News

Family Self Sufficiency Program for Multifamily Housing

HUD issued Notice H-2016-08 on August 26, 2016. This Notice relates to the Family Self Sufficiency (FSS) Program in Multifamily Housing. FSS is a HUD program that provides incentives and support to families in MF assisted housing to increase their earned income and reduce dependence on public assistance. The program has long been used in the public housing and voucher programs, but is now available to owners of privately owned HUD-assisted multifamily housing, such as Section 8. The program is voluntary for both owners and the families living The program is voluntary for both owners and the families living at the properties. Owners wishing to participate in the program will work with public and private resources in the development and implementation of the program. Typical family services include childcare, transportation, education, job training, employment counseling, financial literacy, and homeownership counseling. Participating families work with a five-year plan and are required to enter into an agreement with the owner. The goals are outlined in the plan, and when a family meets its goals and completes the FSS contract, they become eligible to receive funds deposited in an escrow account. The owner will establish an interest-bearing escrow account for each family. HUD will fund the account through adjustments to rental subsidy payments to the owner. If a family s rent increases due to an increase in earned income while participating in the FSS program, the owner will credit the incremental rent due to the increase in earned income to the family s escrow account. When a family completes the program, they may access the escrow funds and use them for any purpose. Funding Congress has not yet appropriated any funds for the employment of FSS coordinators in multifamily housing. However, owners may use residual receipts to assist in paying for the position of the FSS program coordinator. HUD may approve HUD may approve release of residual receipts as an advance rather than a reimbursement, on a semiannual basis. No more than six months of expenses will be advanced at one time. Owners using residual receipts to pay for FSS coordinators are exempt from the requirement to use residual receipts to offset Section 8 payments. Owners will be required to: 1. Coordinate services with local agencies; 2. Develop an Action Plan and submit to HUD for approval; 3. Recruit and screen program participants; 4. Create and execute a contract with participating families; 5. Provide service coordination, case management, or coaching; 6. Create FSS escrow accounts and manage the funds; 7. Submit quarterly reports to HUD; and 8. Comply with fair housing requirements. Participating families will be required to: 1. Execute the contract with the owner; 2. Head of household must seek and maintain suitable employment during the term of the agreement; 3. Work with the owner to set program goals; 4. Complete required activities by established deadlines; 5. Report increases in earned income immediately; 6. Become independent from welfare assistance and remain independent for at least one year before the contract term expires (this applies to all family members); and 7. Comply with the terms of the lease. Program Development & Approval Procedures Owners will be required to have a HUD-approved Action Plan before implementing an FSS program. As part of the approval process, HUD will assess the owner s ability to run an FSS program by reviewing recent Management and Occupancy Reviews (MORs) and the Financial Assessment Subsystem (FASS) score. The most recent MOR review must be Satisfactory or higher and the owner must be current in the submission of all required financial statements. The Action Plan must be comprehensive and include information on: Family demographics; Estimate of participating families; FSS family selection procedures; Incentives plan; Outreach efforts; FSS activities and supportive services; Description of funding sources; Identification of family support needs; Owner policies regarding termination of family participation; Rights of non-participating families; and Timetable for program implementation. Clearly, development of an FSS program at a HUD multifamily property will be time-consuming and labor intensive. Owners will have to decide whether The Action Plan must be comprehensive and include information on: Family demographics; Estimate of participating families; FSS family selection procedures; Incentives plan; Outreach efforts; FSS activities and supportive services; Description of funding sources; Identification of family support needs; Owner policies regarding termination of family participation; Rights of non-participating families; and Timetable for program implementation. Clearly, development of an FSS program at a HUD multifamily property will be time-consuming and labor intensive. Owners will have to decide whether Clearly, development of an FSS program at a HUD multifamily property will be time-consuming and labor intensive. Owners will have to decide whether creation of such a program will be worth the time and effort involved. One reason for consideration of the program may be the potential for extra points under State Qualified Allocation Plans (QAPs) for Section 8 properties seeking to layer Low-Income Housing Tax Credits. If a State Agency will award additional competitive points for a program such as FSS, it may be worthwhile to develop such a plan. Interested owners should obtain a copy of the Notice and examine the requirements carefully.

