News

HUD Provides Guidance on Requesting NSPIRE Appeals

The Department of Housing and Urban Development (HUD) has received feedback from Public Housing Agencies (PHAs) and Property Owners/Agents (OAs) regarding issues encountered when submitting appeals in the NSPIRE IT system. To address this, HUD has made Technical Review Guidance available, providing a summary of the basis for technical review and instructions for submitting an appeal. As a reminder, if an OA believes that a property s inspection results and score should be reviewed for verifiable reasons, it may request a technical review. It should submit the request electronically through the NSPIRE system within 45 calendar days after HUD provides the inspection report. A request for technical review must be accompanied by evidence supporting the claim. HUD recommends seeking a technical review only if the correction will significantly improve the property's overall score, such as an increase to 60 or above or a change in the inspection frequency. Technical Review A property can request a technical review of the inspection results and score. The technical review process allows PHAs and OAs to have points restored for verifiable reasons, including HUD or inspector error, adverse conditions beyond their control, modernization work in progress, and conflicts with state or local code. A request for a technical review of inspection results must be submitted electronically in the NSPIRE system. REAC must receive it by the 45th calendar day after HUD provides the inspection report to the PHA or OA. Eligibility A request for a technical review of inspection results must be accompanied by evidence supporting the claim. PHAs or OAs should only seek a technical review that will significantly improve the property's overall score if corrected. Significant improvement refers to an increase in a score for the property such that the new score crosses an administratively significant threshold, which may include an increase in the property score to 60 or above or a change in the inspection frequency. Basis for Technical Review Building Data Error: E.g., a property component (such as a building, common area, or sidewalk) does not belong to the owner. Acceptable evidence includesLetter from a public authority (e.g., fire department, code enforcement officer, licensed contractor).Surveys (performed by licensed professionals or issued by government entities). Proof of ownership. Adjustments for factors not reflected or inappropriately reflected in physical condition score: E.g., Local code contradicts NSPIRE standards. Acceptable evidence includesLetter from a public authority (e.g., fire marshall, Code enforcement officer, licensed professional). Copy of official publication for the property location and applicable housing code. Unit error count: An error in unit count affected the inspection sample size. Acceptable evidence includes Data count from the source system. Adjustments for adverse conditions beyond the control of the owner or PHA: For example, a natural disaster or circumstance beyond the property owner's control caused the defect. Acceptable evidence includes Statement of nearby work and proof of damage caused to property (e.g., insurance claim, statement from government source). A Non-existent Deficiency Error: E.g., The deficiency cited by the inspector does not apply to the observed condition, or the inspector noted the wrong defect. Acceptable evidence includesEvaluation from a public authority, such as a fire Marshal, code enforcement officer, or licensed contractor. Letter from a licensed professional. Adjustments for modernization work in progress: For example, the defect cited is a result of a HUD-approved modernization or rehabilitation project that is underway. Acceptable evidence includesLetter from HUD approving the work.Work orders from a licensed professional.Contracts (e.g., legal documentation with signature by the vendor responsible for the work). Statement of start and completion dates. Best Practices and Recommendations for Submitting Technical Reviews Before submitting the appeal, review the NSPIRE standards for full details and scoring methodology. Clearly describe the basis for the appeal and ensure that supporting documentation is legible. Do not submit documents that are unrelated to the specific deficiency that is being appealed. To lodge an NSPIRE appeal with HUD, (1) log into the NSPIRE system; (2) select the Inspections tab; (3) Select an Inspection Name to open the inspection record; (4) Select "View all" under "ExAM Deficiencies;" (5) Select a deficiency name; (6) Select "Add/Remove from Appeal," (7) Select an Appeal Reason from the dropdown menu; and (8) Describe the error in the Property Appeals Comment field, and include supporting documentation. If you have any questions, email HUD at NSPIRE@hud.gov or call the Technical Assistance Center (TAC) at 1-888-245-4860.

Justice Department Sues RealPage for Colluding to Raise Rents

On August 23, 2024, The U.S. Department of Justice filed an antitrust lawsuit against RealPage, a real estate software company used by many affordable housing properties, alleging that its software enabled landlords to collude in raising rents across the United States. The lawsuit, supported by eight states (North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington), marks a significant case where an algorithm is central to price-fixing claims. RealPage s software, YieldStar, collects confidential data from landlords about rents and occupancy and is accused of generating rent suggestions exceeding market-driven prices. The Justice Department claims this has led to artificially inflated rents for millions of renters. RealPage, owned by private equity firm Thomas Bravo, advertises its software as a tool for landlords to outperform market rent rates by 3-7%. The company has previously denied any illegal activity, arguing that landlords are not required to follow its pricing suggestions and that factors such as housing undersupply are more responsible for rising rents. This lawsuit, which is being filed in the Middle District of North Carolina, is part of a broader government effort to regulate the misuse of technology in various sectors, with the Justice Department and Federal Trade Commission also investigating the role of algorithms in price-setting across different industries. The suit against RealPage comes when rent increases and housing affordability have become significant political issues, contributing to inflation and economic challenges leading up to the 2024 presidential election. In November 2023, the District of Columbia sued RealPage and 14 of the district's largest landlords, the first such lawsuit by a public agency. Arizona followed in February, accusing RealPage and nine landlords of illegally conspiring to raise rents for hundreds of thousands of renters in the Phoenix and Tucson areas. Affordable housing operators, including operators of LIHTC properties who use YieldStar, should be aware of this lawsuit and carefully monitor its progress.

