News

Small Area Fair Market Rents (SAFMRs)

Small Area Fair Market Rents (SAFMRs)   HUD publishes fair market rents for all areas of the nation. Public Housing Agencies (PHAs) use fair market rents as a guideline when determining payment standards for the Housing Choice Voucher (HCV) program. Usually, the payment standard must fall within a range of 90% to 110% of FMR. Any rents outside this range require HUD approval.   Fair Market Rents have historically been developed for three types of areas: Metropolitan Statistical Areas (MSAs): These are large metropolitan areas made up of one or more counties; HUD Metropolitan Fair Market Rent Areas (HMFAs): These are MSAs that have been divided into smaller areas by HUD; and Non-Metropolitan Counties.   On November 16, 2016, HUD published a final rule implementing small area fair market rents (SAFMRs). This new category of fair market rents is designed to improve housing access for voucher residents. The new rule will give voucher residents access to high opportunity areas with lower poverty rates.   The SAFMR is developed on a ZIP-code basis and PHAs in these areas are required to use the SAFMR when determining the HCV payment standard. HUD has specific selection criteria that must be used when determining the areas that are required to use the SAFMR:   Number of HCV s under lease; Vacancy rate of an area; Number of units in a ZIP code where the SAFMR is more than 110% of the area-wide FMR; and Percentage of voucher holders living in concentrated low-income areas relative to all renters within these areas over the entire MSA.   Beginning in fiscal year 2018, 24 areas will be required to implement the SAFMR:   Atlanta-Sandy Springs-Marietta, GA HUD Metro FMR Area; Bergen-Passaic, NJ HUD Metro FMR Area; Charlotte-Gastonia-Rock Hill, NC-SC HUD Metro FMR Area; Chicago-Joliet-Naperville, IL HUD Metro FMR Area; Colorado Springs, CO HUD Metro FMR Area; Dallas-Plano-Irving, TX Metro Division; Lauderdale-Pompano Beach-Deerfield Beach, FL Metro Division; Worth-Arlington, TX HUD Metro FMR Area; Gary, IN HUD Metro FMR Area; Hartford-West Hartford-East Hartford, CT HUD Metro FMR Area; Jackson, MS HUD Metro FMR Area; Jacksonville, FL HUD Metro FMR Area; Monmouth-Ocean, NJ HUD Metro FMR Area; North Port-Bradenton-Sarasota, FL MSA; Palm Bay-Melbourne-Titusville, FL MSA; Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA; Pittsburgh, PA HUD Metro FMR Area; Sacramento-Arden-Arcade-Roseville, CA HUD Metro FMR Area; San Antonio-New Braunfels, TX HUD Metro FMR Area; San Diego-Carlsbad-San Marcos, CA MSA; Tampa-St. Petersburg-Clearwater, FL MSA; Urban Honolulu, HI MSA; Washington-Arlington-Alexandria, DC-VA-MD HUD Metro FMR Area; and West Palm Beach-Boca Raton-Delray Beach, FL Metro Division   These 24 areas (representing 18 states) contain 368,000 HCVs, which is 18% of all HCVs in the United States. Increased rent levels in these SAFMRs will allow vouchers to pay a higher payment standard, increasing opportunities for voucher holders.   Since the SAFMR will better match the rent in each ZIP-code, HCV rents in some ZIP-codes will go down. This is because the FMRs in certain ZIP-codes were raised by the overall rents in the MSA. As a result, some voucher holders will see a decrease in the payment standard. There is some relief provided by the rule however. If the SAFMR decreases, the PHA does not have to lower the payment standard until the second regular recertification following the effective date of the decrease in the payment standard. Also, the decrease is limited to no more than 10% of the prior year amount.   Examples of areas affected by this change include: San Diego - the downtown area and northern coastal areas of San Diego will have increases in payment standards, but the majority of the inland areas will have decreases; Atlanta - Northern Atlanta will have increases in payment standards but the southern urban areas will go down; and Washington/Northern VA - except for the east side of DC, most of Washington will see increases in the payment standard. Southeast DC will suffer significant decreases and the VA suburbs will also see decreases in payment standards.     Project-Based Vouchers (PBVs)   PBV projects are exempt from the SAFMR requirements. However, PHAs that use SAFMR can use SAFMR for new PBV projects and for existing PBV projects if the owner and PHA mutually agree. Once a PBV project elects to use SAFMR, it cannot revert back to area-wide FMRs.   Impact on LIHTC Properties   LIHTC properties are allowed to collect the full HCV payment standard, even if the payment standard exceeds the maximum allowable LIHTC rent. This could be a significant benefit in the SAFMR areas since the allowable rents for HCV residents could go up. However, as noted earlier, in some ZIP-codes, the payment standards will decrease, and when that happens, the amount collected by LIHTC projects may also go down.   If the payment standard goes below the allowable LIHTC rent, owners will have some decisions to make. The HCV regulations permit residents to pay up to 40% of income when they move in if the rent on the unit is greater than the payment standard. However, if this 40% of income payment still does not come up to the allowable LIHTC rent, owners will have to decide whether to take a lower rent than permitted by the tax credit regulations or decline the voucher resident. While LIHTC properties may not refuse to accept voucher residents simply on the basis of the resident having a voucher, the properties are not required to accept rents lower than the amount collected from non-voucher residents.    

