News

New Software Available for Affordable Housing Properties

MRI Software has introduced MRI Affordable Housing, a property management and compliance software program for owners and managers of affordable housing and mixed-income portfolios. This software fully integrates with MRI s conventional multi-family property management and financial solutions. It is intended to simplify management of mixed portfolios and provide advanced reporting capabilities. The software may assist owners in managing layered projects with multiple subsidies and program requirements. It is designed to track compliance rules across multiple levels. It will also allow users to automate compliance for HUD multi-family, LIHTC, HOME, and USDA Rural Development projects. According to MRI, major features include: A comprehensive compliance engine that automates the resident certification process and permits easy data transmission;At-a-glance tenant files that provide quick access to household contact information, status, important notes, and tasks to be completed;Assistance Connect online portal integration that allows for self-service certification, application intake, payment, service requests and improved communication with applicants, residents, and owners;MRI Financials native integration which offers a single source for property and financial data;Process management dashboards to increase efficiency and workflow and highlight key performance indicators;Role-based dashboards that display a snapshot of work to be completed and actionable data insight; andCentralized reporting using MRI Report Gateway. This permits combined reporting on both conventional and affordable properties. From a practical standpoint, this software is designed to eliminate multiple entries for a household and provide quick access to information and tasks to be completed. Other benefits noted by MRI include more manageable online waitlists with better integration of eligibility data. The system also offers a way to complete background checks without leaving the software. Owners and managers currently exploring affordable housing software options may want to take a look at what this new package has to offer in order to determine what best meets their needs.

Winning Reasonable Accommodation Cases - Smoking Complaints

Every owner and manager of a housing development understands (or should understand) that disabled applicants and residents have the right to request that properties be modified (reasonable modifications) or that rules be changed or waived (reasonable accommodations) so that the disabled person has an equal opportunity to use and enjoy the housing. However, the law does not require that every request for an accommodation be granted. Requests may be denied if there is no need for the requested accommodation or if granting the request would impose an undue financial and administrative burden on the property or fundamentally alter how the property operates. In order to demonstrate that an owner has violated fair housing law by failing to grant an accommodation request, an applicant or resident must prove that: The request for a reasonable accommodation was made by or on behalf of an individual with a disability;The community knew - or was aware of - the disability (owners may verify disabilities that are not obvious);The request was necessary for the disabled individual to have an equal opportunity to enjoy the housing (i.e., there is an identifiable connection between the requested accommodation and the disability);The request was reasonable (owners should remember that even when a request is determined to be "unreasonable," the community should engage in an interactive process that examines alternative accommodations that would meet the needs of the disabled person and that are reasonable); andThe community denied the request. While owners often believe that any requested accommodation must be granted, this is not the case, as illustrated by a number of recent court cases. In this series of articles, I will examine court cases that have ruled against residents for requested accommodations relating to assistance animals, noise complaints, and smoking. This final article deals with the issue of whether a community has to ban neighbors from smoking in their units to accommodate another resident s asthma. Taccino v. Forest City Residential Management, West Virginia, June 2019 Facts of the Case A resident lived in a Section 8 building that banned smoking in common areas such as lobbies but permitted smoking in units.The resident, who had asthma, complained to the property manager that cigarette smoke was drifting into his unit.The property manager investigated the complaint but could not detect the smell of cigarette smoke in his unit or the hallways outside the unit.The resident submitted a reasonable accommodation request along with medical verification of his asthma.The request was approved and the community offered to relocate the resident to a different unit as a reasonable accommodation. The property manager told the resident they could not guarantee that he would not be exposed to cigarette smoke since other residents were permitted to smoke in their units.The resident sued the community. Decision: The court ruled in favor of the community and the resident appealed Appellate Decision: The Appeals Court also ruled in favor of the community. Reasoning The court ruled that the resident did not present any evidence that the community violated fair housing law.Only accommodations that are "reasonable" are required under federal fair housing law.In this case, the resident wanted a guarantee that he would never be exposed to cigarette smoke while in his unit.Since smoking in the apartments is allowed, the community could not make this guarantee.The resident argued that is certain circumstances, fair housing law requires landlords to modify their policies.However, the court ruled that the requirement of reasonable accommodation does not entail an obligation to do everything humanly possible to accommodate a disabled resident - both the cost to the community and the benefit to the resident must be considered.While the cost to the community would involve upsetting the expectations of the other residents, there was no proof that changing the policy would benefit the resident. This case demonstrates that housing providers are not required to immediately grant all requests for accommodations. Once a housing provider is aware of an individual s request for an accommodation, the provider has an opportunity to make a final decision, which necessarily includes the ability to conduct a meaningful review to determine whether the law requires the requested accommodation. There is certainly an industry trend to smoke-free housing, which got a big boost in 2018 when HUD issued a final rule requiring all public housing agencies to go smoke-free. HUD s final rule requires public housing authorities to implement smoke-free policies that ban the use of prohibited tobacco products in all public housing living units, indoor common areas in public housing, and in PHA administrative office buildings. Though the new rule applies only to public housing, HUD strongly encourages all multifamily housing owners and agents to implement smoke-free policies in all their properties. However, going smoke-free for non-public housing properties is not required under federal law.

