News

HUD Announces Resumption of REAC Inspections

On August 7, 2020, the Department of Housing & Urban Development (HUD) has announced that REAC inspections will resume, under a protocol that will prioritize the inspection of properties in counties identified has being at low-risk for COVID-19. Based on the HUD announcement, REAC inspections will start up on or after September 21, 2020, and will be prioritized to properties with historically low REAC scores in localities at low-risk of COVID-19. HUD s announcement states that risk determinations will be based on the latest COVID-19 data from Johns Hopkins University and health risk scoring methodology from the Harvard Global Health Institute. REAC is categorizing states and localities into four risk categories based on this data. HUD says it will maintain a comprehensive list of safe inspection locations on the HUD website. The website has a map identifying states in four risk categories and an excel spreadsheet identifying the risk level of counties as of July 26, 2020 and August 1, 2020. From lowest to highest COVID-19 risk, the risk categories are: (1) low risk; (2) moderately low risk; (3) moderately high risk; and (4) high risk. HUD says REAC will provide a listing on its website of low-risk counties 45 prior to the start of physical inspections. Per HUD, the priority locations will change over time, and HUD will adjust its inspection plans as needed. It is expected that the Excel spreadsheet will be update on a regular basis. HUD also stated that at the end of the 45-day period, REAC will provide a 14-day notification to priority properties in appropriate counties to inform families that an inspection will take place. The first outreach from inspectors to properties will start no earlier than September 21, 2020. Inspectors will prioritize  properties with historically low REAC scores (high risk properties) in Low Risk localities. Based on the current risk assessment, the states most likely to have inspections in the short term are: Vermont (the only low risk state);Maine;New Hampshire;Massachusetts;Rhode Island;Connecticut;New Jersey;Delaware;West Virginia;Michigan;South Dakota;Wyoming;Colorado; andOregon Due to the high incidences of COVID-19, it is unlikely that most southeastern states will undergo REAC inspections in the near-term, although many moderate risk states have some low-risk counties that may be subject to inspection. The Return to Operations Map may be accessed at https://www.hud.gov/program_offices/public_indian_housing/reac

A. J. Johnson Offering Webinar on Handling Assets on Affordable Housing Properties

A. J. Johnson will be conducting a webinar on August 18, 2020 on Dealing with Resident Assets at Affordable Housing Properties. The Webinar will be held from 1:00 PM to 3 PM Eastern Time. This two hour course provides a detailed discussion of requirements related to the determination of asset value and income, and is applicable to all federal housing programs, including the low-income housing tax credit, tax-exempt bonds, Section 8, Section 515, HOME, and Public Housing. Multiple types of assets are covered, both in terms of what constitutes an asset and how they must be verified. The course concludes with a series of problems, designed to test the ability of the attendee to determine the value of an asset and calculate the income from that asset. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."

Multifamily Property Owners in Forbearance Required to Inform Tenants of Protections

On August 6, 2020, the Federal Housing Finance Agency (FHFA) announced that multifamily property owners with mortgages backed by Fannie Mae or Freddie Mac (the Enterprises) who enter into a new or modified forbearance agreement must inform tenants in writing about tenant protections during the project s forbearance and repayment periods. Landlords with Enterprise-backed mortgages can enter into new, or if qualified, modified forbearance if they experienced or continue to experience a financial hardship due to the COVID-19 emergency. While in forbearance, the property owners must agree not to evict tenants solely for the nonpayment of rent. FHFA previously announced additional tenant protections that apply during the repayment periods. These protections include: Giving tenants at least a 30-day notice to vacate;Not charging tenants late fees or penalties for nonpayment of rent; andAllowing tenants flexibility to repay back rent over time and not in a lump sum. Specifically, landlords must notify tenants that they cannot be evicted for nonpayment of rent due to the pandemic. However, if tenants are able to pay their rent, they should continue to do so. In addition to the tenant notification, the Enterprises are also improving their online multifamily property loan look-up tools by putting the tenant protections on the tools landing page and by making it easier for tenants to find out if the property in which they reside has an Enterprise backed mortgage. FHFA will continue to monitor the coronavirus impact on tenants, borrowers, and the mortgage market and update policies as needed. To better understand the protections and assistance the government is offering, owners and managers should visit the joint HUD, FHFA, and CFPB website at cfpb.gov/housing.

