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COVID-19 Takes Disproportionate Toll on Affordable Housing Residents

A new survey by the Federal Reserve (FED) shows that 39% of former workers in households earning $40,000 or less lost work during the current pandemic, and many of these households do not have the resources to make it through to a return to work. Operators of affordable housing (HUD/LIHTC) will know immediately that this is the very income group affordable housing programs are designed to serve, and the vast majority of our residents will fall into this income category. The FED survey was released on May 14 and clearly shows that lower income households entered the COVID-19 shutdown in precarious economic positions that have only worsened since March. At the beginning of the nationwide lockdown, many Americans had limited savings, despite gains from a record-long economic expansion that was of limited benefit to many in the lower-income categories. According to the survey, at the end of 2019, 30% of adults said they could not cover three months worth of expenses with savings or borrowing if a job loss were to occur. 20% of people working in February reported losing a job or being furloughed in March or the beginning of April, and most of that job loss was highly concentrated among low earners. In fact, 39% of former workers living in a household earning $40,000 or less lost work, compared with 13% in those making more than $100,000. The U.S. economy began slowing in March as state and local governments instituted stay-at-home orders in an attempt to slow the spread of the virus. This has almost certainly caused the steepest growth decline in the United States since World War II. Consumer spending has tanked as stores and restaurants closed, and mass layoffs are now a feature of daily lives. Nearly 3 million people filed for unemployment benefits during the week of May 4, resulting in a two month total of more than 36 million. Congress has provided more than $2 trillion in relief spending, expanded unemployment insurance, and provided forgivable loans to small businesses as a way of protecting jobs. However, it is becoming apparent that these efforts will not be enough to stem the damage and there is no discernable timeframe for fully re-opening the economy. About 53% of people with jobs worked from home at the end of March, but this is a highly educated group. More than 60% of workers with a bachelor s degree worked completely from home, versus 20% of those with a high school degree or less. Among those who have lost hours or jobs due to the pandemic, 48% were "finding it difficult to get by" or "just getting by," according to the survey. Only 64% of those with reduced employment felt that they would be able to pay their bills in April, compared with 85% of those without a work disruption. Then there are those who took pay cuts - about 23% of all adults, and 70% of those who had lost their jobs or had hours reduced said their income was lower in March than in February. About 90% of workers who lost jobs expect to return to work for the same employer according to the survey, but most do not have a return date. About 5% had already returned to work, and 8% did not expect to go back to the same employer. Additional help from Congress is almost certainly going to be required but it will be a much harder climb than the earlier packages. The Phase IV CARES relief package is already running into trouble in the Senate and passage of the House bill is unlikely. In the meantime, affordable housing operators must be prepared for a reduction in rent collections and if the crisis continues through the summer, without additional help from the federal government, cash flow for some properties may become an issue. This may be especially true for Low-Income Housing Tax Credit developments, which may not have the mortgage forbearance of some HUD-assisted properties. Now is the time to examine planned expenditures for the upcoming year, and unless necessary for legal reasons or to maintain the property is a sound physical condition, consider deferral of such expenditures.

Joe Biden Releases Housing Plan

Former Vice President and presumed Democratic Presidential candidate Joe Biden has released a comprehensive housing plan - much of which deals with affordable rental housing, including the Low-Income Housing Tax Credit program. Following are the major elements of the 81-page plan that relate to affordable housing. A Homeowner & Renter Bill of Rights - this part of the plan would prevent mortgage brokers from leading borrowers into loans they cannot afford; prohibit the advancing of foreclosures when a homeowner is in the process of receiving a loan modification; and prohibit landlords from refusing to accept Housing Choice Vouchers.Tenant eviction protections, including support for the Legal Assistance to Prevent Evictions Act of 2020, which will help tenants facing eviction access legal assistance.Encourage the elimination of local and state housing regulations that perpetuate discrimination by seeking legislation requiring any state receiving Community Development Block Grant (CDBG) or Surface Transportation Block Grants to develop inclusionary zoning practices.Expand the Community Reinvestment Act (CRA) to apply to mortgage and insurance companies as well as banks and to close loopholes that allow banks to avoid lending and investing in all the communities they serve.Re-implement the Affirmatively Furthering Fair Housing Rule requiring communities to proactively examine housing patterns and identify and address policies that have a discriminatory effect.Create an advanceable and refundable tax credit of up to $15,000 to assist families with down payments to purchase their first home.Provide Section 8 vouchers to every eligible family by fully funding the Section 8 program.Enact a Renter s Tax Credit to reduce the cost of rent and utilities to 30% of income for low-income individuals and families who make too much to qualify for Section 8 but still cannot afford decent housing.Establish a $100 billion Affordable Housing Fund to construct and upgrade affordable housing. This fund would be available to states and communities that are willing to implement new zoning laws that encourage more affordable housing. This Fund, along with the potential withholding of CDBG and transportation dollars, represents the "carrot and stick" approach that is most likely to work with cities that have heretofore been uninterested in affordable housing.Expand the HOME program and the Capital Magnet Fund with an additional $5 billion annually.Increase funding for the Housing Trust Fund (HTF) by $20 billion.Increase credits for the LIIHTC program by $10 billion. This blueprint will certainly provide the framework for any Biden housing plan should he be elected President in November, so it is worth paying attention to. Clearly, some of the goals outlined in the plan would be beneficial to the affordable housing industry.