Children in Common Areas - Fair Housing Settlement Shows Importance of Sound Policy

On July 23, 2019, the U.S. Department of Housing & Urban Development (HUD) approved a Conciliation Agreement between Meadow Ridge IV, LLC and ConAm Management Corp., the owner and manager of Meadow Ridge Apartments in Las Vegas, NV, and a resident, settling claims that the owner and manager discriminated against families with children by allegedly denying unsupervised children access to the property s common areas. The case came to HUD s attention when a mother residing at Meadow Ridge Apartments filed a complaint alleging that the property manager made her son and other children leave a recreational area of the complex after observing the children playing without the supervision of their parents. The woman s complaint further alleged that the owner and manager maintained an unwritten policy that children could not use common spaces without adult supervision. The owner and manager deny that they discriminated against the woman but agreed to settle the complaint. Under the terms of the agreement, the owner and manager will pay $5,000 to the mother and allow her, if she chooses, to terminate her lease after a 30-day written notice without penalty. They further agreed to (1) give the resident a neutral landlord reference; (2) ensure that all leasing and management staff who work with tenants at the property will attend a live fair housing training session; and (3) write a letter to all residents at the property stating that their policy is that children do not need to be supervised in the common areas. This agreement reiterates the importance of having sound community policies relative to use of common areas. It also makes clear the risk of "unwritten policies," which are not policies at all, but merely an arbitrary desire of the owner or management that may be imposed in a discriminatory way. If a policy is not in writing, it is not a policy! As for rules relating to children, safety rules are fine, but behavior rules should be avoided. Any "behavior" rules should be applied to all residents - not just children.

