News

HUD Issues Guidance on Criminal Record Screening

On April 4, 2016, the HUD Office of General Counsel (Helen R. Kanovsky) issued guidance on the relationship of using criminal records as a screening tool for housing decisions to federal fair housing laws. The essence of the guidance is that reliance on criminal history as the basis for a housing decision may be a violation of fair housing law if it creates a disparate impact for individuals due to a federally protected characteristic.   The guidance states that "A housing provider violates the Fair Housing Act when the provider's policy or practice has an unjustified discriminatory effect, even when the provider had no intent to discriminate." The guidance goes on to state "where a policy or practice that restricts access to housing on the basis of race, national origin, or other protected class, such policy or practice is unlawful under the Fair Housing Act if it is not necessary to serve a substantial, legitimate, nondiscriminatory interest of the housing provider, or if such interest could be served by another practice that has a less discriminatory effect."   Disparate impact cases relating to criminal history will be decided using a three-step approach, as follows:   A plaintiff must prove that the criminal history policy has a discriminatory effect, that is, that the policy results in a disparate impact on a group of persons because of their race or national origin. Presenting evidence proving that the challenged practice actually or predictably results in a disparate impact satisfies this burden.   If the plaintiff proves discriminatory impact, the second step of the analysis shifts the burden to the housing provider to prove that the challenged policy or practice is justified - that is, that it is necessary to achieve a substantial, legitimate, nondiscriminatory interest of the provider. For example, the protection of other residents and the property could be cited as a reason for such a policy. However, the guidance indicates that that the policy must actually assist in making the residents or property safer.   If the housing provider is successful in demonstrating that the criminal history policy is necessary to achieve its substantial, legitimate, nondiscriminatory interest, the burden shifts back to the plaintiff or HUD to prove that such interest could be served by another practice that has a less discriminatory effect. HUD's position here is that an individualized assessment of relevant mitigating information beyond that contained in an individual's criminal record is likely to have a less discriminatory effect than categorical exclusions that do not take such additional information into account. HUD infers that owners and managers should delay consideration of criminal history until after an individual's financial and other qualifications are verified in order to minimize any additional costs that an individualized criminal record assessment might add to the applicant screening process. This guidance is enlightening, in that it indicates that HUD is intent or requiring (not recommending) individual assessments, and that owners who fail to implement such a policy will be presumed to have a potentially discriminatory policy.     The guidance explicitly prohibits - for all housing providers - a policy or practice of excluding individuals because of one or more prior arrests (without any conviction). HUD states that such a policy cannot satisfy the burden of showing that the practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest. This is also something I recommend in my guidance to clients when creating criminal screening policies; arrest records should not be used in the determination of housing approval - only conviction records should generally be considered.   The HUD policy is more forgiving with regard to policies that use a record of prior conviction as a reason for declining housing services. However, even a prior conviction policy does not relieve the owner of the requirement to prove that such policy or practice is actually necessary to achieve a legitimate business goal. A policy that denies a person based on any conviction record - regardless of when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then - will not be acceptable.   In other words, a housing provider must show that its policy accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not.   It is clear from this HUD guidance that HUD will consider any criminal screening policy to be discriminatory if it does not (1) take into account the nature and severity of an individual's conviction; and (2) consider the amount of time that has passed since the criminal conduct occurred. Apparently, HUD believes, based on this guidance, that all denials of housing assistance based on criminal convictions, are subject to assessment on a case-by-case basis.   HUD does give approval for one blanket exclusion from housing based on a criminal record. A housing provider will not be liable under the Act for excluding individuals because they have been convicted one or more time of the illegal manufacture or distribution of a controlled substance as defined in the Controlled Substances Act. Again, this is only if there has been a conviction for manufacture or distribution - not arrest. Also, this does not apply for cases involving drug "possession," - only manufacture or distribution.   Based on this new guidance, owners and managers should carefully examine their criminal screening policies. Such policies should never permit the refusal of housing services based solely on arrest records, and use of criminal conviction records should be limited to crimes relating to drugs, violent crimes, property crimes, and sex crimes. Also, any such policies should have reasonable timeframes in terms of how much of a "look back" is used when determining that a person's criminal history poses a threat to the community.   This represents a significant intrusion by HUD into the legitimate operational issues that housing providers must face on a regular basis. How this will all play out in the long run remains to be seen, but as the federal agency responsible for enforcing the nation's fair housing laws, the guidance promulgated by HUD cannot be disregarded. If you want to discuss your current policies or need assistance in developing new policies, please feel free to contact me.