HUD Issues Guidance on COVID-19 and HOME Projects

On May 1, 2020, the Department of Housing & Urban Development (HUD) issued updated guidance relative to application of the CARES Act to projects with HOME funding. Section 4024 of the CARES Act imposes a temporary moratorium on evictions. The temporary eviction moratorium applies to covered dwelling units assisted by the HOME program. Primary components of the guidance include: The CARES Act eviction moratorium applies to HOME-assisted projects as well as dwelling units occupied by recipients of HOME tenant-based rental assistance (TBRA).Rental projects that received HOME assistance that are currently within the period of affordability (POA) specified in the HOME written agreement - including those projects with a POA longer than that required by the HOME regulation - are covered.Rental projects that have a HOME loan within its term of repayment and secured on the property as a first or subordinate lien, regardless of whether the project is in its POA, are covered.Homeownership projects containing rental units that received HOME assistance that are currently within the POA are covered, as are homeownership projects with rental units that have a HOME loan within the terms of repayment and secured by a first or subordinate lien.All residential rental units in or on properties (i.e., multifamily and multi-unit single family) that have a HOME loan secured on the property - regardless of whether the project is in its POA - are covered.E.g., a 100 unit apartment community has ten HOME-Assisted Units; all 100 units must comply with the CARES Act requirements.For a period of 120-days, beginning on March 27, 2020 and continuing through July 24, 2020, an owner cannot:Make, or cause to be made, any filing with the court of jurisdiction to initiate an eviction (e.g., an unlawful detainer, complaint) for nonpayment of rent or other fees or charges; orCharge fees, penalties or other charges to the tenant related to the nonpayment of rent.If an owner did not provide the tenant with an eviction notice, including but not limited to a notice to vacate, quit, or terminate tenancy, for nonpayment of rent or other fees or charges prior to March 27, 2020, the owner may not issue such notice until after the 120-day period.Fees, penalties, or charges relating to nonpayment of rent may not be charged during the 120-day period.Monthly rent, fees, and other charges (except fees and charges relating to the nonpayment of rent during the 120-day moratorium) may accrue during the 120-day period and be charged to the tenant after the CARES Act 120-day moratorium ends on July 24, 2020. In other words, the residents will still own rent for this period of timeThe CARES Act moratorium does not apply to evictions based on violations of permitted lease terms other than nonpayment of rent or other fees, penalties, and charges. Owners and managers of properties with HOME assistance should ensure compliance with these requirements going forward and make sure that all site staff of HOME-assisted properties are also familiar with the requirements.

Supreme Court Refuses to Overturn Idaho Case Giving Homeless the Right to Sleep in Public Places

