News

Airbnb and Affordable Housing

Airbnb: A Potential Challenge for Affordable Housing Properties   Airbnb is a website for people to list, find, and rent lodging. It has over 1.5 million listings in 190 countries. Users of the system must register and create an online profile before using the site. Every property is associated with a host whose profile includes recommendations by other users, reviews by previous guests, as well as a response rating and private messaging system.   Users have full control over who books their home. When a potential guest puts in a reservation request, the host has at least 24 hours to accept or decline the request. After the user accepts the reservation, they can coordinate meeting times and contact information with guests.   Implications for LIHTC properties   Transient use: if a low-income housing tax credit resident subleases a LIHTC unit using the service, the unit will be used on a "transient" basis - a use prohibited by 42 rules. Discovery by the state could result in a loss of credits for the unit.   2.Continuous Residency Requirement: In order to qualify as a low-income unit when under tenancy, a unit must be 'continuously occupied.' This does not mean that the resident may never leave the unit, but it does mean that the unit must be in the possession of the resident at all times. Once the unit is subleased under the Airbnb program, the question of 'continuous use' could be raised by the HFA.   Lease Violations: If the LIHTC lease has been properly prepared, the Airbnb use would constitute lease violations based on unauthorized occupants and subletting - both should be lease violations for a 42 lease.   Fair Housing Implications: if a tenant violates fair housing law in the process of subleasing the apartment, it is possible that the owner of the property could be deemed liable for the violation, especially if they knew - or should have known - that the practice was occurring.   Incidents & Renters Security: There have been cases where Airbnb guests stole from the host home. In most of these cases, Airbnb was not responsive to the claims of the lessor. There is also the possibility that the unit could be rented for illegal purposes. In 2012, two prostitutes rented an apartment in Sweden that the police raided. In July 2014 in California, a guest refused to leave the apartment of an Airbnb host after paying a month's rent. Under CA law, once someone rents an apartment for up to a month, that person is considered a tenant on a month-to-month lease. The host had to hire a lawyer and initiate a legal eviction process.   Financial, tax, and legal liabilities: A 2011 New York State law prohibits renting residential units for less than 29 days, with certain exceptions. Airbnb has asked the state legislature for legalization in return for the collection of hotel taxes. Airbnb style rentals create legal issues in many cities, including Airbnb's home city, San Francisco until a recent change in the law permitted the use.   While there have been no widespread reports of LIHTC residents renting out their apartments under the Airbnb program, it is just a matter of time before it happens. Owners and managers of LIHTC properties should be proactive in the prevention of this practice. Steps that can be taken include:   Review the lease terms. Make sure the lease includes prohibitions on subletting and a requirement that notification of all new occupants - including any overnight guests staying multiple nights (e.g., three nights or more) - be required.   Send letter to all current residents reminding them of the residency rules and specifically note that subletting of any type and for any length of time is a lease violation and will result in lease termination.   The holidays are the most popular time for Airbnb users, so be particularly aware of strangers at the property during these periods.   Owners in areas where Airbnbs are a common form of short-term rental (e.g., resorts, urban areas, etc.) may consider being even more proactive by establishing an Airbnb account and scanning the site occasionally to see if any of the property s units are being offered for rent.   While this is certainly not a major issue for LIHTC (and other affordable housing properties) at this time, it is just one more thing for owners and managers to be aware of and take steps to prevent.