Fair Housing Enforcement at LIHTC Properties

Fair Housing Enforcement at LIHTC Properties   A violation of fair housing law is reportable noncompliance for Low-Income Housing Tax Credit (LIHTC) properties. It is reported on Line 11h of IRS Form 8823, along with any other finding of noncompliance relating to a violation of the general public use rule. While the IRS has indicated that Housing Finance Agencies responsible for implementation of the LIHTC program should not report a taxpayer for a fair housing issue that the HFA believes has occurred, the Agency should report the issue to HUD for administrative follow up.   HUD is responsible for enforcing the Fair Housing Act (FHA). When a fair housing complaint is filed, HUD or a substantially equivalent State or local Fair Housing Agency will investigate it.   The Department of Treasury, HUD, and the Department of Justice (DOJ) entered into a Memorandum of Understanding (MOU) in August 2000, in an effort to ensure cooperation between the agencies with regard to fair housing enforcement at LIHTC properties. Key points of the MOU include coordinated procedures for notifying the state agencies and the IRS of charges, lawsuits, or other actions under the Fair Housing Act that involve LIHTC properties. Based on the terms of the MOU, HUD or DOJ will notify a state agency of:   A charge by the Secretary of HUD for a violation of the FHA; A probable cause finding under a substantially equivalent state law or local ordinance by a substantially equivalent state or local agency; A lawsuit under the FHA filed by the DOJ; or A settlement agreement or consent decree entered into between HUD or DOJ and the owner of an LIHTC property.   Non-FHA civil rights actions and lawsuits, such as Section 504 Rehabilitation Act lawsuits or administrative actions, are not covered under the MOU and are not to be reported to the IRS as noncompliance for Section 42 purposes.   When an HFA receives notification from HUD or DOJ of a violation under the FHA, the agency will immediately file a Form 8823 with the IRS (there will be no correction period given) checking the "out of compliance" box on Line 11h and will notify the property owner in writing of the action that has been taken.   When the IRS receives the 8823, they will send a letter to the property owner stating that a finding of discrimination, including an adverse final decision by HUD or a substantially equivalent state or local fair housing agency, or an adverse judgment by a federal court, will result in a loss of low-income housing credits. Similarly, the IRS will also send a letter to owners notifying them that a judgment enforcing the terms of a settlement agreement or consent decree will result in the loss of low-income housing credits.   In order for the finding to be corrected, documentation that the owner has complied with the court order and/or HUD's requirements and that the violation has been corrected is required.   Depending on the nature of the violation, noncompliance may be determined at the unit, building, or project level.   In summary, the two key elements to be aware of relative to fair housing violations at LIHTC properties are (1) HFAs are required to report potential fair housing violations to HUD or other appropriate fair housing enforcement agencies, and (2) uncorrected 8823s will be issued to the IRS for fair housing violations. It will be the responsibility of the owner to provide evidence to the HFA that the terms of the settlement agreement or consent decree have been complied with in order to have a corrected 8823 sent to the IRS.

