News

A. J. Johnson to Host Live Webinar on LIHTC Acquisition/Rehab Issues

A. J. Johnson will be conducting a 1.5-hour webinar on December 20, 2023, on Critical Issues Relating to the Acquisition and rehabilitation of LIHTC properties. The Webinar will be held at 1:00 PM Eastern Time. This 1.5-hour session focuses on the issues that are critical to the success of any LIHTC acquisition/rehab project. The training focuses on tenant qualification, unit qualification, and first-year credit delivery. There will be a full discussion of determining the first-year applicable fraction, differentiating between the acquisition credit and rehab credit, transferring households between units during rehab, temporary relocation, the timing of resident qualifications, the meaning of the "safe-harbor" rule, re-syndication and previously qualified households, and 8609 issues. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."

HUD Provides Additional Guidance on HOTMA Rules Regarding Calculation of Income

Introduction The U.S. Department of Housing and Urban Development (HUD) has released Notice H 2013-10, which expands upon the Final Rule for implementing the Housing Opportunity Through Modernization Act (HOTMA). The publication of this guidance in September 2023 seeks to clarify aspects concerning the calculation of income for the purposes of determining eligibility and continued occupancy in HUD-assisted housing. Clarifications for Income Calculations HUD's Notice introduces detailed procedures for income calculation during both new admissions and interim reexaminations. Public Housing Authorities (PHAs) and Multi-Family Housing (MFH) owners must calculate household income based on anticipated earnings over the next 12 months for these assessments, a method that aligns with pre-HOTMA practices. Revisions for Annual Recertifications The Final Rule incorporates significant changes to the process of annual income recertification. Property owners now have the flexibility to employ a "safe harbor" verification method, leveraging income determinations from other federal means-tested programs as a valid form of verification for gross annual income. When streamlined or safe harbor approaches are not utilized, the actual income from the prior 12 months will serve as the basis for recalculating tenant rental assistance. Any changes in income, regardless of their nature, must be taken into account. Three-Step Determination Process The procedure for establishing the previous year's income for recertification purposes involves: Determining the annual income: This involves reviewing the EIV Income Report, prior HUD forms, and family certifications to establish a baseline figure. Considering interim reexaminations: In instances where interim reexaminations have occurred, the resultant annual income figure from these should be used unless further changes in income necessitate a reevaluation. Adjusting for reported changes: If families report income changes not captured during the last reexamination, current income data should be employed. Documentation and Verification Hierarchy HUD outlines a verification hierarchy to establish accuracy in income reporting, with the Electronic Income Verification (EIV) system at its pinnacle. The hierarchy descends from written third-party verifications to self-certification, with a deep dive into acceptable verifications planned for a future article. Incorporation of Social Security COLA The HUD Notice requires that the Social Security Administration's annual cost-of-living adjustments (COLAs) be included in income calculations immediately after their announcement, affecting all reexaminations scheduled for January 1st or later of the following year. Handling De Minimis Errors The Notice also addresses minor, or de minimis, errors in income calculation, where discrepancies do not exceed $30 per month. Such minor inaccuracies will not lead to compliance findings against owners during reviews. However, owners are responsible for correcting even these small errors retroactively and adjusting tenant rent accordingly. Conclusion With this additional guidance, HUD has streamlined the process for calculating household income, thus simplifying compliance for PHAs and property owners. The Notice places a strong emphasis on accuracy and fairness in income determination, ensuring that families receive the correct level of assistance while minimizing errors and their subsequent impact.

HOTMA Required Revisions to Tenant Selection Plans and EIV Policies and Procedures

