News

Memo on HUD Notice H 2016-7, RAD Notice Regarding Fair Housing and Civil Rights and Relocation Requirements

HUD published Notice H 2016-7 on November 10, 2016. The Notice replaces and supersedes Notice H 2014-09/PIH 2014-17 (issued July 14, 2014).   The Notice provides PHAs, Owners and RAD development partners with guidance regarding fair housing, civil rights, and relocation requirements for First Component (public housing conversion) RAD projects.   This Post focuses on the relocation requirements of the Notice.   Section 6 and 7 of the Notice provide guidance regarding relocation assistance requirements when planning for or implementing resident moves as a result of a conversion of a public housing project under RAD. PHAs and Project Owners implementing RAD transactions may be subject to the requirements of the Uniform Relocation Act.   For properties being redeveloped with funding under a Choice Neighborhoods Implementation (CNI) grant, the relocation requirements set forth in this Notice are superseded by guidance regarding relocation in the CNI NOFA. Permanent involuntary displacement of public housing or Section 8 assisted residents may not occur as a result of a CNI conversion.   Major Notice provisions relating to relocations include: Requires PHAs or Project Owners to prepare a written relocation plan for all transactions that involve permanent relocation or temporary relocation anticipated to exceed 12-months; Requires PHAs to provide residents with a RAD Information Notice (RIN) in order to ensure that residents are informed of potential project plans and of their rights in connection with RAD prior to submission of the RAD application; Clarifies that the General Information Notice (GIN), when applicable, should be provided as soon as feasible and no later than 30-days following the issuance of the Commitment to enter into a Housing Assistance Payments Contract (CHAP); Requires Project Owners to provide a notification of Return to the Covered Project, when applicable; Moves the date before which PHAs are prohibited from beginning any physical relocation earlier in the conversion process (specifically, from the date of Closing to the later of the effective date of the RAD Conversion Commitment (RCC) and the expiration of the 30- or 90-day RAD Notice of Relocation period, as applicable); Clarifies the specific requirements applicable to different types of relocation (e.g., moves within a property, temporary relocation of less than 12-months, etc.); Provides enhanced guidance on the right to return requirements, any offers of alternative housing options and the documentation that must be retained when tenants choose an alternative housing option and decline their right to return; Describes how HUD has administratively implemented URA requirements and URA relocation assistance and payments for displaced persons, when applicable, to residents who choose to decline the right of return and, instead, choose voluntary permanent relocation; Requires PHAs to maintain detailed data regarding each household that will be relocated, with key dates of notices and moves; and Identifies key fair housing and civil rights requirements applicable during relocation.     Accessibility for Persons with Disabilities Throughout the Planning and Implementation Process   Accessibility requirements will apply during all stages of a RAD transaction, including during relocation. This includes the requirement for reasonable accommodations in rules, policies, practices, and services. Common examples of reasonable accommodations that may occur during relocation include permitting an individual with a disability to relocate near public transportation, providing a unit larger than otherwise permitted for a live-in aide, and making exceptions to no-animal rules for assistance and service animals. Reasonable accommodations must follow the disabled individual throughout the RAD process, including during relocation. Furthermore, PHAs and Project Owners may be required to provide particular reasonable accommodations during relocation, such as assistance moving household items.   The Notice s relocation requirements are extensive and cover 23 pages of the 80 page Notice. The Notice also includes Recommended Relocation Plan Contents.   PHAs and Project Owners involved with First Component RAD conversions that may involve resident relocation should obtain and carefully review the requirements of this Notice. Early planning relating to relocation requirements are essential if these public housing conversions are to be successful.        