HUD Publishes 2016 Income Limits

On March 28, 2016, HUD published the 2016 income limits for HUD programs as well as for the Low-Income Housing Tax Credit and Tax-Exempt Bond programs. The limits for the LIHTC and Bond projects are published separately from the limits for HUD programs. HUD has indicated that the U.S. median income limit is lower this year than it was in 2015.   LIHTC and Bond properties use the Multifamily Tax Subsidy Project (MTSP) limits, and are held harmless from income limit (and therefore rent) reductions. These properties may use the highest income limits used for resident qualification and rent calculation purposes since the project has been in service. HUD program income limits are not held harmless.   Projects in service prior to 2009 may use the HERA Special Income Limits in areas where HUD has published such limits. Projects placed in service after 2008 may not use the HERA Special Limits.   Projects in rural areas that are not financed by tax-exempt bonds may use the higher of the MTSP limits or the National Non-Metropolitan Income Limits (NNMIL). According to HUD, the NNMIL have gone down from 2015 to 2016.   Owners of LIHTC projects may rely on the 2015 income limits for all purposes for 45 days after the effective date of the newly issued limits. This 45-day period ends on May 12, 2016.   The limits for HUD programs may be found at http://www.huduser.org/portal/datasets/il.html. The limits for LIHTC and Bond programs may be found at http://www.huduser.org/portal/datasets/mtsp.html.   Please feel free to contact me with any questions.   AJ

