News

HUD Proposed Rule on Small Area Fair Market Rents - June 16, 2016

In the June 16, 2016, Federal Register, HUD published a proposed rule titled, "Establishing a More Effective Fair Market Rent System; Using Small Area Fair Market Rents in Housing Choice Voucher Program Instead of the Current 50th Percentile FMRs."   HUD is proposing the use of Small Area Fair Market Rents (Small Area FMRs) in the administration of the Housing Choice Voucher (HCV) program for certain metropolitan areas. These rents will be used in place of the current 50th percentile rent in order to address high levels of voucher concentration. HUD believes that Small Area FMRs will give HCV residents a more effective opportunity to move into areas of higher opportunity and lower poverty. This would be accomplished by providing the voucher holders with enough subsidy to make such areas accessible and the reduce the number of voucher families in areas of high poverty concentration.   HUD proposes to use several criteria in determining which metropolitan areas would best be served by application of Small Area FMRs. These criteria include a threshold number of vouchers within a metropolitan area, the concentration of current HCV tenants in low-income areas, and the percentage of renter occupied units in the metropolitan area with gross rents above the payment standard basic range. HUD s goal with the proposed rule is to provide HCV tenants with a greater ability to move into areas where jobs, transportation, and educational opportunities exist.   Comments on the proposed rule are due no later than August 15, 2016.   Purpose of the Proposed Rule   The subsidy for the HCV program is currently determined by a formula that considers rent prices across an entire metropolitan area. However, rents can vary widely within a metropolitan area depending upon the size of the metropolitan area and the neighborhood within the metropolitan area within which a person resides. Experience with the 50th percentile method of rent determination shows that the majority of HCV tenants use their vouchers in neighborhoods with low rents but generally high poverty levels. The goal of this proposed rule is to increase the share of households that choose to use their vouchers in low poverty high opportunity areas.   In order to accomplish this, the rule proposes to determine rents on the basis of ZIP codes. Based on early evidence from PHAs using Small Area FMRs in certain metropolitan areas, HUD believes that Small Area FMRs are more effective in helping families move to areas of higher opportunity and lower poverty.   The proposed rule provides that Small Area FMRs will be set for metropolitan areas with at least 2,500 HCVs under lease; at least 20% of the standard quality rental stock, within the metropolitan area, is in small areas (ZIP codes) where the Small Area FMR is more than 110% of the metropolitan FMR; and the measure of the percentage of voucher holders living in concentrated low-income areas relative to all renters within these areas over the entire metropolitan area exceeds 155%.   HUD is especially interested in receiving comments based on certain elements of the proposed rule, including: Should HUD provide for Project-Based Vouchers that are in the pipeline to continue using metropolitan FMRs even if the area is designated as a Small Area FMR area? What additional policies or requirements should the final rule include that would mitigate the impact of significant and abrupt decreases in the FMRs for certain ZIP code areas on families currently under HAP contract in those impacted areas?   The move to expand the use of Small Area FMRs is a significant policy shift for HUD. It is important that PHAs and property owners with voucher residents review the proposed rule and provide comments to HUD by the noted deadline.

HUD Updates Two Forms - 92006 and 9834

HUD has recently updated two forms that are required for properties with HUD assistance, the HUD Form 92006 and Form 9834.   The Form 92006 - Supplement to Application for Federally Assisted Housing contains an updated expiration date of February 28, 2019. Even though this is the only change on the form, properties must begin using it immediately and discard the forms that show an expiration date of November 30, 2015. If an applicant or resident completed the form after November 30, 2015, they do not need to complete a new form at this time. Just make a note next to the old date that the new form was not released at the time the resident signed the form, initial, and date the note.   HUD also updated the HUD Form 9834, Management Review for Multifamily Housing Projects. The only changes are the date of issue and expiration and more questions about the EIV system. This form will be used by reviewers when conducting MORs and should be used by owners when preparing for MORs. The new form has an expiration date of April 30, 2018.