HUD Final Rule on VAWA - November 16, 2016

The U.S. Department of Housing & Urban Development (HUD) final rule regarding the implementation of housing protections authorized in the Violence Against Women Reauthorization Act of 2013 (VAWA) was published in the Federal Register on November 16, 2016.   In addition to the Final Rule, HUD has published a notice titled the Notice of Occupancy Rights under the Violence Against Women Act that certain housing providers must give to tenants and applicants to ensure that they are aware of their rights under VAWA and these implementing regulations, a model emergency transfer plan that may be used by housing providers to develop their owner emergency transfer plans, a model emergency transfer request form that housing providers could provide to tenants requesting an emergency transfer, and a new certification form for documenting incidents of domestic violence, dating violence, sexual assault, and stalking that must be used by housing providers.   Some of the critical components of the final rule include: Continuation of the core protections - The rule codifies the core protection across HUD s covered programs ensuring that survivors are not denied assistance as an applicant, or evicted or have assistance terminated due to having been a victim of domestic violence, dating violence, sexual assault, and stalking, or for being affiliated with a victim. Emergency Transfers - One of the key elements of VAWA s housing protections are emergency transfers which allows for survivors to move to another safe and available unit if they fear for their life and safety. The final rule includes a model emergency transfer plan, which was required in VAWA 2013, and an emergency transfer request form. Protections Against the Adverse Effects of Abuse - The final rule ensures that covered housing providers do not deny tenancy or occupancy rights based solely on adverse factors that are a direct result of being a survivor. Low Barrier Certification Process - The final rule makes it clear that under most circumstances, a survivor need only to self-certify in order to exercise their rights under VAWA, ensuring third -party documentation does not cause a barrier in a survivor expressing their rights and receiving the protections needed to keep themselves safe. The rule includes a certification form that may be used by covered housing providers. This final rule is effective on December 16, 2016, and compliance with the rule with respect to completing an emergency transfer plan and providing emergency transfers, and associated recordkeeping and reporting requirements, is required no later than May 15, 2017.   All owners and managers of properties subject to VAWA 2013 should obtain a copy of the final rule and move toward implementation. The rule is long (102 pages) and complex. I will be providing guidance on each area of the new rule over the coming weeks to assist clients in implementation. In the meantime, if you have specific questions regarding the new final rule, please feel free to contact me.

Add-on and Special Fees Available for Properties Implementing a Homeless Preference

On October 26, 2016, HUD published a memorandum allowing special and add-on management fees for properties implementing a homeless preference.   HUD has been working to increase the number of assisted properties with homeless preferences. Recognizing that establishing and operating such preferences require time and effort on the part of management agents, HUD is now permitting owners of Multifamily assisted housing to negotiate add-on and/or a special fee with their property management company to assist in implementing a homeless preference.   Fees will cover the cost of staff time associated with establishing and managing a Homeless Preference, including the following activities:   Identifying and engaging local homeless service providers; Learning about the local area needs and determining which families/individuals experiencing homelessness will be the best match for the property; Formalizing agreements and establishing referral processes with local homeless service providers; Amending the Tenant Selection Plan (TSP) and submitting to HUD for approval; Receiving applicant referrals and screening applicants to ensure they meet eligibility criteria; Providing support, education, and tools to property management staff during lease up and management; Facilitating a household s move-in and access to necessary household items; and Documenting results   Special Management Fee   A special management fee will be permitted during a nine-month start up period to enable owners and management agents to create and implement the homeless preference process. The special fee amount is $2.50 per unit per month (PUPM). For example, a 100-unit property can collect up to $2.50 x 100 units x 9 months = $2,250.   The maximum special management fee cannot exceed $4,500 per property, and if the O/A does not complete the process during the nine-month period, the term of the special fee cannot be extended.   Management agents may collect the special fee for the entire nine-month period, even if they complete the preference process in a shorter period of time. Once the nine-month period has ended, the agent may start collecting the add-on fee at the beginning of the 10th month.   Add-on Fee   Once the homeless preference is in place, management agents may collect a monthly add-on fee as long as at least one previously homeless individual or household is admitted to a particular property during a one-year period. The add-on fee is $2.00 PUPM. For example, a 100-unit property can collect up to $2.00 x 100 units x 12 months = $2,400 in a one-year period. The fee may not exceed $3,600 per property per year.   Management agents may not simultaneously collect a special and add-on fee. Collecting an add-on fee is permissible even if a special fee is not requested or approved. The add-on fee can be collected on an ongoing monthly basis as long as the following conditions are met:   A property s homeless preference is active; Local homeless service providers continue to refer eligible applicants; and TRACS shows that the project had a least one homeless household move-in within a one-year period.   Other Provisions   The special and add-on fees cannot be retroactive. If a property already has an approved TSP with a homeless preference and a notification of the preference has already been sent to the waiting list applicants, the management agent cannot collect a special fee for that property.   A rent increase may not be requested in order to pay the special or add-on management fee.   If an owner has agreed to a homeless preference or has reserved units as a homeless set-aside for a specific property as a condition of receipt of Low-Income Housing Tax Credits or other public funding, the management agent can collect a special or add-on management fee for the property.   Interested owners/agents should obtain a copy of the complete Memorandum for information on the request and approval process. If you have questions about the memorandum, contact Carissa Janis at HUD at 202-402-2487 or at Carissa.1.janis@hud.gov.

