News

Novogradac Releases Study on 2023 Income Estimates

Novogradac and Company, a nationally recognized accounting firm in the area of affordable housing, has released a study on potential changes in income limits for 2023. Novogradac completed the estimates using five-year American Community Survey (ACS) data. When the Department of Housing and Urban Development updates the income limits for various housing programs each year, the agency relies on a combination of one-year ACS data. However, the Census Bureau will not be releasing a one-year ACS for 2020, so HUD will most likely rely on the five-year ACS data. Previous research by Novogradac has indicated that 2023 income limits calculated by HUD using the five-year data will be 3.5% lower than they would be under the one-year data. The estimates for 2023 based on the 2020 five-year ACS show much lower income growth than 2022.  However, the Novogradac study shows that income limits will still trend up, even though the rate will be slower than in previous years. In other words, a national decline in income limits is unlikely. One of the major reasons for the expected increase in income is inflation which is currently running at levels unseen in 40 years. Because HUD uses the historical ACS when determining income limits, it uses a consumer price index (CPI) trend factor to project income limits from the historical ACS year to the income limit year. Inflation is expected to continue for the rest of 2022 and well into 2023. The most recent Congressional Budget Office (CBO) estimates show that the CPI will continue to rise rapidly in the upcoming year. Without taking into consideration any other factors, inflation alone will lead to about a 2.34% increase in income limits. When determining very low-income limits (VLI), which are used by LIHTC, tax-exempt bond developments, and many HUD programs, HUD has certain adjustments that impact income limits. One of the adjustments is the cap on how much change there can be for income limits from one year to the next. The increase is capped at the greater of 5%, or two times the change in national median income. In 2022, HUD revised its cap methodology somewhat, resulting in more than 50% of areas having incomes that were capped. This cap will lessen the impact of any decline in income limits for certain areas. Using CBO estimates of 2023 inflation, Novogradac was able to estimate income for more than 2,600 counties. They cannot estimate income limits for areas that are impacted by adjustments made by HUD for high housing costs or the state non-metro adjustment. The estimated change in national median income will be approximately 1%, meaning the cap on increases for 2023 will be 5%. However, the average change in income limits will be 3.11%, which is a major decrease from 2022, when the average was 10.5%. Despite this decrease, the 2023 increase is much higher than was anticipated, thanks mainly to inflation. The good news for LIHTC developers is that less than 6% of all areas are estimated to have a decrease and only 1.4% of areas are estimated to have a decrease of more than 2%. On the other hand, 44% of areas are expected to have increases of more than 4% and 25% of areas will max out at the 5% cap. Those wishing to examine the Novogradac study in more detail should go to the Novogradac website - www.novoco.com.

A. J. Johnson to Partner with the Colorado Housing Finance Authority on VAWA/LIHTC Live Webinar

A.J. Johnson will be partnering with the Colorado Housing Finance Authority (CHFA) in presenting the Violence Against Women Act - Guidance for LIHTC Properties on August 4, 2022, at 11:00 am (EST). This class will be offered through Colorado Housing and Finance Authority s chfareach educational programming for affordable housing property owners and managers. The Violence Against Women (VAWA) Reauthorization Act of 2013 expanded VAWA protections to many different affordable housing programs - including the Low-Income Housing Tax Credit (LIHTC) Program. While HUD has provided detailed requirements on VAWA implementation at HUD properties, there has been no uniform guidance for LIHTC owners and managers. A proposal before Congress would legislate that LIHTC Extended Use Agreements contain VAWA requirements. The IRS has not provided guidance and while many state agencies are requiring VAWA plans, they are relying heavily on property owners to develop specific plans. This two-hour training - when combined with the course materials- will review VAWA requirements and recommend best practices for developing VAWA plans at LIHTC and other non-HUD properties. The session will be presented by A. J. Johnson, a recognized expert in the affordable housing field and the author of "A Property Manager s Guide to the Violence Against Women Act." To register, please visit the chfareach webpage at this link.