IRS Issues Final and Temporary Regulations Regarding Utility Allowances

Utility Allowance Final and Temporary Regulations   The IRS published Final and Temporary Regulations relating to Utility Allowances for Low-Income Housing (LIHTC) properties in the March 3, 2016 Federal Register.   The final regulations clarify the circumstances in which utility costs paid by a tenant based on actual consumption in a submetered rent-restricted unit are treated as paid by the tenant directly to the utility company. The regulation extends the principles of the Submetering rules to situations in which a building owner sells to tenants energy that is produced from a renewable source and that is not delivered by a local utility company.   Background   On August 7, 2012, the IRS published a Federal Register notice of proposed rulemaking that provided that utility costs paid by a tenant based on actual consumption in a submetered rent-restricted unit are treated as paid by the tenant directly to the utility company and thus do not count against the maximum rent that the building owner can charge. In these cases, the owner could establish a utility allowance in accordance with the IRS utility allowance regulation 1.42-10 for submetered utilities.   This final regulation adopts the 2012 proposed regulation and extends those rules to the provision of energy that the building owner acquires directly from renewable sources and then provides to low-income tenants (e.g., solar energy sources).   Submetering   Actual-Consumption Submetering Arrangements and Ratio Utility Billing Systems (RUBS) The 2012 proposed regulations defined an actual-consumption Submetering arrangement for utility allowance purposes as not including a ratio utility billing system (RUBS). The regulations precluded an arrangement such as RUBS from qualifying as an actual consumption Submetering arrangement. However, the regulation did not prohibit the use of RUBS for low-income housing credit projects. However, any amount paid by a tenant for utilities using RUBS must be included in gross rent. The final regulations follow this approach and continue to define an actual-consumption metering arrangement as not including RUBS. Administrative Cost of Submetering The final regulations do not include a requirement to determine actual monthly cost of administering the Submetering program, and they generally permit owners to charge tenants an administrative fee in accordance with a state or local law that specifically prescribes a dollar amount for the administrative fee. The regulation authorizes the Department of Treasury and the IRS to provide for administrative fees in excess of five dollars per month even in the absence of state or local law doing so and to put an upper limit on administrative fees even if state or local law allows higher fees. The proposed regulation limited the fee charged per unit to the lesser of (A) five dollars per month; or (B) the owner s actual monthly cost paid or incurred for administering the arrangement. If a building owner or its agent charges a unit s tenants a fee for administering an actual-consumption Submetering arrangement, the gross rent includes any amount by which the aggregate amount of monthly fees for all of the unit s utilities under one or more actual-consumption Submetering arrangements exceeds the greater of (i) five dollars per month; (ii) an amount (if any) designated by publication in the Internal Revenue Bulletin; or (iii) the lesser of a dollar amount (if any) specifically prescribed under a State or local law or a maximum amount (if any) designated by publication in the Internal Revenue Bulletin. [This essentially permits owners to charge more for administrative fees than permitted under this regulation, but any charges in excess of those permitted must be included in gross rent]. Energy Acquired Directly From a Renewable Source The proposed regulation appeared to preclude applying Submetering principles to electricity generated from renewable sources by the building owner or by some other person from whom the building owner purchases it directly. This regulation contains temporary regulations that apply those principles to energy that the building owner provides to tenants after having acquired it directly from renewable sources. However, in such cases, charges to the tenants for this energy must be comparable to local utility rates. Charges by the building owner must not exceed the rates that the local utility company would have charged the tenants if they had instead acquired the energy from that company. [E.g., if an owner charges residents for electricity generated by solar power, the amount charged may not exceed the amount the residents would pay for electricity provided by the local utility company].   Issues Relating to Utility Allowances Generally   Role of Agencies Regarding the Utility Allowance Methods A significant change with regard to the state agency role in the final regulations is that Agency approval will only be required for qualified professionals that are not properly licensed engineers [the current requirement is that the agencies approve both qualified professionals and licensed engineers]. An agency continues to have the option to review, and take appropriate action regarding, utility estimates based on the energy consumption model or the other optional methods. The regulation continues to allow an Agency to approve or disapprove a method or to require certain information before permitting use of an energy consumption model. Also, an Agency should have the ability to review the energy consumption model even when a properly licensed engineer, who is not subject to Agency approval, uses the model. The final regulations specifically authorize an Agency to approve or disapprove use of the energy consumption model or require information about the model before permitting its use, regardless of the type of professional that calculates the utility estimates. Use of Consumption Data for the Energy Consumption Model The final regulations remove the requirement that an energy consumption model use the building s consumption data for a particular 12-month period. Instead, the final regulations revise the specific factors used in determining estimates under the energy consumption model to include available historical data. This is due to the fact that the most recent 12 months of utility data (required under the current regulation) may not be representative of actual consumption. Areas With No Public Housing Authorities The existing regulations provide that if a building is neither an RHS-assisted building nor a HUD-regulated building and no tenant in the building receives RHS tenant assistance, then the appropriate utility allowance for the units in the building is the applicable PHA utility allowance. This creates problems in areas where there is no local PHA. The IRS is requesting comments on how the rules might best address situations in which no PHA exists. Changes in Public Housing Authority Utility Allowances The final regulation retains the requirement that if a PHA utility allowance changes, the building owner must use the new utility allowance to compute gross rents of the units due 90-days after the change. In other words, the 90-day period ends 90-days after the effective date of the revised PHA allowance. In the regulation, the IRS states that "A building owner that checks the PHA utility allowance every 60 days would have at least 30 days in which to adjust rents." HUD-Regulated Building Existing regulations defined a HUD-regulated building as one for which HUD reviews the rents and utility allowances on an annual basis. Since HUD does not review rents and utility allowances on an annual basis for all programs, the final regulations define a HUD-regulated building to mean one in which the rents and utility allowances of the building are regulated by HUD (with no requirement for an "annual" review).   Effective Dates Owners, beginning on or after March 3, 2016 may use the revised regulations. A building owner may apply the regulations to taxable years beginning prior to March 3, 2016, but are not required to do so. They may continue to use the regulations contained in IRS Regulation 1.42-10 for taxable years beginning prior to March 3, 2016. In effect, if an owner s taxable year began January 1, 2016, they may use the IRS utility allowance regulation published on March 3, 2016 or the regulations in effect prior to March 3, 2016.   Summary of Major Changes: Owners may submeter units for utilities that owners obtain directly from renewable sources instead of from utility providers. The maximum administrative fee that may be charged for submetering is changed from the lesser of (1) $5.00 per month, or (2) the owner's actual monthly costs paid or incurred for administering the arrangement, to the greater of (1) $5.00 per month; (2) an amount designated by the IRS; or (3) the lesser of a dollar amount specifically prescribed under State or local law or a maximum amount designated by the IRS. If a fee in excess of the permitted amount is charged, it must be included in gross rent. Owners are no longer required to have HFA approval when using a Licensed Engineer in the preparation of a utility allowance (HFA approval for other qualified professionals is still required). Agencies still have the ability to review and take appropriate actions relative to utility allowance estimates prepared by licensed engineers. Removes the requirement when using a consumption model to use data from a particular 12-month period, and instead requires use of available historical data. Eliminates the requirement that HUD-regulated buildings be those for which HUD reviews the rents and utility allowances on an annual basis. The requirement now is only that the building be HUD-regulated.    