Preservation and Recapitalization of Section 236 Properties

Preservation and Recapitalization of Section 236 Properties   The Section 236 Program was created by Congress in 1968 and was designed to involve the private sector in the creation of affordable rental housing. Market rate lenders provide loans that are either HUD or FHA insured, and in some cases financing is provided by State Housing Finance Agencies (HFAs). HUD also provided Interest Reduction Payments (IRP) that subsidized the loans down to a one percent interest rate with a 40-year term. Tenant income limits are set at 80% of the median income and rents are capped at HUD-approved, cost-based Section 236 Basic Rents. Rents for higher income residents are capped at the Section 236 Market Rent Level (the rent needed to amortize the market rate of the loan). Project-based rental assistance (PBRA) was also included for many projects.   There are currently 550 Section 236 projects at risk with more than 100,000 units. All of these will required preservation and recapitalization in the next few years. HUD has developed a complete program to assist owners of Section 236 projects with this process; this article is designed to introduce owners to the process and explain how and where to seek assistance.   Assessing options will require a strategy that will involve refinancing, possible restructuring of the Section 236 subsidy, renewal of rental assistance contracts, and possible participation in the RAD 2 program and/or the Low-Income Housing Tax Credit (LIHTC) Program.   There are five steps required for a successful preservation action: Know the property; Set your preservation goals; Choose your preservation options; Apply for financing and HUD approvals; and Secure long-term stability.   Know the Property - The first step in the process is the gathering of documents - a lot of documents. These documents relate to the financing of the project, its rental assistance, and information on the capital needs and reserves of the property.   Documents to gather regarding financing: *Section 236 Mortgage Note; *Section 236 Regulatory Agreement; *Interest Reduction Payment Amortization Schedule; *Flexible Subsidy documents; *ELIHPA or LIHPRHA Plan of Action and Use Agreement (if any); *Other financing documents; and *Financial statements >>When does the Section 236 loan mature? How many months are left on the IRP? These critical questions must be answered by the documents.   Documents to gather regarding rental assistance: *Project-Based Section 8 Contract; *Rent Supplement (Rent Supp) and/or Rental Assistance Payment (RAP) contract; and *Rent roll >>When do the rental assistance contracts expire? What is the mix of subsidized and unsubsidized rents? What are the rents?   Documents to gather regarding capital needs and reserves: *Review the latest REAC report for capital and repair needs, know your score, and understand the issues; *Know the current balances in your reserves for replacement and residual receipts accounts; and *You will need a Capital Needs Assessment (CNA) that evaluates your property's upcoming capital replacement needs.   Set Preservation Goals - After gathering all required information, the next step is to set preservation goals. Primary goals should be: *Safeguard long-term rental assistance; *Improve and modernize the property through capital repairs; and *Stabilize the property by placing on a sound financial footing.   Typical capital improvement goals: *Major repairs; *Modernization of older units and common areas; *Conversion of efficiencies to one-bedroom units; *Energy efficiency upgrades; and *Accessibility improvements.   Choose Preservation Options   Preservation options fall into two categories - financing and rental assistance. With regard to financing owners will need to raise capital, examine prepayment options, consider IRP decoupling, and look into Flexible Subsidy loan deferral. Rental assistance options include Section 8 contracts, vouchers, and RAD 2.   Raise Capital   Capital will need to be raised in order to address capital needs and get access to accumulated equity. Sources of capital may include: >Refinancing - New First Mortgage Debt *FHA-insured, Fannie Mae, Freddie Mac or State HFA >Equity *Low-Income Housing Tax Credits (LIHTC) *Cash-on-cash >Subordinate debt *HOME, CDBG, State housing trust funds, National Housing Trust Fund >Grants (mainly available to non-profits)   Prepayment   Prepayment of the Section 236 loan will usually be required in order to refinance a property and to trigger the issuance of Tenant Protection Vouchers (TPVs). Some properties need HUD permission to prepay. These include: *Nonprofits, properties with Flex Sub Loans, and certain FHA loans with Rent Supplement Contracts. All owners should examine the mortgage note and other property documents to determine prepayment requirements. Prepayment is governed by Section 250(a) of the National Housing Act.   