Despite Recent HUD Guidance, States Must Still Update Qualified Allocation Plans to Reflect IRS Monitoring Regulation

In February 2019, the IRS published a final regulation on how State Housing Finance Agencies (HFAs) must monitor for compliance with the requirements of the Low-Income Housing Tax Credit Program (LIHTC). On July 1, 2020, the Service released a proposed regulation, changing one of the requirements of the 2019 guidance. The proposed regulation relaxes the minimum compliance monitoring sampling requirement for purposes of physical inspections and file reviews but did not modify any of the other requirements of the February 26, 2019 regulation. Provisions of the regulation that have not been modified are: 1. The "all-buildings" rule is retained in the final regulation except for properties that undergo REAC inspections. The IRS is concerned that HFAs may not all have inspectors as well-trained as the HUD-approved REAC inspectors and is therefore requiring a physical inspection of all buildings when the property is not undergoing a REAC inspection. 2. The "reasonable notice" timeframe: The final regulations shorten the reasonable notice requirement to a 15-day notice that a project will experience an upcoming physical inspection or file review.  Also, as noted in the regulation, under the REAC protocol, HUD or HUD-certified REAC inspectors randomly select low-income units for inspection on the day of the inspection; HFAs are now required to do the same. 3. Treatment of scattered site or multiple buildings with a common owner and plan of financing. While a number of industry practioners recommended that in the case of scattered site or multiple buildings with common ownership and financing, the HFA be able to treat the project as a single project for compliance monitoring purposes - regardless of whether or not the owner made the multiple building election on the IRS Form 8609, the final regulation does not adopt this regulation. For compliance monitoring purposes, a project will be defined in accordance with Section 42 - an HFA cannot deem separate buildings to be a project if the 8609 multiple building project election has not been made. 4. All HFAs are required to amend their Qualified Allocation Plans (QAP) to include the requirements of this final regulation. On the date the QAP is amended, Revenue Procedure 2016-15 will be considered obsolete. QAPs must be amended no later than December 31, 2020. 5. Random Selection Requirements: Agencies generally may not select the same low-income units of a low-income housing project for on-site inspections and file reviews, because doing so would usually give prohibited advance notice.  The HFA must select the units for inspections or low-income certification review separately and in a random manner. 6. Meaning of Reasonable Notice: the 15-day notice period begins on the date the Agency informs the owner that an on-site inspection of a project and low-income unit file review will occur. Notice of more than 15-days, however, may be reasonable in extraordinary circumstances that are beyond an Agency s control and that prevent an Agency from carrying out within 15-days an on-site inspection for file review. Extraordinary circumstances include, but are not limited to, natural disasters and severe weather conditions. In the event of extraordinary circumstances that result in a reasonable-notice period longer than 15-days, an Agency must still select the relevant units and conduct the same-day on-site inspection or file review as soon as possible. 7. Use of the REAC Protocol: In order to use the inspection requirements relating to the REAC protocol, the inspection must satisfy the following requirements:             (i) Both vacant and occupied low-income units must be included in the population of units from which units are selected for inspection;             (ii) The inspection complies with the procedural and substantive requirements of the REAC protocol, including the requirements of the most recent REAC Uniform Physical Condition Standards (UPCS) inspection software, or software accepted by HUD;             (iii) The inspection is performed by HUD or HUD-Certified REAC inspectors; and             (iv) The inspection results are sent to HUD, the results are reviewed and scored within HUD s secure system without any involvement of the inspector who conducted the inspection, and HUD makes its inspection report available. 8. HUD Inspections that comply with the requirements of the REAC Protocol: the number of units required to be inspected under the REAC protocol satisfies the requirements of the final regulation concerning the number of low-income units the Agency must inspect. Also, the manner in which the low-income units are selected for inspection under the REAC protocol satisfies the requirements of the final regulation. 9. File Reviews for HUD Inspections that comply with the requirements of the REAC Protocol: An Agency that conducts physical inspections using the REAC protocol is not excused from following the requirements of the final regulations in selecting the files for review. 10. Circumstances under which the same files and units may be chosen for inspection: If an agency chooses to select the same units for on-site inspections and file reviews, the Agency must complete both the inspections and file reviews before the end of the day on which the units are selected.             It is important to note that the final regulation does not include a provision for desk audits of files. The regulation states that the Agency may review the low-income certifications wherever the owner maintains or stores the records (either on-site or off-site).             While HFAs may now inspect the lesser of the applicable number of units in the REAC chart or 20% of the low-income units in the project (rounded up to the next whole number), the rest of the 2019 regulation remains in place. If not done already, HFAs must amend QAPs to reflect these changes no later than December 31, 2020.