HUD Policy for Amending Use Agreements for LIHPRHA Deals - October 28, 2016 (Notice H 2016-16)

HUD Policy for Amending Use Agreements for LIHPRHA Deals - October 28, 2016 (Notice H 2016-16) HUD published Notice H 2016-16 on October 28, 2016. This Notice provides guidance on the circumstances under which HUD may consider amended and restated Use Agreements for properties assisted under the Low-Income Housing Preservation & Resident Homeownership Act of 1990 (LIHPRHA). Amended and restated Use Agreements may be approved in order to incentivize and facilitate the prepayment and refinancing or acquisition transactions to preserve the viability of certain affordable properties. Background HUD financed thousands of affordable properties during the 1960s and 1970s. Many of the projects utilized rental assistance from Section 8 or RAP programs. The FHA 221(d)(3) and Section 236 programs were common financing vehicles and provided for 40-year mortgages with the right to prepay after 20-years. Properties that were in desirable areas and that showed appreciation in value were prime candidates for pre-payment. The first prepayments were in the early to late 1980s. The result was hundreds of thousands of apartments converting from affordable to market rate. The federal government implemented a number of strategies to prevent the prepayments, including LIHPRHA. LIHPRHA offered owners fair market-value incentives to: (1) extend low-income affordability for the remaining useful life of the property [not less than 50-years]; or (2) transfer their properties to nonprofits, tenant organizations, or community-based organizations who would keep the housing affordable. HUD s authority to provide incentives under LIHPRHA lasted about six years. In 1996, Congress restored the Owner s right to prepay federally insured mortgages and stopped the funding of LIHPRHA incentives. HUD is currently supervising an inventory of approximately 640 properties with 75,000 units subject to LIHPRHA. These are mostly low-income housing developments with mortgages insured under Section 221(d)(3)-(d)(5) below-market interest rate (BMIR), Section 221(d)(3) market interest rate, and Section 236. All LIHPRHA projects are fully or partially assisted under the Section 8 program. Many LIHPRHA properties are in need of significant repair. Owners may now seek to prepay the FHA-insured mortgage and to refinance their properties with new forms of debt and equity, including the Low-Income Housing Tax Credit (LIHTC) in order to make project improvements. The LIHPRHA Use Agreements in place at these properties may impose restrictions on Owner distributions and refinance proceeds beyond the statutory required restrictions. For example, some agreements restrict Owners from obtaining any proceeds from refinancing, while others prohibit the use of LIHTC equity. Such restrictions hamper the ability of Owners to execute refinancing or acquisition transactions. Previously, the LIHPRHA statute allowed Owners to take distributions up to 8% of "Preservation Equity" as calculated at the time of the original LIHPRHA closing. The LIHPRHA statute was recently modified to allow an Owner, who is currently subject to a Use Agreement to be entitled to distribute annually, all surplus cash generated by the property, once HUD has determined that the Owner is in material compliance with the LIHPRHA Use Agreement. This includes compliance with prevailing physical condition standards. Many current Use Agreements restrict periodic distributions to 0% to 6% of initial equity. In these cases, in order to permit unlimited distributions, the Use Agreement will have to be modified. Applicability In addition to applying to properties subject to LIHPRHA, the Notice also applies to properties subject to a Use Agreement under the Emergency Low Income