Prepayment when HUD Permission is Required   Tenant Notification Requirements   *Tenants must be notified of the prepayment at least 150-days before the expected prepayment. When the owner submits the prepayment request to HUD, tenant comments must be submitted as an exhibit to the request. *Owners must send a copy of the tenant notification letter to the HUD field office with a signed certification that it has been delivered to the tenants.   Rehab Requirements   *Properties must be rehabbed and minimum requirements apply.   Affordability Requirements   *Properties must be maintained as affordable (with the same benefits that existing under the 236 Program) for low-income residents through whatever the original mortgage note term was. *The owner must execute a new Use Agreement.   Resources & Tools   *Notice H 2006-11 provides information relating to prepayments.   Prepayment when Permission is NOT Required (Governed by Section 219 of the FY 1999 HUD Appropriations Act - Wellstone Amendment)   Tenant Notification Requirements (Wellstone Notice)   *Tenants must be notified at least 150 days - but no more than 270 days - before prepayment may occur. >This requirement may be waived by HUD, but only if necessary to facilitate preservation.   There may be no rent increases for 60-days after prepayment but there are no HUD rehabilitation requirements.   Decoupling the IRP Subsidy   Owners may "decouple" the remaining IRP subsidy at prepayment and apply it to a new loan. In other words, even though the Section 236 loan is being prepaid, the interest reduction payment subsidy may remain with the property. These funds may assist in leveraging new debt capital for the project. The new lender will receive the remaining IRP payments from HUD.   Setting the Rent when Decoupling   If the project has Section 8 units, the rent will be set per the renewal options outlined in the Section 8 Renewal Guide. Owners will have to coordinate Section 8, FHA, and Section 236 rent underwriting.   Non-Section 8 units will be required to retain Section 236 rent-setting rules for five years after pre-payment. The rents will be budget-based and capped at the Section 236 required levels.   IRP Decoupling Use Agreement   The property will be required to maintain Section 236 occupancy and income restrictions. New residents may have incomes no higher than 80% of the area median income, and as noted above, the Section 236 Basic or Market Rents will have to be maintained for five years beyond the current maturity date of the loan.   There can be no involuntary displacement of current residents and Section 8 contracts must be terminated and immediately renewed for 20 years.   IRP Decoupling Distributions   Annual distributions to owners are restricted to 6% of the new adjusted equity. LIHTC equity, long-term deferred developer fees, and owner cash are considered new equity, but not grants and soft loans. If there is no new equity, return is limited to 10% of 10% of the new mortgage amount.   Distributions may be taken only from surplus cash, and for HFA-financed Section 236 deals, state or local law controls the distributions.   Flexible Subsidy Loan Deferral   Owners with a Flex Sub loan may be able to defer repayment of the loan in order to avoid a balloon payment at prepayment, maturity, or sale. In the late 1970 s, HUD provided loans for operating assistance or capital improvements. Such loans are required to be paid in full at the maturity or prepayment of the Section 236 loan, or at sale of the property. Capital improvement loans were amortized and typically have low balances. Operating assistance loans were structured as balloon payments. Owners wishing to defer the Flex Sub loans face certain requirements: *Regulatory compliance; *There may be no other funding sources available to repay the loan; *The maximum deferral and re-amortization is the greater of 20 years or the term of the new first mortgage; *Financial projections must show that repayment under the new terms is feasible; and *The owner must enter into a new Flex Sub Use Agreement restricting rents and incomes to match the new term of the Flex Sub Loan.   Section 8 Contract Renewal   When recapitalizing a Section 236 project, lenders and LIHTC investors will insist on a new 20-year HAP contract for Section 8. Owners may be able to increase rents to market level under the new contract. Owners with existing Section 8 contracts must follow the guidance in the Section 8 Renewal Guide for available options and eligibility to renew. The main factors determining Section 8 renewal options are: Are rents over or under the market at the time of renewal? Is the debt FHA-insured? Does the project come under LIHPRHA or ELIHPA? Are there other regulatory agreements? Is the owner a nonprofit?   