Housing & the 2020 Presidential Election

            Earlier this year, three Democratic presidential candidates - Senators Cory Booker, Kamala Harris, and Elizabeth Warren - released plans for solving the affordable housing crisis. Two more 2020 hopefuls, former HUD Secretary Julian Castro and Any Klobuchar have more recently released affordable housing plans. I have been involved in affordable housing at the national level since 1977 and have never since this much attention to the issue during a presidential campaign.             While virtually everyone agrees that housing costs - especially rents - are too high, there is no clear fix to the problem. In fact, in a time of hyper-partisanship, there is not even a clear partisan divide on the affordability crisis. While the Democratic hopefuls are staking out their territories on affordable housing, the Trump administration is in the process of developing its own plan, and sources familiar with the work say that it will be similar to the plan espoused by pro-growth progressives.             Lately, cities across the country have zeroed in on local land-use regulations as an answer to the affordable housing crisis. By lifting restrictive zoning codes, a strategy known as "upzoning," some cities and states hope to increase the supply of housing and encourage growth in racially segregated areas dense in amenities such as parks and quality schools. Minneapolis, MN is trying this approach and made news in December 2018 by eliminating single-family zoning.             No matter how hard they try, cities and states cannot solve the affordable housing crisis on their own. This is - and should be - the job of the federal government. With the Fair Housing Act of 1968, Congress set a policy that requires communities that receive federal housing funds to actively seek to end segregation - also known as "affirmatively furthering fair housing." Communities could do so by building affordable multifamily housing in wealthier areas (something strongly resisted in the wealthier areas). In the 50 years since, that policy has rarely been enforced. In fact, the Trump administration delayed a formal rule on the Affirmatively Furthering Fair Housing policy in 2018.             Zoning has been left to state and local governments, and until the recent trend in upzoning, those governing bodies have been content to let neighborhoods control the process. As a result, zoning rules are typically written by affluent white men who own homes, and for the benefit of wealthy white neighborhoods.             Zoning is the primary target for the Democratic presidential candidates who have released housing plans so far. Booker, Harris, and Warren have taken different approaches, using a combination of incentives and penalties, to encourage communities to increase their permitted development density. Their strategies are still evolving.             Booker favors the stick over the carrot. Previously, the Senator called for using federal Community Development Block Grants (CDBG) to persuade local governments to unlock exclusionary zoning codes. This would punish cities that use zoning to favor incumbent homeowners by denying them federal funds.             The problem with this approach is that CDBG dollars go to large cities and poor cities - not the suburbs that make the most use of exclusionary zoning. Congress cannot take federal dollars away from wealthy areas that do not receive those dollars in the first place.             But Booker s latest proposal uses a different strategy. His Housing, Opportunity, Mobility & Equity Act would link about $16 billion in various federal funds to local zoning restrictions - including Department of Transportation funding - and targets a much larger pool of money. While CDBG funding is still in the mix, under Booker s proposal, communities that do not move forward to create more affordable housing would risk losing money for roads. This gets the attention of even the wealthiest communities, since they all love the federal transportation dollars.             Both Booker and Harris are also promoting a tax credit for renters, which would be paid out monthly. Booker and Warren support features that address historical racial inequities: Booker wants to use "baby bonds" to bridge the racial wealth gap; Warren has designed a down-payment assistance program for historically redlined areas (i.e., those areas that have lagged behind the market in terms of development). So, why are the politicians now paying attention to affordable housing? Housing affordability has been a problem for poor people for decades. The key is that there are now enough middle-income voters affected by housing affordability in these large costly metro areas that politicians are starting to take notice.             To be successful, housing policy cannot be an "a la carte" menu. There must be a comprehensive, holistic approach that, with federal support, could lead to real movement in terms of affordable housing.             Many of the current candidates (at least on the Democratic side) are committed to expanding the Low-Income Housing Tax Credit (LIHTC) program, increasing rental housing vouchers, and lifting exclusionary zoning codes. All the senators that have heretofore released housing plans have those goals as primary elements of their proposals.             Low-income housing advocacy groups are pushing proposals that are unlikely to gain any mainstream traction, such as: Radical expansion of public housing;Rent stabilization; andFederal subsidization of model programs of collective homeownership In mid-July, Julian Castro rolled out his People First Housing program, a three-part plan to address rental affordability, housing discrimination, and homeownership. His plan would turn the Housing Choice Voucher program into a fully funded federal entitlement for very low-income households, ending waitlists for Housing Choice Vouchers by granting automatic aid to families who qualify. Castro also calls for the creation of a Presidential Committee on Zoning Reform, which would tap experts from HUD, as well as the Departments of Transportation, Justice, and the EPA.             Another reason for the new found interest in affordable housing is that it keeps coming up at forums and town hall meetings. When the voters speak, candidates tend to listen.             Clearly, the Democrats are calling for a lot of new spending on housing. But even if one of these plans comes to pass, housing will remain primarily the province of state and local government. It is subject to bitter local debates about how best to balance the needs of older, wealthier, white homeowners and those of younger, less affluent renters who are more likely to be black and brown.             Based on current reporting, the Trump administration is working on its own housing plan, a joint project between HUD and the Domestic Policy Council, the primary domestic policy forum for the White House. The scant information that has been released so far indicates that the plan will promote zoning deregulation and will not focus on addressing housing affordability specifically. Last August, HUD Secretary Ben Carson told The Wall Street Journal that his department was looking to tie HUD grants to less restrictive zoning. While this is a common theme among housing advocates, using the power of the HUD purse to push local governments to adopt less-restrictive zoning policies runs into a significant problem - few of the most exclusive communities receive enough in housing grants for withholding these funds to affect their decision-making. A more aggressive approach, such as that proposed by Senator Booker in the withholding of road and transportation funds so cherished by exclusive communities, unless they choose to be less exclusive - could tilt the potential for success in the direction of housing advocates.             However, if such a step is taken, all hell will break lose. There are already raging housing debates across the country with exclusive enclaves pushing back against progressive pro-growth zoning policies. Withholding federal transportation funds as a condition of zoning is sure to meet with concerted resistance in these communities.             Advocates for density, affordability, and solutions for homelessness hope that the 2020 election is an opportunity to elevate the profile of housing as a political issue. Democratic candidates are showing that they think housing is a key 2020 issue. As the campaign season wears on, I will be examining the housing plans of each of the candidates and will do my best to keep my readers informed of what is being proposed. One thing is certain, in 2020 - regardless of who is elected - affordable housing is likely to take its place as one of the nation s most significant issues; it is an issue those of us in the industry need to pay close attention to.