On October 2, 2023, HUD published a list of Discretionary Policies the owners participating in HUD Multifamily Housing Programs must set in Tenant Selection Plans (TSPs) and EIV Policies and Procedures. These documents must be updated by March 31, 2024. HOTMA Provision: De Minimis Errors in Income Determinations.Required HOTMA Policy: Owners must take corrective action to credit or repay a family if the family was overcharged tenant rent because of de minimis errors (no more than $360 annually) in calculating family income. If a family is undercharged for rent due to an owner miscalculation of income, families may not be required to repay. Owner s Discretionary Policies: Owners must include in the TSP how they will repay or credit a family the amount that the family was overcharged retroactive to the effective date of the action for which the error was made, regardless of the dollar amount associated with the error. Self-Certification of Net Family Assets Equal to or Less Than $50,000 (adjusted annually for inflation).Required HOTMA Policy: Owners must determine if the family s total net family assets are equal to or less than $50,000, and they must determine the actual income earned from the assets. Owner s Discretionary Policies: (1) Owners may accept a family s self-certification of net family assets if the assets are no more than $50,000 and anticipated income earned from assets without taking additional steps to verify accuracy, at admission and reexamination; (2) Accepting a family s self-certification at admission may reduce the initial burden on applicants and speed up the lease-up process. In deciding whether to accept a self-certification of assets at admission, Owners are encouraged to consider the local needs and priorities in their communities along with the potential risks of accepting self-certification of assets, including the requirement to repay funds for participants/tenants who are later found to be ineligible for assistance; (3) Owners who choose to accept self-certification of assets of no more than $50,000 at reexamination are required to fully verify net family assets every three years; (4) Owners who choose not to accept self-certification must verify net family assets every year (5) Owners must include in their TSPs whether they will accept a family s self-certification of assets of $50,000 or less at admission (only for new admissions effective on or after 1/1/24) and/or at reexamination. Hardship Exemptions for Health/Medical Care Expenses & Reasonable Attendant Care & Auxiliary Apparatus Expenses (General Relief):Required HOTMA Policy: (1) Owners must provide hardship relief to any family that demonstrates its eligible health and medical care expenses, or disability-related expenses exceed 5% of the family s annual income; (2) An increase in medical or disability-related expenses constitutes a qualifying eligibility factor so long as it exceeds 5% of the family s annual income; (3) to meet the requirement for a medical expense hardship exemption, the family s expenses must qualify as medical expenses under HUD regulation; and (4) to meet the requirements for a disability related exemption, the family s disability related expenses must meet the HUD definition of a disability related expense. Owner s Discretionary Policies: (1) Owners must develop written policies in their TSPs defining the changes in circumstances that are required for a family to qualify for a hardship exemption. These are hardships that would not otherwise trigger an interim reexamination; (2) Owners may extend the hardship relief for one or more 90-day intervals, while the family s hardship condition exists; and (3) Owners must state in the TSP whether hardship exemption extensions are allowable, and the maximum number of 90-day extensions (if establishing a maximum policy) families may receive.Note - MFH owners are not limited by HUD to a maximum number of 90-day extensions. Third-party verification of the hardship is required of the file must be documented as to why third-party verification was not available. Attempts to obtain verification must be obtained prior to the end of the 90-day period. Hardship Exemptions for Health/Medical Care Expenses & Reasonable Attendant Care & Auxiliary Apparatus Expenses (Phased-in Relief):Required HOTMA Policy: (1) All families who received a deduction for medical or disability-related expenses based on their most recent income review prior to January 1, 2024, will begin receiving the 24-month phased-in relief at their next annual or interim reexamination, whichever occurs first on or after the date the MFH Owner complies with HOTMA. (2) Families who receive phased-in relief will have eligible expenses deducted as follows: (i) First 12 months: in excess of 5% of annual income; (ii) second 12 months: in excess of 7.5% of annual income; and (iii) after 24 months: in excess of 10% threshold will phase in and remain in effect unless the family qualifies for General Relief. (3) Once a family chooses to obtain general relief, a family may no longer receive the phased-in relief. Owner s Discretionary Policy: MFH Owners may continue the phased-in relief for a new admission who was receiving the phased-in relief at their prior assisted housing at the time that the family was admitted to their current unit. This discretion should be stated in the TSP. For example, a family is admitted to a new MFH property, but they would have still been receiving the 24-month phased-in hardship exemption had they continued to reside in their previous unit at a different MFH property. Owners may establish a policy to continue