HUD Issues New Guidance on Multifamily Utility Allowance Determination

HUD has provided updated information to HUD Notice H-2015-04, Methodology for Completing a Multifamily Housing Utility Allowance. The additional information relates to six areas of the original HUD Notice.   Baseline Analysis Owners/Agents (O/A) are required to submit documentation to HUD or the Contract Administrator (C/A) when requesting approval of a UA. Backup information could include: Copies of tenant data received from utility providers; or Copies of printouts indicating a summary of monthly data if the tenant was able to obtain data online from their utility provider for the previous 12-months, or ten-months as the case may be; or If the O/A obtained actual monthly utility bills from the tenant, the O/A may submit a spreadsheet summarizing an average of the monthly bills. Actual utility bills may be requested at the discretion of HUD/CA. These bills, regardless of whether they are provided to HUD/CA, must be retained by the owner for three years; At the discretion of HUD/CA, there may be cases where a combination of the information noted above will have to be provided. The new guidance also establishes a limit to the age of data used in the analysis. The utility analysis should be prepared four to six months prior to the anniversary date of the contracts, with submitted data covering the prior 12-month period. Thus, at the time of contract renewal, the data used in the analysis to support the UA should generally be no more than 18-months old. Release Forms HUD has clarified that refusal by a tenant to sign a release form for release of utility information can be considered a lease violation. According to HUD, a tenant refusal to sign a release form constitutes material noncompliance with the lease agreement, as defined in the lease agreement, and repeated violations can result in termination of tenancy. Further, for properties other than 236 and 221(d)(3), not signing the release form is a violation of the regulatory obligations of the tenant found at 24 CFR 5.659(b)(1).   To add clarity to this requirement, HUD encourages owners to include language in their rules and regulation (House Rules) advising tenants of their obligation to sign release forms and to provide any information deemed necessary to administer the program, or face possible termination.   Utility Assistance as Income   HUD also provided guidance that is applicable only in California. Some utility bills in CA include a "climate credit," and the question has been raised regarding whether or not this credit should be included in the UA calculation. HUD s response is no - the California Climate Credit should not be used by owners in calculating utility allowances and should be removed from the cost totals. This is because, while the California climate credit is delivered to California residents through their utility bills, the California Public Utilities Commission (CPUC) has held that the climate credits "should not be considered a reduction in the individual customer s electricity bill." Instead of being used to offset utility allowances, California climate credits should be considered "income" for the purposes of recertification. This guidance applies only to the California Climate Credit. Questions relating to similar state or local benefits will be reviewed by HUD on a case-by-case basis.   The Factor-Based Utility Allowance Analysis   Going forward, Utility Allowance Factors (UAF) will be effective on the same date as the OCAF, which is typically February 11 of each year. Factors for 2017 will be release at the same time as the FY 2017 OCAF.   Also, the UAF will not automatically be applied to the prior year UA. HUD systems will not automatically apply the UAF to the prior year UA, nor is it the CAs responsibility. UA regulations require the owner to "submit an analysis of the project s utility allowances" for review and approval each year. This requirement extends to the factor-based years in which an owner will show how the factor was applied and identify the resulting UA recommendation.   Utility Allowance Decreases - Phase In   O/As are required to phase-in UA decreases, but only in the initial implementation of the new methodology, and only if the decrease exceeds 15% AND is equal to or greater than $10. UA phase-in eligibility is determined at the time of the first baseline analysis after implementation of Housing Notice 2015-04 only. At this time, the total decrease should be examined to determine if the decrease is more than 15% or $10 from the last UA provided. Following is an example of how a three-year phase in would be applied: Year One Current UA: $90 Decrease in First year: 40% New Calculated UA: $54 Year one UA: $77 (with a phase-in cap of 15% each year, the new capped UA is $77 ($90 minus 15%). This is the UA that is implemented in year one.   Year Two Second year UAF (applied to uncapped new UA): +2% New Actual UA: $55 ($54 + 2%) Tenant s second year capped UA: $65 ($77 minus 15%) - (The UA that is implemented in year two is $65 even though the calculated UA is $55).   Year Three Third year UAF (applied to uncapped second year UA): +2% New actual UA: $56 ($55 + 2%) Tenant s third year UA: $56 (implement the actual calculated UA as it is less than 15% lower than the prior year s UA). In this example, the phase-in occurs over two years of the cycle (baseline year, plus first factor-adjusted year). In each of the factor-adjusted years, the factor is applied to the previous year s calculated UA, i.e., what the UA would have been if there were not a cap applied because of the requirement to phase it in. After that, there is a new baseline and phase-in requirements no longer apply. Miscellaneous   HUD has clarified that a Section 811 Project Rental Assistance (PRA) property with a Rental Assistance Contract (RAC) must separate the PRA units from the project-based units when completing the utility analysis. In other units, projects of this type will conduct a separate analysis for the PRA units and the RAC units.   Owners and Agents should review this additional information in conjunction with a review of HUD Notice H-2015-04, issued on June 22, 2015. These requirements apply to the following programs: Project-based Section 8 (including Rural Housing Section 515 projects with Section 8); Section 101 Rent Supplement; Section 202/162 PAC; Section 202 PRAC; Section 202 SPRAC; Section 811 PRAC; Project Rental Assistance (PRA); Section 236; Section 236 RAP; and Section 221(d)(3) BMIR.

