York apartment complexes, alleging that they discriminate against foreign-born residents by refusing to rent to anyone who does not have someone who speaks English fluently living with them. CNY Fair Housing filed the lawsuit in U.S. District Court in Syracuse, asking the Court to declare that Swiss Village Apartments and the Alps at Swiss Village are violating the federal Fair Housing Act with their policy of not renting to individuals or families with a limited ability to speak English. The lawsuit was filed in November 2021, and also seeks an order barring the complexes from continuing their policy and asks the court to award the organization unspecified compensatory and punitive damages. CNY Fair Housing conducted a test of the properties after being alerted to the policy by a local housing services provider. In June 2019 and August 2020, two CNY staff posed as representatives of prospective tenants who speak only limited English. When the testers called the complexes, they were told by a leasing agent that tenants must be able to read and speak English so they could communicate with the site s managers about any issues relating to their apartments. When the testers said they would serve as translators for the applicants, they were told that someone living in the apartment had to be able to speak English. The Landlord has asked that the court dismiss the case, arguing that (1) a prospective tenant s language or Limited English Proficiency (LEP) status was not a protected class under federal or state fair housing law, and (2) the complaint failed to otherwise identify the prospective tenant s race or national origin. CNY Fair Housing has responded that consistent with HUD guidance and case law, a prospective tenant may adequately plead discrimination based on race or national origin using proof of a housing policy employing language-related criteria. The federal government submitted a statement of interest supporting the group's position. The court has ruled against the Landlord and will not dismiss the case. The court gave deference to a 2016 HUD Guidance that concluded that LEP was often used as a pretext for national origin discrimination and that the FHA may be violated by "selective application of a language-related policy, or use of LEP as a pretext for unequal treatment of individuals based on race, national origin, or other protected characteristics." The court also found that nothing in the language of the FHA or related regulations prohibited the use of proof of LEP criteria as a pretext for race or national origin discrimination. Also, the group did not need to identify the specific national origin or race of particular tenants in order to state an initial case of discrimination under the FHA. Unless the two parties settle the case, it now appears that the suit will be heard in federal court. This case serves as a reminder that landlords should never have a policy requiring that applicants or residents speak English as a condition of occupancy.

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

During the month of October 2022, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association for two live webinar training sessions intended for real estate professionals, particularly those in the affordable multifamily housing field.  The following sessions will be presented: October 18: Ensuring Section 42 Compliance on December 31. Experienced LIHTC managers and compliance professionals all know the importance of the last day of the tax year (normally December 31). This session will focus on all the issues to be aware of as the year draws to a close, with recommendations on how to ensure compliance at year-end and the ramifications of noncompliance. The discussion will center on the three primary compliance areas impacting the ability to claim credits - eligibility, affordability, and habitability. The training will stress the importance of year-round compliance relative to rent since excess rent at any point in the year can result in a credit loss. The session will close with a review of casualty loss issues and how these events may (or may not) impact the credits. October 19: Hoarding - A Fair Housing Challenge. In May 2013, the American Psychiatric Association (APA) confirmed that Compulsive Hoarding is a mental disability and a protected class. More than 15 million Americans suffer from the mental health problem of hoarding and potential problems from hoarding include noxious odors, pest infestation, mold growth, increased risk of injury or disease, fire hazards, and even structural damage.Hoarding is the one class of disability that requires landlords to offer an accommodation - even if an accommodation is not requested!This 1.5-hour live webinar is designed to assist multifamily managers in understanding how to deal with hoarding problems in a way that will prevent liability under fair housing law. The session will define hoarding and provide detailed recommendations on how to deal with a hoarding problem. It will outline examples of accommodations for hoarding, how to engage in the "interactive process" with residents who hoard, and the steps necessary to remove uncooperative residents. Finally, a recent court case regarding hoarding will be reviewed as an illustration of the potential difficulties managers face in hoarding situations.This is an evolving area of fair housing law, and this webinar will provide the guidance necessary to approach the problem in a systematic way that will give multifamily operators the best chance of avoiding the legal traps that exist when dealing with this unique disability. Persons interested in any (or all) of these training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