Occupancy Rights of Domestic Violence Victims Who Are Not the Eligible Voucher Holder

Reminder to PHAs: Domestic Violence Victims May Have Occupancy Rights Even if They are not the Eligible Tenant Under the Voucher Program   A recent court case (A. S. v. Been, January 2017) serves as a reminder to PHAs that victims of domestic violence have VAWA protection even if the perpetrator of the violence is the eligible tenant.   In this case, a Section 8 voucher resident claimed that her husband attempted to rape her. She obtained an Order of Protection and submitted a HUD-91066 form to the PHA to initiate a lease bifurcation action in accordance with VAWA.   The husband was the holder of the voucher and the victim sought to have the voucher transferred to her name.   After a number of hearings and procedures, the PHA terminated the husband s voucher with no mention of a process to appeal the decision. The wife filed suit to force the PHA to transfer the voucher and the PHA asked the court to dismiss the case. The PHA s reasoning was that since the voucher was not in the wife s name, she had no protected property interest. The wife argued that VAWA establishes that she had a protected property interest.   A New York district court denied the PHA request and ordered a trial. The court s reasoning was: The PHA is subject to VAWA; VAWA allows a victim the opportunity to seek eligibility to receive the voucher if the PHA terminates the husband s voucher; VAWA expressly provides for a bifurcation procedure to protect victims of domestic violence; VAWA s bifurcation procedure allows PHAs to terminate assistance to any individual who engages in domestic violence without "penalizing a victim of such criminal activity who is also a tenant or lawful occupant of the housing." The statute also states that if the individual who is removed due to the perpetration of domestic violence is the "sole tenant eligible to receive assistance under a covered housing program," the PHA "shall provide any remaining tenant an opportunity to establish eligibility for the covered housing program;" and The court indicated that the law gives occupants of a unit who are not the voucher holders themselves some interest in the voucher.   The conclusion here is that lawful occupants of a unit assisted through the voucher program are protected by VAWA, including the lease bifurcation provisions.