Potential Impact on LIHTC Projects from The Housing Opportunity Through Modernization Act of 2016

Potential Impact on LIHTC Projects from The Housing Opportunity Through Modernization Act of 2016 Congress recently passed the Housing Opportunity Through Modernization Act of 2016. While many of the changes brought about by the Act apply only to Public Housing & Vouchers, a number apply to the HUD Multifamily Programs - the Section 8 Project-Based program in particular. Regulatory guidance for this program is found in HUD Handbook 4350.3.   Only those changes that apply under 4350.3 and that are related to the methodology used to determine tenant income may be applicable to the Low-Income Housing Tax Credit (LIHTC) program, since the LIHTC program is required to follow HUD guidance specific to the Section 8 program.   While the primary HUD regulations that apply to the LIHTC program relate to the determination of household income, some of the Act s other provisions may apply tangentially to the tax credit program. This article outlines the elements of the Act that may apply to LIHTC properties.   Possible Changes not Related to Income Determination   Many LIHTC projects house voucher residents. Under prior law, any Housing Quality Standards (HQS) violation at lease renewal could slow approval and delay payment to owners. Under the new regulations, only life-threatening issues will delay payment. If corrected within 30-days, payments can begin again and missed payments may be paid retroactively. However, any HQS violation not corrected within 60-days will result in termination of the HAP and the resident will have to move.   Annual Income Reviews   The Section 8 program will no longer require annual verification of fixed income sources (e.g., SS). Since this is a recertification issue, additional guidance from the IRS will be required. It is also possible that the IRS will not address the issue at all, in which case owners will have to rely on guidance from their Housing Finance Agencies (HFA). Since this requirement is related to the method in which income is determined for Section 8 purposes, it does seem reasonable that it would also apply to LIHTC projects, and would be within the purview of HFAs to permit it.   Calculation of Income   Owners may use income determinations from other agencies (e.g., TANF, Medicaid, SNAP). This means that HFAs will be able to permit owners to use income verifications from other agencies in lieu of obtaining their own verifications. Income will not be imputed to assets unless the total cash value of the assets exceeds $50,000. This is a major change to the income calculation requirements and HUD will adjust this amount annually. For HUD purposes, residents with total assets of $50,000 or less will be able to provide affidavits stating the value of their assets. This will eliminate the requirement to verify all assets. Since this is directly related to the income verification requirements, it should apply to LIHTC properties as well. A new excluded income will be income from the Aid and Attendance program for veterans. Another possible change is that all retirement accounts will be fully excluded as assets. Current regulation only permits such exclusion if a resident or applicant is retired and taking regular payments from the retirement account.   This new Act will make some meaningful changes to a number of HUD programs, and for that reason, the LIHTC program will also be affected. However, the Act states that the changes will not be effective until HUD publishes final regulations implementing the new law. So, until HUD publishes an update 4350.3 (change 5?), owners and managers of LIHTC properties should continue to operate as they have been.