HUD Allows for Increase in Distribution of Surplus Cash for Insured Properties

The Department of Housing & Urban Development (HUD) issued Mortgagee Letter 2022-16 on September 7, 2022, allowing for an increase in the frequency of the distribution of surplus cash for Non-Assisted HUD Insured properties. Surplus Cash Distributions from insured multifamily projects are governed by the HUD Regulatory Agreement (Form HUD-92466M). Section 13 of this document requires that the Borrower calculate "Surplus Cash" (as that term is defined in the Regulatory Agreement, along with the term "Distributions") as of the last day of its fiscal year and submit a report of its Surplus Cash calculations to HUD with its required annual financial reports, pursuant to Program Obligations. The Borrower may also, at its election, calculate Surplus Cash as of the last day of the sixth month of its fiscal year. The semi-annual distribution rule was created in the 1970s to control Distributions to owners of subsidized housing with extremely constrained operating income due to affordable rental rates (e.g., the Section 236 and Section 8 programs). The primary economic benefit of multifamily equity investment was large tax deductions, and manual bookkeeping methods precluded more frequent reporting. HUD will now permit modification of Section 13 of the Regulatory Agreement (form HUD-92466M) to allow Distributions from Surplus Cash as frequently as monthly for eligible Borrowers. This policy is limited to FHA-insured multifamily properties not subject to a Section 8 project-based rental assistance payments contract or a HUD-held mortgage note. This policy aligns HUD s multifamily insurance for unassisted projects with industry standards and increases its competitive standing in the lending industry. This new policy is only available to eligible multifamily projects with loans endorsed after September 7, 2022. Projects with loans closed before this date are not eligible and HUD will not consider amendments to executed Regulatory Agreements on existing insured projects. Borrowers of such projects with loans closing after September 7, 2022, should obtain a copy of the Notice and follow the guidance provided in order to take advantage of the more frequent distributions. For questions about this Mortgagee Letter, contact Thomas A. Bernaciak, Deputy Director, Office of Multifamily Production at Thomas.A.Bernaciak@hud.gov or (202) 402-3242.

A. J. Johnson to Offer Live Webinar on Interviewing Skills for Affordable Housing Managers

A. J. Johnson will be conducting a webinar on September 29, 2022, on Interviewing Skills for Affordable Housing Managers.  The Webinar will be held from 1:00 PM to 4:00 PM Eastern time. One of the most important skills any affordable housing manager can possess is the ability to interview applicants and residents and obtain the information required to determine eligibility - this is also one of the greatest weaknesses of most affordable housing managers. This training has been developed to address that weakness. This three-hour session focuses on the interview process and provides concepts and tools that will aid managers as they conduct their interviews. Techniques apply to all interview settings including initial eligibility interviews, interim certifications, and annual recertifications. The primary emphasis is on the initial eligibility interview since it is so critical to the housing process. The skills taught during this session will also assist managers in detecting fraud and in dealing with third parties when resolving discrepancies. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