Vouchers   Tenant Protection Vouchers   Tenant Protection Vouchers (TPVs) may be available to owners of Section 236 projects. These vouchers provide Section 8 assistance to tenants after the loss of rental assistance or at Section 236 mortgage prepayment. TPVs protect residents from being displaced due to rent increases.   The local Public Housing Agency (PHA) issues TPVs. The vouchers are portable, but in certain circumstances may be project-based. Availability is subject to annual Congressional appropriations, and the tenants must income qualify. Units must also meet Housing Quality Standards. TPVs may be "Enhanced Vouchers (EV)," or regular Housing Choice Vouchers (HCV).   Enhanced Vouchers   Enhanced vouchers provide more protection for residents than standard TPVs, and the rent-setting requirements are more flexible. The availability of EVs is triggered when: *A Section 236 loan is prepaid and is subject to Section 219 (Section 219 of the Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1999, requires an owner of preservation eligible projects to give at least 150 days, but not more than 270 days, advance notice of mortgage prepayment); or *The prepaid property has a Flex Sub Loan; or *The Section 8 contract is not renewed at expiration. Discretionary TPVs for Section 236 Properties   If a Section 236 project does not meet the requirements for TPV or EV issuance, HUD has limited competitive funds for Enhanced Vouchers or Project-Based Vouchers. Certain tenants in low-vacancy areas who are at risk due to loss of affordability and not otherwise eligible for TPVs may be eligible for these discretionary vouchers.   Rental Assistance Demonstration 2 (RAD 2)   RAD 2 allows conversion of expiring non-renewable Rent Supp and RAP contracts into long-term project-based Section 8. While TPVs generated by Rent Supp or RAP expiration are tenant-based, RAD 2 allows conversion to Project-Based Vouchers (through the local PHA) or Project-Based Rental Assistance (through HUD). Applications can be submitted on a rolling basis according to the rules outlined in the Final RAD Notice from HUD.   Apply for HUD Approvals   After choosing the preservation options, owners will apply for financing and HUD approval.   Preservation Application Process   Processing of applications is centralized through the HUD Office of Recapitalization (Recap). To begin the process for a Section 236 preservation transaction, owners should go to the Multifamily Preservation Resource Desk at http://www.hudmfpreservation.net/ and click on "Submit an Application." This begins the process of securing HUD approval and will deal with: *Prepayment approval or permission request; *Waivers with HFA-Financed Transactions; *IRP decoupling; *Flexible Subsidy Loan deferral requests; *Request for increase in post-transaction rents; *Issuance of TPVs; *Nonprofit fees and sales proceeds; *LIHPRHA - ELIHPA amendments; and *Unit Conversion requests (combining efficiencies into one bedroom units).   Prepaying State HFA Loans   Many Section 236 loans were originated through a State HFA. All Section 236 preservation rules and incentives apply to these properties. Owners must apply for approvals through HUD like any 236 project PLUS contact their HFA about their required prepayment approvals.   Secure Long-Term Stability   The last steps in the process are to close on the new financing, secure the rental assistance, renovate the property, and stabilize the property by placing it on solid financial footing.   Owners whose loans have matured or are maturing very soon should contact HUD immediately to discuss their options. Issues that should be discussed with HUD include: If loan has not matured, can TPVs be obtained by prepayment? Would the project qualify for discretionary TPV set-aside funds? Are you able to renew your Section 8 rental subsidy contract to leverage new financing for capital needs?   HUD can guide you through the entire process, and the best place to start is the HUD account executive or project manager for the project. An option is to email the Office of Recap at 236Preservation@hud.gov. Ask them any questions you may have including what you need to do to get started. They can also give you suggestions on how to pay for predevelopment costs.   The key for Section 236 owners is to begin the process now. Even if you have a year or two before the loan matures, starting the process early will prevent a lot of sleepless nights down the road.        