Avoiding Discrimination Based on Sex in Housing

Avoiding Discrimination Based on Sex in the Provision of Housing     Federal law did not prohibit sex discrimination in housing until 1974, when a non-controversial provision of the Housing and Community Development Act of 1974 added "sex" as a prohibited basis of discrimination to the Fair Housing Act (Title VIII of the Civil Rights Act of 1968).   The protection was initially intended to prevent housing operators, developers, property managers, etc., from leasing, selling or negotiating with men and women on an unequal basis. For example, discounting a woman s income when evaluating the ability to pay for housing is prohibited. In HUD v. Baumgardner (1990), the court stated that Congress intended the Fair Housing Act (FHA) ban on sex discrimination "to end housing practices based on sexual stereotypes."   It should be noted that while fair housing law generally prohibits expressing a preference for or against a protected characteristic when advertising, the Federal Register, 3309, January 23, 1989, provided an exception for sex "where the sharing of living areas is involved." An exception also exists for dorms at educational institutions.   Congress has provided limited exemptions from the FHA for single family home owners and owners who live in small apartment buildings (four or fewer units). Persons who meet an exception may discriminate on the basis of sex (the Civil Rights Act of 1866 only prohibits discrimination on the basis of race). However, state or local law may not provide for an exception and the Equal Credit Opportunity Act prohibits sex discrimination in the provision of mortgages and other forms of credit in housing.   While the protections against sex discrimination have been used to prevent sexual stereotyping in the provision of mortgages, housing sex harassment cases are becoming more common.   Most of the legal principles used in housing harassment cases derive from employment law. Title VII of the Civil Rights Act of 1964 covers sexual harassment in the workplace. While Title VIII of the Civil Rights Act of 1968 includes "sex" as a characteristic protected from discrimination in the provision of housing, there is no specific mention of "sexual harassment." However, sexual harassment in the context of housing may be even more devastating than workplace harassment, since home is more central to lives than is the workplace. The first major study on the issue of sexual harassment in housing is a 1987 Wisconsin Law Review article, "Home is No Haven: an Analysis of Sexual Harassment in Housing." Author Regina Cahan stated "When sexual harassment occurs at work, at that moment or at the end of the workday, the woman may remove herself from the offensive environment. She will choose whether to resign from her position based on economic and personal considerations. In contrast, when the harassment occurs in a woman s home, it is a complete invasion in her life. Ideally, home is the haven from the troubles of the day. When home is not a safe place, a woman may feel distressed, and often, immobile."   The first fair housing decision relative to sexual harassment was Shellhamer v. Lewallen (1983). The plaintiffs were a married couple who were evicted because the wife refused to pose for nude pictures and have sex with the landlord. Having no real guidance on how to proceed, the Magistrate in the case turned to the Title VII guidance, which already recognized "quid pro quo" and "hostile environment" theories of liability in the workplace. The landlord had made two sexual requests over a three to four month period; the magistrate determined that this did not rise to the level of a hostile environment. However, since a quid pro quo claim does not require persistent conduct, this test was met. This was due to the fact that the decision to evict was based on Mrs. Shellhamer s refusal to give in to the requests.   While sexual harassment is illegal, the law does not prohibit "genuine but innocuous" differences in the way men and women interact with members of the same sex and the opposite sex. Simple teasing, offhand comments, and isolated incidents (unless extremely serious) do not amount to discriminatory changes in the terms and conditions of housing.   Context   "Context" is an important element in determining whether or not sexual harassment has occurred. The Supreme Court used the following example of how context must be considered: If a pro football coach smacks one of his players on the butt, it would not be considered sexual harassment. But, if that coach smacks his secretary (whether female or male) on the butt, it could be considered harassment.   In addition to examining context, the behavior must also be "unwelcome." Behavior that is welcomed cannot be harassing behavior.   There are two general types of sexual harassment in housing (and employment); "quid pro quo," and hostile environment.   