Affordable Housing Improvements May be Included in Next COVID-19 Legislation

While it is been delayed due to a Senate recess, there will be another COVID-19 relief package. Hopefully, it will be passed by Congress by mid-August and based on indications from Congressional staff, may include a number of affordable housing components. At this point, the most likely affordable housing improvements to be included in any COVID-19 relief include: Enactment of a four percent Housing Credit Rate - this rate is currently at an all-time low of 3.07 percent, which is threatening the viability of a number of pending deals. Enacting a minimum 4 percent rate is immediately needed and would provide parity to the nine percent housing credit rate, which was enacted as part of Congress s response to the 2008 economic crisis. Not only will a four percent rate provide an immediate equity infusion into developments now stalled, but it is estimated to produce 126,000 additional LIHTC apartments over the next ten years.Provide additional basis boosts to allow developments to access additional equity if needed for financial feasibility - boosts in eligible basis will supply needed equity for developments that are not currently financially feasible. The boost would apply to rural areas and Tax-Exempt Bond financed properties. Additional boosts may also be included for vulnerable populations, such as extremely low-income tenants and Native American communities.Allow developments to access four percent credits by lowering the "50% test" - Lowering the 50% threshold for bond financed deals will provide much needed flexibility for state agencies. In addition, a number of agencies have reached their bond cap, limiting the ability to access the four percent credits. Lowering the 50% test to 25% will allow the development of up to 1.4 million more LIHTC units in the next ten years.Increase the annual LIHTC allocation by at least 50 percent, phased in over two years, and adjusted for inflation, beginning in 2021 - This increase in credits will finance hundreds of thousands of affordable homes. While there is no guarantee that any of these changes will be included in the upcoming legislation, there is broad bi-partisan support for all of these, so - we re keeping our fingers crossed.

