News

Biden Housing Plan Stresses Housing as Infrastructure

On May 26, the Biden Administration released its full plans for a surge in new housing spending as part of the American Jobs Plan. The proposal would invest $318 billion, including $105 billion in newly proposed tax credits. The goal is to expand the supply of safe, affordable housing in all 50 states and territories, in turn creating thousands of jobs. According to the White House, the Jobs Plan will create more than 2 million affordable housing units, making it the most aggressive affordable housing plan in the nation s history. While the overall plan will be hard-fought in Congress, there is broad bipartisan support for the elements that comprise the housing portion of the legislation, creating the possibility that even if the entire plan is not passed into law, some of the affordable housing components could be passed as stand-alone legislation. There are currently 11 million households in the United States that pay more than 50% of their income toward rent and millions of children live with exposure to lead paint in substandard housing. The main element of the housing portion of the Plan is $213 billion in spending for a variety of HUD programs, including (1) $45 billion for the Housing Trust Fund, which represents a huge expansion of a program that serves persons whose incomes do not exceed 30% of the area median income; (2) $35 billion for the HOME program, which is often used in conjunction with Low-Income Housing Tax Credits (LIHTC); and (3) $2 billion each into the Section 202 program for the elderly and project-based rental assistance. If approved, the new project-based rental assistance agreements will be the first in more than 20 years. In addition to the increased funding for HUD programs, the plan provides $105 billion in new and expanded tax credits, including $55 billion for the LIHTC program. Between the LIHTC and similar programs, the Jobs Plan aims to spur the construction of 500,000 to 600,000 affordable apartments over a five-year period. Included in this $105 billion tranche is a brand new tax credit based on the Neighborhoods Home Investment Act. This $20 billion program is modeled after the LIHTC program and would cover the cost of purchasing and rehabilitating homes in areas where the cost of building new housing is higher than the actual value of the homes. About 22% of metro areas nationwide and 25% of non-metro areas would qualify for these investments. The housing component of the Jobs Plan provides funds for rural housing also, with plans that would complement current Department of Agriculture housing programs. One of the most intriguing (and sure to be controversial) parts of the plan is a $5 billion zoning reform program that would be used for local housing policy grants for cities and counties that agree to ease restrictive or exclusionary zoning. Exclusionary zoning is one of the key contributors to the lack of affordable housing in many areas and leads to segregation and concentrated poverty. We will be following the progress of the American Jobs Plan as it works its way through Congress and will provide regular updates on its progress.

Court Affirms Right of Spouse to be a Live-in Aide at HUD-Assisted Property

In Johnson v. Guardian Management, April 2021, a court ruled that a current spouse may be a live-in aide for a resident at a HUD Section 8 project. Facts of the Case A Section 8 resident requested an accommodation for a live-in aide because of increased health problems associated with falls, memory issues, seizures, and other issues resulting from his disabilities.The resident submitted the required verification form from a healthcare provider verifying that he was disabled and his need for a live-in aide was related to his disability and necessary for him to have equal enjoyment of his apartment.Management denied his request because he asked that his wife be considered as the live-in aide.The resident filed a complaint with HUD s Office of Fair Housing & Equal Opportunity (FHEO) and filed suit in federal court.The FHEO determined that the wife did not qualify as a live-in aide, explaining that "while a relative may be considered a live-in caregiver," HUD s "applicable rules and regulations" don t allow a spouse to be a live-in aide.The FHEO s Letter of Findings quoted HUD Handbook 4350.3 s three requirements to be a live-in aide: (1) the aide must be essential to the care and well-being of the resident; (2) the aide may not be obligated for the support of the disabled person; and (3) the aide would not be living in the unit except to provide the necessary supportive services. Court Ruling The court ruled that spouses are not automatically excluded from serving as live-in aides and that HUD s interpretation of its own regulations was wrong. The judge pointed out that the HUD Handbook specifically states that a relative may be a live-in aide if they meet all the requirements.In fact, the judge noted that when the HUD regulation defining live-in aides was established, the agency intentionally deleted proposed text that would have prevented spouses and family members from serving as live-in aides specifically to encourage such persons to serve as live-in aides.The circumstances of this case showed sufficient evidence to support the resident s claim that the spouse would not be living with the resident except to provide supportive services.At the time of their marriage, the resident lived in Oregon and his wife lived in the Philippines.The resident and his wife continued to live apart for the next two years.During those two years, the wife continued to live and maintain her own home in the Philippines, where she worked as a teacher and showed no intention of moving to the United States.After two years of marriage, she offered to move to the United States to care for the resident because of his disability.The wife took a leave of absence from her job in the Philippines and was certified as the resident s live-in aide under the Medicaid Independent Choice Program.According to the court, the fact that the wife did not move to the United States for two years after marrying the resident until his health deteriorated further, is adequate evidence to support the resident s claim that his wife lives with him solely for the purpose of providing supportive services. Why This Case Matters A separated spouse - even if not legally separated - can be a live-in aide. The facts and circumstances will dictate whether the HUD requirements as outlined in 4350.3 are met. In this case - and all cases where a spouse is proposed as a live-in aide - the key is to show that were it not for the needs of the disabled resident, the spouse would not be living in the unit. As a best practice, you should be able to verify that the spouse has established their own residence, apart from your resident, for a long enough period of time to show that their intention is to live apart. And finally, remember that since the Low-Income Housing Tax Credit Program follows HUD rules in the determination of household membership, this same requirement applies to LIHTC properties.