Housing Preservation Act (ELIPHA). Use Agreements under ELIPHA expired on the maturity date of the original FHA-insured or HUD-Held mortgage. Most ELIPHA Use Agreements have therefore recently expired or will expire in the near future. In these cases, it is unlikely that Owners will desire an amendment to an ELIPHA Use Agreement. However, if Owners wish to do so, HUD will consider requests for amendments of ELIPHA Use Agreements that meet the requirements of this Notice. Unfortunately, Owners subject to ELIPHA Use Agreements are not eligible for unlimited distributions of surplus cash or the release of funds accumulated in a residual receipts account. Owners subject to LIHPRHA are eligible for both of these benefits. Requirements for Amending & Restating Use Agreement HUD will allow the amendment and restatement of the property s LIHPRHA Use Agreement to permit the Owner to receive proceeds from the refinance of the property, to allow the Owner to receive unlimited annual distributions from surplus cash, and to receive funds accumulated is a residual receipt account as allowed by statute. Properties must meet the following requirements in order to amend a Use Agreement under LIHPRHA: Compliance with business agreements - such compliance must be demonstrated by: The project must have a current REAC score of 60 or above, or demonstrate how an amendment to the Use Agreement will result in correction of deficiencies; Owners must be in current compliance with all applicable nondiscrimination and equal opportunity requirements; The project must have an approved up to date Affirmative Fair Housing Marketing Plan; The project must have received satisfactory Management & Occupancy Review (MOR) ratings for the prior three review cycles; If this requirement is not met, the Owner must provide a list of the corrective actions that will be taken relative to MOR issues; The Owner must be current in the submission of Annual Financial Statements, all excess income owed to HUD must be repaid in full; Any FHA-insured, HUD-Held or state insured mortgage on the property must have been current for the prior three-years; and There can be no outstanding notices of default or violation. Except for changes in the Use Agreement permitted by this Notice, all other requirements of the Agreement must remain in place. When an Owner has an Amended & Restated Use Agreement under LIHPRHA that allows for unlimited distributions, the Owner is allowed unlimited distributions of surplus cash. I.e., the distribution must be taken from surplus cash, and may not be listed as a line-item expense in the Section 8 HAP Contract budget. If the project is considered troubled, HUD will require an experienced owner/managing agent who has demonstrated the ability to successfully own and manage troubled projects. If there is a HAP contract in place at the property, and the project is seeking prepayment approval from HUD, the Owner must execute a renewal contract with a 20-year term. Processing of Requests for Amended & Restated LIHPRHA Use Agreements The owner submits a request to the HUD Regional Center or Satellite Office; HUD will review the request for amendment to the Use Agreement; This request must be reviewed within 30-days. The Regional Center will then submit the request to the Office of Asset Management and Portfolio Oversight at HUD Headquarters for consideration. HUD HQ will advise the Regional Center Director if and when the amendment is approved, and the Regional Center will execute the amended Use Agreement. Owners with properties subject to this Notice should obtain a copy of the Notice and determine whether the provisions of this guidance apply to their properties, and if so, whether they want to avail themselves of the benefits that can result from amendment of the LIHPRHA Use Agreements.