HUD Updates National Nonmetropolitan Income Limits

When the Department of Housing & Urban Development (HUD) published the 2022 income limits (effective April 18, 2022), the Department simultaneously published the National Nonmetropolitan Income Limits (NNMIL) as part of the Frequently Asked Questions (FAQ) section of the Income Tables. When originally published, the 50% NNMIL was as follows: 1 Person:    $25,000 2 Person:    $28,550 3 Person:    $32,100 4 Person:    $35,650       5 Person:    $38,550 6 Person:    $41,400 7 Person:    $44,250 8 Person:    $47,100 HUD has recently revised the NNMIL on the FAQ section of their website as follows: 50% NNMIL 1 Person:    $24,950 2 Person:    $28,500 3 Person:    $32,100 4 Person:    $35,650       5 Person:    $38,500 6 Person:    $41,350 7 Person:    $44,200 8 Person:    $47,050 The revised limits are slightly lower for certain family sizes. Owners and managers using the NNMIL for their LIHTC properties should update the appropriate income limits going forward. While this revision was made after the original April 18 effective date, HUD has provided no guidance indicating that the revised limits have a later effective date. For this reason, owners and managers should assume the revised limits were effective on April 18 - even though they were not published. It is recommended that all new move-ins to these properties on or after April 18, 2022, be reviewed for eligibility under the revised limits. If an eligibility issue is discovered, owners should consult with syndicators and investors to determine the steps to be taken. While it is hoped that state HFAs would be understanding in these cases, that is certainly not guaranteed. You may also feel free to reach out to us directly to discuss your options in these cases.

Census Bureau Report Shows an Aging and More Diverse Population

On June 30, 2022, the U.S. Census Bureau released the 2021 Population Estimates by Age, Sex, Race, and Hispanic Origin. The report shows that the last two decades have seen the country grow continuously older. Since 2000, the national median age - the point at which one-half the population is older and one-half younger - has increased by 3.4 years, with the largest single-year gain of 0.3 years coming in 2021. The median age in the U.S. is now 30.8. The median age for most states also increased from 2020 to 2021, indicating their populations are getting older overall. Utah remains the youngest state in the nation with a 2021 median age of 31.8 - up from 31.5 in 2020. The District of Columbia has the second-lowest median age (34.9) but had the largest increase - 0.5 years from the 2020 age of 34.4. According to the Census Bureau, "With birth rates trending downwards and the aging of the Baby Boom and Generation X cohorts, the median age will likely continue to rise in the coming years." Only one state s population - Maine - became slightly younger, as its median age decreased from 44.8 to 44.7. However, Maine remains the state with the oldest median age in the nation. Only three states have no change in median age - Montana (40.1), New Hampshire (43), and West Virginia (42.8). These are also among the oldest states in terms of median age. The median age in 57% of all U.S. counties and equivalents increased, and 74% of counties had higher median ages than the nation as a whole. Six counties had median ages greater than or equal to 60 years - Sumter County, FL (68.3); Kalawao County, HA (65.5); Catron County, NM (61.8); Harding County, NM (60.3); Charlotte County, FL (60.2); and Jeff Davis County, TX (60). The counties or equivalents with the youngest median ages in the nation were Lexington City, VA (22.2); Todd County, SD (23); Kusilvak Census Area, AK (23.7); Madison County, ID (32.7); and Radford City, VA (24.4). The median age increased in about 76% of metro areas between 2020 and 2021. The three largest increases were in Lake Charles, LA, where the median age rose from 36.5 to 37.4; Hilton Head Island-Bluffton, SC, which increased by 0.8 years to 47.8; and San Francisco-Oakland-Berkeley, CA, where the median age crossed the 40-years-of-age threshold, increasing from 39.4 to 40.1. Provo-Orem, UT was the metro with the lowest median age in 2021, and The Villages, FL, had the highest median age - 68.3. Not surprisingly, The Villages is located in Sumter County. Regionally, the Northeast was the oldest in 2021 with a median age of 40.4, followed by the Midwest (39), the South (38.6), and the West - which experienced the largest increase, 0.3 years to 37.7. In addition to aging, the nation is becoming more diverse. Nationally, all race and Hispanic origin groups experienced population increases, with the exception of the White population, which declined slightly by 0.03%. The Native Hawaiian and Other Pacific Islander population was the fastest-growing race, increasing by 1.54% between 2020 and 2021. Population breakdowns follow: White: 260,183,037 (down 79,836 since 2020);Black or African American: 49,586,352 (up 0.7%);Asian: 23,962,215 (up 1.2%);American Indian or Alaska Native: 7,206,898 (up 1.0%); andNative Hawaiian or Other Pacific Islander: 1,709,860 (up 1.5%). The Hispanic (any race) population grew by 767,907 from 2020 to 2021. California, Texas, and Florida have the largest Hispanic populations. Only New York (-1.1%) and the District of Columbia (-2.5%) experienced drops in the Hispanic population. Maine (5.4%) and Montana (5.4%) were the states with the fastest-growing Hispanic populations. There are two major takeaways from the data: The nation is growing more diverse; andIt is getting older. For affordable housing developers and housing agencies, this indicates continuing growth in the need for senior housing - especially housing that provides the amenities and services required for "aging in place." The growth in diversity serves as a reminder that discrimination based on national origin is a violation of federal fair housing law. Owners of multifamily housing must be willing to work with prospects for whom English may not be the primary language and should have policies and procedures in place for doing so.