Discrimination Based on National Origin

This is my second in a series of articles focusing in detail on each of the seven characteristics that are protected under the federal Fair Housing Act. These seven characteristics (also known as "Protected Classes") are race, color, national origin, religion, sex, handicap, and familial status. While all housing professionals are certainly familiar with these seven protected characteristics, there are details and specifics regarding each that may be of interest. The purpose of these articles is to provide some historical context as well as case law to assist those who are in the housing field in their understanding of the law relative to each of the characteristics. The first of the six articles covered race and color; this month I am dealing with discrimination based on National Origin   Discrimination Based on National Origin   The Fair Housing Act prohibits discrimination on the basis of nationality. This applies to both the country where the person being discriminated against comes from and where their ancestors came from. Approximately 12% of current fair housing complaints are based on national origin, and more than half of those involve Hispanic or Latino individuals.   A number of recent court cases illustrate the type of national origin discrimination now being adjudicated.   Lozano v. City of Hazleton, July 2013: In this case, a federal court ruled that the City of Hazleton, PA could not regulate residence based solely on immigration status. A Hazleton city ordinance required that anyone seeking to rent housing in the city had to demonstrate legal immigration status. Persons age 18 and older were required to obtain an "occupancy permit" indicating "proof of legal citizenship or residency." Landlords faced fines or prison if they permitted violations of the occupancy permit. When the ordinance was challenged, the court held - "Congress has not banned persons who lack lawful status or proper documentation from obtaining rental or any other type of housing in the United States. Hazleton s decision to impose this distinct, unusual and extraordinary burden upon aliens impermissibly intrudes into the realm of federal authority."   Long Island Housing Services, Inc. et al v. German-American Settlement League, Inc (GASL), 2015: The GASL owns Siegfried Park in Yaphank, Long Island, where, in the late 1930 s, German-Americans traveled to rally together in support of Nazism. GASL still displays one of the Hitler Youth emblems on top of a flagpole flying the German flag in its clubhouse at Siegfried Park.   Siegfried Park is a 50-home residential community. Since its 1937 incorporation, GASL has excluded non-whites from its membership, recreational programs, and summer homes in favor of new residents with German ancestry.   GASL rents lots on an annual basis to its members who live year-round in Siegfried Park in single-family homes. Community rules restrict homeownership to members who are primarily of "German extraction." New members must be sponsored by a current member and accepted by a majority of the Board and membership. Membership may be extended under limited circumstances to "other national elements" only if they are sponsored by current members, all of who are white.   GASL prohibits members from renting homes and from publicly advertising homes for sale. Homes may be listed for sale only in the minutes of the GASL Board meetings that are hand-distributed to GASL members.   The suit has been brought on behalf of Philip Kneer and Patricia Flynn-Kneer who are white American citizens of German ancestry. They have owned a home at Siegfried Park since 1999. They claim they have been unable to sell their home due to the GASL racially restrictive policies. The suit was filed in October 2015 and claims discrimination based on race and national origin. GASL has never granted full membership to any non-white individual.   In theory, claims based on national origin discrimination are distinguishable from racial claims. In Patel v. Holley House Motels, 1979, the court stated, "national origin has come to mean the country of an individual s ancestry, rather than his race or color."   The Supreme Court ruled in Espinosa v. Farah Mfg. Company, Inc (1973), that the term "national origin" refers to "the country where a person was born, or, more broadly, the country from which his or her ancestors came."   What these various cases illustrate is that in order to substantiate a national origin discrimination case, a plaintiff must show that the defendant is willing to deal with some countries, but not others.   Under the FHA, plaintiffs who allege discrimination due to being "Hispanic" have sufficiently identified their national origin to state a claim - they do not have to identify the specific "Hispanic" nation from they or they or their ancestors originate. This is also the case for Arabs, persons from the Middle East, and perhaps Muslims. Either U.S. citizens of a particular national background or citizens of other countries may bring a national origin complaint under the FHA. The FHA does not prohibit discrimination on the basis of U.S. citizenship, unless it has the effect of discriminating against particular national origins, racial minorities, or religions. However, housing discrimination against persons who are not U.S. citizens may be prohibited by other civil rights laws, such as 42 U.S.C. 1981, which finds its statutory authority in the Civil Rights Act of 1866. 1981 of this law provides equal rights under the law for "all persons within the jurisdiction of the United States."   Discrimination against persons who do not speak English is also not a specific violation of the FHA. In Veles v. Lindow (2000), the court affirmed a jury verdict in favor of a landlord who required at least one adult member of a household to speak fluent English in order to lease a unit. In order to be legitimate, such a policy could not be applied against only certain national origins. Keep in mind that HUD-assisted housing providers must assist persons with limited English proficiency, and a policy of requiring an English speaking member of a household in federally assisted properties will probably not be acceptable.   Dark-skinned plaintiffs, including Mexican-Americans, Pakistanis, and Native Americans, have brought most national origin discrimination cases.   There is often not a clear distinction between what constitutes race vs. national origin discrimination. This may be relevant if the housing involved is exempt from the FHA (such as single family homes if sold or rented by the owner) and the only applicable law is the Civil Rights Act of 1866, which bans racial but not national origin discrimination.   Owners and managers can avoid potential claims of discrimination based on national origin by following some common sense guidelines, including: Promote policies to treat everyone equally - regardless of where they come from. Do not stereotype people based on their names, appearance, or clothing. Be sensitive to other cultures. For example, don t ask applicants why they wear head coverings or garb related to the country from which they or their ancestors originate. In fact, during the applicant selection process, it is not even a good idea to ask what country someone comes from. If you re going to screen for legal residency in the United States, apply the standards consistently. Keep in mind that while discrimination based on citizenship or legal status in the country does not violate the FHA, there may be state or local protections. Don t steer households based on national origin by assuming that people will be more comfortable living near people from the same region. Enforce reasonable occupancy standards. Keep in mind that overly restrictive occupancy standards could discriminate against multi-generational households, which are common among certain national groups, including Hispanics, Native-Americans and Asians. Finally, watch out for resident relations; one of the most common types of resident-on-resident harassment is based on national origin.  

Affirmatively Furthering Fair Housing Assessment Tool for States and Insular Areas - Notice March 11, 2016