Owner Verification Procedures When Noncitizens Claim VAWA Protection

Verification Procedures When Noncitizens Claim VAWA Protection   On December 15, 2016, HUD issued a General Counsel Memo. This memo relates to noncitizen "self-petitioner" procedures under the Violence Against Women Act (VAWA), and applies to public housing, Housing Choice Vouchers (including project-based vouchers), Section 8 Project-based assistance, Section 236 rental assistance, Rent Supplement, Flexible Subsidy and Section 221(d)(3) BMIR programs. VAWA self-petitioners are those who claim to be victims of "battery or extreme cruelty." Battery or extreme cruelty includes domestic violence, dating violence, sexual assault, and stalking. VAWA allows these noncitizens to self-petition for Lawful Permanent Resident (LPR) status without the cooperation of knowledge of their abusive relative. Section 214 of the Housing & Community Development Act of 1980 states that HUD may not allow financial assistance to ineligible noncitizens. However, assistance cannot be denied while immigration status is being verified. Self-petitioners can indicate that they are in "satisfactory immigration status" when applying for assistance or continued assistance from Section 214-covered housing providers. This is basically a self-certification of legal immigration status. Owners will make a final determination of immigration status through the Systematic Alien Verification for Entitlements (SAVE) System. Not every noncitizen victim who has been subjected to domestic violence will qualify under these procedures. In order to qualify, the noncitizen victim must have been battered or subjected to extreme cruelty by a spouse or parent, who is a U.S. citizen or lawful permanent resident (LPR). In other words, if the perpetrator is not a U.S. citizen or LPR, the victim may not claim VAWA protection. Once an owner receives a self-petition (INS Form I-360 or I-130), or INS Form 797, the owner must obtain the following information in order to complete the verification: Initiate verification in the SAVE system by Entering self-petitioners name; Enter alien ID number; and Date of birth. The system will provide one of the following responses: If there is a match, no further action is necessary; or "No match," in which case the owner must go to step 2.   Push button "Institute Additional Verification." Then type, "verify VAWA self-petition. If the applicant provided a Form I-130, type, "verify I-130." Upload one of the following documents for the applicant: I-360 VAWA Self-Petitioner; I-130 Family Based Visa Petition; I-797 Notice of Action; or Steps Undertaken by DHS: Receipt of I-130 or I-360, prima facie determination, or approval of self-petition. The SAVE system will show one of two confirmations: VAWA self-petition is verified, in which case the applicant is immediately eligible for housing and no evidence of domestic violence may be requested or collected; or The I-130 is verified, in which case the petitioner must provide to the owner evidence of "battery or extreme cruelty."   Until a final determination of LPR status is made, housing assistance and full VAWA protection must be granted to the self-petitioner. If the final determination is to deny the VAWA self-petition or LPR petition, the owner must notify the petitioner and take action to terminate voucher assistance or evict the petitioner from public housing.   It is expected that both the HUD Office of Public and Indian Housing and the Office of Housing will publish notices in the near future outlining details on how to comply with the general counsel guidance.

Determining the Income of Independent Contractors

Determining the Income of Independent Contractors   It is becoming more and more common for managers of affordable housing to have to verify the income of "gig" workers. Sometimes called "giggers," these are people who work out flexible work arrangements to provide services for one or more employers for a specified amount of time at an agreed upon rate. Examples of such contractors include Uber, Lyft, and TaskRabbit. This is a website that matches people with specific needs (e.g., running errands, assembling furniture, packing boxes) with people willing to do the work.   These contractors can make varying amounts of money from week-to-week and month-to-month. These non-traditional jobs can present verification challenges to managers.   While "temporary, nonrecurring, and sporadic" income should not generally be counted, income from ridesharing or freelance jobs is different. If these jobs are expected to continue, the income is considered "cyclical" as opposed to temporary, sporadic, and nonrecurring, and should be counted.   Documentation of Self-Employment Income   Gig drivers (e.g., Uber and Lyft) should be treated as self-employed. Self-employed individuals are required to keep track of all income and expenses - net income should be counted for housing purposes. For ridesharing drivers, allowable expenses include tolls, parking fees, maintenance, gas, and loan interest on the purchase of the vehicle. Managers should request driving logs and other documents to support vehicle expenses. This is especially important if the vehicle is used for both business and personal reasons.   A primary source of verification of self-employment is tax returns, including the Schedule C. Managers should be aware that if a self-employed individual makes $400 or more per year, the filing of a federal tax return is required.   For rideshare drivers, managers may also request a summary of payments from the rideshare company. All such companies can provide these summaries. Managers may use this summary, along with the household members Affidavit of Self-Employment, to develop an estimate of income.   For HUD projects, when no financial information is available, a notarized statement of net income may be accepted. In these cases, I recommend the self-employed individual be told that his or her income will be re-examined in 60 to 90 days and that at that time they must present legitimate income and expense documents. HUD managers may then conduct an interim recertification if there has been an increase in the income noted on the self-affidavit of $200 or more per month. It should be noted that if the income has decreased by $40 or more per month, the resident may request an interim.   Managers should not deduct accelerated depreciation of assets - only straight line depreciation may be deducted for housing purposes. If accelerated depreciation is used, an accountant s determination of the straight-line amount should be obtained.   Projecting Income When "Current Circumstances" is not the Best Indicator of Probable Income   When it is clear that a person s current circumstances are not the best estimate of likely income, HUD guidance says "to make a reasonable judgment as to the most reliable approach to estimating what the household member will receive during the year." This gives managers discretion as to the best approach to use. A review of historical earnings is often a good method. Also, if there is a legitimate reason for a reduction in income, don t automatically discount it.   On HUD projects, plan for interims. People with irregular employment are likely to experience unexpected and drastic income changes.   Ultimately, managers will have to use discretion in how the income of these gig workers will be determined, but remember - this is a type of income that must be counted.  