GAO Issues Second Report on the LIHTC Program, May 2016

The United States Government Accountability Office (GAO) recently issued a report to the Senate Judiciary Committee titled "Low-Income Housing Tax Credit - Some Agency Practices Raise Concerns and IRS Could Improve Noncompliance Reporting and Data Collection." This is the second in a series of three reports that the GAO will release on the administration of the LIHTC program.   The GAO was asked to review allocating agencies oversight of the LIHTC program. This report reviews how allocating agencies administer the LIHTC program and identifies any oversight issues. GAO reviewed regulations and guidance for allocating agencies; analyzed 58 allocation plans (from 50 states, the District of Columbia, U.S. territories, New York City, and Chicago); performed site visits and file reviews at nine selected allocating agencies; and interviewed IRS and HUD officials. The nine agencies were California, Chicago, Illinois, Massachusetts, Michigan, Nevada, Rhode Island, Virginia, and Washington, DC.   As a result of their findings, the GAO recommends that the IRS clarify when agencies should report noncompliance and participate in the Rental Policy Working Group to assess the use of HUD s database to strengthen IRS oversight. The IRS agrees that it should improve its noncompliance data, but also stated that it has to consider resource constraints. HUD supports using its expertise and experience administering housing programs to improve the LIHTC program.   Major findings from the study include the following: More than 50% of the qualified allocation plans (QAPs) that GAO analyzed did not explicitly mention all selection criteria and preferences that Section 42 of the Internal Revenue Code requires. Allocating agencies notified local governments about proposed projects as required, but some also require letters of support from local governments. HUD has raised fair housing concerns about this practice, saying that local support requirements (such as letters) could have a discriminatory impact on the location of affordable housing. Allocating agencies can increase (boost) the eligible basis used to determine allocation amounts for certain buildings at their discretion. However, they are not required to document any justification for the increases. The criteria used to award boosts varied, with some allocating agencies permitting boosts for specific types of projects and one allowing boosts for all projects in the state.   In the first report on the LIHTC program (July 2015), the GAO found that IRS oversight of allocating agencies was minimal and recommended joint administration with HUD to more efficiently address oversight challenges. The current report continues to state that IRS oversight is minimal, particularly in the review of QAPs and practices relative to the awarding of basis boosts.   Issues relating to IRS management of noncompliance reports from allocating agencies include: The IRS provides discretion to allocating agencies for reporting noncompliance data, but does not provide feedback to the agencies about data submissions. Consequently, allocating agencies have been inconsistent in their reporting of noncompliance to the IRS. The IRS does not use the information it receives from the allocating agencies to identify trends in noncompliance. The report states that the IRS has recorded only about 2 percent of the noncompliance information received since 2009 in its database. The IRS does not use key information when determining whether to initiate an audit, potentially missing opportunities to initiate LIHTC-related audits.   Findings of Interest in the Report   A number of findings should be of interest to program participants (developers, management companies, investor/syndicators, and HFAs).   