HUD Enters Into Conciliation Agreement Relating to Language Access Services

The Department of Housing & Urban Development (HUD) recently entered into a Conciliation/Voluntary Compliance Agreement with an owner and management company in Sacramento, CA resolving allegations that they violated the Fair Housing Act (FHA) and Title VI of the Civil Rights Act of 1964. The respondents allegedly failed to provide language access services to Vietnamese residents and retaliated against a property employee for advocating for residents with limited English proficiency to receive oral interpretation services and translated vital documents. The FHA prohibits housing providers from discriminating against persons based on their national origin. This includes aiding others in the exercise or enjoyment of their fair housing rights. Additionally, Title VI of the Civil Rights Act of 1964 prohibits discrimination on the basis of national origin by recipients of federal financial assistance and requires such recipients to take reasonable steps to ensure meaningful access for limited English proficient (LEP) persons. The case came to HUD s attention when an agent at the Apartment Community, which receives HUD funding, filed a complaint alleging that the owners and managers of the property failed to provide language access services to the complex s Vietnamese residents and retaliated against an employee because she advocated for the housing providers to provide language services to LEP residents. Under the terms of the settlement, the management agent agreed to the following: Pay $10,000 to the employee who filed the complaint;Will not give a negative employment reference for the employee if potential future employers contact the management company;Provide $20,075 in compensation to residents of the property, with each household receiving $275 as either a check or rent credit;Send a notification letter to each household - in their primary language - notifying them of the agreement, including that the management company will provide LEP applicants with free oral interpretation services and translated documents when required by law; andEnsure that all employees who interact with residents or applicants attend training on Title VI language access requirements. This case is a reminder to all owners and property managers of the requirement to have LEP policies at all properties that receive federal assistance (primarily HUD and properties assisted by the Rural Housing Service). Owners and managers of non-federally assisted properties should also remember that the Fair Housing Act, which applies to nearly all housing owners and operators, protects individuals based on national origin, which makes it illegal to discriminate because of a person s birthplace, ancestry, culture, or language. What is Limited English Proficient (LEP)? The Census Bureau defines Limited English Proficiency as speaking English "less than very well."The entire LEP population grew by 52% in a ten-year period and is growing fastest in states with the greatest immigrant growth (California, Texas, and Florida). HUD s Title VI LEP Guidance Properties with HUD assistance are required to conduct a "Four Factor Analysis" relating to LEP persons: Number or proportion of LEP individuals served or encountered in the eligible service area;Generally, the greater the number or proportion of LEP persons from a certain language group within the eligible service area, the more likely language services are needed.What is the "Eligible Service Area"?The area from which the program would expect to draw its applicants and beneficiaries (i.e., the market area).Consider geographic and programmatic terms. Even if the overall number of LEP persons is small, the number of contacts the recipient has with LEP persons from the language group may be high.Only consider LEP individuals and not all persons from non-English speaking national origins.The frequency with which LEP persons come into contact with the program;The more frequent the contact with a particular language group, the more likely that enhanced language services in the language are needed.The nature and importance of the program, activity, or service provided by the program; andThe resources available to the grantee. Determining if there is Meaningful Access What is "Meaningful Access?" Ability to access programs and participate in services, activities, and other benefits. Where should the analysis begin? Here are some HUD-approved "safe-harbors:"If more than 5% of the eligible population or beneficiaries and more than 50 people are LEP deficient, vital documents should be translated to that language.If more than 5% of the eligible population or beneficiaries but less than 50 people are LEP deficient, there should be a translated written notice of their right to receive free oral interpretation of documents.If less than 5% of the eligible population or beneficiaries and less than 1,000 people are LEP deficient, no written translation is required. Minimum Essential Elements of LEP Services Recipients of federal assistance, no matter how small, must provide essential elements of LEP services, including: Assess languages used among the eligible population in the recipient s service area;Make "I Speak" cards readily available in the languages that have a significant population;Establish access to a translation line such as LanguageLine; andMake its website accessible to LEP persons. LEP Summary Recipients of federal funding need to be making efforts to provide access to people with limited English skills;The analysis of what services a recipient needs to provide is a fact specific balancing test; andIf someone is having difficulty accessing federally funded programs due to a language barrier, they can file a complaint and HUD may investigate. LEP Resources HUD LEP Page: http://portal.hud.gov/hudportal/HUD/pro gram_offices/fair_housing_equal_opp/pr omotingfh/lep Inter-Agency LEP Page: www.lep.gov