HUD Implementation Guidance for Housing Opportunity Through Modernization Act of 2016

In the October 24, 2016 Federal Register, HUD published initial implementation guidance for the Housing Opportunity Through Modernization Act of 2016 (HOTMA). President Obama signed HOTMA into law on July 29, 2016, but only certain parts of the law are currently effective. The purpose of this HUD guidance is to identify the sections of the law that are effective immediately and those that will require further action by HUD in order to become effective. This guidance is effective October 24, 2016.   Introduction   Some of the laws most significant amendments include setting a maximum income level for continued occupancy in public housing, expanding the availability of Family Unification Program (FUP) vouchers for children aging out of foster care, changes to the housing quality standards for Section 8 Voucher Units, multiple changes to the Project-Based Voucher program, modification of the requirements for mortgage insurance for condominiums, creation of a Special Assistant for Veterans Affairs in HUD, and changing the allocation formula for the Housing Opportunities for Persons with AIDS (HOPWA) program.   General Implementation Issues   HOTMA makes several of its provisions effective upon enactment (July 29, 2016). Other statutory changes made by HOTMA become effective only after the issuance of a notice or regulations by HUD, or at the start of the calendar year following the publication of a notice or regulations.   Provisions of HOTMA Effective Upon Enactment or Already in Effect - No HUD Action Required to Implement   Reasonable Accommodation Payment Standards - permits PHAs to establish a payment standard of up to 120% of the Fair Market Rent (FMR) as a reasonable accommodation for a disabled person, without HUD approval. A PHA may also establish an exception payment standard in excess of 120% as a reasonable accommodation with HUD approval. Establishment of Fair Market Rent - provides that in the Housing Choice Voucher (HCV) program no PHA is required, as a result of a reduction in the FMR, to reduce the payment standard applied to a family continuing to reside in a unit under a HAP contract at the time the FMR was reduced. Under prior law, if a reduction in the FMR caused the PHA payment standard to exceed 110% of FMR, the PHA was required to reduce the payment standard so that the payment standard was within the payment range of the new FMR. PHAs may choose, but are no longer required, to reduce the payment standard for a family who remains under HAP contract at the family s second annual reexamination. Owners of LIHTC properties with voucher residents should make note of this change. Family Unification Program for Children Aging out of Foster Care - makes changes to the FUP, revising the length of the term that a FUP-eligible youth may receive FUP assistance from 18 months to 36 months. The change applies to youth currently receiving FUP assistance as well as any new participants. The law also revises the eligibility requirements. Previously, FUP-eligible youth had to be at least 18 years old and not more than 21 and have left foster care at age 16 or older. Under the new law, FUP-eligible youth must: Be at least 18 years old and not more than 24; have left foster care at age 16 or older or will leave foster care within 90-days; and be homeless or at risk of being homeless. Preference for United States Citizens or Nationals - this change applies only to Guam and establishes a preference or priority in receiving financial assistance for any citizen or national of the United States over aliens. Exception to Public Housing Agency Resident Board Member Requirement - provides for an exception for certain jurisdictions (Housing Authority of the County of Los Angeles or any PHA in Alaska, Iowa, and Mississippi) from the resident board member requirements. Inclusion of PHAs and Local Development Authorities in Emergency Solutions Grants (ESG) - authorizes local governments that receive ESG funds to subaward all or a portion of those funds to PHAs and local redevelopment authorities. Inclusion of Disaster Housing Assistance Program in Certain Fraud and Abuse Prevention Measures - provides that the Disaster Housing Assistance Program shall follow the rules of the McKinney Homeless Assistance Act for the purpose of income verifications. Energy Efficiency Requirements Under Self-Help Homeownership Opportunities Program (SHOP) - prohibits HUD from requiring units developed under the SHOP program to meet energy efficiency standards other than those contained in the Cranston-Gonzalez National Affordable Housing Act. Formula and Terms for Allocations to Prevent Homelessness for Individuals Living with HIV or AIDS - makes several changes to the HOPWA program, including (1) alterations to the allocation formula, (2) continued eligibility of FY 2016 grantees, and (3) authorization to award funds to alternative grantees.     