54 of the 58 allocating agencies reviewed cited the use of points or thresholds (minimum requirements) to weight, evaluate, and score applications against certain criteria and factors. Over 1/3 of the QAPs reviewed cited letters of support from local governments as a consideration in the awarding of credits. Major scoring criteria in QAPs include the following: Qualifications of development team: 92% Cost-effectiveness or cost-containment: 72% Energy Efficiency: 70% Prior compliance with the LIHTC program: 70% Leveraging other federal or state programs: 51% Project readiness: 50% Letters of support from local government: 38% 12 agencies actually require local government approval prior to an allocation of credits. Monetary contributions from local government: 31% Other local government contributions: 20% While all agencies must allocate at least 10 percent of credits to qualified nonprofit organizations, some reserve more than 10 percent. Virginia and Chicago reserve 15% and 30% respectively. Extended Use Agreements must have a minimum term of 30-years, but some agencies require much longer periods. California has a minimum extended use period of 55 years, and other agencies such as Virginia, Massachusetts, and Nevada award extra points for longer extended use. Michigan has restricted owners from using the Qualified Contract process at the end of the compliance period by limiting the ability of owners to remove affordability restrictions. From calendar year 2009 to April 2016, the IRS has received 214,000 Form 8823s - an average on nearly 27, 000 forms per year). States vary widely in what they report to the IRS: California, Virginia, and Rhode Island will not send a Form 8823 for minor violations of the Uniform Physical Conditions Standards (UPCS) - such as peeling paint or missing light bulbs - if the violations were corrected during the inspection. Michigan, Nevada, and Washington, DC send the form to the IRS for any instance of reportable noncompliance, whether or not the issue was resolved during the inspection. The range of reported violations between the agencies in 2013 was stark: California reviewed 785 properties and sent 59 8823s; Chicago reviewed 125 properties and sent one 8823; Illinois reviewed 232 properties and sent one 8823; Massachusetts reviewed 212 properties and sent 96 8823s; Michigan reviewed 929 properties and sent 1,728 8823s; Nevada reviewed 196 properties and sent 511 8823s; Rhode Island reviewed 125 properties and sent one 8823; Virginia reviewed 183 properties and sent 368 8823s; and Washington, DC reviewed 10 properties and sent 28 8823s. A number of agencies fail to meet the requirement to submit 8823s to the IRS within 45-days after the deadline for correction. Virginia, Illinois, Michigan, Massachusetts, Rhode Island, and Nevada all meet the deadline, but California submits the forms monthly, Chicago once a year, and Washington, DC biannually (the GAO report did not define whether in this case biannually means twice a year or once every two years (both uses are common). I assume twice a year since the alternative would be ridiculous. The IRS informed the GAO that the Service is not communicating with allocating agencies regarding form submission practices or the application of the IRS Guide (this comes as no surprise to the agencies). As of April 2016, the IRS database includes information from only 4,200 of the nearly 214,000 8823s received since 2009 (less than 2%). For this reason, the IRS is unable to provide information on the most common types of noncompliance (although we know from the allocating agencies that physical deficiencies are reported much more often than any other type of noncompliance). The IRS also has no method to determine if issues reported as uncorrected have been resolved or if properties have recurring noncompliance issues.   GAO Recommendations for Executive Action   The GAO is making three recommendations based on this report: The IRS should collaborate with the allocating agencies to clarify when allocating agencies should report such information on the Form 8823. The IRS and Treasury Department should coordinate the drafting of such guidance to ensure that any new guidance is consistent with Treasury regulations; The IRS should participate in the physical inspection alignment initiative of the Rental Policy Working Group; and The IRS should evaluate how the agency could use HUD s REAC databases, including how the information might be used to reassess reporting categories on the Form 8823 and to reassess which categories of noncompliance information have to be reviewed for audit potential.   It is unlikely that any action will be taken as a result of this report in the short term - certainly not until the third of the expected reports is released, which will probably be in 2017. At that point, we will have a new President and a new Congress and tax reform will be under consideration. It is certain that the GAO findings will be elements of the discussion when deciding how to proceed with the LIHTC program in the future.      