The U.S. Supreme Court denied a petition by Boise, ID to review Martin v. Boise, December 16, 2019, leaving in place earlier rulings by the 9th Circuit that homeless persons cannot be punished for sleeping outside when there are no adequate alternatives. This decision leaves in place the April 2019 9th Circuit ruling which covers nine western states and sets national precedence. The covered states are Alaska, Washington, Montana, Idaho, Oregon, California, Nevada, Hawaii and Arizona. The original case was filed in 2009 by the National Law Center on Homelessness & Poverty, seeking to prevent homeless people from being punished for sleeping on the streets when they have no other option. The goal of the suit was to force localities to offer affordable housing as the primary solution to homelessness. Boise had a "Camping & Disorderly Conduct Ordinance" against homeless persons. In 2018, the 9th Circuit found that "as long as there is no option of sleeping indoors, the government cannot criminalize indigent, homeless people for sleeping outdoors on public property, on the false premise that they had a choice in the matter." The High Court refusal to consider the case affirms that within the 9th Circuit, "the 8th Amendment precludes the enforcement of a statute prohibiting sleeping outside against homeless individuals with no access to alternative shelter." This ruling does not prohibit cities from addressing street encampments; it just means they have to do it in constructive ways that reduce harm and actually assists in ending homelessness. Putting homeless people in jail simply takes up jail space that could be used for dangerous criminals and imposing fines they cannot pay further inhibits their ability to afford housing. Early in the case, the Department of Justice recognized that "criminalizing public sleeping in cities with insufficient housing and support for homeless individuals does not improve public safety outcomes or reduce the factors that contribute to homelessness." The victory in this case is not that it allows homeless people to sleep in public areas; the victory is that it will force communities to address homelessness proactively through development of adequate affordable housing, while providing safe and appropriate emergency shelter in the meantime.

HUD Issues Issues Waivers for Public & Indian Housing Programs, Including Section 8 Project-Based Vouchers During COVID-19 Emergency