A. J. Johnson Partners with Mid-Atlantic AHMA for Affordable Housing Training - September 2024

In September 2024, A. J. Johnson will join forces with the Mid-Atlantic Affordable Housing Management Association to conduct training for real estate professionals. Three sessions, tailored for those in the affordable multifamily housing field, will be delivered through live webinars. The following sessions are scheduled: September 10, Basic LIHTC Compliance- Course Overview: This training is designed primarily for site and investment asset managers responsible for site-related asset management. It is especially beneficial to those managers who are relatively inexperienced in the tax credit program. It covers all aspects of credit related to on-site management, including the applicant interview process, determining resident eligibility (income and student issues), handling recertification, setting rents - including a full review of utility allowance requirements - lease issues, and the importance of maintaining the property. The training includes problems and questions to ensure students fully comprehend the material. September 17: Dealing with Income and Assets in Affordable Multifamily Housing - Course Overview: The live webinar provides concentrated instruction on the required methodology for calculating and verifying income and determining the value of assets and income generated by those assets. The first section of the course involves a comprehensive discussion of employment income, military pay, pensions/social security, self-employment income, and child support. It concludes with workshop problems designed to test what the student has learned during the discussion phase of the training and serve to reinforce HUD-required techniques for determining income. The second component of the training focuses on a detailed discussion of requirements related to determining asset value and income. It applies to all federal housing programs, including the low-income housing tax credit, tax-exempt bonds, Section 8, Section 515, and HOME. Multiple types of assets are covered, both in terms of what constitutes an asset and how they must be verified. This section also concludes with problems designed to test the student s understanding of the basic requirements relative to assets. September 26: Intermediate LIHTC Compliance - Course Overview: 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 and minimum set-aside issues (including the Average Income Minimum Set-Aside), optional fees, HOTMA changes, and use of common areas are included. The Available Unit Rule is covered in great detail, as are the requirements for units occupied by students. Attendees will also learn the requirements for 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 a year-long collaboration between A. J. Johnson and MidAtlantic AHMA 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 this training may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

A. J. Johnson Releases the 2024 Edition of the Professional Property Manager's Guide to the LIHTC

The 2024 Edition of A. J. Johnson s "The Professional Property Manager s Guide to the Low-Income Housing Tax Credit" has been released, offering a vital resource for professionals managing LIHTC properties. Originally a concise 19-page overview of the LIHTC program in 1987, the guide has evolved into a comprehensive 163-page manual addressing the current complexities of LIHTC property management. Evolution of the LIHTC Program The last update in 2019 reflected a stable LIHTC program, with its effectiveness in generating affordable housing well-recognized. As of April 2024, the program remains popular and essential in the affordable housing sector, but the integrity of the program must be maintained through careful management and compliance. Since 2019, the LIHTC program has undergone several reforms to enhance its effectiveness in addressing affordable housing challenges. These changes include: Increased Allocation Authority: This adjustment stimulates more affordable housing production. Income Averaging: This policy allows for a broader range of income levels to be served by LIHTC properties. 4% Fixed Rate for Bond-Financed Projects: This reform aims to attract more private investment by stabilizing financial expectations. In response to the COVID-19 pandemic, temporary relief measures were introduced to ease compliance requirements and extend deadlines, providing essential flexibility during the crisis. Impact of Recent Regulatory Changes The 2024 Guide addresses the 2023 publication of the final Housing Opportunities Through Modernization Act (HOTMA) rule by HUD, which includes several changes impacting the LIHTC program. Additionally, HUD s implementation of the National Standards for the Physical Inspection of Real Estate (NSPIRE) has altered the inspection approach for many Housing Credit Agencies. However, the full impact on LIHTC properties is still being assessed. Compliance and Monitoring State agency compliance differences persist, but the industry has largely aligned on the necessary operational procedures to minimize credit risk. The IRS Audit Guide has clarified IRS expectations for LIHTC project operations, making compliance a more accessible target for property managers. The 1990 Amendments to Section 42 of the Internal Revenue Code mandated compliance monitoring for all properties utilizing the credit, effective from January 1, 1992. State Housing Finance Agencies are responsible for this monitoring, with specific requirements outlined in each State s Allocation Plan. Since January 1, 2001, State Housing Finance Agencies must review all new buildings and 20% of low-income units and resident files by the end of the second year after the final building in a project is placed in service. Following this initial review, HFAs continue to inspect a percentage of units and files, generally 20%, every three years. A Resource for Practitioners The 2024 Edition of the guide is designed to assist property managers and other professionals overseeing tax credit properties in navigating the LIHTC program. While it does not delve into the highly technical or legal aspects of the tax credit, it offers sufficient detail to help operators successfully manage LIHTC properties in compliance with both state and federal requirements. For specific legal or tax advice, readers are encouraged to consult with professionals in those fields. In summary, this guide is an essential tool for those managing LIHTC properties, helping them understand and meet the program's requirements while maintaining the integrity and success of the projects under their care. To purchase this invaluable resource, go to the link lihtc.guide. As always, if you have any questions about the content of The Guide, contact A. J. directly at aj.ajjcs@gmail.com