HOME Funds Trigger Section 504 Compliance

One of the most common questions I get from clients with HOME funding for their project is whether Section 504 requirements apply when HOME funding is present. THE ANSWER IS ALMOST ALWAYS - YES! What is Section 504? Section 504 of the Rehabilitation Act of 1973 is a federal law, codified at 29 U.S.C. 794, that prohibits discrimination on the basis of disability in federally assisted programs or activities. Specifically, Section 504 states: "No otherwise qualified individual with a disability in the United States. . .shall, solely by reason of her or his disability, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program, service or activity receiving federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Postal Service." This means that Section 504 prohibits discrimination on the basis of disability in any program or activity that receives financial assistance from any federal agency, including HUD as well as in programs conducted by federal agencies. Who is a recipient of federal financial assistance? The Section 504 regulations define "recipient" as any State or its political subdivision, any instrumentality of a state or its political subdivision, any public or private agency, institution organization, or other entity, or any person to which federal financial assistance is extended for any program or activity directly or through another recipient, including any successor, assignee, or transferee of a recipient, but excluding the ultimate beneficiary of the assistance. (24 C.F.R. 8.3.) Thus, a HUD-funded public housing agency or a HUD-funded non-profit developer of low-income housing is a recipient of federal financial assistance and is subject to Section 504's requirements. Therefore, a public housing agency is covered by Section 504, for example, in the operation of its Section 8 voucher program or activity. However, a private landlord who accepts Section 8 tenant-based vouchers in payment for rent from a low-income individual is not a recipient of federal financial assistance merely by virtue of receipt of such payments. Similarly, while a developer that receives Community Development Block Grant (CDBG) or HOME funds for the rehabilitation of an owner-occupied unit is a recipient for purposes of Section 504, a family that owns the unit is not a recipient because the family is the ultimate beneficiary of the funds. What physical accessibility requirements must a new federally assisted housing development meet in order to be in compliance with Section 504 requirements? New construction of multifamily rental housing with five or more total units (not five or more HOME units) must be designed and constructed to be readily accessible to and usable by persons with disabilities. The common areas in the building must be made accessible, as well as a certain number of units. For a federally assisted new construction housing project, Section 504 requires 5% of the dwelling units, or at least one unit, whichever is greater, to be accessible for persons with mobility disabilities. An additional 2% of the dwelling units, or at least one unit, whichever is greater, must be accessible for persons with hearing or visual disabilities. The project must also meet all Section 504 requirements in HUD s implementing regulation, such as requirements regarding dispersal and utilization of accessible housing units. If a federally assisted housing project is targeted for substantial alteration, what does Section 504 require in terms of accessible units? Under Section 504, alterations are substantial if they are undertaken on a project that has 15 or more units and the cost of the alterations is 75% or more of the replacement cost of the completed facility. (See 24 C.F.R. 8.23(a)). The new construction provisions of 24 C.F.R. 8.22 apply. Section 8.22 requires that a minimum of 5% of the dwelling units, or at least one unit, whichever is greater, shall be made accessible to persons with mobility disabilities and an additional 2% of the dwelling units, or at least one unit, whichever is greater, shall be made accessible to persons with hearing or visual disabilities. Recipients shall pay for reasonable modifications and accommodations needed by the individual (e.g., a ramp to a unit) unless providing that accommodation would be an undue financial and administrative burden or a fundamental alteration of the program. During the development phase, these costs are eligible HOME costs. In summary, if you are developing or operating a multifamily property with five or more total units, and the project has any amount of HOME funding, the entire project is subject to the requirements of Section 504. In addition to the required percentage of accessible units, this means that owners of the project are required to pay the costs of modifications and accommodations for all units in the project - not just the HOME-designated units.

HUD Charges Landlord with Discrimination Against Transgendered Resident

In one of the clearest signals yet that HUD considers the Fair Housing provision against discrimination based on sex to include sexual orientation and gender identity, the Department has filed a charge of Discrimination against an RV resort in central Florida for its treatment of a transgendered individual. This makes Florida the first state to have a transgendered fair housing case. The charges are the first since the U.S. Supreme Court expanded civil rights protections for transgendered Americans with a 2020 ruling in an employment case. While Congress has not formally amended the Fair Housing Act to include protections based on sexual orientation or gender identity, HUD is the federal agency charged with enforcing federal fair housing law, and as such, has discretion in interpreting how court decisions affect the implementation of fair housing law. Nathan Dykgraaf, the owner and manager of 21 Palms RV Resort Park in Davenport, FL has been named as a defendant in the case. In the complaint, HUD alleges that Dykgraaf took issue when an unnamed resident began to dress and present themselves as a transgendered woman. According to the complaint, in January 2021, Dykgraaf gave the resident a handwritten letter telling her to stop presenting herself as a woman. According to HUD, the letter said, "I have been informed of your actions to have your sex changed to a female, I am told you have started taking the necessary medication and that after a period of time, your change will be completed. To avoid problems you must: 1. Act as a man. 2. Talk as a man. 3. Dress as a man. 4. Avoid tight clothing that is revealing sexual organs. If you follow the above steps trouble will be avoided. Sincerely, Nathan D." After getting the letter, the resident stopped fully expressing her gender identity and avoided neighbors, RV park staff, and curtailed her use of the park s amenities. The resident and her family, which included a minor child, moved from the property on August 26, 2021, and filed the complaint with HUD, seeking "actual damages including, but not limited to emotional distress, lost housing opportunity, and out-of-pocket expenses." HUD is stating that the actions of the owner violate the Fair Housing Act by setting illegal conditions or restrictions in order to have housing. The next step in the process will be a hearing by a U.S. Administrative Law Judge or in a federal district court. Damages may be awarded by the ALJ after the hearing, or they may order injunctive relief and payment of attorney s fees, in addition to fines. Federal courts may also impose punitive damages. This charge makes it clear that HUD now considers discrimination based on sex in housing to include sexual orientation and gender identity.