Provisions That Require HUD Guidance or Rulemaking   For these provisions, PHAs, multifamily owners, or grantees may not use the provisions of HOTMA until HUD issues a rule or notice.   Initial Inspections of Section 8 Voucher Units - authorizes assistance payments for up to 30-days if an annual inspection reveals non-life-threatening defects and to authorize occupancy of units prior to an inspection by a PHA if the property has met the requirements of an alternative inspection (e.g., LIHTC inspection) in the previous 24-months. HUD is considering the appropriate method for implementation. Enforcement of Housing Quality Standards (HQS) for Section 8 Voucher Units - outlines timeframes for correcting deficiencies discovered by inspections. The law requires life-threatening deficiencies to be corrected within 24 hours and sets the time for correcting other deficiencies at 30-days unless the PHA determines otherwise. It also provides families with 90-days to relocate to a new unit if an owner fails to correct the defaults and permits PHAs to use up to two months of any assistance amounts withheld or abated for costs directly associated with relocation. HUD is developing regulations relative to this change. Income Reviews - revises the frequency of family income reviews and the calculation of income. The law requires that the reviews of family income must be conducted upon admission and annually thereafter, depending on certain decreases or increases in annual adjusted income. It also changes the definitions for the public housing and Section 8 programs of income and adjusted income for each member of the household who is 18 years or older and unearned income for each dependent who is less than 18. HUD is considering the best method for implementation. Income Review for Project-Based Housing - the law eliminates the requirement that reviews of family income shall be made no less frequently than annually. HUD is considering the best method for implementation. Limitation on Public Housing Tenancy for Over-Income Families - sets the maximum amount of annual adjusted income for continued occupancy in public housing at 120% of area median income (AMI). If a family s annual adjusted income exceeds the maximum amount for two consecutive years the family will not be eligible for public housing. PHAs will have the option of terminating the family s tenancy or allowing them to remain at a higher rent. HUD will issue additional information on this requirement in the future. Limitation on Eligibility for Assistance Based on Assets - the law sets limits on the assets that families residing in assisted housing may have. This requirement must be put in place by rulemaking. Units Owned by PHAs - provides that the term owned by a public housing agency refers to units in projects that are owned by a PHA, by an entity wholly controlled by a PHA, or by a limited liability company or limited partnership in which a PHA (or PHA controlled entity) holds a controlling interest. PHAs should continue their current practices until HUD issues additional guidance. PHA Project Based Assistance - the law makes several statutory changes to the Project Based Voucher (PBV) program. HUD is considering the appropriate implementation method. Public Housing Capital & Operating Funds - HUD will issue new rules regarding use of capital funds for establishing replacement reserves. Use of Vouchers for Manufactured Housing - the law extends the definition of "rent" for vouchers to include monthly payments for purchasing a manufactured home, tenant-paid utilities, and monthly rent for real property. This is not effective until HUD issues an implementation notice.   Other elements of the law that also require HUD implementing regulation include (1) Modification of FHA Requirements for Mortgage Insurance for Condominiums; (2) Definition of Geographic Area for Continuum of Care Program; and (3) HOPWA Allocations.   Most changes to the Project-Based Section 8 Program made by the new legislation will not take effect until HUD publishes implementing regulations or notices. Many of these may not occur until 2017 or 2018.

