News

CARES Act Eviction Moratorium applies to the HOME Program

The Department of Housing & Urban Development (HUD) recently sent a reminder to HOME Participating Jurisdictions (PJs) of their responsibility to notify property owners and tenants about the temporary eviction moratorium established by Section 4024 of the CARES Act. The temporary eviction moratorium applies to covered dwelling units assisted by the HOME program and some PJs have failed to notify property owners and tenants participating in the HOME program of this fact. The CARES Act established a 120-day moratorium on evictions in certain federally-assisted housing, including housing assisted under the HOME program. The eviction moratorium applies to all covered dwelling units in HOME-assisted rental projects, as well as units occupied by recipients of HOME-funded Tenant-Based Rental Assistance (TBRA). If HOME funds were provided to a property as a loan, the eviction moratorium applies to all rental units in or on the property - not just the HOME-assisted units. The eviction moratorium began on March 27, 2020 and is in effect through July 24, 2020. During the moratorium, landlords may not: File eviction actions against tenants for nonpayment of rent; orCharge any late fees, or accrue charges/fees, for nonpayment of rent during the 120-day period. Rent is still due during the eviction moratorium and unpaid rent can accrue during the 120-day period. If the amount owed for rent is not paid back after July 24, 2020, owners/property managers may file for eviction in the court of jurisdiction 30 days after a notice of eviction is issued to the tenant, in accordance with state and local laws. The eviction moratorium does not affect any eviction that was in the court of jurisdiction before March 27, 2020 in accordance with state and local laws. If a tenant was past due on rent, and received a notice of eviction, or an eviction action was filed before March 27, 2020, the owner/property manager may proceed with the eviction action after providing a 30-day written notice in accordance with HOME requirements and applicable state and local laws. An eviction for lease violations other than nonpayment of rent or nonpayment of other fees or charges unrelated to nonpayment of rent is permitted. Owners and property managers can still evict for prohibited tenant actions enforceable by the lease (other than nonpayment of rent and related charges). While some PJs have not provided appropriate notice to HOME-assisted properties, those properties are still required to comply with the eviction moratorium provisions of the CARES Act.