COVID-19 IRS Extension for Qualifying Units (Notices 2021-12 and 2021-17)- Industry Positions on Year Two Credits

In January 2021, the IRS released Notice 2021-12, extending various COVID-19 relief provisions for the Low-Income Housing Tax Credit (LIHTC) and Tax-Exempt Bond programs. The service also added relief with regard to deadlines for satisfying occupancy obligations. Section IV.E of Notice 2021-12 provided an extension to satisfy certain occupancy obligations. It stated that for purposes of Section 42(f), "if the close of the first year of the credit period with respect to a building is on or after April 1, 2020, and on or before June 30, 2021, then the qualified basis for the building for the first year of the credit period is calculated by taking into account any increase in the number of low-income units by the close of the 6-month period following the close of that first year." Section 42(f) is "Definition and special rules relating to credit period." This section includes special rules for the first year of the credit period, including how the applicable fraction is determined for the first year. Since the applicable fraction is used to determine qualified basis, Notice 2021-12 seemed to indicate that the six-month extension applied to any determination of a first-year qualified basis. This would mean that units qualified after the end of the first year of the credit period, but within the six-month extension, would qualify for first-year credits. On March 16, 2021, the IRS issued Notice 2021-17, which was included in the April 5, 2021, Internal Revenue Bulletin. This notice provides a more precise reference citation, clarifying that Section IV.E of Notice 2021-12 applies only for purposes of 42(f)(3)(A)(ii). This section of the code stipulates that units qualified after the first year of the credit period will only be entitled to 2/3 of the credit that units qualified during the first year of the credit period may claim. This clarification indicates that increases in qualified occupancy during the six-month extension may be used to avoid two-thirds tax credits in the future but may not be used to actually claim first-year credit for units not qualified during the first year. In other words, units qualified after the first year of the credit period but within the six-month extension will claim accelerated credit beginning in the second year of the credit period. Units qualified during this extension will not be entitled to credits during the first year of the credit period. We know two things with certainty based on the IRS Notice: (1) Units not qualified in 2020 will not be eligible for inclusion in a building s applicable fraction in 2020 [i.e., no 2020 credit for those units]; and (2) if such units are qualified no later than June 30, 2021, they will not be considered "2/3" units, meaning taxpayers may claim an accelerated credit for those units beginning in 2021. What We Don t Know with Certainty How will the credit in 2021 for units not qualified in 2020 but qualified no later than June 30, 2021, be determined? There are currently three schools of thought in the industry regarding how the credits for these units will be determined: A monthly weighted average will be applied to the units for the 2021 tax year and any disallowed credit will be claimed in year 12;A monthly weighted average will be applied to the units for the 2021 tax year and any disallowed credit is permanently lost; andCredit for 2021 will be determined based on the applicable fraction at the end of the tax year since 2021 is the second year of the compliance period. To determine which of these scenarios is most likely, an examination of the credit calculation requirements outlined in the Code is required. First Year Credit Calculation Section 42(f)(2) of the Code outlines that credits during year one of the credit and compliance period are calculated using a  monthly weighted average of applicable fractions as of the last day of each month (for buildings that are in service for the full calendar month). This is clear and is the method that will be used in the determination of 2020 credits. In other words, units not qualified during 2020 will not be eligible for 2020 credits. Increases in Qualified Basis 42(f)(3)(A) states that if qualified basis increases after the first year of the credit period, units that qualify and cause the increase in qualified basis after the first year will be subject to a "2/3" credit. In these cases, 42(f)(3)(B) states that the credit for these units will be determined using the same weighted average method as used in year one. This is the reason that some in the industry believe that numbers one or two noted above apply to the situation addressed in Notice 2021-12 and 17. However, there are two problems with this position: Since Notices 2021-12 and 17 state that units qualified no later than June 30, 2021, will be included in qualified basis at the end of 2020, there is no increase in qualified basis based on the qualification of these units, if qualified by June 30, 2021.There is only one first year of the credit period. In the scenarios envisioned by the IRS relative to the two notices, 2020 is the first year of the credit period - 2021 is year two of the credit period. 