On April 10, 2020 the HUD Office of Public & Indian Housing (PIH) issued waivers to provide administrative relief and ensuring continued program operations during the COVID-19 pandemic. These waivers can be reviewed in their entirety in Notice PIH-2020-05. These waivers are directed to public housing authorities (PHAs), Indian tribes and tribally designated housing entities, and apply to public housing, Section 8 Housing Choice Vouchers (HCV), Section 8 Project-Based Voucher, and Indian Housing Programs. PHAs and Indian tribes may implement any or all of these waivers, immediately or at any point during the applicability period. HUD has also waived certain requirements relating to notice and approval of Administrative Plan and ACOP amendments, which will allow PHAs to adopt these new waivers more quickly. HUD is providing both short term waivers (focused on providing essential flexibilities when normal operations are severely disrupted) and long-term waivers, which allow PHAs to defer important but less critical functions in order to focus on the most vital responsibilities until transitioning back to normal operations. The short term waivers generally end on July 30, 2020 and the long-term waivers expire on December 31, 2020. HQS Waivers >PHAs may enter into a Housing Assistance Payment (HAP) contract for tenant-based or PBV units, turn over units to a new family, add new units to a PBV HAP contract, or substitute units on a PBV HAP contract without conducting a Housing Quality Standards (HQS) inspection through July 31, 2020. >In lieu of the HQS inspection, the PHA may accept a certification from the project owner that the owner "has no reasonable basis to have knowledge that life threatening conditions exist" in the units in question. >Units must be inspected by October 31, 2020. >These same alternate requirements apply to PHAs choosing to utilize the alternative inspection flexibility that had previously been provided under the Housing Opportunity Through Modernization Act of 2016 (HOTMA), which allows the PHA to recognize alternative inspection regimes such as REAC. In lieu of a PHA inspection within 15 days, the PHA may accept an owner s certification of no knowledge of life threatening conditions to delay inspections until no later than October 31, 2020. >If an HQS inspection has been conducted but the PHA uses the Non-Life Threatening Deficiencies (NLT) flexibility that had previously been provided under HOTMA, project owners have up to 60 days, instead of 30, to make NLT repairs. >For units already under a HAP contract, PHAs may delay the required biennial HQS inspections until no later than October 31, 2020. >If a tenant notifies a PHA that their unit does not comply with HQS, through July 31, 2020, the PHA may notify the project owner in lieu of conducting an HQS inspection. For life threatening deficiencies, the owner must either correct the deficiency or provide evidence that the deficiency does not exist within 24 hours. For NLT deficiencies, the project owner must either correct the deficiency or provide evidence that the deficiency does not exist within 30 days of the PHA notification. >HUD is waiving the HQS requirement that a leased unit have at least one bedroom or sleeping room for every two people in order to accommodate residents who may need to add household members as a result of the COVID-19 emergency. Recertifications for Income & Family Composition (Public Housing & HCV/Section 8  >PHAs may delay annual re-examinations of family income and composition until December 31, 2020. >If a PHA wants to proceed with re-certifications, through July 31, 2020, PHAs may rely on family self-certification and forego reliance on third-party income verifications, such as the EIV system. HUD will even permit self-certifications over the phone if the PHA staff creates a contemporary written record. >Interim certifications may be used to adjust a family s portion of the rent if the family has lost income. Again, PHAs may rely on family self-certifications and need not rely on EIV or other third party verification through July 31, 2020. In addition, PHAs may wish to review and adjust their interim re-examination policies, such as when increases in family income must be reported or how to determine the effective date of the interim certification. >Mandatory EIV monitoring is waived through July 31, 2020. However, families will be responsible if significant discrepancies from their self-certification are later discovered. >If a PHAs payment standard increases, PHAs do not have to wait until the regular family re-examination for a unit to increase the HAP subsidy. Additional Waivers Applicable to PIH and HCV/Section 8 Programs >Section 8 Administrative Plans and public housing Admissions and Continued Occupancy Policies (ACOP) may be temporarily amended without board of directors approval until July 15, 2020. >PHA Annual Plan/5-Year Plan submission dated extended - PHAs with June 30 and September 30 fiscal year ends now have until October 18, 2020, to submit their annual or 5-year plans. PHAs with December 31 fiscal year ends have until January 16, 2021. In addition, plan amendments, except for amendments required for RAD, Section 8, and Section 22 repositioning efforts, can be adopted without an open public meeting of the PHAs board of directors. >HUD is still requiring PHAs to notify tenants of policy changes, but 30-day advanced notice is no longer required. >PHAs have been given broad latitude to extend a family s initial voucher, execute HAP contracts up to 120 days after the start of a family s lease, allow vacancies for more than 180 days, and retain units on a HAP contract even if the unit does not generate subsidy for more than 180 days. >COVID-19 qualifies as "good cause," through December 31, 2020, to extend a family s participation in the Family Self-Sufficiency (FSS) Program for up to two years. >Public notice for PHAs opening or closing waitlists can be provided by leaving an outgoing voice message on its answering system and website, if the messages are accessible for hearing, visual, and other communication-related disabilities. >Capital Fund obligation end dates and expenditure end dates are extended by one year. PHAs may exceed Total Development Cost (TDC) and Housing Construction Cost (HCC) limits by 25% and may seek HUD approval to exceed TDC and HCC by up to 50%. Deadlines for closeout forms are extended by six months. >PHAs may use force account labor (workers employed directly by the agency), rather than contracted labor, for modernization activities. >Energy audits are suspended and PHAs need not review utility allowances until December 31, 2020. >HUD is temporarily suspending the Public Housing Assessment System (PHAS) and the Section 8 Management Assessment Program (SEMAP) for PHAs with a fiscal year end on or before December 31, 2020. >Financial statement submission deadlines have been extended. >PHAs now have 90, rather than 60, days to submit form HUD-50058 for transactions impacted by these waivers. HUD will provide future guidance regarding reporting work-arounds in the PIH Information Center (PIC) system. The CARES act also provides supplemental funding for the Public Housing and HCV programs and additional flexibility to move monies between Operating and Capital Funds. HUD will publish additional guidance regarding these aspects of the CARES Act in the future.

Minnesota Supreme Court Rules that Payments Made to a Parent to Care for a Disabled Child Count as Income

