News

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

A. J. Johnson will be conducting a webinar on November 23, 2021, 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."

A 2023 Reduction in Income Limits is Possible

The Census Bureau has announced that it will not release a one-year American Community Survey (ACS) for 2020. Without this survey, the Department of Housing & Urban Development (HUD) will almost certainly be restricted to the use of the five-year ACS data to determine income limits. Novogradac, an Accounting and Consulting firm, conducted research that indicates the change from the one-year to the five-year ACS will result in area median income limits (AMI) that average 3.5% lower than they would be under the one-year ACS. This reduction is a result of the income calculation methodology used by HUD. HUD generally uses the ACS data from three years prior to the income limit year. They then combine this with data from the Consumer Price Index (CPI) to trend ACS data for the appropriate income year. For example, the 2022 income limits will use 2019 ACS data. However, the 2020 ACS data will be used for the 2023 limits. Since HUD will not have access to 2020 ACS one-year data, the Agency will use the five-year ACS. All data collected during the five-year period will be given the same weight, so the five-year ACS data for 2020 will cover the period from 2016 - 2020. It is likely that the five-year ACS will be less than the one-year ACS. As part of their study, Novogradac examined the historical variance between the one-year and five-year ACS for all metropolitan statistical areas (MSAs) in the country for ACS years ending in 2017 - 2019 (2019 is the most recent ACS year available). On average, the one-year ACS was 3.71% higher than the five-year ACS. In 82% of areas, the one-year result was higher than the five-year. The impact of the five-year average is more striking in larger MSAs. Of the 30 largest MSAs (including all those with a population of more than 2.1 million), none had a one-year ACS that was lower than the five-year ACS. For these areas, the one-year ACS was on average 4.92% higher than the five-year ACS and was 5.44% higher in 2019. The eight areas with a population of more than five million had a one-year ACS higher than the five-year ACS in each of the three years included in the sample. Novogradac is clear in their findings that incomes will not necessarily be 3.5% lower on average than they will be in 2022. It means that limits will grow 3.5% slower than they otherwise would have. For example, if an area was projected to have a 5% increase from 2022 to 2023 based on the one-year ACS, the increase would only be 1.5%. Areas projecting less than a 3.5% increase for 2023 can expect actual reductions in income limits. This will have a substantial impact on rents and properties being underwritten for a 2023 placed-in-service date will have to take this into consideration. This is an important study and owners and agencies should carefully review potential impacts in planning for 2023.

Claiming Low-Income Housing Tax Credit on Temporary Transfer Unit

A question that clients often ask regarding moving tenants around on acquisition rehab projects is "Can we claim the credit on both units, even though the resident will only be in the temporary unit until the rehab is done on their apartment". Unfortunately, I cannot give an answer that is fully supported by any regulatory reference. Generally, transient units are not credit eligible, and clearly, the second unit is being used on a temporary (transient) basis. However, the resident is on a lease (so the resident is not transient) and they are being provided with rent-restricted housing on a continuous basis. The owner should be able to obtain a tax credit due to the benefits being provided to the resident. It does not appear to be a fair result if the owner loses credit on both units while still providing affordable housing to the resident. While units swap status in a transfer, this is not a "transfer," so I don t believe we can rely on the unit transfer rule to preserve the credits. So, what are your options? (1) Treat the temporary unit as transient and don t claim the credit on either unit. This is the safest course. (2) Claim credit on the temporary unit for the months the household is in that unit and leave the permanent unit out of the applicable fraction. While this is the more aggressive of the two options, it is the one I would choose if I was the owner. Ultimately, it is a fairness issue (but the tax code is not always fair). The only way to truly know if this would meet with IRS approval would be to request a Private Letter Ruling (PLR). While this is costly, it may be the only way to resolve the question. It must be noted that a Private Letter Ruling is not precedent and may only technically be applied to the specific case for which it is requested.  Having said that, PLRs often provide good indicators of IRS thinking on a specific issue. My recommendation in these cases is to claim the credit on both units (but not at the same time). If challenged, I would make the argument that this is not a transient unit since the resident has a lease at the property and is being housed at restricted rents. Since the resident is still under lease at the property, and they are being housed on a non-transient basis, the particular unit they are in should not impact the ability of the owner to claim full tax benefits. I realize this is a pretty aggressive position to take and since I cannot offer legal or accounting advice, owners should consult with their own counsel before deciding on a course of action.