42(c)(1)(A) stipulates that except for the first year of the credit period, the applicable fraction will be determined as of the close of each taxable year. So, based on the language in the Code, option three above is the most likely method for determining the credit for units qualified after 2020 but no later than June 30, 2021. Put another way, as long as low-income units are qualified by June 30, 2021, for properties that first claim credit in 2020, the units will generate credit for the entire 2021 tax year (assuming the units are in the applicable fraction at the end of 2021). While we can never have complete confidence in positions that the IRS may take, the language in Section 42 seems to indicate that option three above is the most likely methodology to be used in the determination of credits for units qualified after 2020 but before June 30, 2021.

Key Improvements to LIHTC Program Possible for 2021

An updated Affordable Housing Credit Improvement Act (AHCIA) has been introduced in the House and Senate with bipartisan support. The House and Senate bills are identical and are a continuation of an effort that began with the initial introduction of the AHCIA in 2016. With the ongoing move from a focus on COVID-19 relief to infrastructure and economic recovery, the chance of passage is greater now than at any time in the past. Adding to this is the strong support for affordable housing by the Biden Administration. Since its initial introduction in 2016, some elements of the original AHCIA have become law. Most recently, as part of the Consolidated Appropriations Act (December 2020), a minimum 4% tax credit rate for bond-financed deals and the acquisition of existing buildings was established. Here are some of the key provision of AHCIA that have at least a reasonable chance of passage in 2021: Increase the allocation of credits by 50% - 25% in 2021 and 25% in 2022.Lower the bond-financing threshold from 50% to 25% to receive a full allocation of 4% credits. This move alone could produce or preserve as many as 1.49 million additional affordable housing units from 2022 to 2031 (according to a study by the National Council of State Housing Agencies (NCSHA).Modify the definition of a Difficult Development Area (DDA) to automatically include sites located in an Indian area, making these sites eligible for the 30% basis boost if needed for project feasibility.Provide more relief under the "casualty loss" rules. Currently, if a LIHTC property suffers a casualty loss and is not part of a federal disaster area, the owner is required to restore the property no later than December 31 of the year of the casualty loss to avoid a reduction in credits. The AHCIA proposes that there will be no loss of credits during a restoration period for any casualty loss as long as the building is restored within a reasonable period of time, as established by the allocating agency. The timeframe will not be able to exceed 25 months from the date of the casualty. However, in the case of federal disaster areas, Housing Finance Agencies (HFAs) would be able to extend the 25-month period by an additional 12 months if reconstruction within 25 months was not practical. Any additional time beyond 25 months would be added to the project s compliance period in these cases.Align the LIHTC program with the requirements of the Violence Against Women Act (VAWA) by (1) Requiring all LIHTC Extended Use Agreements to include VAWA protections; (2) clarify that an owner should treat a tenant who has his or her lease bifurcated due to violence covered under VAWA as an existing tenant and should not recertify the tenant s income as if he or she was a new tenant at initial occupancy; and (3) clarify that victims under VAWA qualify under the special-needs exemption to the LIHTC general public use rule.Align the LIHTC student rule with the HUD student rule and provide an exception to the rule for students age 24 and older so that they may pursue educational opportunities. Students under age 24 would have to qualify under the HUD student rule. These exceptions include (1) youth who were homeless immediately before turning 18; (2) veterans; (3) students who are married; and (4) students with children. The AHCIA also provides an exception to the student rule for victims or threatened victims of domestic violence or sexual assault. These are the changes that appear to have the best chance of passage in 2021. We will continue to track the status of the legislation and provide regular updates.