2017 Social Security COLA Announced - October 18, 2016

The federal government announced today that the Social Security Cost of Live Adjustment (COLA) for 2017 will be 0.3%. This means that there will be a very slight change in the Social Security income of SS recipients for the upcoming year (about $4 per month on average). 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.

HUD Revises Previous Participation Certification Requirements, Final Rule - October 14, 2016

On October 14, 2016, HUD published in the Federal Register a Final Rule, "Improving the Previous Participation Reviews of Prospective Multifamily Housing Program Participants."   This rule revises HUD regulations for review of Previous Participation Certifications (PPC) for certain participants in multifamily housing and healthcare programs. This memo applies only to the changes relating to the multifamily housing programs.   The final rule clarifies which individuals and entities will undergo review, and fully replaces the current PPC regulation. This rule is effective on November 14, 2016.   All applicants for HUD program funding must complete HUD Form 3560 (Previous Participation Certification). The form requires disclosure of all principals involved in a project, a list of prior projects they were involved in, and assurances that they met their responsibilities in the prior projects.   Projects covered by this requirement ("covered projects") include: FHA-Insured Projects; Section 202 and 811 Projects; Risk Share Projects; Projects subject to HUD Use-Restrictions or Affordability Restrictions; Subsidized Projects - if 20% or more of units receive subsidy from: Section 236; Rent Supplement; and Project-Based Section 8   Note - single-family projects are not subject to this requirement.   Controlling Participants   A "controlling participant" is a participant or entity that is serving as a "Specified Capacity." A Specified Capacity is defined as any of the following: An owner of a covered project; Borrower of a loan financing a covered project; A management agent; A master tenant of an FHA-insured project; or A general contractor     Control of Entities   If the Specified Capacity is an entity, rather than an individual, any individuals with control of the financial or operational decisions of the entity will be considered a "controlling participant."   Individuals or entities with the ability to direct the day-to-day operations of a Specified Capacity or a Covered Project may also be considered a controlling participant, as will Individuals or entities that own at least 25% of an entity that is a Specified Capacity; and Individuals or entities with the ability to direct the entity to enter into agreements.   There are exclusions from the definition of Controlling Participant, including: Passive investors and investor entities with limited liability in Covered projects benefitting from tax credits (e.g., the low-income housing tax credit). This applies to both syndicators and direct investors; Individuals/entities that do not exercise financial or operational control; Unless determined by HUD to exercise day-to-day control, Board members of a nonprofit who are not officers or part of the nonprofit management team; Mortgagees acting in their capacity as such; and Public Housing Agencies.   Triggering Events   The following events will trigger the PPC requirements: Application for FHA Mortgage insurance; Application for HUD funds for a program administered by HUD s Office of Housing; A request to change any controlling participant; and A request for consent to assign a Section 8 HAP Contract.   The Appendix to the Final Rule is the Processing Guide for the PPC process and should be carefully reviewed by anyone who may be considered a Controlling Participant under this new guidance.  

Streamlining Administrative Regulations for Multifamily Housing Programs, Notice H-2016-09