the phased-in hardship exemption for the family s remaining months in the 24-month phase-in period. Hardship Exemption to Continue Child Care Expense Hardship:Required HOTMA Policy: (1) MFH Owners must develop written policies to define what constitutes a hardship, which includes the family s inability to pay rent, for the purposes of the childcare expense hardship exemption. (2) Owners must include this policy in the TSP. (3) Owners must obtain third-party verification of the family s inability to pay rent or must document in the file the reason third-party verification was not available. Owners must attempt to obtain third-party verification prior to the end of the 90-day period. Owner s Discretionary Policy: (1) Owners may, pursuant to their own discretionary policies, extend the hardship relief for one or more additional 90-day periods while the family s hardship condition continues. (2) Owners must include in their TSP whether they will permit extensions of the 90-day hardship period and the maximum number of 90-day extension periods (if establishing a maximum policy) that a family may receive. Note: Owners are not limited by HUD to a maximum number of 90-day extensions. Interim Reexaminations - Decreases in Adjusted Income:Required HOTMA Policy: (1) Owners are required by HUD to process interim reexaminations for all decreases in adjusted income when a family permanently moves out of a unit. (2) Owners are not permitted to establish a dollar figure threshold amount instead of a percentage threshold of less than 10 percent. Owner s Discretionary Policy: (1) Owners may decline to conduct an interim reexamination of family income if the Owner estimates that the family s adjusted annual income will decrease by an amount that is less than ten percent of the family s annual adjusted income, or such lower threshold established by the Owner. (2) Owners must identify in their TSPs the percentage threshold they will use for conducting interim reexamination for decreases in a family s adjusted income. (3) Owners may establish policies to round calculated percentage decreases up or down to the nearest unit (e.g., a calculated decrease of 9.5% may be rounded up to 10%). Interim Reexaminations - Increases in Adjusted Income:Required HOTMA Policy: (1)Owners must conduct an interim reexamination of family income when they become aware that the family s annual adjusted income has changed by an amount that would result in an estimated increase of ten percent or more in annual adjusted income or another amount established through HUD notice, except Owners may not consider any increases in earned income when estimating or calculating whether the family s adjusted income has increased unless the family has previously received an interim reduction during the same reexamination cycle. (2) Owners may not establish a different threshold to conduct interim reexaminations for increases in adjusted income. Owner s Discretionary Policy: (1) Owners may choose not to conduct an interim reexamination if a family reports an increase in income within three months of their next annual reexamination effective date. (2) Owners may choose not to include earned income increases in determining whether the ten percent threshold is met in adjusted income when the family previously had an interim reexamination performed for a decrease in annual adjusted income (earned, unearned, or combined) since the last annual reexamination. (3) Owners must describe these policies in their TSPs. Interim Reexaminations - Reporting Changes & Effective Date:Required HOTMA Policy: (1) Families must report household composition changes and changes to adjusted income consistent with HOTMA s requirements; however, Owners determine the timeframe in which reporting must occur to be considered "timely." (2) If the Owner has adopted a retroactive rent decrease policy, it may not be applied prior to the later of:The 1st of the month following the date of the actual decrease in income; orThe 1st of the month following the most recent previous income examination.Note - Owners must clearly communicate to the family how a retroactive adjustment will affect the family s responsibility for rent. Owner s Discretionary Policy: (1) Owners must develop policies that describe when and under what conditions families must report changes in household composition and adjusted income consistent with HUD s requirements for processing interims or other non-interim reexamination transactions. (2) Owners have the discretion to develop specific reporting policies that describe which changes must be reported and the timeline for reporting the change to be considered timely. (3) Owners may adopt a policy to apply rent decreases retroactively and establish additional criteria to describe the conditions under which retroactive decreases will be applied. (4) Owners must describe these policies in their TSPs. Revocation of Consent Form (Revocation of consent or refusal to sign the consent form prohibits the owner from requesting and accessing  income information and financial records, including pulling any EIV reports and using EIV data to verify income):Required HOTMA Policy: (1) An executed consent form will remain effective until the family is denied assistance, the assistance is terminated, or the family provides written notification to the Owner to revoke consent. (2) Families have the right to revoke consent by notice to the Owner; however, revoking consent can result in termination or denial of assistance if the Owner has established an admission and occupancy policy that the revocation of consent will result