Winning Reasonable Accommodation Cases - Noise Complaints

Every owner and manager of a housing development understands (or should understand) that disabled applicants and residents have the right to request that properties be modified (reasonable modifications) or that rules be changed or waived (reasonable accommodations) so that the disabled person has an equal opportunity to use and enjoy the housing. However, the law does not require that every request for an accommodation be granted. Requests may be denied if there is no need for the requested accommodation or if granting the request would impose an undue financial and administrative burden on the property or fundamentally alter how the property operates. In order to demonstrate that an owner has violated fair housing law by failing to grant an accommodation request, an applicant or resident must prove that: The request for a reasonable accommodation was made by or on behalf of an individual with a disability;The community knew - or was aware of - the disability (owners may verify disabilities that are not obvious);The request was necessary for the disabled individual to have an equal opportunity to enjoy the housing (i.e., there is an identifiable connection between the requested accommodation and the disability);The request was reasonable (owners should remember that even when a request is determined to be "unreasonable," the community should engage in an interactive process that examines alternative accommodations that would meet the needs of the disabled person and that are reasonable); andThe community denied the request. While owners often believe that any requested accommodation must be granted, this is not the case, as illustrated by a number of recent court cases. In this series of articles, I will examine court cases that have ruled against residents for requested accommodations relating to assistance animals, noise complaints, and smoking. This second article deals with the issue of whether a community has to grant a resident s request to soundproof a unit. Poursaied v. Reserve at Research Park, LLC, Alabama, May 2019 Facts of the Case A resident filed a lawsuit alleging fair housing violations against Reserve at Research Park, an Alabama apartment community. The suit was filed just 19-days after the resident moved in.The resident alleged that she had been harassed and "criminally tortured" by noise at prior apartment complexes since 2006; that she was controlled by neighbors through noise; that noise caused her to fall in 2017 resulting in injuries; and that noise caused her to lose her job and flee her previous apartment in North Carolina.In the complaint against Reserve at Research Park, she alleged that its employees promised her a quiet, soundproof unit and failed to accommodate her disability.The community asked the court to dismiss the case, arguing that the resident failed to prove that she was disabled or that it failed to accommodate her due to a disability. Decision: The court ruled in favor of the community Reasoning The resident did not allege any facts demonstrating that she was disabled under fair housing law.She failed to show that she had any disability involving sensitivity to noise.Her complaint was not noise sensitivity or disability, but that the noises would be egregious or tortuous to anyone regardless of disability.The lease at the property did not provide any special provisions regarding disabilities or accommodations claimed by the resident.The resident provided no facts in her complaint as to what the community did or failed to do to accommodate her disability during the 19 days she lived at the property.She stated that when she complained to the property management she was told she could move out in 30-days or wait six months for another unit to become available. This demonstrated that the community did not refuse to accommodate her concerns.The resident wanted a soundproof unit and the only solution would be to discontinue living in an apartment since no apartment owner could make such a guarantee. This case demonstrates that housing providers are not required to immediately grant all requests for accommodations. Once a housing provider is aware of an individual s request for an accommodation, the provider has an opportunity to make a final decision, which necessarily includes the ability to conduct a meaningful review to determine whether the law requires the requested accommodation. The next article in this series will cover a case that answers the question as to whether a community has to ban neighbors from smoking in their units to accommodate a resident s asthma.