On October 3, 2016, HUD published Notice H-2016-09, relating to the streamlining of Administrative Regulations for Multifamily Housing (and some medically related) Programs. This memo relates only to the portions of the Notice relating to multifamily housing. The full streamlining rule was published in the Federal Register on March 8, 2016.   The Notice only applies to programs administered by the HUD Office of Multifamily Housing, as follows: Project-based Section 8, including new construction, HFA-financed projects, Substantial Rehab, Section 202/8, Rural Housing Section 515/8, Loan Management Set-Aside, and Property Disposition Set-Aside; Section 101 Rent Supplement; Section 202 PAC; Section 202 and 811 PRAC; Section 202 Senior Preservation Rental Assistance Contract (SPRAC); Section 811 Project Rental Assistance Demonstration Units under a Rental Assistance Contract (PRA); Section 236; Section 236 RAP; and Section 221(d)(3) BMIR.   Verification of Social Security Numbers (SSN)   This change applies to Rent Supplement, Section 8, Section 221(d)(3), Section 236, Section 202, and Section 811. It modifies the regulation as it applies to program applicants (as differentiated from program participants).   The regulation now permits owners/agents (OAs) to accept applicant households that include an applicant family member under the age of six, who does not yet have a SSN and was added to the household six months or less from the move-in date. In other words, if the child was added to the household more than six months prior to move-in, the child must have a SSN in order to move into the unit. With this change, the O/A may not deny occupancy to such applicant households.   The O/A must give the applicant 90-days from the effective date of the move-in certification to provide SSN documentation for the child. An additional 90-days must be granted if the failure to provide SSN documentation is due to circumstances that are outside the control of the household. Examples of such circumstances are delayed processing by the SSA, natural disaster, fire, death in the family, etc. During this time, the child will be counted as part of the household and will receive all program benefits, including the dependent deduction. Once the SSN is provided, an interim recertification is required.   TRACS Input   Purchased software used by O/As to transmit data to TRACS may not yet have the ability to properly transmit the SSN data. O/As will input using one of two methods: Pre-Software Change: when completing the SSN field in TRACS for a child who has been added to the applicant household six months or less from move-in and has no SSN, the owner must input an SSN of "999990000." This may only be used for move-in and initial certifications. Post-Software Change: Once software is updated, all SSNs of "999990000" must be edited with an interim certification. For a child without an SSN, the owner will input "999999999," with an "M" exception code. When the child is issued an SSN, an interim will be conducted and the correct SSN will be entered. All software is expected to be updated by February 17, 2017.   Penalty for Nondisclosure of SSN   The penalty for nondisclosure of a SSN for someone who is supposed to have or be issued a SSN is termination of tenancy for the entire household. Proration of assistance is not permitted.   Housing Assistance Payments During Eviction   HAP payments will continue during eviction and continue until the household is actually evicted. If a court refuses to evict a household, the household will be permitted to remain. O/As should continue to use "999999999" until an SSN is obtained, at which point an interim will be done.   Change in the definition of Extremely Low-Income (ELI)   This change applies only to the Section 8 Program.   The definition of "Extremely Low-Income" is now the highest of 30% of the Area Median Income or the Federal Poverty Level. The poverty level definition does not apply for public housing or projects in U.S. possessions, territories, or Puerto Rico.   HUD will publish the ELI annually - no research by the O/A is required.   Section 8 owners must use the ELI limits to meet the income targeting requirements (i.e., at least 40% of units rented at the ELI income level).   Change in the definition of Tuition   This change applies only to the Section 8 Program (other than Section 8 Mod Rehab). It amends the definition of "income" for purposes of tuition. Tuition now includes mandatory fees and charges and is excluded from income for Section 8 only. Formal guidance on this change was published in Notice H-2015-12. I sent a memo to clients on this on December 2, 2015.   Reexamination of Income   This is a major change in procedures, and applies to Project-based Section 8 properties, including 202 and 811 projects.   O/As may now use streamlined income determinations for fixed sources of income. For each fixed source, O/As must apply either a verified cost of living adjustment (COLA) or current rate of interest to previously verified or adjusted income. All non-fixed income must still be third party verified.   O/As have discretion regarding whether or not to adopt this rule. If chosen, the method may be used on the two annual recertifications following the annual recertification or move-in certification for which the income was third party verified. Every third year, all income must be third party verified.   If a household has both fixed and non-fixed income, the streamlined method may be used for the fixed income sources only.   Tenants may instruct owners not to use the streamlined method, in which case third party verification will be required.   Note: Low-Income Housing Tax Credit project owners should check with their HFA prior to using this streamlined method. While state agencies will be able to permit this method for LIHTC projects, they are not required to do so.                 Definition of "Fixed-Income"   Examples of fixed income include Social Security, SSI, SSDI; It is interesting that HUD considers SSI as a fixed-income since it is subject to change at any time. Federal/State/Local/Private Pensions; and Periodic payments from annuities, insurance policies, retirement funds, disability or death benefits, etc.   The Adjustment Factor   O/As must verify all adjustment factors (e.g., COLA or current rate of interest) from public sources or tenant-provided, third party generated documentation. If such documentation is not available, third party verification is required. Once an adjustment factor is verified, it is applied to the previously verified or adjusted income amount.   EIV verification of income is not required in the streamlining years.   All the changes outlined here apply to the HUD Project-based Section 8 program, and one (streamlining) may also apply to the LIHTC program. These changes are now in effect.