California City Settles Claim of Discrimination Against Farmworkers

HUD has reached a Voluntary Compliance/Conciliation Agreement with the City of Santa Maria, CA, resolving allegations that the city s enactment and enforcement of restrictions on housing for certain farmworker visa-holders in residential areas of the city violated the Fair Housing Act. The City agreed to immediately halt enforcement of the ordinance that created the restrictions, repeal the ordinance within 90 days, and refrain from enacting any similar restrictions. The ordinance imposed a discretionary conditional use permit requirement on housing for employees, which was directed at housing for H-2A foreign national farmworker visa-holders, almost all of whom are Hispanic. The City has also agreed to undertake an effort to analyze and identify any other existing zoning laws that may be discriminatory. The text and legislative history of this particular ordinance make it clear that the restrictions were directed solely at housing for certain farmworker visa-holders, over 90% of whom are from Mexico. The City entered into the agreement in order to avoid litigation and a possible $400,000 fine. In addition to the repeal of the ordinance, city staff must take fair housing training, and the City must hire a designated housing resource employee and improve language accessibility in city services. This is just the latest of many attempts through the years of localities to keep out Hispanic workers. When such ordinances clearly target individuals from specific countries or geographic parts of the world, they violate the national origin protections of the Fair Housing Act.

HUD Determines That Owner's COVID-19 Visitor Policy Violated the Fair Housing Act

HUD recently signed a Conciliation Agreement/Voluntary Compliance Agreement with owners of a HUD-subsidized community in Fairhope, Alabama. The agreement resolves allegations and a HUD investigation into whether the owner s policy prohibiting visitors under the age of 12 due to COVID-19 was discriminatory. A resident, who had been providing childcare for her grandchildren, was allegedly told that she could no longer do so because it violated the owner s policy, instituted due to COVID-19, prohibiting visitors under age 12. Under the agreement, the owners will pay the resident $20,000 and rescind the policy prohibiting visitors to the property who are under the age of 12, and remove playground signage targeting anyone on the basis of age. The Fair Housing Act prohibits housing providers from making housing unavailable and imposing discriminatory terms and conditions based on a person s actual or perceived disability (including the perception that they are unsafe to associate with because of fear they may spread contagious disease (or their familial status or retaliating against a person for exercising their fair housing rights. Section 504 of the Rehabilitation Act of 1973 prohibits discrimination on the basis of disability by recipients of federal financial assistance. In addition, the Age Discrimination Act of 1975 prohibits discrimination on the basis of age in programs or activities receiving federal financial assistance. HUD views blanket bans on children s visits to be discriminatory even during the COVID-19 pandemic.  Housing providers are able to take reasonable precautions to protect residents from COVID-19 (e.g., mask mandates, social distancing, etc.), they may not impose blanket prohibitions on any visits from children no matter what precautions are taken, thus keeping residents from visiting with family and friends in their own homes. Owners and managers should keep this ruling in mind when establishing protective protocols at properties.

A. J. Johnson to Offer Live Webinar on The Most Common LIHTC Non-compliance - Avoiding 8823s

A. J. Johnson will be conducting a webinar on October 26, 2021, on Avoiding the Most Common LIHTC Noncompliance - Remaining 8823 Free.  The Webinar will be held from 1:00 PM to 2:30 PM Eastern time. Credit loss on tax credit properties generally is the result of mistakes in six specific areas - habitability (physical condition), inaccurate determination of income at move-in, changes in eligible basis, the charging of excess rent or fees, utility allowance errors (resulting in excess rent), and non-qualified student households. This 90-minute session will provide an overview of each of these areas, with recommendations on how to avoid non-compliance that may result in credit reduction or recapture. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

Social Security COLA - 2022

The federal government announced on October 13, 2021, that the Social Security Cost of Live Adjustment (COLA) for 2022 will be 5.9%, which is the largest increase since 1982 when the increase was 8.7%. This increase will provide an additional $92 per month for the average retiree. This is a huge increase over the 2021 increase of 1.3%. Social Security recipients will receive a notice in the mail in early December showing their new benefit amount. Recipients will see an increase in their January 2022 payment. Those receiving SSI will see the increase on December 31, 2021. Owners and managers of properties that are required to determine the income of residents should use the new COLA SS rate when projecting the income of applicants and residents. This also affects persons receiving SSI, VA pensions, Civil Service Pensions, and Railroad Retirement.

A. J. Johnson to Offer Live Webinar on Tenant-on-Tenant Harassment; Limiting Fair Housing Liability.

A. J. Johnson will be conducting a webinar on November 3, 2021, on Tenant-on-Tenant Harassment; Limiting Fair Housing Liability.  The Webinar will be held from 1:00 PM to 2:00 PM Eastern time. Dealing with tenant-on-tenant harassment is an evolving area of fair housing law. Landlords are generally familiar with how their actions can be construed as discriminatory. But how should landlords react when one resident is violating the fair housing rights of another resident?This one-hour training is designed to help landlords understand the current legal state of this issue and to establish policies to limit potential landlord liability. The session will include a discussion of the two most relevant court cases relating to tenant-on-tenant harassment and will provide recommended policies to limit potential liability. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."