News

HUD Updates COVID-19 Guidance

On October 14, HUD issued updated guidance on COVID-19 as it relates to HUD-assisted properties. Following is some of the new guidance issued by HUD. On-Site COVID Testing HUD will permit the temporary use of property common areas, parking lots, and vacant offices by providers of healthcare services to provide flu shots and/or COVID-19 testing for residents. The services must not affect property operating costs beyond budgeted and approved supportive services funds. Owners and agents should ensure that the testing site has a Clinical Laboratory Improvement Amendments (CLIA) certificate of waiver or is covered by another facility s CLIA certificate. Owners and managers are encouraged to consult with their legal counsel before hosting healthcare services on site. Update on the CDC s Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19 Notice and Order This CDC order of September 4, 2020, imposed a temporary halt in residential evictions to prevent the further spread of COVID-19 and is in effect until December 31, 2020. The order applies to all tenants, lessees, or residents of residential property in the United States who are subject to eviction for nonpayment of rent and who sign and submit a declaration, as described in the Order, under penalty of perjury. The CDC does have a sample declaration form on its website. The Order only applies in areas that do not already have a moratorium on residential evictions in place that provides the same or greater level of public health protection than the CDC s Order. The Order applies to all HUD-assisted housing programs. Under the Order, HUD-assisted residents must sign and submit a declaration to become a "covered person" and receive the Order s protection. The signed declaration must be submitted to the owner or management agent of the residential property where they live or to another person who has a right to have them evicted or removed from where they live. A resident cannot be required to complete the declaration. However, without the declaration, residents are not protected from eviction under the Order. This means that until the declaration is signed and submitted to the owner or agent, the CDC eviction protection is not in place. The Order is separate from the now-expired eviction moratorium in Section 4024 of the CARES Act, the active eviction moratorium related to the forbearance required under Section 4023 of the Act, and any other eviction moratoriums afforded to federally insured or guaranteed loans. HUD Encourages - but Does Not Require - Owners to Notify Residents of the CDC Protection While the Order does not mandate resident notification, HUD is encouraging owners and agents to notify their residents that the CDC eviction moratorium is in place and that execution of the declaration in the Order is required in order to be covered by the CDC order. If owners choose to make such notification, they should document that the notice has been made. Owners and agents should also review their state and local laws, as some may have different notification requirements regarding the moratorium and providing the Declaration to tenants. Covered Residents May be Evicted for Reasons Other than Nonpayment of Rent Covered persons may still be evicted for reasons other than not paying full rent or making a full housing payment. The Order does not prevent eviction for (1)engaging in criminal activity while on the premises; (2)threatening the health or safety of other residents; (3)damaging or posing an immediate and significant risk of damage to the property; (4)violation of applicable building codes, health ordinance, or similar health & safety regulation; or (5)violating any other contractual obligation of a lease, other than the timely payment of rent (including nonpayment or late payment of fees, penalties, or interest). The Order is not a "Waiver" of Rent Covered persons still owe rent to the landlord. The Order halts residential evictions only temporarily. Covered persons still must fulfill their obligation to pay rent and follow all other terms of the lease and policies of the property in which they live. Covered persons must use best efforts to make timely partial payments that are as close to the full payment as their individual circumstances permit. When the order expires at the end of 2020, a covered person will owe unpaid rent and any fees, penalties, or interest as a result of their failure to pay rent or make a housing payment on a timely basis during the period of the Order. The CDC eviction moratorium differs from the CARES Act eviction moratorium in this regard: fees for nonpayment of rent from March 27, 2020 - July 24, 2020, could not be charged. The prohibition on charging fees or related penalties for nonpayment of rent continues to apply to properties in forbearance under Section 4023 of the CARES Act. HUD is encouraging (but not requiring) O/As to consider entering into repayment agreements for all outstanding payments with residents facing financial difficulties during the pandemic. What is required of residents in order to be eligible for the protection? A resident must provide a completed and signed declaration to their landlord, owner, agent, or another person who has a right to have them evicted or removed from where they live. The declaration may be signed and transmitted either electronically or by hard copy. Each adult listed on the lease, rental agreement, or housing contract should complete the declaration. In certain circumstances, such as individuals filing a joint tax return, it may be appropriate for one member of the household to provide an executed declaration on behalf of other adult residents party to the lease. Evictions Initiated Prior to the Order are Subject to the Order Any evictions for nonpayment of rent that were initiated prior to September 4, 2020, but have yet to be completed, are subject to the Order. Any eviction that occurred prior to the Order is not covered. Other October 14 Guidance Hazard Pay Hazard pay has historically been included in income for HUD programs and is not broadly excludable under 24 CFR 5.609.  O/As should examine whether the pay increase is temporary or recurring in determining whether it will trigger an income reexamination. My recommendation in this area is that unless the Hazard Pay has a specific end date that is no more than 180 days after the start of the pay, the pay should be counted as income. If the pay will absolutely end (i.e., may not be extended) within 180-days of the start of the income, it should be considered temporary and excluded. Lease Execution After Closing a RAD Deal In order to provide PHAs and owners additional time to execute individual leases with tenants in light of social distancing measures, HUD will permit the HAP effective date to be the first day of the third full month after closing upon request (rather than the first day of either of the first two months following closing). E.g., RAD closing occurs on November 15. The HAP effective date may be December 1, January 1, or February 1. This option will be available for any closing that occurs through March 31, 2021.