HUD Demonstration Program on Housing Choice Voucher Physical Inspections

On April 27, 2016, HUD published in the Federal Register a "Notice of Demonstration to Test Proposed New Method of Assessing the Physical Conditions of Voucher-Assisted Housing."   Through this Notice, HUD is seeking comments on a demonstration designed to test a new method of performing inspections on apartment units occupied by residents with Section 8 Vouchers, now known as Housing Choice Vouchers (HCV). Comments are due to HUD by July 5, 2016.   Background In the 1970's HUD established housing quality standards (HQS). PHAs use these standards to determine if housing meets the requirements necessary for the safety and habitability of occupants assisted under the Section 8 voucher program.   The HUD Office of Inspector General (OIG) has released several audit reports and evaluations that have identified weaknesses in the HCV inspection program. As a result of these reports, the Senate 2014 appropriations bill directed HUD to "...move to a consistent inspection standard across housing assistance programs, as well as for oversight of Section 8 units." A subsequent review by HUD showed that the current HQS protocol lacks objective, well-defined deficiency descriptions, is unable to capture granular unit conditions, and relies on a paper inspection form. There is also an absence of modern health standards such as carbon monoxide detectors and sprinkler systems, and an absence of a universal list of life threatening or emergency deficiencies.   HUD has not accelerated the search for a replacement to the HQS, leading to the eventual development of the Uniform Physical Condition Standards - Voucher (UPCS-V). In the Consolidated Appropriations Act of 2016, Congress directed HUD to implement a single inspection protocol for public housing and voucher units. This demonstration begins the process for implementing a single inspection protocol by soliciting Public Housing Agencies (PHAs) to voluntarily move to the single inspection protocol, conduct field testing, and participate in oversight and monitoring activities relating to the new standard.   The Demonstration   UPCS-V incorporates housing health and safety constructs, concepts from the UPCS, and HQS.   Under this demonstration, HUD will test, for up to three years, with up to 250 PHAs, the UPCS-V model as a new method of assessing the physical condition of voucher-assisted housing.   The new inspection model differs from the HQS inspection model in that it incorporates standards based on UPCS and uses a classification system that collects a more detailed level of data resulting in a better representation of the condition of the unit.   To participate in this Demonstration, a PHA must administer a HCV program. PHAs participating in any aspect of the Demonstration will be required to participate in focus groups, conference calls, and training sessions on policies and procedures. HUD will train each participating PHAs inspectors, administrators, and quality control staff on the new inspection protocol, including how to use the inspection software.   HUD is requesting that PHAs interested in participating in the Demonstration notify HUD no later than July 5, 2016, by emailing HUD at UPCSV@hud.gov, and providing the PHA name, address, contact name, contact phone number, and email address.   Owners and managers of multifamily properties that accept vouchers should stay abreast of progress relative to this Demonstration since it will impact the inspection of units occupied by voucher holders.

Updated REAC Guidance - May 23, 2016

HUD has released a document titled "UPCS Guidance & Protocol Clarification." This guidance was effective on May 23, 2016, and changes some of the prior guidance inspectors followed during REAC inspections. Primary changes/clarifications are as follows: HUD has clarified that vegetation touching a fence but not causing damage is not a violation. However, since changes to protocol issues published in the Federal Register need to be revised through regulatory changes, this guidance applies only to fences in land areas that are not in active use. Owners and managers should still consider vegetation contact with fences in primary residential areas as being a level 2 violation. If the exterior cover plate for a clothes dryer is missing or damaged, it will be considered a penetration and reported as a hole in the building s exterior and will be a level 2 finding. When an inspector chooses to test a zip tie used to secure electrical boxes, if the tie breaks and wires are exposed, it is a defect; if no wires are exposed it is not a defect. When testing Self-Latching doors, inspectors are to make only two attempts to confirm that the door closes - no more and no less. If the door does not close on the first attempt, it should be opened at a different angle for the second attempt. The resident/owner/manager may not open a window to assist the door closing. The door needs to operate whether or not a window is open. A missing strike plate is a deficiency even if a door operates. Caulking on a breaker or fuse panel is now considered a Health & Safety hazard. No foreign material - including caulk - may be used to repair an electrical panel. When there is an opening in an electrical panel, repairs must be made using materials specifically designed for such repairs. Overgrown weeds and grass in an area that is not in use is not a defect. Stains on exterior walls that are painted are a defect; stains on non-painted exterior walls (vinyl, brick, aluminum, etc.) are not a defect. Handicap chair lifts or stair lifts are considered elevators and must operate in the manner intended by the manufacturer. Property staff may demonstrate operability. If a showerhead in a unit leaks when turned on (even if it does not leak when turned off) it is a defect. Level 1 if contained and level 3 if not contained.

HUD Announces Housing Trust Fund Awards - May 5, 2016

On May 5, 2016, HUD published a notice in the Federal Register announcing the fiscal year 2016 Funding Awards for the Housing Trust Fund HTF). HUD had originally estimated that $120 million would be allocated in 2016, but this notice awards $173,591,160. In 2008, Congress authorized the HTF with the stated purpose of (1) Increasing and preserving the supply of rental housing for extremely low-income families with incomes between 0 and 30% of area median income and very low-income families with incomes between 30 and 50% of area median income, including homeless families, and (2) increasing homeownership for extremely low-income and very low-income families. Fannie Mae and Freddie Mac fund the HTF with an affordable housing set-aside. The awards range from a low of $12,321 for American Samoa to a high of $10,128,143 for California. Most states will receive $3 million. Affordable housing developers should contact their State Housing Finance Agency for information on how the fund will be administered.