VAWA Deadline Reminders

VAWA Deadline Reminders   As I noted in a prior client memo, HUD has released four Model forms for use on HUD properties to ensure compliance with requirements of the Violence Against Women Act (VAWA). These model forms are Appendix A: Notice of Occupancy Rights Under the Violence Against Women Act (HUD Form-5380); Appendix B: Model Emergency Transfer Plan (HUD Form-5381) Appendix C: Certification of Domestic Violence, Dating Violence, Sexual Assault, or Stalking and Alternate Documentation (HUD Form-5382); and Appendix D: Emergency Transfer Request Form (HUD Form-5383).   Any of these forms may be modified but must retain the same information and language. I recommend using the forms as published, without alteration, for HUD properties that are subject to the HUD final rule.   There are some important deadlines associated with the use of these forms. Notice and Certification form (HUD Form-5380 and 5382). Between now and December 15, 2017, each household must be given these forms. The forms should be provided to every household that moves in, as well as households at lease renewal or annual recertification. If there will not be an annual recertification or lease renewal between now and December 15, 2017, owners/agents should make sure that a copy of each form is given to the households. I recommend hand delivery of the forms to the residents at their apartments, and ask that they sign an acknowledgement of receipt. Beginning December 16, 2017, these two forms must be provided at move-in or when assistance is denied. I do not recommend waiting until this date to begin providing the forms to move-ins and those denied assistance. I recommend beginning this process now. Providing the forms to persons on the waiting list is not Emergency Transfer Plans must be fully implemented by June 14, 2017; so, owners/agents have four months to get these plans in place. If you are going to require tenants to provide a written request for an emergency transfer, all tenants should be given a copy of the Emergency Transfer Request Form (HUD Form-5383).   HUD is planning to update the Form HUD-91066 for multifamily programs, but until they do, owners/agents of properties under HUD s Office of Multifamily Housing should use the HUD Form-5382.