in termination of assistance or denial of admission. (3) Owners may not process interim or annual reexaminations of income, including when a family s income decreases and the family requests an interim reexamination to decrease tenant rent, without the family s executed consent form(s). (4) Owners must explain to families the consequences, if any, of revoking their consent. (5) Owners must notify their local HUD office when an applicant or participant family member revokes their consent. Owner s Discretionary Policy: (1) Owners may establish in a written policy that revocation of consent will result in termination of assistance or denial of admission. (2) When Owners do not establish a policy such that revoking consent will result in termination of assistance, participant families will be required to sign a new consent form by the next regularly scheduled reexamination or interim reexamination, whichever occurs first. (3) Owners may establish policies to deny admission but allow existing participant families to continue to receive assistance after revoking their consent until the next interim or annual reexamination, whichever is sooner. (4) Owners must describe these policies in their TSPs. Determination of Family Income Using Other Means-Tested Public Assistance, i.e., "Safe Harbor:"Required HOTMA Policy:(1) Owners may determine the family s income prior to the application of any deductions based on income determinations made within the previous 12-month period for purposes of the following means-tested forms of Federal public assistance:The Temporary Assistance for Needy Families Block Grant ("TANF").Medicaid.The Supplemental Nutrition Assistance Program ("SNAP").The Earned Income Tax Credit.The Low-Income Housing Tax Credit.The Special Supplemental Nutrition for Women, Infants, and Children ("WIC").Other programs administered through HUD.Other means-tested forms of Federal public assistance for which HUD has established a memorandum of understanding.Other Federal benefit determinations made by other means-tested Federal programs that the HUD Secretary determines to have comparable reliability and announces through a Federal Register Notice.(2) Owners are not required to accept or use determinations of income from other Federal means-tested forms of assistance.(3) Safe Harbor verification must be obtained by means of third-party verification and must state the family size, must be for the entire family (i.e., the family members listed in the documentation must match the family s composition in the assisted unit, except for household members) and must state the amount of the family s income.(4) Safe Harbor verification must not be mixed and matched with other income verifications, including other Safe Harbor income determinations. Owner s Discretionary Policy: (1) Owners that choose to implement Safe Harbor income determinations must:Establish in a written policy when they will accept Safe Harbor income determinations (e.g., at reexamination only or at admission and reexamination), including which programs from which they will accept income determinations; andCreate policies that outline the course of action when families present multiple verifications from the same or different Safe Harbor programs (e.g., Owners could establish policies to accept the most recent income determination). Owners must describe these policies in their TSPs. Enterprise Income Verification (EIV) Usage:Required HOTMA Policy: (1) MFH Owners must use HUD s EIV system in its entirety. (2) Owners must update their EIV policies and procedures to reflect their discretionary use of EIV reports (e.g., Income Report, zero Income reports, New Hires Report, etc.) under HOTMA. Owner s Discretionary Policy: (1) Owners are not required to use EIV during interim reexaminations. (2) Owners who adopt policies to not include earned income increases in determining whether the 10 percent threshold is met for increases in adjusted income when the family previously had an interim reexamination performed for a decrease in annual adjusted income (earned, unearned, or combined) since the last annual reexamination, are not required to use the EIV New Hires report between annual reexaminations. (3) Owners who have a policy to consider earned income increases in calculating whether the ten percent threshold has been met for an interim reexamination are required to review the EIV New Hires report at least quarterly, for the remainder of the reexamination period after the interim reexamination to decrease rent occurs. (4) Owners are not required to use the Income Report at annual reexamination if they use Safe Harbor verification to determine the family s income. (5) Owners are not required to use EIV Income Discrepancy Report at annual reexamination if they used Safe Harbor verification to determine the family s income at the last reexamination. (6) Owners must describe these policies in their EIV policies and procedures. Bottom Line As outlined in this article, MFH owners have a good deal of discretion regarding the implementation of a number of HOTMA provisions. Important discretion exists with regard to (1) Self-Certification of family assets; (2) Hardship exemptions for medical and disability-related expenses, as well as child care expenses; (3) the handling of interim reexaminations; (4) Means tested determination of family income {i.e., the "Safe Harbor"}; and (5) use of EIV. Owners who wish to apply any of these discretionary measures must ensure that such policies are reflected in Tenant Selection Plans (TSPs) and EIV Policies and Procedures no later than March 31, 2024.