Family Members of Live-in Aides- New HUD Guidance

In the past, HUD guidance has indicated that family members of live-in aides could not reside with the aide in housing developments assisted under the HUD Multifamily Housing Division. This includes project-based rental assistance programs such as Section 8, as well as Section 811, Section 202 and other programs.  However, this has been "guidance" only and there is no statutory provision against permitting the family members of live-in aides to reside in a unit with the aide. In fact, HUD guidance for the Housing Choice Voucher program was that it was up to a Public Housing Agency (PHA) whether or not to permit the children of aides to live in a unit, but if they did so, the PHA could not provide a separate bedroom for the child. Recent guidance from HUD (July 2019) as part of the Section 811 Frequently Asked Questions (FAQ) section of the HUD website indicates that owners may in fact allow occupancy by family members of live-in aides. Here is the specific wording of the guidance: Question: Can a live-in aide have one of his/her family members reside in the unit (such as children, etc.); or, is only the live-in aide allowed to reside in the unit with whom he/she is providing care? Answer: Each individual property establishes its own occupancy standards which must be included in the Tenant Selection Plan. Although HUD provides some general guidelines, the decision is with the owner. There is no requirement that requires a live-in aide to have his/her own bedroom or room nor is there a restriction against a live-in aide having a child. When approving the live-in aide and/or live-in aide with a child, the property has to maintain compliance with the written occupancy standards of the property. Based on this new guidance, HUD is leaving it up to property owners as to whether or not to permit occupancy by family members of live-in aides. Background Allowing a Live-in Aide for a disabled person is both a HUD and fair housing requirement. The HUD definition of a live-in aide is a person who resides with one or more elderly persons, near-elderly persons, or persons with disabilities, and who: 1. Is determined to be essential to the care and well-being of the person(s); 2. is not obligated for the support of the person(s); and 3. would not be living in the unit except to provide the necessary supportive services. Requirement #1 essentially means that in order to have a live-in aide, a resident would have to meet the Fair Housing Act (FHA) definition of handicapped or disabled; otherwise, the aide would not be essential to the care and well-being of the resident. To qualify as a live-in aide: 1. The owner must verify the need for the live-in aide. Verification that the live-in aide is needed to provide the necessary supportive services essential to the care and well-being of the person must be obtained from the person's physician, psychiatrist, or other medical practitioner or health care provider. The owner must approve a live-in aide if needed as a reasonable accommodation under fair housing law to make the program accessible to or usable by the family member with a disability. The owner may verify whether the live-in aide is necessary only to the extent necessary to document that applicants or tenants who have requested a live-in aide have a disability-related need for the requested accommodation. This may include verification from the person's physician, psychiatrist, or other health care provider. The owner may not require applicants or tenants to provide access to confidential medical records or to submit to a physical examination. It should be noted that fair housing law prohibits verification of the need for a reasonable accommodation when both the disability and the need for the requested accommodation are obvious. If an owner/agent determines by observation that a resident is so clearly disabled as to require the services of an aide, the file should be clearly documented with regard to the reason why no professional verification was obtained. 2. Expenses for services provided by the Live-in Aide, such as nursing services (dispensing of medications or providing other medical needs) and personal care (such as bathing or dressing), that are unreimbursed out-of-pocket expenses for the tenant are considered eligible medical expenses for HUD purposes (this issue does not apply for purposes of the Low-Income Housing Tax Credit Program since there are no deductions from income). Homemaker services such as housekeeping and meal preparation are not eligible medical expenses. 