Affirmatively Furthering Fair Housing Tool for States and Insular Areas - Notice March 11, 2016   On March 11, 2016, HUD published a Notice in the Federal Register providing information on the Affirmatively Furthering Fair Housing Assessment Tool for States and Insular Areas. On July 16, 2015, HUD published the Affirmatively Furthering Fair Housing (AFFH) final rule that provides HUD program participants with a new process for planning for fair housing outcomes that will assist them in meeting their statutory obligation to affirmatively further fair housing. This process involves an assessment tool that must be used by program participants to evaluate fair housing choice and access to opportunity in their jurisdictions, to identify barriers to fair housing choice and opportunities at the local and regional levels, and to set fair housing goals to overcome such barriers and advance fair housing choice.   Three assessment tools will be provided by HUD. One is for use by local governments that receive assistance under certain grant programs administered by HUD s Office of Community Planning & Development (CPD), as well as by joint and regional collaborations between various agencies. The second tool (the subject of this Notice) is to be used by States and Insular areas, and is known as the "State and Insular Area Assessment Tool." The third assessment tool will be for PHAs. On December 31, 2015, HUD issued the Local Government Assessment Tool.   This Notice solicits public comment for a period of 60 days on the proposed State and Insular Area Assessment Tool. Comments are due no later that May 10, 2016.   The Proposed State and Insular Area Assessment Tool   In developing the new AFFH process, HUD will provide certain nationally uniform data to program participants. All program participants must use the HUD provided data when completing the Affirmative Fair Housing plan.   In creating the proposed State and Insular Area Assessment Tool, HUD recognizes that there are other important data sources that may be available and have local relevance, including data that may be unavailable from the Assessment Tool. Consequently, although HUD will provide nationally available data that are expected to be of use to program participants, the AFFH rule recognizes the value of local data and knowledge.   Program participants will be required to use local data and local knowledge to assist in completion of the assessments. The AFH process does not require program participants to create or compile new data. Only currently existing data should be relied on.   A program participant must complete its AFH using the assessment tool designated for its use and HUD-provided data, as well as any local data and local knowledge that are relevant. To the extent that HUD does not provide data for a program participant to respond to a question in the assessment tool, and there is no local data and no local knowledge that would assist with the question, the participant may state that data and knowledge are unavailable.   Structure of the Proposed State and Insular Area Assessment Tool   The following presents the structure for the proposed State and Insular Area Assessment Tool: Section 1: contains the Cover Sheet and Certification and addresses basic information applicable to the program participant; Section II: this is the Executive Summary; Section III: addresses the community participation process and directs the State or Insular Area to describe certain outreach activities to encourage community participation in the development and review of the AFH; Section IV: this is the "Assessment of Past Goals and Actions," and asks States and Insular Areas to explain the fair housing goals they selected in their recent fair housing plans, and the progress that was made in achieving those goals; Section V: this is the "Fair Housing Analysis, " and presents the core analysis that will be undertaken by States, Insular Areas, and program participants that may be participating with the State or Insular Area in a collaborative AFH. This section will also include an assessment of certain key fair housing issues, including segregation and integration, racially or ethnically concentrated areas of poverty, disparities in access to opportunity, disproportionate housing needs, publicly supported housing, and disability and access. One area of analysis that is included in the State and Insular Area Assessment Tool pertains to low-income housing tax credits (LIHTCs). The LIHTC questions presented in the proposed tool include questions pertaining to a State s Qualified Allocation Plan (QAP). Section VI: Fair Housing Goals & Priorities.   Upcoming PHA Assessment Tool   HUD will soon issue the 60-day public comment notice for the proposed PHA Assessment Tool. This tool will differ from the questions addressed to "Qualified PHAs" that collaborate with States using the proposed State and Insular Areas Assessment Tool.   The State and Insular Area Assessment Tool is primarily designed for use by State and Insular Area program participants. These include the 50 States, the Commonwealth of Puerto Rico, and four Insular Areas (American Samoa, the Territory of Guam, the Commonwealth of the Northern Marianas Islands and the U.S. Virgin Islands). States and these Insular areas should review the HUD Notice in detail, and provide comments by the due date noted above.