A.J. Johnson Consulting Services, Inc. Welcomes Back Lori Neff

A.J. Johnson Consulting Services, Inc., a leader in affordable housing compliance consulting, is thrilled to announce the return of Lori Neff to our team. Lori rejoined the company on July 16, 2024, bringing diverse experience and expertise. A Familiar Face with Fresh Perspectives Lori worked as a Compliance Analyst with A.J. Johnson Consulting from 2003 to 2008 before establishing her own consulting firm. In the intervening years, she has expanded her skill set by working as a financial planner, loan officer, and insurance agent. This multifaceted background enhances our ability to provide comprehensive consulting services to our clients in the affordable housing industry. Expanding Our Expertise Lori's return significantly broadens our company's capabilities. Her expertise spans: Banking and financial services Property management Loan administration Insurance sales Client relationship management Additionally, Lori holds licenses as a Life & Health Insurance Officer and a Mortgage Loan Officer. She maintains affiliations with various professional associations in the mortgage and home-building industries, keeping her at the forefront of industry developments. A Specialized Role In her new position, Lori will work within our company's "Special Projects" section, focusing on extensive or unusual property reviews. Her responsibilities will include: Conducting tax credit, HOME, Section 8, and Section 515 compliance reviews Performing asset management reviews for various investor clients Handling complex cases that require in-depth analysis and expertise A.J. Johnson, founder of A.J. Johnson Consulting Services, Inc., commented on Lori's return: "We are more than pleased to welcome Lori back to the fold. Her diverse experience and deep understanding of our industry will ensure that our clients continue to receive the most comprehensive consulting services in affordable housing." Lori's return to A.J. Johnson Consulting Services, Inc. underscores our commitment to providing top-tier expertise and service to our clients. As the affordable housing landscape continues to evolve, we are confident that Lori's contributions will help our clients easily navigate complex compliance and management challenges. We invite our clients and industry partners to join us in welcoming Lori Neff back to the A.J. Johnson Consulting Services team.