Recent Court Case Shows Importance of Apartment Accessibility

In Ability Center v. Moline Builders, Ohio, August 2020, a court granted partial judgment to fair housing advocates in a lawsuit against multiple entities and individuals based on the design and construction of a senior housing development in Ohio. At issue was whether, under the requirements of the Fair Housing Amendments Act of 1988, the front door and walkway leading to a covered unit are required to be accessible to persons with disabilities. The defendants took the position that their only obligation was to provide an accessible route into the unit, which, they allege they had done by providing an accessible route through the garage. The Department of Justice joined the case and argued that under the FHA, the front doors and walkways are "public use and common use portions" of covered dwellings and therefore required to be accessible, regardless of whether there is another accessible route into the unit. The court agreed with the DOJ argument, ruling that failure to provide "unimpeded access" to the front door to persons who use wheelchairs, including not just those who live in the unit but also a "neighbor, friend, or family member, a political candidate, or a repairman," is "in effect, the send them away as if unwelcome." The court indicated that this is precisely the discrimination the FHA forbids. Lesson Learned Owners with properties that are subject to the accessibility requirements of the FHA (generally, those built for first occupancy after March 13, 1991), should ensure that the main entrances to buildings the contain covered units are fully accessible to the disabled. Covered units are ground floor units in buildings with four or more units. Also, in elevator buildings with four or more units, every unit on a floor served by an elevator is a covered unit. It is not enough to have secondary or alternate entrances that are accessible.