Defining "Principal Residence" for Affordable Housing Purposes

Defining "Principal Residence" for Affordable Housing Purposes   Virtually all affordable housing programs, including Section 8 and the Low-Income Housing Tax Credit (LIHTC), require that the lessees of the unit use apartments being rented under the applicable program as a "principal residence". Agencies have not provided a lot of guidance regarding how to define a "principal residence." A common definition of "principal residence" is the home that a person physically occupies and personally uses the most. The tax code provides no specific definition. With regard to tax law, whether or not a taxpayer uses a property as his principal residence depends on all the facts and circumstances in each case, including the good faith of the taxpayer. Clearly, if someone lives in the same home for years and considers it to be their only home, it is clearly a principal residence. At the same time, taking a couple of weeks vacation from the home each year does not create a situation where the home is no longer a principal residence. But what about longer absences? The IRS has provided the following example: "Professor Paul Beard, who is single, bought and moved into a house on August 28, 2001. He lived in it as his main home continuously until January 5, 2003, when he went abroad for a one-year sabbatical leave. During part of the period of leave, the house was unoccupied, and during the rest of the period, he rented it. On January 6, 2004, he sold the house at a gain. Because his leave was not a short, temporary absence, he cannot include the period of leave to meet the two-year use test." The IRS does concede that ownership and use requirements do not have to be continuous, but clearly they intend that it be the main place of residence. A recent court case in Massachusetts has provided some additional guidance on what constitutes a "principal residence." In Boston Redevelopment Authority v. Pham (2015), the Massachusetts Court of Appeals affirmed a Superior Court decision that the owner of an affordable housing condominium unit did not violate the deed, affordable housing covenant, and other documents' restrictions on the use of the unit as the owner's principal residence by using the unit as the home base for extensive business travel and by taking roommates to share housing costs. While this case involved a condo purchase and not a rental apartment, the definitional issues considered by the court are instructional for rental housing. The condominium covenant required Pham to occupy the unit as his principal residence. The determination of whether he occupied the unit as his principal residence is a mixed question of law and fact. As the phrase "occupy as principal residence" was not defined in the covenant or other documents (and it is not usually defined in rental leases), the trial court reasonably considered factors such as: (1) Pham neither leased nor owned property elsewhere; (2) he used the unit as his home base despite his extensive work-related travel; (3) Pham kept a room in the unit and was physically present there for one to two weeks per month; (4) he maintained his valuable personal possessions there; (5) he identified the unit as his tax address and address for other official purposes; and (6) he kept the utilities in his name and paid those bills. Leases generally do not prevent residents of affordable housing from taking jobs demanding frequent travel, assuming they maintain the affordable housing unit as their home. Such restrictions would conflict with the goals of aiding persons of moderate and middle income. The court found that Pham was an owner/occupier of the unit for residential purposes, and had not leased the entire unit for business, speculative, or investment purposes. When determining whether an affordable unit is the principal residence, the issues noted above should be considered. Basically, it will boil down to a "facts and circumstance" test, but if it is clear that the apartment is the primary home of the resident - even if they are gone for extended periods of time - it should be considered the principal residence.

HUD Publishes Major Rule Changes for Public Housing, Housing Choice Voucher and Multifamily Housing Programs