Understanding HUD Special Claims

Understanding HUD Special Claims: A Comprehensive Guide for Property Owners and Managers Financial losses due to vacancy, unpaid rent, and tenant damages in subsidized housing can significantly impact property owners. The U.S. Department of Housing and Urban Development (HUD) recognizes this challenge and offers a solution through its special claims process. This article delves into the intricacies of HUD special claims, providing essential information for property owners and managers to navigate this reimbursement system effectively. What are HUD Special Claims? HUD special claims are a reimbursement mechanism designed to compensate owners of eligible HUD projects for financial losses resulting from vacancy loss, unpaid rent, and tenant damages. While filing these claims is not mandatory, it is highly recommended. Management agents who neglect to file special claim requests fail to collect funds the property owner is entitled to and may also violate the terms of their Management Agreement. Eligibility Criteria The special claims process is available for several project types, including: Section 8 Section 202/8 Section 202 PAC Section 202 PRAC Section 811 PRAC To be eligible for a special claim related to unpaid rent, other charges, or damages, the former tenant must have been: Receiving rental assistance at the time of move-out or Had rental assistance terminated before moving out due to failure to comply with program requirements, such as: Not providing necessary information about family composition and income Failing to provide social security numbers Refusing to sign consent forms, verification forms, or HUD-50059 Not establishing citizenship or eligible immigration status Failing to move to an appropriately sized unit within 30 days of notification Special Requirements for Unpaid Rent and Other Charges To successfully claim for unpaid rent and other charges, owners/agents must meet several criteria: Proper Security Deposit Collection: The tenant must have provided the appropriate security deposit. Failure to do so may result in a reduced claim amount. Debt Collection Efforts: Owners/agents must certify they have billed tenants for unpaid rent and taken reasonable steps to collect the debt, including: Sending a certified letter detailing unpaid charges, demanding payment, and involving a collection agency if the tenant fails to pay. Compliance with State and Local Laws: The claim must adhere to state and local laws regarding security deposit deductions. Allowable Charges: "Other charges" may include fees for unreturned keys, late payments (if permitted by lease and local law), and previously billed damages that remain unpaid at move-out. Non-Allowable Charges: Legal fees, collection agency fees, unpaid utility bills, and costs for photographing unit damage are not eligible for claims. Special Requirements for Tenant Damages For damage claims, additional requirements apply: Certification of Tenant Negligence: Owners/agents must certify that the claimed damages resulted from tenant negligence or abuse. Extraordinary Repairs Only: Claims should be limited to repairs and replacements beyond normal wear and tear. No Duplication of Reimbursement: Owners cannot claim for damages already reimbursed through insurance, Reserve for Replacements, or Residual Receipts accounts. Proper Tenant Notification: Failure to provide tenants with an itemized list of damages will result in claim denial. Supporting Documentation To substantiate claims, owners/agents must provide comprehensive documentation, including: For Unpaid Rent: Signed HUD-50059 form showing required security deposit Proof of security deposit collection Copy of certified letter sent to tenant Documentation of collection agency efforts HUD approval for other charges (if applicable) For Damages: Move-in and move-out inspection reports Security deposit disposition notice Repair cost breakdown (invoices, receipts, or owner/agent certification) Claim Limitations and Timeline The total claim amount for unpaid rent and damages is capped at the monthly contract rent when the tenant vacated or had assistance terminated, minus the security deposit plus any interest earned. This limitation ensures fair compensation while preventing excessive claims. Importantly, HUD or the Contract Administrator must receive claim forms within 180 calendar days of the unit becoming available for occupancy. This timeline emphasizes the need for prompt and efficient claim processing. Conclusion The HUD special claims process offers property owners and managers a valuable opportunity to recover financial losses in subsidized housing scenarios. By understanding the eligibility criteria, documentation requirements, and claim limitations, housing professionals can effectively utilize this system to maintain financial stability and operational efficiency. While the process may seem complex, diligent record-keeping and adherence to HUD guidelines can streamline the claim submission process. As the housing landscape evolves, staying informed about such reimbursement mechanisms becomes increasingly crucial for successful property management in the affordable housing sector. For more detailed information and updates, property owners and managers are encouraged to consult the HUD Special Claims Processing Guide (HSG-06-01) and stay abreast of any policy changes or updates from HUD.

Rural Development Releases 2024 Income Limits

The Rural Development Service of the United States Department of Agriculture has released the 2024 income limits for the Rural Development Multifamily Housing (Section 515) program. The limits were effective July 12, 2024, and may be found at RD-MFHLimitMap.

A. J. Johnson Offers Live Webinar on Tenant-on-Tenant Harassment

A. J. Johnson will conduct a webinar on June 20, 2024, on Navigating the Challenges Dealing with Tenant-on-Tenant Harassment in Multifamily Housing. The Webinar will be held from 1:00 PM to 2:00 PM Eastern time. Attending a webinar on Tenant-on-Tenant Harassment is crucial for multifamily housing professionals for several reasons: Understanding Legal Responsibilities: Gain insight into federal, state, and local laws regarding tenant harassment and the responsibilities of housing providers in preventing and addressing such issues. Enhancing Tenant Safety: Learn strategies to create a safe and respectful living environment, thereby reducing the risk of harassment and ensuring the well-being of all tenants. Improving Conflict Resolution Skills: Develop skills to effectively mediate and resolve conflicts between tenants, which can prevent harassment situations from escalating. Protecting Property Reputation: Learn the impact of tenant harassment on the property's reputation and how proactive management can enhance community perception and tenant satisfaction. Minimizing Legal Risks: Learn about the potential legal ramifications of tenant-on-tenant harassment and how to mitigate these risks through proper documentation, response protocols, and preventative measures. Compliance and Best Practices: Stay updated on best practices and compliance requirements to ensure the property meets all legal standards and fosters a harassment-free environment. Enhancing Staff Training: Acquire knowledge that can be used to train staff members to recognize, prevent, and respond effectively to tenant harassment. Creating a Positive Community: Foster a positive, inclusive, and respectful community culture that can improve tenant retention and satisfaction. By attending this webinar, multifamily housing professionals can equip themselves with the necessary tools and knowledge to handle tenant-on-tenant harassment effectively, ensuring a harmonious living environment and safeguarding their property s reputation and legal standing. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."