Impact of COVID-19 on Affordable Housing Properties

A recently published study by NDP Analytics, funded in part by the National Leased Housing Association, outlines the dramatic impact that COVID- 19 has had - and will continue to have - on affordable housing. According to the study, "Impacts of COVID-19 on Low- and Moderate-Income Housing Providers." the COVID-19 pandemic has had a devastating impact on renters and housing providers alike. Unlike many earlier studies, which understandably have focused on the needs of low-income renters, this study is even-handed in its description of the impact on landlords. When households cannot afford to pay rent, the owner of the property loses rental income which is needed to cover operational costs. The report analyzes the economic and business impact of COVID-19 on housing providers and the subsequent impact on renters and surrounding communities in the short and long term. Rental Landscape Before COVID-19 In 2019, nearly 36% of American households rented (44.1 million). Before the pandemic, nearly half of American households spent at least 30% of their income on rent. Clearly, even before COVID-19, low-income households were stressed about their ability to pay rent. Housing providers typically operate on small margins and rely on monthly rental payments for the income required to cover operating expenses. The average breakdown of rental income is 39% for the property s mortgage payment, 27% for personnel wages and salaries, maintenance, and other operational expenses, 14% for property taxes, 10% for capital expenditures, and 9% in income for the owners. Many property owners are small businesses and individuals who are using their retirement funds for rental properties. In short, housing providers spend 90% of rental income on property-related expenses. As a result of the COVID-19 economic and health crisis, many households lost the income needed to pay rent. At the same time, housing providers had an increase in operating expenses due to enhanced health and safety issues relating to the pandemic. The additional operating costs are largely attributed to extra cleaning and personal protective equipment (PPE). Rental Income Due to the nature of the COVID-19 economic crisis, many renters who always paid rent on time were unable to make monthly payments due to furloughs, job loss, and other economic hardships. Overall, renters have been disproportionately affected by the pandemic. Workers in the industries that have been most impacted by COVID-19 (food service, travel, entertainment, retail, and transportation) are the most likely to rent. Additionally, about 43% of households most likely to be affected by COVID-19 were already struggling with rent cost burdens before the crisis. More than 75% of landlords implemented flexible payment policies for renters negatively impacted by the pandemic. However, housing providers rely on rental income as the primary source of revenue. The vast majority (88.9%) of affordable housing providers experienced revenue reductions due to COVID-19. Average declines in revenue were greatest for smaller housing providers with fewer than 1,000 units and 1,000 to 5,000 units (12.8% and 12.2%, respectively). Despite the increase in non-payment of rent, few renters have been evicted for missing payments. From March to July 2020, (with some additional relief in September), a federal moratorium prevented many housing providers from evicting residents due to non-payment of rent and some states and municipalities have created similar rules. In August 2020, less than 18% of housing providers reported the eviction of renters with missed payments. Financial Losses Before the pandemic, for every dollar of rent received, 39 cents went to the mortgage, 27 cents for operating expenses, 14 cents for property taxes, and 10 cents for capital expenditures - leaving only 9 cents in profit. With an 11.8% decline in rental income, housing providers now receive 88 cents in rent instead of $1.00. To make matters worse, a 14.8% increase in operational costs raises the expenses from 27 to 31 cents, leaving only four cents of every dollar for capital expenditures and income. To offset financial losses, 56.4% of housing providers applied for and received aid from government relief programs. Only 41.5% of housing providers with under 1,000 units received assistance ($44,288 on average), compared to 76.2% of housing providers with 1,000 to 5,000 units ($310,017 on average). 60.6% of large housing providers (over 5,000 units) received an average of $730,679. Impact on Renters In the short run, renters have largely been removed from the impact of the financial hardships faced by housing providers. Government aid and protections implemented in response to the pandemic, such as expanded unemployment benefits and eviction moratoria, have provided important assistance to renters. However, these programs are expiring to a great extent, leaving uncertainty for the future. The lack of action at the federal level, particularly in the Senate, does not bode well for any relief prior to the election. This is especially problematic for renters since rent payments accrue even when evictions are restricted. In the long run, eviction moratoria and increased regulation on housing provider-renter relationships negatively impact housing supply and renter mobility. Restrictive policies, such as eviction moratoria, limit the ability of renters to move, thus limiting labor mobility. Significantly, job and income losses caused by the pandemic put many people, particularly Black and Latino adults, at increased risk of housing instability. As a result, the long-run impact on renter mobility and housing supply is likely to have a disproportionate impact on these communities and exacerbate existing racial and economic disparities accessing safe and affordable housing. Summary For those of us in the affordable housing field, nothing in this study is a surprise. We know that the policy of protecting renters from eviction while not providing support for landlords will lead to massive evictions and property failures. Unless support comes from the federal government, both in terms of rental support for residents and operational support for landlords who are prohibited from taking action against non-payers, 2021 will be a disastrous year for the affordable housing industry.