A. J. Johnson to Offer Live Webinar on Interviewing Skills for Affordable Housing Managers

A. J. Johnson will be conducting a webinar on December 6, 2023, on Interviewing Skills for Affordable Housing Managers.  The Webinar will be held from 1:00 PM to 4:00 PM Eastern time. One of the most important skills any affordable housing manager can possess is the ability to interview applicants and residents and obtain the information required to determine eligibility - this is also one of the greatest weaknesses of most affordable housing managers. This training has been developed to address that weakness. This three-hour session focuses on the interview process and provides concepts and tools that will aid managers as they conduct their interviews. Techniques apply to all interview settings including initial eligibility interviews, interim certifications, and annual recertifications. The primary emphasis is on the initial eligibility interview since it is so critical to the housing process. The skills taught during this session will also assist managers in detecting fraud and dealing with third parties when resolving discrepancies. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

HOTMA Adds New Income Exclusions

HOTMA Adds New Income Exclusions for Affordable Housing Projects Introduction In February 2023, the U.S. Department of Housing and Urban Development (HUD) published the Final Rule implementing the Housing Opportunity Through Modernization Act (HOTMA). Subsequently, on September 29, 2023, HUD released Notice H 2013-10, offering additional guidance and clarifications regarding the implementation of the Final Rule. Among the many changes, HUD has added a number of new income exclusions, impacting a broad spectrum of HUD-assisted properties, projects under the Rural Housing Service Section 515 program, the Low-Income Housing Tax Credit (LIHTC) program, and properties with Tax-Exempt Bonds. This article will delve into the essential changes in income exclusions that affordable housing managers must acquaint themselves with. Note: This article does not address all income exclusions listed in 24 CFR 5.609(b), but only those that are newly added or updated by the final rule. Nonrecurring Income The nonrecurring income exclusion replaces the former exclusion for temporary, nonrecurring, and sporadic income (including gifts), but it provides a narrower definition of excluded income in contrast to the former broad exclusion of temporary, nonrecurring, or sporadic income. Income that will not be repeated beyond the coming year (i.e., the 12 months following the effective date of the certification), based on information provided by the family, is considered nonrecurring income and is excluded from annual income. However, income received as an independent contractor, day laborer, or seasonal worker is not excluded from income, even if the source, date, or amount of income varies. Income that has a specific end date and will not be repeated beyond the coming year during the family s upcoming annual reexamination period will be excluded from a family s annual income as nonrecurring income. This does not include unemployment income and other types of periodic payments that are received at regular intervals (such as weekly, monthly, or yearly) for a period of greater than one year that can be extended. For example, an increasing number of cities and states are piloting guaranteed income programs that have discreet beginning and end dates. This income can be excluded as nonrecurring in the final year of the pilot program. For example, for an annual reexamination effective 2/2/24, guaranteed income that will be repeated in the coming year but will end before the next reexamination on 2/1/25 will be fully excluded from annual income. Income amounts excluded under this category may include but are not limited to, nonrecurring payments made to the family or to a third party on behalf of the family to assist with utilities, eviction prevention, security deposits to secure housing, payments for participation in research studies depending on the duration, and general one-time payments received by or on behalf of the family. Following are examples of income that may be excluded: Payments from the U.S. Census Bureau for employment lasting no longer than 180 days and not culminating in permanent employment; Direct federal or state economic stimulus payments; Amounts directly received by the family as a result of state refundable tax credits or state tax refunds at the time they are received; Amounts directly received by the family as a result of federal refundable tax credits or federal tax refunds at the time they are received; Gifts for holidays, birthdays, or other significant life events or milestones (e.g., wedding, baby shower, or anniversary gifts); In-kind donations (e.g., food, clothing, or toiletries received from a food bank or similar