3. The Live-in Aide qualifies for occupancy only as long as the disabled resident requires the aide s services and remains a tenant. The Live-in Aide may not qualify for continuing occupancy as a remaining family member, and under no circumstance should a Live-in Aide be converted to a household member. Owners should use a lease addendum (HUD approved in the case of a HUD property) that denies occupancy of the unit to a Live-in Aide after the tenant, for whatever reason, is no longer living in the unit. The addendum should also give the owner the right to evict the Live-in Aide if they violate any house rules. This may also be done through the use of a "Live-in Aide Agreement. 4. Income of a Live-in Aide is excluded from household income. 5. In a HUD property, the Live-in Aide must disclose and provide verification of their Social Security Number (SSN). 6. Live-in Aides should also be required to meet the property s screening criteria - other than credit and rent-paying history. The screening of Live-in Aides at initial occupancy and the screening of Live-in Aides to be added to an existing household should be the same. They should be screened based on the criminal screening procedures that the owner uses in screening applicants for housing. HUD properties should note that the EIV Existing Tenant Search is required for Live-in Aides. A relative may be a Live-in Aide if they meet the requirements stated above - especially #3. This also applies to HUD Section 202 PRAC and Section 811 projects, where adult children are not eligible to move into a unit unless they are performing the functions of a Live-in Aide and are classified as a Live-in Aide for eligibility purposes. Live-in Aides must be counted for the purpose of determining appropriate unit size, i.e., a Live-in Aide is entitled to their own bedroom. However, if a unit with a separate BR for the aide is not available, the aide should not be denied occupancy as long as permitting such occupancy does not overcrowd the unit under state or local law. If a larger unit becomes available and the tenant requests a transfer to such unit, the owner is obligated to permit the transfer as a reasonable accommodation. However, there is no obligation to charge only the rent that would be charged for the smaller unit. In the case of HUD-assisted properties, a Live-in Aide may never be considered a dependent. When permitting a Live-in aide to reside it a unit as a reasonable accommodation, owners and managers should be certain that the file clearly documents the status of the aide. It is also recommended that Live-in Aides be included on the Tenant Income Certification (TIC), but they should not be permitted to sign the TIC. Also, other than on the Live-in Aide addendum to the lease, an aide should never be listed on a lease - not even as an occupant. Recommendations Relating to Family Members of Live-in Aides If an owner decides to permit family members of live-in aides to reside in a unit with the aide, I recommend the following policies be added as part of the project occupancy policies: Do not prohibit occupancy by family members of live-in aides, but stipulate that the only family members that may reside in the unit with the aide are children of the aide or a current spouse of the aide;Children of the aide should be under age 18 unless they are a full-time student;HUD properties should only provide a bedroom for the aide - not for a child or spouse;Any spouse of an aide or full-time student child age 18 or over should sign the Live-in Aide Agreement, and the agreement should list all members of the Aide s family that will live in the unit. The Agreement should specifically state that none of the family members of the Aide have a right to occupy the unit if the Aide is not living in the unit;Screen all family members of the aide that are age 18 or over in the same manner as applicants/residents are screened, except for credit and rent-payment history;List only the Live-in Aide on the Tenant Income Certification - no members of the Aide s family should be shown (the Aide should not sign the TIC);Do not show the aide or any members of the aide s family on the lease - even as an occupant;If the project is a senior property that does not rent to families with children, children of an Aide should not be permitted to live in the unit; andDo not exceed the property occupancy standards (e.g., two people plus one per bedroom). Summary While HUD does not prohibit an owner from not allowing family members of aides to reside in a unit, this guidance indicates that in the case of a fair housing challenge regarding such a policy, HUD policy may not be used as a defense. It is certainly predictable that a disabled resident in need of a live-in aide will request that a family member of the aide be permitted to reside in a unit as part of a reasonable accommodation request. Such a request may well have to be granted if the chosen aide has a child and cannot reasonably be expected to live apart from their child; the same could be said for a spouse. For this reason, I recommend a revision to any current occupancy policies that prohibit occupancy by family members of live-in aides.