Quid Pro Quo Harassment   Quid pro Quo ("this for that"),or "conditional tenancy" harassment is the most serious form of sexual harassment. It essentially conditions the provision or a benefit of housing on the performance of sexual favors. A fairly recent case, U.S. v. Barnason (May 2012), illustrates some of the components of a conditional tenancy case. In this case, the owners and managers of three Manhattan apartment complexes agreed to pay more than $2 million to six women who were harassed by the superintendent (who was a Level 3 Registered Sex Offender) of the properties. Actions that the superintendent took against the women included: Entering apartments while drunk - demanding sex; Unwelcome groping and fondling; Unwanted verbal sexual advances; Demanding sex in return for rent reductions; and Taking adverse action against women who refused. In addition to the monetary penalty against the owner, the offending employee has been banned for life for working at a residential property. Conditional tenancy claims generally require only one incident to rise to the level of sexual harassment.   A more recent case provided the largest settlement in a fair housing sexual harassment action. In U.S. v. Wesley (July 2015), the respondents settled for $2.7 million. In this case, two employees of a local housing authority (the Section 8 Coordinator and the Housing Inspector), were accused of sexually harassing female voucher holders. The harassment included making unwanted sexual comments, sexual touching, and taking adverse action against women who refused their advances. The employees undertook these actions while exercising their authority on behalf of the Agency, and the Agency failed to take reasonable preventive or corrective measures. For this reason, the Agency was found to be "vicariously liable" for the actions of the employees. The two employees, as in the Barnason case above, have been banned from real estate for life.   Hostile Environment   Hostile environment is defined as unwelcome behavior of a sexual nature that creates an intimidating or hostile housing environment. Trivial or isolated incidents do not rise to the level of harassment; the actions must be severe and pervasive.   In determining whether a hostile environment exists, courts and judges will examine all circumstances, including: Frequency; Severity; and Whether the actions are physically threatening or humiliating or just a mere utterance.   Courts have ruled in favor of defendants when inappropriate behavior did not meet this standard. In Hall v. Meadowood Limited Partnership (2001), a court ruled that though the defendant s conduct was "crude or inappropriate," the fact that it occurred "only occasionally and was not severe (and therefore) did not rise to the level of actionable sexual harassment."   HUD published a proposed rule in the October 21, 2015, Federal Register titled, "Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices Under the Fair Housing Act." In addition to formalizing standards for assessing claims of harassment under the FHA, the regulation is intended to clarify when housing providers may be held directly or vicariously liable under the FHA for illegal harassment.   Owners and managers of housing must understand how the rules relating to discrimination based on sex apply to them, and should develop specific policies to limit the potential for such claims. Following are recommendations for the steps that owners and property management firms should take to minimize the risk of discrimination claims based on sexual harassment.   Establish a Zero-Tolerance Policy Against Sexual Harassment. This should be a written policy that makes it clear that any type of sexual harassment will not be tolerated and will result in disciplinary action. The policy should include examples of what constitutes sexual harassment, including Explicitly or implicitly suggesting sex in return for living in the community, receipt of services, or otherwise related to the terms and conditions of tenancy; Suggesting or implying that failure to accept a date or sex could adversely impact a tenant s residency; Initiating unwanted physical contact, such as touching, grabbing, or pinching; Making sexually suggestive or obscene comments, jokes, or propositions; and Displaying sexually suggestive photos, cartoons, videos, or objects. Pay close attention to employee hiring and training. All employees should receive regular (at least annual) training on fair housing (including sexual harassment). Employers should also check references for new employees, and do criminal record checks (note the Barnason case above). Adopt specific rules for employees who have access to units. Such employees should only enter units for repairs, maintenance, or in the case of emergencies, and except for emergencies, should never go in unless reasonable notice was given. If residents are home, staff should not enter a unit until the resident lets them in and staff should never enter a unit if the only persons in the unit are children (under age 18). And, under no circumstance, should an employee fraternize or establish a social relationship with residents. Never ignore a sexual harassment complaint. All such complaints should be investigated as soon as possible, and corporate counsel should be consulted regarding how to proceed. If a complaint is justified, take immediate action to halt the harassment. If the harasser is an employee, take appropriate disciplinary action, such as reprimand, suspension, or termination - whatever is warranted. If the complaint is about a vendor, seek legal advice on how to proceed - but proceed; never ignore the issue. Finally - never retaliate against anyone complaining about sexual harassment. Under the FHA, it is illegal to "coerce, intimidate, threaten, or interfere with" anyone who exercises their rights under fair housing law.