National Report on Affordable Housing Preservation Released

A Joint report of the National Low Income Housing Coalition (NLIHC) and the Public and Affordable Housing Research Corporation (PAHRC) on the affordable housing preservation situation and needs in the United States was released in late May. The report focuses on the challenge of preserving the existing federally assisted affordable housing stock. Federally-assisted affordable housing provides stability for 4.9 million low-income renter households. The need for affordable rental homes, however, still far outweighs the supply. Fewer than four affordable rental homes are available to every ten extremely low-income renter households, leaving a national shortage of 7 million rental homes. Preserving and expanding the nation s federally-assisted housing stock will require adequately funding affordable housing programs, adopting policies that support long-term affordability, developing local preservation strategies, and boosting capacity for affordable housing preservation. Introduction The United States faces a shortage of approximately 7 million affordable rental homes.Without government assistance, the private sector cannot produce adequate numbers of affordable housing.From 2012 - 2017, the private market has lost more than 3 million affordable rental units.At the same time, there is chronic underinvestment in federal affordable housing programs.Current federal programs for affordable rental housing are tenant-based and project-based and are administered by HUD, RD, and the IRS.Tenant-based subsidies (e.g., housing choice vouchers) are demand-side subsidies allocated directly to tenants to subsidize their rents in the private market up to a modest payment standard.Project-based subsidies, such as the LIHTC, PBRA, and Public Housing, are supply-side subsidies that provide affordable housing owners with capital or operating support to create and maintain the affordable housing stock.About 4.9 million rental units receive federal project-based subsidies - 10% of the rental housing stock in the U.S. Primary Federally Funded Project-Based Subsidy Programs Program Units Assisted in 2019 Low-Income Housing Tax Credit (LIHTC)                  2,413,156 Section 8 PBRA                                                           1,403,603 Public Housing                                                            948,021 Section 515                                                                 383,520 Section 521                                                                 270,812 HOME Program                                                          261,718 HUD Insured Mortgages                                             176,097 Section 538                                                                 54,540 Section 202 Direct Loan                                             39,737 State HFA Section 236                                               35,284 Other programs that provide affordable housing include: Community Development Block Grants (CDBG)National Housing Trust Fund (HTF)Housing Opportunities for Persons with Aids (HOPWA)Project-based vouchers (PBVs) Preservation Risks There are currently three basic risks to the preservation of existing affordable housing: Expiration or exit risk;Depreciation; andThe lack of appropriations Exit risk refers to the degree to which federally assisted housing is at risk of no longer being subject to program requirements (e.g., expiring extended use agreements for LIHTC projects). With the exception of Public Housing, all federal project-based subsidies carry restrictions on affordability and eligibility that are limited in duration. Research shows that a for-profit owner of a rental property with a Section 8 PBRA contract in a tight rental market is more likely to not renew a subsidy contract and reposition a property as market rate. Depreciation risk refers to the degree to which the financial stability and physical quality of federally subsidized housing can deteriorate over time. This risk can be greater than exit risk to the preservation of assisted housing. Due to the low rent paid by residents, owners of these properties require ongoing operating or capital support - or both - to maintain the financial stability and physical viability of the housing. Appropriations risk refers to the degree to which federally subsidized housing depends on Congress to provide continual funding in order to continue to operate as affordable housing. In some programs, such as LIHTC, subsequent credit allocations may be the only way to extend eligibility and affordability restrictions within a program. Between 2000 and 2015, Congress cut the Public Housing Capital fund by more than 50% and it has only twice provided adequate funding levels for the operating fund since 2002. This has led to the loss of more than 250,000 Public Housing units since the mid-1990s and a capital needs backlog of $70 billion. 15% of current Public Housing units have failing physical inspection scores and are in need of immediate capital infusions. Why Preservation Must be the Cornerstone of Any Affordable Housing Strategy New development alone cannot offset the loss of the existing affordable housing stock. LIHTC, the largest affordable housing production program, does not assist tenants of properties exiting the program. Preservation may be the only option to ensure housing stability for many LIHTC tenants so long as existing eligibility and affordability requirements are maintained in the process. The issues that make it difficult to replace housing in high-cost and exclusionary neighborhood make preservation more cost-effective than new construction. In disadvantaged neighborhood, preservation has the potential to prevent further disinvestment. Preservation also presents a clear opportunity to retrofit older federally-assisted housing for energy-efficiency, lowering greenhouse gas emissions and figuring in a larger national strategy to combat climate change. Further research is needed to fully compare the environmental impact of new construction and preservation (especially preservation that involves rehabilitation). Finally, preservation prevents the loss of units from the federally assisted stock. Preservation must play a central role if federal resources are to be expanded and the challenges of the affordable housing crisis are to be met. Federally-Assisted Housing Stock In 2019, 81,007 federally-assisted properties (4.9 million units) received federal project-based assistance. This does not include: Community Development Block Grants (CDBG)National Housing Trust Fund (HTF)Moderate RehabilitationMcKinney Vento Permanent HousingHousing Opportunities for Persons with Aids (HOPWA)Tax-Exempt BondsProject-based vouchers (PBVs) LIHTC supports 49% of all project-based federally-assisted rental homes making it the largest affordable housing subsidy program, followed by Section 8 PBRA (29%), Public Housing (19%), and USDA loan programs (9%). Tenants also frequently use HCVs at project-based federally-assisted rental home, further boosting the reliance on multiple funding sources. The percentage of federally-assisted housing varies greatly by state. Federally-assisted rental homes make up a larger percentage of the rental stock in the Northeast and Midwest. States with 15% or more of the rental stock being federally-assisted are Maine, Massachusetts, Rhode Island, Mississippi, Minnesota, and South Dakota. LIHTC, HOME, CDBG, and the HTF are the only federally funded programs actively financing new construction of affordable housing. However, due to the pressure to preserve existing housing, fewer new units are being built. Federally-Assisted Housing Stock at Risk Affordability restrictions are set to expire for 299,303 (6%) rental homes between January 2020 and December 2024. This figure will increase in future years. North and South Dakota have the greatest percentage of assisted housing expiring.  Overall, federally-assisted homes with subsidies expiring in the next five years are concentrated in California (34,215), New York (30,410), Florida (16,373), and Texas (16,121). Currently, most of the expirations are for Project-Based Section 8 Contracts, but in 2025, the LIHTC program will pass Section 8 for the most expiring low-income use requirements. Many federally-assisted homes expiring in the next five years demonstrate factors that can increase exit risk: 79% did not receive subsidy for capital improvements in the past 20-years;53% are owned by for-profit owners (which are more likely to exit affordability programs);18% were built before 1975;7% have failing REAC scores; and58% suffer from two or more of these risk elements. Trends in Preservation Ensuring adequate funds for the preservation of existing federally-assisted properties can keep these homes affordable to extremely low-income families for years to come and can save construction costs in the long run. Programs that provide funding to meet the capital needs of properties and incentives for owners to renew their rental assistance contracts (i.e., not exit the affordable housing stock) support the preservation of affordable homes. Programs that are currently preserving affordable housing include: LIHTCFinances the construction, rehabilitation, and preservation of affordable housing for low-income individuals.Preserves approximately 32,000 units annually.HOMEBlock grant that finances activities to increase and preserve the supply of affordable housing.Preserves up to 7,000 units annually.National HTFBlock grant that finances the construction, rehabilitation, and preservation of affordable housing.Preserves less than 700 units annually.CDBG Block grant that finances activities benefitting low and moderate income households that improve housing, living environments, and economic opportunity.Contributes to the preservation of publicly owned units. Other programs contribute limited numbers of preservation units annually, including: Mark-to-Market;Multifamily Housing Preservation & Revitalization (MPR) Demonstration Program;Section 515;Project-based vouchers;Section 202 Capital Advance; andSection 811 Capital Advance. LIHTC and HOME, two of the largest active federally funded subsidy programs, provide resources for preserving the existing affordable rental housing stock in need of capital investment. Depending on the year, 35% to 62% of units financed by the LIHTC program between 2003 and 2012 were for existing affordable properties. Strategies that Can Expand & Preserve Affordable Housing The study makes a number of recommendations regarding how to address the preservation problems. Fully fund the national HTF.Expand the LIHTC program, incorporating key reforms.Fully fund Public Housing capital and operating funds.Expand funding for rural housing programs, including Section 521, 515, and MPR.Expand state and locally funded subsidy programs.Require LIHTC properties to waive the right to Qualified Contracts.Increase the notification requirements when an owner opts out.Incentivize or require owners to keep their property affordable beyond the federally mandated minimum.Prioritize funding opportunities for mission-driven developers committed to preserving long-term affordability.Establish right-of-first refusal policies.Build a data-base of at-risk properties.Create a preservation plan.Build preservation networks.Provide technical assistance on preservation.Award pre-development funds. While it is certainly aspirational, this report does provide a blueprint on how to increase the preservation of affordable housing in the United States. While many of the proposals are probably not politically feasible, others may well be put into place. For example, expansion of the LIHTC program is very possible, as is the expansion of state and local programs (although growth in state and local programs will probably be delayed due to the crushing financial burden imposed by COVID-19).