American Housing and Economic Mobility Act of 2021 Introduced

On April 23, 2021, Senator Elizabeth Warren and Congressman Emanuel Cleaver introduced the American Housing & Economic Mobility Act of 2021 (S. 1368 and H.R. 2768. These bills reintroduce bills from the prior Congress, with some additional provisions. Among the major provisions in the Act: Leverages federal funding to build 3 million new housing units. It is hoped that the increased supply will lower the cost of housing for lower-income and middle class families. An independent analysis by Moody s Analytics indicates that this level of new production will reduce rents by 10%. This new production will be accomplished by -Investing $445 billion in the Housing Trust Fund to build, rehabilitate, and operate up to 2.1 million homes for low-income families, including in rural areas and in Indian country where housing quality is especially poor.Invest $25 billion in the Capital Magnet Fund, which will be leveraged 10:1 with private capital, to build more than 835,000 new homes for lower-income and middle class families.Invest $4 billion in a new Middle-Class Housing Emergency Fund, which supports construction or acquisition of homes, to be made affordable permanently, for middle-class purchasers and renters where there is a housing shortage and costs are rising faster than incomes.Invest $523 million in rural housing programs to create 380,000 rentals and help 17,000 families buy homes.Invest more than $2.5 billion to build or rehabilitate 200,000 homes for Native Americans and Native Hawaiians.Invest more than $3 billion in the Public Housing Capital Fund to help maintain public housing units.Downpayment assistance to communities that have been historically denied mortgages by the federal government. As late as the 1960s, the federal government was the primary impediment to mortgage subsidies for African-Americans. This was a prime contributor the today s black/white wealth gap. This bill provides downpayment grants to first-time homeowners living in formerly redlined or officially segregated areas.VA-guaranteed home loan eligibility for descendants of certain veterans. While the GI-Bill provided for VA-guaranteed home loans for veterans, federal discrimination prevented many Black veterans from using this benefit. The bill extends eligibility for VA-guaranteed home loans to direct descendants of veterans who served between the enactment of the GI Bill and the Fair Housing Act but did not receive that benefit.Creation of incentives for local governments to eliminate unnecessary land-use restrictions that drive up costs. The bill puts $10 billion into a new competitive grant program that communities can use to build infrastructure, parks, roads, or schools. To be eligible, local governments must reform land use rules that restrict production of new affordable housing or implement measures to protect tenants from harassment and displacement.Expands the Community Reinvestment Act (CRA) to cover non-bank mortgage companies, promotes investment in activities that help poor and middle-class communities, and strengthens sanctions against institutions that fail to follow the rules.Would amend the Fair Housing Act to prohibit discrimination based on sexual orientation, gender identity, marital status, veteran status, and source of income. It would also make it easier to use housing choice vouchers in neighborhoods with good schools and good jobs and will allow tribal housing authorities to administer their own voucher programs.All housing built or supported with funding from this legislation will have to have 10% (vs. 5%) of units set aside for persons with mobility impairments (Section 504 requirements). The fate of this bill, along with other housing related bills, is uncertain. We will track the progress and provide regular updates.