On February 12, 2020, the Supreme Court of Minnesota held that some of the payments made by the state under a program for families with children having developmental disabilities who need to stay at home, which are made to offset the cost of necessary services and equipment, are not excluded from the annual income computation for purposes of calculating eligibility under HUD Section 8 rules. Facts of the Case The plaintiff received funds through the Minnesota Developmental Disability Waiver program;This program provides funding to pay for the necessary services and equipment for keeping a disabled person living at home;The plaintiff chose to allocate a portion of the budget to herself as a paid parent to provide some of the necessary services to her son;The County found that, although most of the benefits paid were excluded from her income for purposes of determining her Section 8 eligibility, the amounts she paid herself were not, citing 24 C.F.R. 5.609(c)(16);The cited provision excludes from income "Amounts paid by a State agency to a family with a member who has a developmental disability and is living at home to offset the cost of services and equipment needed to keep the developmentally disabled family member at home;"Plaintiff counsel argued that the amounts in question were excluded from income under section 5.609(c)(16);The County argued that the amounts must be included in income because they were not used to "offset" and "cost" to the plaintiff, since the plaintiff did not actually incur an out-of-pocket expense;The hearing officer ruled that plaintiff s payments to herself were not excluded from income;Plaintiff appealed and the hearing officer s decision was upheld, so the plaintiff appealed to the State Supreme Court. Finding The Supreme Court affirmed the decision. Reasoning "Cost" means monetary expense, and as the plaintiff incurred no monetary expense, there was no "cost" to offset;Federal income exclusions include "amounts received by the family that are specifically for, or in reimbursement of, the cost of medical expenses for any family member;"Equating cost and expense, cost is a monetary expense per the regulation;"Cost" as used in this regulatory context can only mean an actual monetary expense that has been, or will be, incurred by the family to keep the disabled family member living at home;"Cost" means "out-of-pocket expenses" to be "reimbursed or offset by the state;" andThe amounts the plaintiff received as payment for her services in caring for her son were not paid to offset the cost of services and equipment because the plaintiff incurred no actual monetary expense. Therefore, they were not excluded from annual income by federal regulation. Summary This case makes it clear that in order to exclude money paid for medical expenses, it must be a payment that either (1) may only be used for medical expenses, or (2) is a direct reimbursement for medical expenses that have actually been incurred.

IRS Extends Deadlines for Several LIHTC Requirements Due to COVID-19

The IRS has issued Notice 2020-23 extending the deadline to July 15, 2020 for any tax action that was due to be performed from April 1, 2020 through July 15, 2020. The actions for which the extended deadline applies were outlined in Revenue Procedure 2018-58 and include several affordable housing provisions. Among the deadlines extended for low-income housing tax credit properties are the 10% of reasonably expected basis test, the 24-month period of minimum rehabilitation expenses, and the annual owner certification of compliance. The IRS is awaiting further guidance from the Department of Treasury on what other specific considerations the IRS may grant with regard to the Section 42 program. The IRS has also agreed to apply relevant sections of Revenue Procedure 2014-49 (for the LIHTC program) and 2014-50 (for Tax-Exempt Bonds)immediately. These procedures outline the waivers from certain requirements for projects located in federal disaster areas. As of April 8, 2020, 46 states had disaster declarations due to the COVID - 19 outbreak. Specific Requirements Outlined in 2014-49 (requires State approval) Carryover Allocation and Placed in Service Requirements:10% deadline extension: Housing Finance Agencies (HFAs) may grant an extension for meeting the 10% expenditure test. Owners with carryover allocations must demonstrate that at least 10% of total project costs have been incurred within one year after the allocation date. Under 2014-49, the HFA may grant an extension of up to six-months.Placed-in-Service extension: the two-year placed in service deadline may be extended by the HFA for up to 12-months. These extensions may be granted on an individual project basis or for all or a group of owners in the disaster area. Since 2014-49 and 50 were intended for projects that were "damaged" in a major disaster area, additional guidance is required in order to determine if delays in leasing will be able to obtain deadline extensions, but it is believed that such extensions will be granted.

HUD Issues COVID-19 Suspensions and Waivers for HOME Program

On April 10, 2020, HUD issued guidance regarding suspension and waivers for requirements for the HOME program as a result of COVID-19. The memorandum authorized HOME participating jurisdictions (PJs) to use HOME tenant-based rental assistance (TBRA) funds to facilitate urgent housing assistance to families experience financial hardship as a result of the COVID-19 pandemic. The memorandum allows PJs to use HOME funds for rental assistance to individuals and families experiencing financial hardship as a result of the pandemic, including (1) providing immediate rental assistance to individuals and families seeking housing, (2) assisting households that have housing but face reduced or lost wages, and (3) assisting existing families with TBRA with additional assistance due to reduced or lost wages. Prior to using this authority, a PJ must notify the local HUD Field Office of its intent to do so, identifying which suspensions or waivers the PJ plans to use. HUD Community Planning & Development (CPD) Field Offices shall inform PJs of the availability of these suspensions and waivers. PJs should also obtain a copy of the Memorandum of April 10. Note: this guidance applies only to Participating Jurisdictions. It does not apply in any way to individual property owners with HOME funds.