Housing Discrimination Based on Religion

Discrimination Based on Religion   In this third installment in my series on the Fair Housing Act protected categories, I want to review some of the issues relevant to discrimination based on religion.   Religion is one of the characteristics that were originally protected in the 1968 Act. The Act does include an exemption for religious based organizations. However, unlike Title VII employment protections, the Fair Housing Act (FHA) does not require that housing providers "reasonably accommodate" religious beliefs, observances, or practices. The percentage of fair housing complaints relating to religion is fairly small, never having exceeded 5% on an annual basis. In fact, a large percentage of the fair housing complaints based on religion have involved disputes in the New York City area between Jewish persons and other groups. A number of these (and other) cases involved challenges to municipal land-use restrictions that allegedly discriminated against the plaintiff s religion. More traditional types of fair housing cases have been brought against owners and operators of multifamily properties. In these cases, owners and property managers have been accused of religious discrimination against housing applicants or residents. An example of such as case is Snyder v. Bazargani, 2007; in this case, a jury upheld a verdict against landlords who first inquired about the plaintiffs religion and then refused to rent them a unit because they were Jewish. Another case out of Newport News, Va. was Lotz Realty Company, Inc. v. U.S. Department of Housing & Urban Development (1983). In this case, the Anti-Defamation League prevailed in its challenge to a realtor s use of Christian symbols and slogans in its housing ads. With regard to the use of religious words, symbols, and slogans in housing ads, HUD has opined that such ads may violate the FHA if it conveys a discriminatory preference or limitation by using such words as "Protestant," "Christian," or "Jew." For example, an ad stating "Christian home for rent," could be deemed discriminatory. Harassment against religious minorities has also been alleged in some cases, such as Halprin v. Prairie Single Family Homes of Dearborn Park Association (2004). The court upheld a claim by condominium owners against the Condo Association and its board members for harassment of the plaintiff couple because the husband was Jewish. This case also upheld a finding that neighbors had discriminated against the couple.   Exemptions from the Religious Discrimination Provisions of the FHA   The primary exemption in the Act relative to religious discrimination applies to religious organizations. Such organizations may discriminate in favor of members of the religion in the operation of "noncommercial" dwellings (i.e., operated without a profit motive) as long as membership in the religion is not based on race, color, or national origin. However, Congress has noted that the Civil Rights Act of 1866, which prohibits any discrimination based on race, covers discrimination against Jews.   As is evidenced by current legislative efforts in a number of states, religion is often defended with regard to discrimination against certain groups. There have been a series of cases in which landlords have argued that there religious beliefs require them to discriminate against unmarried couples or other classes of tenants who are protected by state and local antidiscrimination laws. In 1994, for example, in Attorney General v. Desilets, the Massachusetts Supreme Judicial Court held that a provision of the state constitution guaranteeing freedom of religion protected landlords who had refused, in violation of the state s antidiscrimination law, to rent to an unmarried couple. In this case, the landlords held what the Court deemed to be a sincere belief that their rental practices had to conform to their religious beliefs, which included not facilitating sinful conduct such as pre-marital sex. Under these circumstances, the court held, the landlords should prevail unless the state could prove that it had a "compelling" interest in eliminating marital status discrimination. This would be difficult since it is generally accepted that marital status discrimination is not as intense a concern as is discrimination based on certain other classifications, such as race, color, religion, sex, and national origin. Based on this reasoning, a landlord refusing to rent to a married couple of the same sex would have a more difficult time prevailing, since the discrimination would be at least partially based on sex (assuming the landlord would rent to heterosexual married couples).   The bottom line for landlords is that the intent of the Fair Housing Act was (and is) to ensure that all persons have access to safe, decent, and sanitary housing where they can exercise their right to worship or not to worship as they choose. Owners who choose to operate housing in the commercial marketplace should not use any religious test (either their own or an applicants) as a condition for housing.