Using PHA Income Verification for Section 8 Voucher Residents on LIHTC Projects

IRS Regulation 1.42-5 states that the requirement to verify the income of a low-income resident with a Section 8 voucher at a tax credit property is satisfied "if the public housing authority provides a statement to the building s owner declaring that the tenant s income does not exceed the applicable income limit under Section 42(g)." Based on an exact reading of this language, the verification does not have to state a specific income - it only needs to state that the household income does not exceed the qualifying income limit. However, this creates potential problems when certifying the income of households, since residents are required to sign a tenant income certification stating a specific income. The IRS 8823 Guide states that a tenant income certification and supporting documentation are not sufficient unless, at a minimum, the following documents are included: Application/Income and Asset Questionnaire - a document completed by the household that the owner uses to gather information relevant to establishing all aspects of eligibility, including, but not limited to, household composition, income, income from assets, and student status. Verification of Income and Assets - All sources of income and assets must be verified to establish move-in eligibility. Each tenant file must contain an annual statement of income, household composition, and student status. Student Status (if required). Tenant Income Certification - Documents must be signed by all the adult members of a household prior to move-in and at the time of the annual recertification, and must state the anticipated annual gross income of the household. Based on #4, tenant income certifications must state a specific amount of income. If the PHA verification does not provide a specific amount, what amount should be shown on the certification? The IRS has not addressed this issue, so it is left up to the States. Most (if not all) State agencies require that income verifications, including those from PHAs, state a specific income. Theoretically, a HFA could permit the resident to self-certify income on a TIC as long as there was a PHA verification stating that the income did not exceed the maximum. However, since all income shown on a TIC must generally be verified, this type of self-certification would probably not be acceptable to most agencies. Our recommendation is that when accepting verifications from PHAs regarding the income of voucher residents, owners should request that the PHA provide the exact income that was verified for the resident. Only in cases where HFAs have specific written policies permitting an owner to accept PHA verification that income does not exceed the qualifying limits should such verification be accepted.

Notice H 2016-18, Automating Capital Needs Assessments

HUD published Notice H 2016-18 on December 30, 2016, "Implementation of the CNA e Tool: Automating Capital Needs Assessments (CNA), and Related Policy Changes." The Notice introduces new Capital Needs Assessment tools, and consolidates and aligns due diligence methods for CNAs. These tools are optional at this time, but will become mandatory in the future. Background In 2010, the Domestic Policy Counsel convened the Rental Policy Working Group (RPWG) that included the Departments of Treasury, Agriculture, and HUD to align their policies and practices applicable to multifamily housing projects. RPWG recommendations were published in 2011 and included a proposal to create a standard, automated, electronic template and process for CNAs for use by various agencies and programs, and available for use by all multifamily industry participants. The CNA e Tool and training and technical assistance resources for users are released in conjunction with this Notice and will continue to be developed by HUD. The Tool and associated components can be found at the CNA e Tool home page: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/can Implementation of the Tool for HUD Programs The Notice describes: The implementation schedule for optional use, then mandatory use, of the CNA e Tool; Which HUD programs will use the Tool; System user access credentials and methods; and Training and self-help resources, technical assistance and help desk resources that are available to users. Calendar for Implementation All program participants and their CNA providers are encouraged to begin using the CNA e Tool for preparation of CNAs submitted to HUD beginning on January 15, 2017. All CNAs submitted to HUD on or after July 1, 2017, must be submitted through the CNA e Tool in order to be an acceptable CNA. Applicability to HUD Programs This Notice does not apply to any Public Housing Authority (PHA) except those for the RAD program. On or after July 1, 2017, CNAs are required to be submitted using the CNA e Tool for the following programs: Refinance/Acquisition Section 223(a)(7) & 223(f); Substantial Rehab less than gut rehab Sections 220, 221, & 231; New Construction or Substantial Rehabilitation (gut rehab) Sections 220, 221, 231; Supplemental Loans Section 241(a); Mark to Market Restructuring; RAD - Rental Assistance Demonstration without insured mortgage financing; Ten-year update CNAs for assets with insured mortgages; Partial payment of claims or Loan Modifications; and Section 202-811 with PRAC assistance, but not an insured mortgage transaction. Owners with projects falling in these categories should obtain a copy of the Notice and begin the process of understanding and using the CNA e Tool.