HUD Releasing $800 Million in CARES Act Assistance for Section 8 Properties

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides $1 billion of additional appropriations to Project-Based Rental Assistance (PBRA) to prevent, prepare for, and respond to coronavirus, including to maintain normal operations and take other necessary actions during the time that the program is impacted by the COVID-19 pandemic. On May 28, HUD completed funding actions to provide $800 million of CARES Act supplemental appropriations to approximately 16,500 properties with Section 8 PBRA contracts to maintain normal operations. This money, in addition to amounts appropriated under the FY 2020 appropriations Act, will help compensate owners for decreased tenant rent payments resulting from reductions in tenant income. The funds will also assist in covering increases in vacancy payment claims that may occur due to COVID-19 related delays in moving in new tenants. Owners will receive automated notifications through TRACS/ARAMS that funds have been obligated on HAP contracts. Owners/Agents (O/As) do not need to take any special actions to access these CARES Act funds. O/As should follow current protocols for interim tenant recertifications when a loss of income is reported and voucher for subsidy accordingly. A notice (or notices) describing the allocation methodology and the requirements governing the remaining $200 million of CARES Act PBRA supplemental funding will be released by HUD shortly. A small percentage of owners will receive more than $150,000 in funding. The CARES Act requires monthly reporting in these cases. HUD will work to ensure that this requirement can be fulfilled by recipients in a manner that utilizes to the greatest extent possible existing reporting streams with minimal additional burden. O/As should contact their assigned account executive at HUD with any questions regarding CARES Act funds.

A. J. Johnson Partnering with Mid-Atlantic AHMA for Affordable Housing Webinars

A. J. Johnson is partnering with the Mid-Atlantic Affordable Housing Management Association (Mid-Atlantic AHMA) in a series of webinars relating to the development and operation of affordable housing properties. Upcoming webinars include: June 9: Section 8 Management & Best Practices;June 10: Intermediate LIHTC Compliance;June 11: Update on IRS/HUD Guidance to be followed by a two-hour webinar on Issues Relating to the Acquisition & Rehabilitation of LIHTC properties;June 23: Dealing with Income & Assets on Affordable Housing Properties; andJuly 9: Advanced Issues Relating to LIHTC Compliance Requirements. For information on these webinars or other training offerings by A. J. Johnson Consulting Services, please visit our website (www.ajjcs.net) and click on training.