Significant New Housing Law Ready for President's Signature

On July 14, 2016, the U.S. Senate passed HR 3700, the Housing Opportunity Through Modernization Act of 2016. It is expected that the President will sign the Act into law shortly at which time the statute will be sent to the Department of Housing & Urban Development to be placed into Regulation.   The Act contains seven Titles and makes some significant changes to some HUD housing programs, most particularly the Section 8 Multifamily Housing Program, Public Housing, and Vouchers. The seven Titles of the Act are:   Title I: Section 8 Rental Assistance & Public Housing Title II: Rural Housing Title III: FHA Mortgage Insurance for Condominiums Title IV: Housing Reforms for the Homeless and for Veterans Title V: Miscellaneous Title VI: Reports Title VII: Housing Opportunities for Persons with Aids   This memorandum deals primarily with Title I, since changes in this area have the greatest impact on existing multifamily housing properties. The memo outlines changes from regulations that are currently in effect.   Title I   Initial Inspections   Correction of Non-Life Threatening Conditions: Units that fail to meet the inspection standard for participation in the Housing Choice Voucher program will no longer result in a withholding of assistance payments unless the failure is the result of a life-threatening condition. If a life-threatening condition exists, the PHA may withhold payments beginning 30-days after the deficiency is discovered. Once the correction has been made, payments will begin again. If the dwelling unit is not brought into compliance with housing quality standards (HQS) within 60-days after the unit is deemed out of compliance (or such reasonably longer period as the agency may establish, the tenant will be required to move; and The PHA will provide the tenant the necessary forms to allow the tenant to move to another dwelling unit and will transfer assistance to that unit. Protection of Tenants: If assistance is withheld due to the failure of a unit to pass inspection, the owner of the unit may not terminate the tenancy of the resident, but the tenant may terminate tenancy through notice to the owner. Termination of Lease or HAP Contract: If the owner does not correct the noncompliance within 60-days of the determination of noncompliance, the Agency must terminate the housing assistance payments (HAP) contract for the unit. Relocation: The agency must give families residing in such units 90-days (or longer) to lease a new unit. The 90-day unit begins upon termination of the HAP contract. Availability of Public Housing Units: If a family is unable to find a unit within the required timeframe, the PHA shall, at the option of the family, provide such family a preference for a public housing unit that becomes available after expiration of the 90-day timeframe. Assistance in Finding a Unit: Agencies will be able to provide assistance to families in finding a new residence, including the use of up to two months of any assistance payments that were withheld or abated due to the failure of the unit to meet HQS standards. Assistance may include security deposits and reimbursement for reasonable moving expenses. These provisions will not apply if the reason for the unit not meeting HQS was tenant-caused damage. Effective date: This section will take effect following HUD publication of Notice or Regulation implementing the requirements.   Income Reviews   Income Reviews for Public Housing & Section 8 Programs: Reviews of Family Income: Annual reviews will still be required for all families, except for families with fixed income. Households may request a review of income anytime the income or deductions of the family change by an amount that is estimated to result in a decrease of 10% or more in adjusted annual income (this is a change from the current $40 monthly reduction in income). The income must be reexamined any time the income or deductions of the family change by an amount that will increase the annual income by 10% or more. However, any increase in the earned income of a family will not require an interim recertification (this is a major change from current Section 8 rules). There will be an exception to this if the increase due to employment corresponds to a previous decrease that resulted in an interim recertification. Calculation of Income: Use of current year income - for purposes of initial occupancy, agencies or owners shall estimate income for the upcoming year. Use of prior year income - for purposes of annual reviews, agencies or owners shall use the income of the family as determined for the preceding year, taking into consideration any interims performed during the preceding year. Other Income - agencies or owners will have the authority to make other adjustments that are considered appropriate. Safe Harbor - agencies or owners may use income determinations made for participation in other programs such as TANF, Medicaid assistance, and the SNAP (food stamp) program. PHA & Owner Compliance - agencies and owners will not be considered out of compliance for de minimis errors made in the calculation of family incomes. Adjusted Income: There have been some significant changes to the determination of adjusted income: Excluded amounts: Income will not be imputed to assets unless the net family assets exceed $50,000 - this is an increase from the current $5,000. This amount will be adjusted by HUD annually based on the inflation rate. Expenses related to the Aid and Attendance program for veterans who are in need of regular aid and attendance. HUD will publish other statutory exclusions with the newly updated regulations. Earned income of students - HUD will determine by regulation the amount of earned income of full-time students that is to be excluded; this amount is currently any earned income in excess of $480 per year. HUD will also be able to determine the exclusion of any room and board for students. The one-time deduction for an elderly family will increase from the current $400 to $525; The dependent deduction will remain at $480 for the time being, but along with the elderly deduction, will be adjusted annually based on inflation, rounded to the nearest $25. Health & Medical Expenses: in a major change, allowable medical expenses for an elderly or disabled family will now be the amount in excess of 10% of gross income instead of the current 3%. This will also be true for disability related expenses if such expenses enable a household member to work. Hardship exemptions will be available based on the new HUD regulations.     Housing Choice Voucher Program   PHAs will be able to establish a payment standard of not more than 120% of fair market rent when required as a reasonable accommodation for a disabled person, without HUD approval. Payment standards in excess of 120% of FMR will require HUD approval.   Effective date: HUD will issue notices or regulations implementing this section of the Act. These provisions will take effect at that time, but only at the beginning of a calendar year.   The Act requires that the Secretary of HUD conduct a study on the impact of the changes on elderly and disabled individuals not later than 12-months after the Act goes into effect.   Limitation on Public Housing Tenancy for Over-Income Families   A major change for the Public Housing Program is the requirement that higher income families already in occupancy will no longer be eligible for public housing. If the income of a family in public housing exceeds the income limit for two consecutive years, the rent of the family must be raised to the applicable market rent for the geographic area and terminate the tenancy of the family in public housing not more than six months after the second income determination. The income limit that may not be exceeded is 120% of the median income for the area, so it is not the low-income limit for the area. The HUD Secretary may establish higher income limits because of prevailing levels of construction costs, or unusually high or low family incomes, vacancy rates, or rental costs. Also, this regulation will not apply to over-income families living in public housing due to a lack of qualified low-income residents.   Limitation on Eligibility for Assistance Based on Assets With regard to the Public Housing Program, units may not be rented and assistance may not be provided to households with assets in excess of $100,000 or who own a home that is suitable for occupancy, unless the family is receiving Section 8 assistance, is a victim of domestic violence, or is offering the home for sale. Asset Exclusions At least for public housing, the full value of retirement accounts will be excluded as an asset - not just the value if regular distributions are being taken. We will need to wait until HUD issues regulations to see if this will apply to Multifamily Housing (e.g., Section 8) as well as Public Housing. Self-Certifications It does appear that for both Multifamily Housing and Public Housing, families will be able to provide a certification that net assets do not exceed $50,000 in lieu of verification. This amount will be adjusted annually based on inflation. This is clearly a major change from the current requirement that permits such an affidavit when assets are $5,000 or less for public housing and vouchers (as well as the LIHTC program). Project-Based Vouchers The new law permits PHAs to assign up to 20% of voucher units as project-based (up from 15%). An additional 10% of units may be authorized as project-based to house homeless families, families with veterans, supportive housing to persons with disabilities or elderly persons, or in areas where vouchers are difficult to use. Not more than the greater of 25 units or 25% of the units in any project may be provided project-based vouchers. PHAs may enter into HAP contracts for up to 20-years for project-based assistance, subject to the availability of Congressional funding. Preference for United States Citizens or Nationals The new law will give preference or priority for assistance to citizens or national of the United States prior to any alien who is otherwise eligible for such assistance. This will impact waiting list administration. This synopsis if for informational purposes only. Agencies, Owners, and Managers should make no changes in operational procedures at this time. None of the statutory changes outlined here will go into effect until HUD issues new Notices and regulations implementing the law.    