Costs and Burdens Relating to VAWA

The cost of implementing the VAWA 2013 requirements can be significant. The HUD final rule provides guidance on who will bear the cost of implementation. One issue is who bears the cost if a property is damaged due to a VAWA-related incident. The final rule lacks clarity and simply states that the means for recuperating costs for damages will vary depending on the HUD-covered program. HUD also states that while implementation of these new rules will increase costs to housing providers, there will be no increase in funding to offset the additional expenses. Basically, the law creates an "unfunded mandate" on covered housing providers. At least one section of the final rule is clear with regard to the cost of emergency transfers. While covered housing providers are "encouraged" to pay for or assist with the cost of emergency transfers, there is no requirement that they do so.   Issue: Can a tenant or applicant terminate a lease for VAWA related reasons? The answer is yes - the VAWA lease term/addendum must provide that the tenant may terminate the lease without penalty if a determination is made that the tenant has met the conditions for an emergency transfer.   Issue: What are the rights of Limited English Proficient (LEP) victims under VAWA? Executive Order 13166 directs all federal agencies to ensure that programs receiving federal assistance provide meaningful access to LEP persons. Covered housing providers are required to follow the Executive Order, but are not required to go beyond that order. Required steps may include providing oral interpretation services, hiring bilingual staff, and providing notices of LEP services.   Issue: To what extent to VAWA protections to mixed status immigrant families? There are no special protections for mixed status immigrant families.   Issue: Are lease violations unrelated to domestic violence affected by VAWA? No - housing providers may evict or terminate assistance to a victim of domestic violence for a lease violation not related to domestic violence. There must be a connection between the alleged violation and domestic violence to trigger VAWA protections.   Issue: Confidentiality Requirements are not outlined in detail by HUD. Will more guidance be given? Issues that HUD has not addressed with regard to confidentiality include: How to maintain an auditable trail while also protecting the privacy of details of a tenant s status; Whether VAWA documentation should be retained separately from the tenant file; and How actions such as transfers should be documented.   HUD has indicated that they will take steps to ensure that housing providers understand their obligations with respect to maintaining confidentiality. We do know at this point that no confidential information may be placed in a shared data-base without a request or consent in writing by the individual. There is no specific exception for disclosure to law enforcement or government agencies. Where disclosure of the fact that someone is the victim of a VAWA crime is necessary to secure VAWA protections, the individual requesting the protections may consent to the disclosure.   Issue: In the case of Housing Choice Vouchers, do the confidentiality provisions apply to the PHA or the property owner? The answer is - both. Neither the PHA administering the voucher nor the owner of the property using the voucher may violate the confidentiality provisions of VAWA.   Issue: Where must VAWA-related documents be kept? The final rule does not require housing providers to maintain VAWA-related documents in a particular location. Housing providers should determine the best strategy for maintaining confidentiality in accordance with VAWA 2013.   Issue: Will program specific regulations include VAWA confidentiality provisions? No - such a prohibition could limit a PHA from providing other landlords and owners with relevant and necessary information about a tenancy that is unrelated to a VAWA crime.   Issue: Are tenants in HOME-assisted units covered by VAWA? For project-based HOME assistance, the assistance may be in the form of operating assistance, development assistance, and mortgage interest rate subsidy. VAWA requirements apply to "all HOME tenant-based rental assistance and rental housing assisted with HOME funds." Rental housing assisted with HOME funds is rental housing that has been newly constructed, acquired, or rehabilitated with HOME funds. When HOME assistance is provided "solely for development assistance," VAWA applies. Since an entire project is assisted by the HOME funds, the language of the law indicates that all units are subject to VAWA requirements - not just the HOME units.   Issue: Are HOME funded projects begun prior to the effective date of the final VAWA rule subject to the rule? No - compliance with the regulations set forth in the final rule is required for any tenant-based rental assistance or rental housing project for which the date of the HOME funding commitment is on or after the effective date of the final rule, which is December 16, 2016. However, basic statutory core protections of VAWA were effective upon enactment of VAWA 2013. The law was enacted on March 7, 2013. The core protection of VAWA prohibits denial or termination of assistance or eviction on the basis of domestic violence, dating violence, sexual assault, or stalking.