Winning Reasonable Accommodation Cases

Every owner and manager of a housing development understands (or should understand) that disabled applicants and residents have the right to request that properties be modified (reasonable modifications) or that rules be changed or waived (reasonable accommodations) so that the disabled person has an equal opportunity to use and enjoy the housing. However, the law does not require that every request for an accommodation be granted. Requests may be denied if there is no need for the requested accommodation or if granting the request would impose an undue financial and administrative burden on the property or fundamentally alter how the property operates. In order to demonstrate that an owner has violated fair housing law by failing to grant an accommodation request, an applicant or resident must prove that: The request for a reasonable accommodation was made by or on behalf of an individual with a disability;The community knew - or was aware of - the disability (owners may verify disabilities that are not obvious);The request was necessary for the disabled individual to have an equal opportunity to enjoy the housing (i.e., there is an identifiable connection between the requested accommodation and the disability);The request was reasonable (owners should remember that even when a request is determined to be "unreasonable," the community should engage in an interactive process that examines alternative accommodations that would meet the needs of the disabled person and that are reasonable); andThe community denied the request. While owners often believe that any requested accommodation must be granted, this is not the case, as illustrated by a number of recent court cases. In this series of articles, I will examine court cases that have ruled against residents for requested accommodations relating to assistance animals, noise complaints, and smoking. This first article deals with the issue of whether a community has to permit a resident to keep a dangerous assistance animal. Borenstein v. Nellis Gardens, Nevada, May 2019 This case makes it clear that dangerous animals do not have to be permitted as assistance animals if there is proof that the animal presents a direct threat to other residents. Facts of the Case A resident had a service dog and lived in the community for several years with no issues.The dog died, and the resident obtained another service dog of the same breed.The community provided evidence that the replacement dog lunged at residents, chased children and dogs, and bit at least one other dog.The resident refused requests to muzzle the dog.The community started eviction proceedings due to the resident s failure to control the dog, and the state court ordered eviction of the tenant.The resident then filed suit in federal court.Based on the resident s allegations that the community was evicting him because of the service dog, the court granted a temporary hold on the eviction pending a hearing.The court ordered the resident to muzzle the dog until the hearing.The resident did not comply with the court order and admitted that he took the dog outside without a muzzle.The federal court ruled in favor of the community. Reasoning According to the court, the community had initiated the eviction proceedings because of his failure to control the new dog - not due to the resident s disability or his use of a service animal.It was not reasonable to require the community to accommodate a service animal that displayed aggressive and dangerous behavior toward other residents. This case reiterates what other similar cases have shown - under fair housing law, communities may deny a request for an assistance animal if the specific animal would pose a direct threat to the health and safety of others - or would cause substantial physical damage to the property of others, and the risk cannot be reduced or eliminated by another reasonable accommodation. The next article in this series will cover a case that answers the question as to whether a community has to soundproof a unit due to a claim of excess noise.