Verification of Cash Payments

Verification of income from employment is usually just a matter of obtaining a written verification of income from the employer or the most recent four to six consecutive pay stubs from the applicant. However, in some cases, persons are paid in cash and do not receive paychecks or directly deposited employment income. In these cases, verification of income can be problematical. When verifying income for Section 8 or other HUD projects, HUD requires obtaining third party written verification, and if such verification is not possible, oral third party verification may be obtained. If not third party verification is possible, in some circumstances an affidavit provided by the applicant may be acceptable, but this is certainly a last resort - even for HUD properties where mistakes in certifications can be corrected by an interim certification. Certifications for Low-Income Housing Tax Credit Projects (LIHTC) are a different issue, since there generally is no "do-over." Tax credit managers have to get it right the first time and an incorrect certification (or one that the Housing Finance Agency [HFA] will not accept) can lead to a credit reduction for a property.   Some states (California for example) have very strict income verification requirements that exceed the requirements outlined by HUD in Handbook 4350.3, Chg. 4. HFAs are permitted to impose requirements that are stricter than HUD and LIHTC owners and managers in those states need to understand what those requirements are. We review LIHTC properties in all the states and territories and I teach students from all over the country how to comply with the requirements of the LIHTC program. One of the most common questions I get when teaching and one of the most common issues my staff confronts during file reviews is how to handle the verification of income for someone who is paid in cash. Following are the procedures we recommend in these cases, but keep in mind - if the requirements of your HFA are more stringent than our recommendation, you should follow your state s guidance.   If your applicant/resident states that they are paid in cash for their employment, we recommend the following information be obtained:   A statement from the employer on company letterhead or management form regarding the amount paid to the employee in cash and how the money is paid (i.e., weekly, bi-weekly, semi-monthly, monthly, etc.). Obtain the most recent tax return of the applicant/resident either by having the resident obtain a copy of the transcript from the IRS by calling 1-800-908-9946 or obtaining the return directly from the IRS by having the applicant sign an IRS Form 4506-T and submitting the form to the IRS. If the applicant/tenant states that they do not file taxes, the return should still be requested from the IRS. The IRS will confirm that no return is on file. The IRS has determined that in many cases, individuals who are paid in cash are "independent contractors" and are required to file tax returns.   Managers should keep in mind that in order to obtain the tax return using one of the methods shown above, a person must have either a Social Security Number or a taxpayer identification number (TIN). I recommend that if a tenant is paid in cash and does not have a SS number or TIN, I recommend that they be required to apply for one prior to considering their application.   In essence, we strongly advise against renting to applicants solely on the basis of a self-certification of employment income (or most other forms of income for that matter). Residency in LIHTC properties is a privilege - not a right, and the burden to demonstrate eligibility rests with the applicant; management s burden is to request the required information.