HUD Issues MOR Rule and Notice

On June 27, 2022, the Department of Housing & Urban Development (HUD) published the Management and Occupancy Review (MOR) Rule and Notice in the Federal Register. The rule becomes effective on September 26, 2022. This final rule follows the 2015 publication of a proposed rule on MOR scheduling. The Rule and Notice apply to properties covered under project-based Section 8 Housing Assistance Payments (HAP) Contracts for the following programs: New ConstructionSubstantial RehabilitationNew Construction or Substantial Rehabilitation financed by State Housing AgenciesNew Construction financed under Section 515 of the Housing Act of 1949 (Section 8/515 projects)Loan Management Set Aside ProgramDisposition of HUD-Owned ProjectsSection 202/8 HUD conducts MORs to ensure that owners and agents (O/As) comply with HUD requirements. The MOR rule establishes a frequency for the completion of MORs based upon a project s prior MOR score and the project s rating under HUD s risk-based asset management model. HUD believes that moving to a risk-based MOR schedule will enhance HUD oversight of the Section 8 HAP program and improve overall program effectiveness. Beginning on September 26, 2022, Contract Administrators (CAs) will establish MOR schedules as follows: Properties with a previous MOR rating of Unsatisfactory  or Below Average will be reviewed within 12 months of the prior MOR;Properties with a previous MOR rating of Satisfactory will be reviewed within 12 months of the prior MOR if the Risk Classification of the property was Troubled or Potentially Troubled. If the Risk Classification was Not Troubled, these properties will be reviewed within 24 months of the prior MOR;Properties with a previous MOR rating of Above Average or Superior will be reviewed within 12 months of the prior MOR if the Risk Classification of the property was Troubled or Potentially Troubled.  If the Risk Classification was Not Troubled, these properties will be reviewed within 36 months of the prior MOR. Owners and Agents should remember that MORs are different than the physical inspections conducted by HUD s Real Estate Assessment Center (REAC). The MOR Rule and Notice do not affect REAC s inspections of Section 8 HAP properties. O/As operating any of the property types noted above should obtain a copy of the MOR Rule and Notice at https://www.federalregister.gov/documents/2022/06/27/2022-13426/streamlining-management-and-occupancy-reviews-for-section-8-housing-assistance-programs?utm_medium=email&utm_source=govdelivery.

A. J. Johnson Partners with Colorado Housing on Average Income Webinar

A.J. Johnson will be presenting Average Income Minimum Set-Aside: Requirements and Best Practices on July 19, 2022, at 11:00 am (EST). This class will be offered through Colorado Housing and Finance Authority s chfareach educational programming for affordable housing property owners and managers. The one-hour live webinar will review the requirements of the Average Income Minimum Set-Aside Test (AI), discuss the risks of this set-aside, and provide best practice recommendations for implementation of the Average Income test. It will also cover the current IRS guidance relating to the AI set-aside and recent industry requests made to the IRS. The webinar will be presented by A. J. Johnson, a nationally recognized expert on affordable housing who has  provided compliance oversight on multiple properties using the AI set-aside To register, please visit the chfareach webpage at this link.

A. J. Johnson to Host Live Webinar on Criminal Screening Policies

A. J. Johnson will be conducting a webinar on June 29, 2022, on Criminal Screening in Multifamily Housing - Recommended Policies & Procedures.  The Webinar will be held from 1:00 PM to 2:30 PM Eastern time. 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. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

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

During the month of July 2022, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association for three live webinar training sessions intended for real estate professionals, particularly those in the affordable multifamily housing field.  The following sessions will be presented: July 12: Dealing with Affordable Housing Expenses & Deductions - Owners and managers must determine the amount of a family s income before the family is allowed to move into assisted housing and at least annually thereafter. The amount of assistance paid on behalf of the family is calculated using the family s annual income less allowable deductions. HUD program regulations specify the types and amounts of income and deductions to be included in the calculation of annual and adjusted income. There are five possible deductions that may be subtracted from annual income based on allowable family expenses and family characteristics. The remainder, after these deductions are subtracted, is called adjusted income. Adjusted income is generally the amount upon which rent is based. This training focuses on the calculation of annual adjusted income and will cover in detail the adjustments relating to (1) dependent deduction; (2) childcare deduction; (3) disability-related expenses; (4) the elderly deduction; and (5) deductions for medical expenses. The training also includes problems to ensure that the attendees can apply what they learn to actual situations. July 14: Operating Policies for Affordable Housing Properties - Written Operating Policies are a critical component of good management of affordable housing properties. This training will introduce attendees to the basic requirements of four essential policies - the Management Plan, general property policies (aka - "house rules"), tenant transfer policies, and waiting list management. At the conclusion of the training, property managers will be much more aware of the importance of these policies and the elements that should be part of each of the policies. July 26: 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. 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.