A. J. Johnson to Present Webinar on Complying with the Requirements of the IRS on Tax Credit Properties

A. J. Johnson will be conducting a webinar on October 27, 2020, on Meeting IRS Requirements for the Low-Income Housing Tax Credit Program. The Webinar will be held from 9 AM to 3:30 PM Eastern time. One of the key requirements for the protection of the credits in a Low-Income Housing Tax Credit (LIHTC) property is a full understanding of how the IRS defines "noncompliance." These requirements are outlined in the Guide for Completing Form 8823 (the "8823 Guide") - a guide published by the IRS to assist Housing Finance Agencies in understanding the compliance monitoring requirements of the LIHTC program. This six-hour training describes in detail each of the elements of noncompliance reportable on the IRS Form 8823. A description of each type of noncompliance is discussed and includes a detailed discussion of the requirements relative to each area, as well as a description of when noncompliance occurs and acceptable methods of correction. The session features a detailed review of the program requirements in the areas most likely to result in a loss of credits - habitability, affordability, and eligibility. Also, a detailed review of all the issues relating to the establishment of eligible basis is included. Unlike most LIHTC training, this session is presented from the point of view of the IRS, which will provide owners and managers of LIHTC properties with a unique perspective regarding how to protect the credits for these important properties. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."

Social Security COLA - 2021

The federal government announced on October 13, 2020, that the Social Security Cost of Live Adjustment (COLA) for 2021 will be 1.3%. This increase will provide an additional $20 per month for the average retiree. This is slightly less than the 2020 increase of 1.6% and will not keep up with the actual cost of living for seniors who depend on SS as their primary source of income. Social Security recipients will receive a notice in the mail in early December showing their new benefit amount. Recipients will see the increase in their January 2021 payment. Those receiving SSI will see the increase on December 31, 2020. 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.

Upcoming 2021 Social Security COLA

The Social Security Administration is scheduled to release the 2021 Cost-of-Living Adjustment for Social Security tomorrow (October 13, 2020). Operators of affordable housing properties should be on the look-out for the announcement and include the increase in projected income for the upcoming year (beginning in January 2021). The SSA calculates the percent change between average prices in the third quarter of the current year with the third quarter of the previous year; that s why the final number comes out in October and it s likely that those figures (the third-quarter comparison) will show an increase. Note that the Social Security Administration ties its adjustment for Social Security benefits to the wage earners consumer price index, which is similar to, but not the same as, the urban dwellers consumer price index (which drives inflation reporting). Based on the percent change during that time, I estimate about a 1.2% COLA for 2021. There have been three years (2010, 2011, and 2016) with no COLA increase. Since 2009, the average COLA has been 1.75% with the highest being 5.8% in 2009. Managers should also remember that the COLA will apply to SSI, VA, Civil Service, and Railroad retirement.

HUD Issues Fair Housing Charge Against Wyoming Property Owner, Management Agent, and Onsite Manager for Familial Status Violation