Warn Residents of COVID-19 Scams

Scammers, fraudsters, and other criminals are taking advantage of rapidly changing data and facts associated with COVID-19, both in the workplace and in our homes. Government agencies, corporations, and news outlets continue to warn individuals to be mindful of increased fraudulent activities during these uncertain times. These scams, which can be sent via email, text message, and social media claim to provide COVID-19 updates, sell products, ask for charitable donations, or reference government aid packages. These messages appear to be legitimate in nature but seek to fraudulently obtain personal information, financial gain, and create panic. Proactive property managers and owners of multifamily housing should consider notifying residents of these potential scams and providing the following tips as a way to avoid these traps: Watch for emails claiming to be from the Centers for Disease Control and Prevention (CDC) or experts claiming to have inside information on the virus. There are currently no vaccines, potions, lozenges, or other prescriptions available online on in-store to treat or cure COVID-19.Do your homework prior to donating to charities or crowdfunding sites. Confirm the validity of the organization as fraudsters are now advertising fake charities. Do not let anyone rush you into a donation, particularly those who ask for cash, gift cards, or wiring of funds.Do not click on links or open attachments from sources you do not know. Cybercriminals are using the COVID-19 headline as a tactic to spread computer viruses and steal information. Do not provide personal information, payment information or sensitive workplace information via suspicious email addresses.Be suspicious of urgent demands and emergency requests. The health and safety of you and your family is the top priority. Do not fall for scammers threatening fees or fines, cancelled deliveries, and health concerns in exchange for financial gain.If it should too good to be true - it probably is. Many individuals have begun to receive robo-calls and social media requests for social security numbers, banking information, and gift cards. Scammers promise high paying work from home opportunities, free sanitation and cleaning, as well as COVID-19 protection in exchange for payment and sensitive information.Be aware of scammers using government aid packages for criminal gain. Lawmakers have announced plans to send Americans checks to assist with the financial burden of the virus, with details still in discussion. The government will not request payment, nor will anyone reach out requesting personally sensitive health or financial information in exchange for financial support.Obtain your news from trusted sources. Be mindful of text message scams, social media polls and fraudulent email accounts sharing false information to create panic. A best practice is not to believe anything you see on social media (Twitter/Facebook, etc.). Before acting on information, review its source and check a trusted news outlet to confirm its validity.When in doubt, ask a coworker, family member, or friend for their opinion. Two sets of eyes are better than one. If you believe you have fallen victim to a scam, call your local police at their non-emergency number and consider reporting to the FBI s IC3 Internet Crime Database. Providing this type of information and guidance to residents can assist in protecting them from scams and other predatory behavior, and is especially important at senior properties, since the elderly are a prime target for these criminals.

HUD Issues Notice on Electronic Signatures

On May 26, 2020, HUD issued Notice H20-4, Electronic Signature, Transmission and Storage - Guidance for Multifamily Assisted Housing Industry Partners. This Notice provides guidance to HUD multifamily assisted housing partners on electronic signatures, electronic transmission, and electronic storage of documents and forms required by HUD Multifamily Housing Programs. With the issuance of this Notice (which is effective immediately), HUD permits, but does not require, industry partners to use electronic signatures. The Notice also permits electronic transmission and storage of files. Owners and management agents (O/As) adopting the terms of the Notice must provide applicants and tenants the option to utilize wet (i.e., original) signatures and paper documents upon request. When feasible, O/As, applicants, and tenants should have the option of providing signatures and documents in wet or paper form. The Notice does not change the nature or use of required documents and all such guidance remains the same. For example, an O/A may accept a tenant s notarized statement or signed affidavit regarding the veracity of information submitted, if the information cannot be verified by another acceptable verification method. However, the document may be submitted in paper form or signed and/or transmitted to the O/A electronically. Applicability The Notice is applicable to the following HUD programs: Project-based Section 8, includingNew Construction;HFA financed;Substantial Rehabilitation;Section 202/8;Rural Housing Section 515/8;Loan Management Set-Aside (LMSA);Property Disposition Set-Aside (PDSA); andRAD projects with Project Based Rental Assistance.Other ProgramsSection 202 SPRAC;Section 202/162 PAC;Section 202 (PRAC);Section 811 PRAC;Rent Supplement;Section 236 (including RAP); andSection 221(d)(3)/(d)(5) BMIR. The guidance does not apply to the 221(d)(4) program, the HOME program, or Public & Indian Housing Programs. The Notice pertains to all HUD forms and O/A created documents relating to asset management, Section 8 contract renewal, and occupancy policies. When implementing this Notice, O/As should ensure that all applicable laws relating to electronic transactions are followed. This includes: Electronic Signatures in Global and National Commerce Act;The Uniform Electronic Transactions Act; andGovernment Paperwork Elimination Act. O/As interested in utilizing electronic signatures and transmissions should obtain a copy of this Notice and should also download and review "Use of Electronic Signatures in Federal Organization Transactions," which provides greater discussion and detail on items discussed in the HUD Notice.