IRS Chief Counsel Memorandum Takes Hard Line on LIHTC Common Area Noncompliance

An IRS Chief Counsel Memorandum issued on May 22, 2019 takes a hard line regarding the noncompliance of common area for purposes of 42 Low-Income Housing Credit. The memo was prepared by the Office of Associate Chief Counsel (Passthroughs and Special Industries) in response to a request for clarification from an IRS Program Manager for Technical Issues. While this is an IRS internal document, and cannot be cited as precedent, it does provide clear guidance regarding how the IRS may approach the issue of common area noncompliance during an audit, or as a result of the issuance of an 8823 by a Housing Credit Agency (HCA). Clarification was requested relating to three issues: Should the noncompliance of a common area in a qualified low-income building, based on a failure of the inspection standards under 1.42-5(d) of the Income Tax Regulations or any requirements under 42, be treated as a change in the eligible basis of the building in the taxable year in which the noncompliance occurs?If the noncompliance of a common area in a qualified low-income building is treated as a change in the eligible basis of the building in the taxable year in which the noncompliance occurs, for purposes of determining if recapture under 42(j) is appropriate, is the change a reduction in the amount of the total costs attributable to the specific common area that was included in the eligible basis of the building, or in the amount of the costs attributable only to the noncompliant portion of the common area?As an alternative, should the noncompliance of a common area be treated as a change in the applicable fraction of the building, as if one of the low-income units located the closest to the non-compliant common area was out of compliance? The IRS concluded "yes" for issue #1. Common area violations are an eligible basis issue. Issue #2 is where the IRS has taken a very hard line. As stated in the Memo, "For purposes of determining recapture under 42(j), a change in the eligible basis of a qualified low-income building is a reduction in the eligible basis of the building in the amount of the total costs attributable to the specific common area that was included in the eligible basis of the building. The reduction in the eligible basis is not the amount of the costs attributable only to the portion of the noncompliance common area." Issue #3, was addressed with a straightforward "no." Noncompliance of a common area should not be treated as a change in the applicable fraction of a building. Detailed Analysis of the IRS Position Issue One Common areas in a LIHTC project are residential rental property if functionally related and subordinate to the qualified LIHTC building or project. Under 42(d)(4)(A) and (B), the eligible basis for a LIHTC building includes the adjusted basis of the property used in common areas or provided as comparable amenities to all residential rental units in the building. Therefore, if a common area of a LIHTC building is non-compliant under the inspection standards or any other requirements under 42 during the compliance period, and if the noncompliance is uncorrected as of the close of the taxable year in which the noncompliance occurs, the noncompliance should be treated, in the taxable year in which the noncompliance occurs, as a change and reduction in the eligible basis of the building. Note the use of the term "or any other requirements." This indicates that violation of any requirement relative to common area - such as charging a fee for use of the area - will also result in a reduction in eligible basis. Issue Two In the event of a reduction in eligible basis due to noncompliance in a common area, recapture under 42(j) may be triggered. The eligible basis is the adjusted basis that was determined as of the close of the first year of the credit period. The reduction in the eligible basis is not limited to the amount of the costs attributable to only the portion of the non-compliant common area that was included in the eligible basis of the building. Instead, the eligible basis of the building is reduced by the amount of the total costs of the specific common area that caused the noncompliance. The memo provides the following example to illustrate how this will work: A qualified low-income building contains multiple common areas. One of the common areas is a laundry room for use by all tenants of the building without additional charge. The laundry room contains 20 laundry machines. For purposes of the LIHTC under 42, the costs of the entire laundry room ($40,000), and those of the 20 laundry machines ($10,000), were included in eligible basis (a total of $50,000) as of the close of the first year of the credit period. In June of Year 3, during the compliance period, the HCA inspected the building and discovered that ten of the laundry machines were not properly functional and, therefore, the common area (the laundry room) was deemed noncompliant. The HCA gave the owner 90 days to correct the noncompliance, but the noncompliance was not corrected and remained uncorrected at the end of Year 3. Therefore, in year 3, there is a reduction in eligible basis in the amount of the total costs of the laundry room that were included in eligible basis ($50,000), because the laundry room was noncompliant. The reduction is not limited to the amount of the costs attributable to the nonfunctional laundry machines ($5,000).Also, if the adjusted basis of the common area is allocated to the eligible basis of one or more buildings in the project for credit calculation purposes, such as a carport that is for use by all of the tenants of a qualified multi-building LIHTC project, the reduction in the eligible basis of the buildings will be allocated among the buildings. This position indicates that if even a relatively small area of a common area is noncompliant, the eligible basis for the entire area is lost. For example, one parking space in a parking lot that cannot be used due to the condition of the space could result in the loss of eligible basis for the entire parking lot. Issue Three Treating the noncompliance of a common area as if one of the low-income units located closest to a noncompliant common area was out of compliance is not a valid alternative, since it does not properly and accurately account for the change caused by the noncompliance of a common area. Reporting the Noncompliance If common area noncompliance is discovered by the HCA, the memorandum states that the HCA should check both box 11c (violation of UPCS standards [if the violation is an inspection standard violation]), and box 11e (reduction in eligible basis) on the 8823. Conclusion This is unwelcome guidance. While we have always known that violations of the rules relating to common area could result in credit loss and recapture, it has been common practice to allocate the basis reduction to the area of the common area that was affected by the noncompliance, often using a square foot calculation. This memorandum suggests that such an approach may not be acceptable to the IRS and that any violation of common area rules may result in a loss of the entire common area from eligible basis. This is just one more reason why owners and managers must ensure that common areas remain in sound physical condition and that the rules relating to the use of common area are carefully followed.