On September 9, 2020, the Department of Housing & Urban Development (HUD) charged the owners and managers of an apartment community in Cheyenne, Wyoming with violation of the familial status provisions of the Fair Housing Act (FHA). This case is particularly interesting in how it deals with the use of community facilities and supervision rules relating to children. The Case HUD & Complainants v. Tralee Prairie View, LLC, RAM Partners, LLC, and Pam Gunnarson (Respondents) Facts of the Case On November 2, 2017, a couple with four minor children (complainant) filed a complaint with HUD alleging that the respondents imposed discriminatory terms, conditions, or privileges and limited services or facilities in connection with a rental; printed a notice that indicated a preference, limitation or discrimination; and otherwise made housing unavailable to them because of their familial status in violation of the FHA.In June 2017, the children consisted of a one-year-old infant, and a six-year-old, an eight-year-old, and a nine-year-old.On or around June 5, 2017, Respondents posted a newsletter on the doors of all tenants, that read in part, "PLEASE SUPERVISE YOUR CHILDREN WHEN THEY ARE OUTSIDE - We are having way too many complaints about kids on bikes driving in front of cars in the parking lot and have notice [sic] that most of these children do not have helmets." [emphasis was in the original].On June 26, 2017, Respondents issued new rules at the property. The rules were posted on tenant doors and stated in part -Due to the NUMEROUS complaints, we have received regarding unsupervised children disrupting the peace of the community at all hours of the day and night these rules will be going into effect IMMEDIATELY:Children 12 and under must be supervised by an adult while outside.The playground area and field with the basketball hoop are the ONLY designated play areas - there will be no more playing or hanging out behind the building, entryways/stairwells, in parking lots, or the dog park.Curfew is 9 PM - children should not be left outside unattended after hours.Excessive noise will not be tolerated.If you are a resident who is being disturbed due to any of these abovementioned issues please do not hesitate to relay any information to the office. If behavior continues LEASE VIOLATIONS AND POSSIBLE EVICTIONS will be delivered. [emphasis was in the original].The site manager authored the Community Notice with help from the assistant property manager and issued the rules to everyone at the subject property. The content of the Community Notice was based on the manager s own judgment and beliefs.The site manager did not address the individual behavior of children that were the basis of the various complaints and instead issued the June 26, 2017 Community Notice.On June 23, 2017, the family had received a lease violation notice from Respondents. The notice was related to sunflower seeds left on the sidewalk near the family s unit.The mother of the children began keeping the children inside the unit because she was unable to provide adult supervision for them outside since the father frequently worked out of town and the mother needed to be inside to care for the infant.Children were prohibited from playing anywhere aside from the two "designated play areas." The prohibition included large grassy areas contained within the property, including the field behind the family s apartment.Based on this prohibition, the mother could no longer supervise her older children in the open field behind her unit through the glass sliding door. She would take the older children outside to the designated play areas for short periods of time when she could bring the baby, but the children often wanted to remain outside.The complainant stated the keeping the children inside without an outlet for their energy caused the kids to become "hyperactive."Keeping the children inside all summer caused tension within the family, and the family was compelled to move away from the property to another property where the kids could play outside.The family moved on or about August 31, 2017.The family moved to a trailer that they rented from a family friend.The trailer was not move-in ready and required the family to replace the carpet, mitigate a rodent problem, and address various maintenance issues such as fixing holes.The family had to send the children to a different school and attend a new church. The children were bullied at the new school, and the family could no longer attend church with the wife s mother, who now attends church alone. HUD s position is that as a result of the respondents discriminatory conduct, the family suffered actual damages including, but not limited to, emotional distress, loss of housing opportunity, inconvenience, and economic loss. HUD is asking the following from an Administrative Law Judge: A declaration that the actions of the respondent violated the Fair Housing Act;Enjoin the respondents from discriminating against any person due to familial status;Mandate that the respondents take affirmative steps to remedy the effects of the illegal, discriminatory conduct and prevent similar conduct in the future;Require respondents and their employees to attend fair housing training;Award damages to fully compensate the Complainant; andAssess a civil penalty against each respondent for each violation of the Act. The Takeaway This case is a cautionary tale for property managers when it comes to the type of behavior and supervisory rules that will be applied to families with children. In general, except in very unusual circumstances, "behavior" rules should be applied to all residents - not just children. "Safety" rules for children are fine (e.g., supervision at swimming pools, fitness centers, etc.). Also, rules relating to the supervision of children should be reasonable, and not penalize families with children to the extent that their children cannot reasonably play outside.

A. J. Johnson Webinar on Management of Tax-Exempt Bond Financed Properties

A. J. Johnson will be conducting a webinar on October 21, 2020, on Understanding the Basic Management Requirements of the Tax-Exempt Bond Program. The Webinar will be held from 1 PM to 4 PM Eastern. THIS IS A TWO HOUR COURSE THAT COVERS THE BASIC REQUIREMENTS OF THE TAX-EXEMPT BOND PROGRAM, ESPECIALLY CONCERNING ON-SITE COMPLIANCE. IT IS RECOMMENDED PRIMARILY FOR SITE AND SENIOR MANAGEMENT AS WELL AS DEVELOPMENT PERSONNEL. THE COURSE COVERS THE COMPLIANCE DIFFERENCES BETWEEN THE TAX-EXEMPT BOND AND LIHTC PROGRAMS AND PROVIDES GUIDANCE WHEN COMBINING THE TWO PROGRAMS. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."