organization); Lump-sum additions to net family assets (e.g., lottery winnings, contest winnings, etc.); Income of Live-in Aides, Foster Children, and Foster Adults (note that the exclusion of income for foster children and adults is a change from current regulation); Payments received for the care of Foster Children or Adults or State or Tribal Kinship or Guardianship Care Payments; Insurance payments or settlements for personal or property losses, including but not limited to payments under health insurance, motor vehicle insurance, and workers compensation (note that periodic payments paid at regular intervals (such as weekly, monthly, or yearly) for a period of greater than one year that are received in lieu of wages for workers compensation continue to be included in annual income; Amounts recovered in a civil action or settlement based on a claim of malpractice, negligence, or other breach of duty that resulted in a member of the family becoming disabled. Such funds are excluded whether received periodically or in a lump sum; Veterans Regular Aid and Attendance payments made to veterans. This exclusion applies only to veterans and not to surviving spouses or other beneficiaries; Home-based care payments for a disabled family member. The payments are excluded from income as long as the amounts are provided to enable a disabled family member to remain in the unit. Both the person providing the care and the disabled person must be family members (not household members) and must live in the same household; Replacement housing "gap" payments are made under the Uniform Relocation Act (URA) as long as the payments cover actual increased out-of-pocket costs of rent and utilities. PHAs/Owners may accept a self-certification from the family stating that the income will not be repeated during the coming year. Student Financial Assistance The treatment of student financial assistance depends on the HUD program, student/household characteristics, and the type of financial assistance received by the student. The student financial assistance rules apply to both full-time and part-time students. Student financial assistance to be excluded includes, Amounts received under Section 479B of the Higher Education Act (HEA) of 1965, as amended, includingFederal Pell Grants;Teach Grants;Federal Work Study Programs;Federal Perkins Loans;Student financial assistance received under the Bureau of Indian Education;Higher Education Tribal Grant;Tribally Controlled Colleges or Universities Grant Program; and Employment Training Program under Section 134 of the Workforce Innovation and Opportunity Act (WIOA) Other Student Financial Assistance, including grants or scholarships received from the following sources:The Federal government;A State (including U.S. territories), Tribe, or local government;A private foundation registered as a 501(c)(3) nonprofit;A business entity (such as a corporation, general partnership, LLC, LP, joint venture, business trust, public benefit corporation, or nonprofit entity); or An institution of higher education. Student financial assistance does not include -Financial support provided to the student in the form of a fee for services performed (e.g., a work-study or teaching fellowship that is not excluded under the HEA; or Gifts, including gifts from family or friends. Other than funds excluded under the HEA, all student financial assistance must pay for actual educational expenses. Actual covered costs include tuition, books, supplies, room and board, and fees required and charged to a student by an institution of higher education. For a student who is not the head, co-head, or spouse, actual covered costs also include the reasonable and actual costs of housing while attending school and not residing in the assisted unit. The only situation in which HEA assistance is not automatically excluded from income is in the case of a Section 8 household during years in which a HUD appropriations act specifically requires that educational assistance in excess of actual educational costs be included in income for Section 8 households. In such years, all educational expenses in excess of actual cost will be included in income - including assistance that is part of the HEA. However, in such years, for students who are over the age of 23 with dependent children, the HEA assistance will be excluded. Conclusion The exclusions noted in this article apply to all affordable housing programs that are required to follow HUD rules when determining annual income. This includes not only projects with HUD assistance but also LIHTC properties, Rural Development Section 515 projects, Tax-Exempt Bond Projects, Housing Trust Fund Projects, and HOME projects (in most cases). Owners and managers operating properties under these programs should familiarize themselves with these new income rules and be prepared to put them into effect on January 1, 2024.