Procedures for Requesting a Private Letter Ruling

A Private Letter Ruling (PLR) is a written decision by the Internal Revenue Service (IRS) that is sent in response to a taxpayer s request for guidance on unusual circumstances or complex questions about their specific tax situation. For certain transactions involving large amounts of money, the tax law may be unclear. The purpose of the private letter ruling is to remove any uncertainty and to advise the taxpayer, usually a business, regarding the tax treatment they can expect from the IRS given the circumstances specified by their ruling. A PLR may also help a taxpayer confirm whether or not a potential action will result in a tax violation. How a PLR Works A PLR is specific and applicable only to the individual taxpayer and their tax situation at the time of the request. PLRs on behalf of other taxpayers cannot be used as precedent by a person requesting a ruling regarding their own issue, and in no way binds the IRS to take a similar position when dealing with other taxpayers. However, the IRS may redact the personal content of a PLR and issue it as a Revenue Ruling, which becomes binding on all taxpayers. Even with a favorable ruling, a taxpayer has no absolute guarantee of the tax consequences, since the IRS can modify or revoke a previously issued PLR if it is later determined that the ruling was incorrect or inconsistent with the current position of the IRS. Private letter rulings are generally made public 90 days after they are provided to the taxpayer, with all identifiable information on the taxpayer redacted. How to Request a PLR Taxpayers requesting a PLR should consult the Revenue Procedure published by the IRS at the start of each calendar year, which describes guidelines and updates for the process and includes sample request letter templates and a checklist of over 50 questions that must be answered. Taxpayers planning to request a PLR should consult with an IRS employee or another tax expert for help with the process. The filing procedure is extremely technical and exact compliance is required for a successful filing. The IRS generally will not issue "comfort letters" on matters that have already been decided by tax law, regulation, court decision, revenue ruling, revenue procedure, or notice. On April 30, 2020, the IRS released an advanced version of Revenue Procedure 2020-29 which modifies the procedures outlined in Revenue Procedure 2020-1. This revised procedure temporarily allows for the submission of requests for PLRs by electronic means. One of the burdens of requesting a PLR is the cost, which has steadily risen in recent years. Fees incurred by a taxpayer can range from $150 for simple requests to $50,000 for pre-filing agreements. For a specific transaction, costs of $30,000 are not unusual - this is in addition to the professional fees the taxpayer will incur. The IRS generally completes ruling requests within 60-90 days, although the process can take significantly longer if multiple branches of the IRS need to review the ruling or if there are other extenuating circumstances. Also, current requests may take longer due to limited IRS personnel as a result of the pandemic. All PLR requests must include the following: A complete statement of facts and other information;An analysis of material facts;A statement indicating whether the issue affects any tax returns the owner already filed;A statement indicating whether a ruling on the same or a similar matter has been issued or requested, or is pending;A list of authorities that support the request;A list of authorities that appear to run contrary to the request;A statement identifying any pending legislation that would affect the request;A statement identifying information to be deleted from the copy of the PLR the IRS will make available to the public;The owner s signature or the signature of its authorize representative;A list of authorized representatives;A power of attorney and declaration of representative from each authorized representative;A statement attesting to the accuracy of the request under penalties of perjury; andThe number of copies of the request the owner is submitting. Once the request is made to the IRS, a representative of the IRS will contact the taxpayer within 21 days after the IRS receipt of the request in order to discuss procedural issues. One important note relating to the COVID-19 pandemic, according to Revenue Procedure 2020-29 (noted above), electronic submission will result in faster processing than paper submission. After this initial contact with the IRS, taxpayers should maintain contact with the Service while the ruling is pending. This can further speed up the process.

Webinar on Fair Housing and COVID-19

A. J. Johnson will be conducting a webinar on June 2, 2020 on Complying with Fair Housing Law in the Age of COVID-19. The Webinar will be held at 10:00 AM Eastern Time. This one hour webinar will provide property managers with guidelines and recommendations for handling COVID-19 fair housing issues. A brief overview of fair housing requirements will be followed by a discussion of how COVID-19 fears may lead to fair housing violations relating to ethnic minorities and the disabled. The relationship between the pandemic and reasonable accommodation requests will be covered, as well as the particular attention that must be paid to potential sexual harassment. Finally, the importance of consistent treatment of applicants and residents will be discussed. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."