On March 3, 2016, HUD published in the Federal Register a new rule on Streamlining Administrative Regulations for Public Housing (PH), Housing Choice Voucher (HCV), Multifamily Housing (MFH) and Community Planning & Development (CPD) Programs.   The Department of Housing & Urban Development Appropriations Act, 2014, made several changes to the United States Housing Act of 1937. HUD published notices implementing these changes on May 19, 2014, and June 25, 2014. A HUD proposed rule on January 6, 2015, codified the changes in regulation. This final rule makes changes to the January 2015 proposed rule, and will be effective on April 3, 2016.   Background   The 2014 Appropriations Act made changes to the 1937 Act, such as allowing for biennial physical inspections of certain assisted properties and permitting alternative inspection methods; codifying the definition of extremely low-income (ELI); capping utility allowances at the lesser of unit size on the voucher or the size of the unit leased by the family.   The rule affects the public housing program, the Housing Choice Voucher Program, some CPD programs and the following MFH programs: Project-based Section 8; Section 8 Moderate-Rehabilitation; Rent Supplement; Section 202 (both PAC & PRAC); Section 811 (both PRA & PRAC); Section 236; Rental Assistance Program (RAP); and Section 221(d)(3) and (d)(5).   Major Changes Made by the Final Rule Affecting Multifamily Housing Programs Definition of Extremely Low-Income (ELI): The 2014 Appropriations Act changed the definition of ELI to mean a very low-income family whose income does not exceed the higher of 30% of Area Median Income (AMI) or the poverty level. This final rule adds the term "very low-income" to the definition of who is eligible under the ELI definition. This means that households with income between 30% and 50% of AMI will be eligible as ELI. [No action is required by owners since HUD will reflect this in the published program income limits]. Use of Actual Past Income: the proposed rule would have required owners to use one definition of annual income (either actual past income or projected income) for all families in a program. Comments to the proposed rule objected to the use of past income due the difficulty in determining proper rent based on past income and correlating current expenses such as child care and medical expenses to past income. Given the concerns to the proposed rule, HUD has decided not to adopt the use of actual past income in the final rule. This means that owners and PHAs will continue to project income using guidance currently in place. Streamlined Annual Reexamination for Fixed Incomes: The proposed rule permitted PHAs and owners to conduct streamlined income redeterminations for fixed-income households (once every three years). The final rule revises this provision to provide PHAs and owners with the option of conducting a streamlined income redetermination for any fixed-income source, regardless of whether a family or individual also has a non-fixed source of income. This means that the regulation no longer requires a family to have 100% of its income from fixed sources. The final rule also adopts an expanded list of fixed income sources. In addition to pensions and retirement, income from annuities or other retirement benefit programs, insurance policies, disability or death benefits or other similar types of periodic receipts will all be considered fixed income. If a family member receives an income from any of these sources and the income consists solely of periodic payments at reasonably predictable levels, the income source may be considered "fixed." The regulation still requires verification of medical expenses and other deductions from gross income for fixed-income families. Procedures currently in place may be used for such verifications. HUD will not adopt the use of self-certification of medical expenses and other deductions due to the risk of improper payment of subsidy. The final rule makes clear that a full examination of income must be conducted upon admission to a program. PHAs and owners that choose to adopt the streamlined income redetermination, a full reexamination of family income must be performed at least every three years. Owners should also remember that non-fixed income, such as employment, will still require annual verification. Family Declaration of Assets Under $5,000: The final rule will permit the Public Housing and Housing Choice Voucher programs to accept family affidavits when assets are $5,000 or less. At admission, all assets of a family will be verified as is the current practice. The final rule also requires a PHA to obtain third party verification of all assets every three years. While this rule currently applies only to public housing and HCV programs, the Office of Multifamily Housing Programs, which operates various rental assistance programs (including Section 8), will issue an interim final rule to expand this provision to multifamily programs. In addition to the changes outlined above that impact the MFH programs, a number of changes are specific to public housing and the Housing Choice Voucher Program. A brief description of those changes follows: Utility Reimbursements: PHAs will have the option of making utility reimbursement payments "quarterly," rather than monthly for reimbursements of $45 or less per quarter. If the PHA opts to make the payments on a quarterly basis, the PHA must institute a hardship policy. This change is optional and PHAs may continue to make UA reimbursements monthly. Alternative reimbursement methods such as debit cards may be used, but no fees may be required of a tenant as a result of the alternative method. PHAs may also continue to make payment directly to the utility company. It should be noted that HUD is exploring the possibility of expanding this option to MFH programs. Public Housing Rents for Mixed-Income Families: the final rule permits PHAs to accept a tenant s self-certification of compliance with community service requirements. HUD is requiring PHAs to review a sample of self-certifications and validate their accuracy with using third party verification procedures. Biennial Inspections and Use of Alternative Inspection Methods: PHAs may conduct HQS inspections on a biennial rather than an annual basis. Alternative inspections (e.g., LIHTC or HOME inspections) may also be relied on if HCV units are included in the population of units forming the basis of the sample. HUD approval for any alternative method is required. Housing Quality Standards (HQS) Reinspection Fees: The final rule states that a reinspection fee may be charged only if an owner stated that a deficiency had been fixed and the deficiency is found during reinspection to still exist or if a reinspection conducted after the expiration of the timeframe for repairs reveals that the correction has not occurred. Exception Payment Standards for Providing Reasonable Accommodations: the final rule allows a PHA to approve a HCV payment standard of not more than 120% of the FMR without HUD approval if required as a reasonable accommodation. Family Income & Composition: the final rule eliminates the requirement that s voucher agency conduct a reexamination of income whenever a new family member is added. This rule already exists for Public Housing. Note: MFH programs must continue to conduct interim recertifications when there is a change in household composition. Earned Income Disregard {EID} (applies to public housing, HCV ([not project-based vouchers], Section 811 Supportive Housing Program, HOME, and HOPWA): The final rule will provide tenants with the ability to start and stop employment and still retain the benefits of the EID. However, these residents may only receive the benefit for up to 24 consecutive months from the date of initial increase in annual income. If an individual becomes eligible to receive the EID, the 24-month period will not stop if the circumstances that triggered the EID cease; however, if the individual experiences an event that would again provide an EID benefit during the 24-month period, the individual will be provided the rent incentive. This change is retroactive to families that began the 24-month period prior to the final regulation.   These are fairly extensive changes to current regulations, especially for public housing agencies administering the HCV and public housing programs. HUD will be updating applicable Handbooks to incorporate these changes into the various programs, but in the meantime, program participants should review the final rule and begin establishing procedures implementing the required changes. Changes are minimal for the MFH programs (such as project-based Section 8) and virtually non-existent for the Low-Income Housing Tax Credit Program (which follows the guidance provided by HUD Multifamily Housing).  