Rural Development Voucher Program

The Rural Housing Service (RHS) published a notice in the Federal Register on June 29, 2016, titled "Rural Development Voucher Program." The purpose of the notice was to inform the public of the general policies and procedures for the Rural Development Voucher Program (RDVP) for fiscal year 2016. Rural Development Vouchers are only available to low-income tenants of RD financed multi-family properties where the RHS Section 515 loan has been prepaid prior to the loan s maturity date. In order for eligible tenants to participate, a voucher obligation form must be submitted within ten-months of the foreclosure or prepayment. In the event of a prepayment or foreclosure, RD will notify tenants of the availability of vouchers and how to obtain a voucher.   $15 million of RHS Vouchers will be made available to any low-income household (including those not receiving rental assistance) residing in a property financed with a Section 515 loan that has been prepaid after September 30, 2005. The amount of such voucher is the difference between comparable market rent for the Section 515 unit and the tenant paid rent for the unit. The RDVP is administered using the same rules as the HUD Housing Choice Voucher Program.   Low-income tenants in the prepaying property are eligible to receive a voucher to use at their current rental property, or to take to any other rental unit in the United States and its territories.   There are some limitations on the use of the voucher: The rental unit must pass an RD health and safety inspection, and the owner must be willing to accept an RD Voucher; The Voucher cannot be used for units in subsidized housing, such as Section 8 or public housing, when two housing subsidies would result; and The Voucher may not be used to purchase a home.   Tenant Eligibility   The tenant must meet the following requirements: Be residing in the Section 515 project on the date of the prepayment or foreclosure; Be a United States citizen, U.S. citizen national, or a resident alien; and Be a low-income tenant on the date of the prepayment or foreclosure, meaning their income may not exceed 80% of the area median income as defined by HUD.   If RD determines that a tenant is low-income, the tenant has ten-months from the date of prepayment or foreclosure to return the Voucher Obligation Request form and citizenship declaration to the local RD office. Failure to submit these forms within the required timeframe eliminates the tenant s opportunity to receive a voucher.   The tenant receiving a Rural Development Voucher has an initial period of 60 calendar days from issuance of the voucher to find a housing unit. RD may grant one or more extensions for up to an additional 60 days, but no tenant may have more than 120-days to find a replacement unit.   Initial Lease Term   The initial lease term for the housing unit where the tenant wishes to use the voucher must be for one-year.   Inspection & Unit Approval   Once the tenant finds a housing unit, RD will inspect and determine if the housing standard is acceptable within 30-days of RD s receipt of the HUD Form 52517, "Request for Tenancy Approval Housing Choice Voucher Program," and the Disclosure of Information on Lead Based Paint Hazards. The inspection standard used for the RD Section 515 Program will be used for the RD Voucher Program.

Child Support Pass-Through and Disregard Policies for Public Assistance Recipients

Child Support Pass-Through and Disregard Policies for Public Assistance Recipients   Under federal law, families receiving public assistance, known as Temporary Assistance for Needy Families (TANF), must cooperate with child support establishment and enforcement efforts.   In addition, TANF recipients must assign their rights to child support payments to the state. When a state collects child support on behalf of a TANF recipient, the state is permitted to keep the money to reimburse itself and the federal government for TANF assistance. States, however, have the option of allowing some of the child support payment to be passed through to the parent and child and "disregarded" when determining TANF assistance, meaning the amount would not be considered income for purposes of determining TANF eligibility.   About half the states have chosen various ways of passing through child support without reducing the family s TANF assistance. Some states pass through up to $50, while others pass through $100 - $200, depending on the number of children. In 2014, states distributed more than $118 million in child support payments to families receiving TANF.   Following is a breakdown of the 52 states and territories based on their pass-through and disregard policies. The information is from October 2015, which is the most recent information available.   The following states permit no pass-through or disregard: Alabama Arizona Arkansas Florida Guam Hawaii Idaho Indiana Iowa Kansas Kentucky Louisiana Maryland Michigan (Michigan discontinued a $50 pass-through and disregard effective 10/1/11 due to budgetary constraints). Mississippi Missouri Nebraska Nevada New Hampshire North Carolina North Dakota Ohio Oklahoma South Carolina (The SC statute still indicates that there is a $75 pass-through. However, the state has not passed through any child support since 2010). South Dakota Utah Virgin Islands Washington (WA suspended its $100/$200 pass-through in 2010). Wyoming   The following states permit a pass-through and disregard: Alaska - $50 California - $50 Colorado - All (effective January 1, 2017) Connecticut - $50 Delaware - $50 District of Columbia - $150 Georgia - up to unmet need for purposes of fill-the-gap budgeting. This means that the amount of child support distributed to the family is equal to the difference between the maximum eligibility standard and the recipient s income; essentially to fill the gap between income and need. However, Georgia has not actually passed through any child support since 2010. Illinois - $50 Maine - $50 Massachusetts - $50 Minnesota - Full pass-through and a disregard in the amount of $100 for one child and $200 for two or more children. Montana - $100 New Jersey - $100 New Mexico - up to $100 for one child and $200 for two or more children. New York - up to $100 for one child and $200 for two or more children. Oregon - $50 per child, per month, up to $200 per family. Pennsylvania - $100 for one child and $200 for two or more children. Puerto Rico - $50 Rhode Island - $50 Tennessee - up to unmet need. Texas - $75 Virginia - up to $100 West Virginia - up to $100 for one child and $200 for two or more children. Wisconsin - $75   When determining income for affordable housing programs such as Section 8 and the Low-Income Housing Tax Credit, the full amount of TANF is counted as public assistance and the full amount of the pass-through is counted as child support. Managers should not count child support that is held by the state as repayment of TANF.