2024 Social Security COLA Announced

The federal government announced on October 16, 2023, that the Social Security Cost of Live Adjustment (COLA) for 2024 will be 3.2%, which is significantly lower than the 8.7% increase for 2023. This increase will provide an additional $50 per month for the average retiree. Social Security recipients will receive a notice in the mail in early December showing their new benefit amount. Recipients will see an increase in their January 2024 payment. Those receiving SSI will see the increase on December 31, 2023. 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.

HOTMA Makes Significant Changes to Asset Rules

Navigating Changes in Asset Rules under the HUD Final Rule Implementing HOTMA Introduction In February 2023, the U.S. Department of Housing and Urban Development (HUD) published the Final Rule implementing the Housing Opportunity Through Modernization Act (HOTMA). Subsequently, on September 29, 2023, HUD released Notice H 2013-10, offering additional guidance and clarifications regarding the implementation of the Final Rule. Among the many alterations, significant changes pertain to the handling of assets for families residing in properties subject to HOTMA, impacting a broad spectrum of HUD-assisted properties, projects under the Rural Housing Service Section 515 program, the Low-Income Housing Tax Credit (LIHTC) program, and properties with Tax-Exempt Bonds. This article will delve into the essential changes in asset rules that affordable housing managers must acquaint themselves with. Asset Limitation HOTMA introduces a restriction on the eligibility of a family to receive assistance if the family possesses real property suitable for occupancy as a residence or has assets exceeding $100,000, adjusted annually for inflation. While this rule applies to new applicants, owners have discretion during recertification when enforcing the asset limitation on eligibility for assistance. HUD is expected to issue additional guidance concerning the use of this discretionary authority. Regarding assets, HUD provides clarification that net family assets do not encompass the value of "non-necessary" personal property items with a combined value of $50,000 or less, subject to annual inflation adjustments. Notably: Federal tax refunds or refundable tax credits are excluded from net family assets for 12 months after receipt. Non-revocable trusts are not considered assets if they are not controlled by a household member. The value of any "baby bond" account established, authorized, or funded by Federal, State, or local government is excluded as an asset. Necessary & Non-Necessary Personal Property Necessary personal property is exempt from net family assets calculations. Non-necessary personal property, exceeding a combined value of $50,000 (adjusted for inflation), is included in net family assets. Necessary personal property encompasses items essential for maintaining, using, and occupying the residence, supporting employment, education, health, and wellness. This category extends beyond mere essentials, including personal effects, convenient items, those assisting household members with disabilities, and reasonable accommodations for disability-related needs. Non-necessary personal property includes items such as campers, motorhomes, travel trailers, all-terrain vehicles (if not for day-to-day transportation), bank accounts, financial investments, recreational boats, expensive jewelry without religious or cultural value, collectibles, equipment not generating business income, and luxury items. Remember, if the total value of all non-necessary personal property is $50,000 or less, it is not combined with other assets for the $50,000 limit calculation. For instance, if someone owns real estate valued at $80,000 and non-necessary personal property worth $40,000, the total assets are $80,000. However, if the non-necessary personal property's value were $80,000, the total assets would be $160,000. Other Changes to Asset Rules HOTMA and the Final Rule now include "actual" income from assets in the income definition. This necessitates counting any actual income received as family income. Imputed income applies to assets exceeding $50,000 when no actual income can be computed. A key procedural change is introduced, where actual income is calculated for some assets, and imputed income is calculated for others with a combined value exceeding $50,000, effectively combining both income streams. Notably, financial assets like bank accounts with zero income (0% interest or no dividends) do not incur imputed income, whereas non-financial assets, like real property or non-necessary personal property, are subject to imputation. PHAs or owners may determine net family assets based on self-certification by the family, provided the assets do not exceed $50,000, and full verification is required every three years. However, LIHTC purposes may have different requirements for declarations, including the expected income from assets. The asset limitation rule, restricting assistance for families with real property suitable for occupancy or assets over $100,000, applies to various housing programs but not to the LIHTC program. Exceptions to the real property restriction exist, including disability-related needs, distance to work or educational institutions creating hardship, and properties posing health and safety risks. The $100,000 asset limitation does not apply to LIHTC properties. Retirement accounts recognized by the IRS are not counted as assets, and educational savings accounts are exempt as well. Owners have discretion in enforcing asset limitations during recertification, with additional HUD guidance expected. Conclusion The changes in asset rules under the HUD Final Rule implementing HOTMA have far-reaching implications for affordable housing managers. Understanding the nuances of asset limitations, necessary vs. non-necessary personal property, and imputed income calculations is vital for compliance. It's essential to note that these rules will come into effect on January 1, 2024, and operators of LIHTC properties and those with Tax-Exempt Bonds should consult with oversight agencies regarding potential implementation variations. As affordable housing stakeholders navigate these changes, thorough knowledge and adherence to the updated rules are imperative to ensure compliance and maintain the integrity of housing assistance programs.

HUD Issues New HOTMA Implementation Guidance

On September 29, 2023, HUD published Housing Notice 2023-10, Implementation Guidance: Sections 102 and 104 of the Housing Opportunity Through Modernization Act of 2016. The Notice contains implementation guidance for everything but the Section 104 asset limitation. HUD will provide additional guidance on the asset limitations at a later date.  HUD does affirm that the asset limitations will apply to the Section 202/8 program. While HOTMA does go into effect on January 1, 2024, HUD recognizes that PHAs and owners will need time to put all the new policies into place. The Notice provides guidance on these delayed timeframes, including the requirement that MFH owners (owners of Project-Based Section 8 properties and other properties governed by the HUD Office of Multifamily Housing) update Tenant Selection Plans and EIV Policies & Procedures by March 31, 2024. HUD also published a List of Discretionary Policies to Implement HOTMA. This identifies areas in which owners have policy discretion; owners must state in the Tenant Selection Plan how they will exercise such discretion. Owners and managers of impacted properties should obtain a copy of the Notice and the list of discretionary policies. We will be updating the HOTMA        training provided by A. J. Johnson Consulting Services to include this new guidance and will publish updates of the changes on our website.