National Housing Trust Fund Money Now Available

National Housing Trust Fund   The National Housing Trust Fund (NHTF) was established as part of HERA 2008, and will provide communities with funds to build, preserve and rehabilitate rental homes that are affordable for extremely low and very low-income households. Program funds have now been released to the states.   The NHTF is a permanent program, with a dedicated source of funding not subject to the annual Congressional appropriations process. Funding comes from the operations of Fannie Mae and Freddie Mac, and there is no requirement that states provide matching funds.   It is targeted toward rental housing. At least 90% of the funds must be used for the production, preservation, rehabilitation, or operation of rental housing. Up to 10% of the funding may be used for homeownership for first-time homebuyers.   The program is targeted to extremely low-income households. At least 75% of the funds for rental housing must benefit extremely low-income households (30% of AMGI or 30% of the poverty level, whichever is higher) and up to 75% can benefit very low-income households 50% of AMGI).   How is the money distributed and administered?   The money is distributed as block grants to states by a formula developed by HUD. 75% of the formula has been given to two factors that reflect the shortage of rental housing that is affordable and available to extremely low-income households, and that reflect the extent to which extremely low-income renter households are paying more than half of their income for rent and utilities.   The funds will be administered by state agencies. To date, nearly 40 states have named the administering agencies.   Each state must prepare an annual allocation plan showing how it will distribute NHTF resources based on prioritized housing needs. The allocation plan must give priority for funding based on the following factors:   >Geographic diversity as reflected in the state's Consolidated Plan;   >The extent to which rents will be affordable, especially for ELI households;   >The length of time rents will remain affordable; >The merits of an applicant's proposed activity (e.g., housing accessible to transit or employment centers; housing that includes greenbuilding and sustainable elements; and housing that serves people with special needs); >The use of other funding sources; and   >The applicant's ability to obligate the NHTF dollars and undertake the funded activities in a timely manner.   States must commit funds within two years. Uncommitted funds will be recaptured by HUD and distributed to other states. All funds must be spent within five years.   HUD's interim NHTF regulations establish maximum rents for NHTF units at no more than 30% of the greater of either 30% of the federal poverty line or 30% of the AMGI.   The interim rule requires units to be affordable for at least 30 years.   The statute considers the NHTF to be "federal financial assistance" for the purposes of federal civil rights laws, meaning that properties will be subject to Section 504 of the Rehabilitation Act of 1973, the Age Discrimination Act of 1973, and the Uniform Relocation Act. However, use of NHTF funds will apparently not trigger Davis-Bacon prevailing wage rates.   Developers interested in potential participation in the program should contact the Agency in their state that will be administering the program.