Rapid Action Needed for Owners Needing HUD COVID-19 Supplemental Payments

On July 23, 2020, HUD published Housing Notice H-2020-08, "Availability of Funds for COVID-19 Supplemental Payments (CSPs) for Properties Receiving Project-Based Rental Assistance Under the Section 8, Section 202, or Section 811 Programs." HUD is making available CARES Act funds to offset property expenditures to combat the effects of COVID-19. The notice provides a method for owners to receive payments beyond the amounts available under the terms of their current rental assistance contracts. The supplemental payments may cover the following costs: Increased frequency of cleaning and disinfecting common areas and property management offices as a preventative measure.Intensive deep cleaning and sanitization services in response to presence of COVID-19 cases at the property, which may include treatment in units being prepared for re-occupancy, in addition to common areas.Office technology and other equipment needs to facilitate social distancing.Personal protective equipment (PPE) such as face masks and goggles, gloves, hand hygiene products for use by property management staff and for residents entering leasing offices or using common areas.Facility and equipment needs related to maintaining adequate social distancing, including but not limited to cough/sneeze barriers or modifying or limiting access to communal spaces.Site control measures to enforce shelter-in-place orders, stay-at-home orders, or visitor-restriction policies within properties.Temporary staffing, contract services, and/or supply expenditures to maintain or enhance on-going service coordination in properties designated to serve the elderly or persons with disabilities (excludes grant-funded service coordinators).Temporary staffing increases to process higher-than-normal volumes of interim tenant recertifications requested by tenants due to loss of income. CSPs are not a means to receive funding for lower tenant rent payments due to income reductions, extended vacancies, or unpaid tenant charges. These financial impacts can be addressed through Special Claim Payment requests and through tenant recertifications with corresponding subsidy voucher adjustments. The notice allows owners to submit payment requests for expenses incurred between March 27, 2020 and July 31, 2020. Requests are due to HUD or the Contract Administrator by August 5, 2020. CSP funding is not being provided on a first-come, first-served basis. All requests received by HUD or the PBCA by 11:59 PM local time on August 5 will be given equal consideration. Requests received after this deadline may be evaluated at HUD s discretion only after all other eligible CSPs have been funded, and in no case will be considered if received after August 12, 2020. Property owners and management agents should contact their assigned HUD Account Executive or Contract Administrator with any questions about property eligibility for a CSP.

HUD Implements Housing Choice Voucher Mobility Demonstration Program

On July 15, 2020, HUD published in the Federal Register a Notice implementing the Housing Choice Voucher (HCV) Mobility Demonstration Program. This program was authorized by the 2019 and 2020 Appropriations Acts. Background The 2019 Appropriations Act, signed into law on February 15, 2019, made available $25 million to carry out an HCV mobility demonstration. The 2020 Appropriations Act, signed into law on December 20, 2019, made an additional $25 million available to the demonstration. Incremental voucher assistance for the HCV Mobility Demonstration Vouchers (MDVs) and mobility-related services made available under the notice may only be provided to families with children. The vouchers are designed to encourage such families to move to lower-poverty areas in order to expand their access to opportunity areas. The demonstration is effective until October 1, 2028. Program Design Recent research shows that growing up in neighborhoods with lower levels of poverty improves the academic achievement of children and their long-term chance of success. It also reduces intergenerational poverty. The HCV program offers families with vouchers the opportunity to live in a neighborhood of their choice, including low-poverty, opportunity neighborhoods. Despite this, families with HCVs often encounter barriers to using their vouchers in communities with expanded opportunities. Some barriers are financial, such not having enough money for a security deposit or maintaining a positive credit score. Other barriers may include inadequate time to find a unit, landlord unwillingness to participate in the program, or limited awareness of neighborhood amenities, such as the location of high-performing schools. Some PHAs and non-profits have implemented "housing mobility programs" to help reduce barriers for families with vouchers to live in neighborhoods of their choice. These programs often include "mobility-related services" such as pre- and post-move supports, family financial assistance (e.g., security deposits), landlord outreach, and housing search assistance. Building on recent research, and evidence from prior and existing housing mobility programs, the Seattle Housing Authority and King County Housing Authority partnered with researchers from Opportunity Insights, to implement and evaluate a housing mobility program they named "Creating Moves to Opportunity (CMTO)." Based on the initial report provided by the researchers, the provision of mobility-related services appear to have helped create strong gains in the number of families who moved to opportunity areas. Through the demonstration, HUD will implement, test, and evaluate whether housing mobility programs designed to increase family choice, actually expand access to opportunity neighborhoods. Overview This demonstration will allow participating PHAs throughout the country to implement housing mobility programs by offering mobility-related services to increase the number of voucher families with children living in opportunity areas. Again - only families with children may participate in the demonstration. To be eligible for the demonstration, PHAs must meet eligibility criteria, described in Section V of the notice. The demonstration includes four statutory categories of eligibility: Category A: PHA Partnerships;Category B: Consortia with High-Performing Family Self-Sufficiency (FSS) Program;Category C: Consortia with Small PHA; andCategory D: Single Agency HUD anticipates that most applications for the demonstration will come from multiple PHAs within a region submitting one application jointly. The demonstration is expected to be implemented by PHAs over the course of six years. Demonstration Size Using publicly available data on costs for mobility-related services, HUD estimates that there is enough available mobility-related service funding to provide services to at least 9,500 families. Preliminary calculations indicate that a minimal sample size of 1,950 families with children at each PHA site, across both treatment groups and the control group, is necessary to detect the impact of the treatments. To meet the minimum enrollment requirements, PHAs will primarily recruit and enroll existing voucher holders to participate in the demonstration. Award Description HUD expects to make approximately 5 - 10 awards for MDVs and mobility-related services together. HUD expects the minimum award amount, including both MDVs and mobility-related services funding, likely to be no less than $4 million and the maximum award likely to be no more than $10 million. HUD expects to announce the awards under this demonstration in December 2020, so interested PHAs need to move quickly. Only PHAs that already administer HCVs are eligible to apply. PHAs seeking additional information on this demonstration should contact Rebecca Primeaux, Director of the Housing Voucher Management & Operations Division at HUD. Her phone number is 202-708-1112 and her mailing address is Department of Housing & Urban Development, Seventh Street SW, Room 4214, Washington, DC 20410.