Administration Announces More Funding for ERAP

On May 7, 2021, the Biden Administration announced the allocation of an additional $21.6 billion under the American Rescue Plan for Emergency Rental Assistance - including $2.5 billion targeted to the highest need areas. The original funding for the program is referred to as ERA1. This new funding is ERA2.  In concert with the additional funding, the Administration is implementing additional, stronger guidance regarding how the funds are distributed. Concurrent with the announcement by the Administration, the Treasury Department updated the ERAP FAQs.  The new guidance adds the following requirements to the ERAP program: Requires - for the first time - programs to offer assistance directly to renters if landlords choose not to participate.Cuts in half the wait for assistance offered to renters when landlords do not participate. Currently, where assistance is first offered to landlords, programs must wait 14 days when reaching out by mail or ten days when reaching out by phone, text, or email before offering relief directly to a tenant. Those wait times will now be cut in half, to seven days and five days respectively.Allows - for the first time - offers of assistance directly to renters first. Rental assistance under the initial ERAP had to be offered to landlords first. The new funds can now be used to provide assistance to renters first and immediately.Increases the number of eligible uses for the money. In addition to using the funds to keep renters in their homes, the new funding may be used to cover such costs as moving expenses, security deposits, future rent, utilities, and the cost of a transitional stay in a hotel or motel when a family has been displaced.Protects renters from eviction while payments are being made on their behalf. Effective immediately, programs that use ERAP funds must prohibit the eviction of renters for nonpayment in months for which they receive emergency rental assistance.Grantees are prohibited from establishing documentation requirements that would reduce participation.Allows programs to verify the eligibility of low-income renters based on readily available information or "proxies." Programs will now be able to verify the income eligibility of renters using any reasonable fact-specific proxy, such as the average income in the geographic area in which the renters live. Grantees must require all applications for assistance to include an attestation from the applicant that all information included is correct and complete. If a written attestation of income - without further documentation (or a fact-specific proxy) - is relied on, the grantee must reassess household income for such household every three months.Prohibits programs from denying assistance to eligible residents solely because they live in Federally-Assisted housing.Requires that programs document prioritization of assistance to renters most in need. Programs are required to prioritize assistance to low-income households and those with members who have been unemployed for more than 90 days. Priority must go to households with income below 50% of the AMGI.Time Limit on Assistance. Under ERA1, an eligible household may receive up to 12 months of assistance (with an additional three months if necessary to ensure housing stability). Under ERA2, assistance may be up to 18 months.Administrative Expenses. Under ERA1, not more than 10% of the amount paid to a grantee may be used for administrative expenses. Under ERA2, not more than 15% of the amount paid to a grantee may be used for such expenses.

HUD Publishes Income Limits for Multiple Programs

On May 3, 2021, HUD published 2021 income limits for the Community Development Block Grant (CDBG) Program, Emergency Solutions Grants (ESG) Program, HOME, HOPWA, Housing Trust Fund (HTF), and the Neighborhood Stabilization Program (NSP).  HUD also published the 2021 rent levels for HOME and HTF. In addition to the programs noted above, new income limits were published for (1) the Brownfield Economic Development Initiative [BEDI], (2) the Section 108 Loan Guarantee Program, and (3) Self-Help Homeownership Opportunity [SHOP]. The 2021 income limits will be effective on June 1, 2021 for all programs except ESG, for which the 2021 limits became effective on April 1, 2021. The updated limits can be accessed on the HUD Exchange s Income Calculator page (Hudexchange.info/incomecalculator) under "Related Materials." The rent limits for the HOME and HTF program will be effective on June 1, 2021. The HOME rent limits can be accessed on the HUD Exchange HOME Rent Limits (https://www.hudexchange.info/programs/home/home-rent-limits/) and the HTF rent limits may be found on the HTF Rent Limits page (https://www.hudexchange.info/programs/htf/htf-rent-limits/).