HUD Issues Final FAST Act Streamlining Rule

The Department of Housing & Urban Development (HUD) has issued its final rule implementing Fixing America s Surface Transportation (FAST) Act legislation. The rule was effective on June 8, 2020. In the final rule, HUD made official the FAST Act changes to requirements relative to asset verification, utility allowance reimbursements, and triennial income verifications. Fixed-Income Verification "Fixed income" is defined as periodic payments are reasonably predictable levels from one or more of the following sources: Social Security, Supplemental Security Income, Supplemental Disability Insurance;Federal, state, local, or private pension plans;Annuities or other retirement benefit programs;Insurance Policies;Disability or death benefits;Other similar types of periodic receipts; andAny other source of income subject to adjustment by a verifiable cost-of-living adjustment (COLA) or current rate of interest. Under this final rule, owners may streamline income recertification procedures for families with income that comes from fixed-income sources. This means that such income only has to be verified at move-in and then every three years thereafter. In the intervening years, the owner may use a previously determined or verified COLA or interest rate adjustment specific to each source of fixed-income. This significantly reduces the paperwork burden on both tenants and management. If at least 90% of a family s income comes from a fixed-income source, an owner may - but it not required to - adjust the non-fixed income using the same methodology, and verification of the non-fixed income is not required. If less than 90% of household income comes from fixed-income sources, all non-fixed income must be verified each year. This "streamlining" applies only to the verification of income. If a household has medical expenses that are deducted for purposes of determining adjusted income, the medical expenses must be verified each year. Changes to Asset Verification Procedures If a household has total assets with a cash value of $5,000 or less, the final rule requires full verification of assets only every three years, with self-certifications in the interim years. Management should be aware that anytime verified assets exceed $5,000, the assets will have to be fully verified in the following year. The ability to accept self-certifications only applies for the two years following a year in which the assets have been verified to be $5,000 or less. Utility Reimbursements When tenants pay for their own utilities, owners must reimburse tenants if the utility allowance exceeds the total tenant payment. The payments have generally been made monthly, and in the case of very small reimbursements, the administrative costs associated with processing the payments may approach the reimbursements themselves. With the final rule, owners may make utility reimbursements on a quarterly basis if the reimbursement is $15 or less per month ($45 per quarter). For example, assume a utility allowance of $100 per month and a Total Tenant Payment of $90. The utility reimbursement is $10 per month. Since it is not more than $15 per month, the owner may make the payment quarterly, so a payment of $30 may be made to the tenant on a quarterly basis, rather than $10 per month. Owners who use this option must have a policy to assist tenants for whom the quarterly reimbursement will be a financial hardship. Owners are not required to implement any of these streamlining procedures, but if they do so, a property s written policies should be amended to outline the use of the procedures.