HUD Funding Demonstration Program for Housing for the Elderly

The Department of Housing & Urban Development (HUD) recently announced the availability of funding of approximately $15 million under the Department's Supportive Services Demonstration for Elderly Households in HUD-Assisted Multifamily Housing. Funds obtained under this Notice must be used to fund supportive services in eligible existing HUD-assisted multifamily developments for the elderly. Supportive services eligible for support under this program include:   >Aging in place; >Transitions to institutional care; and >Housing stability, well-being, health outcomes, and health care utilization (e.g., hospitalizations, emergency room visits) associated with nursing home placement and high health care costs.   The funds are available for up to 80 grants for a three-year demonstration program and can cover the costs of full-time service coordinators, a part-time wellness nurse, and some start-up costs. There is no cost sharing or cost-matching requirement.   Applicants must submit a complete application by April 18, 2016.   AGENCY Contact: HUD staff will be available to provide clarification on the content of this NOFA. Please note that HUD staff cannot assist applicants in preparing their applications. For technical assistance in downloading an application package from Grants.gov, contact the Grants.gov help desk at 1-800-518-Grants or send an email to support@grants.gov. For programmatic information, or questions regarding specific program requirements send email to MFSC@hud.gov.

IRS Amends State LIHTC Monitoring Requirements

Amendments to LIHTC Monitoring Regulation, Revenue Procedure 2016-15   On February 25, 2016, the IRS published a proposed rule in the Federal Register that would amend the compliance monitoring duties of a state or local housing credit agency relative to the Low-Income Housing Tax Credit (LIHTC) Program. The Regulation will revise and clarify certain rules relating to the requirements to conduct physical inspections and review low-income certifications and other documentation.   Comments on the proposed regulation are due by May 25, 2016.   Simultaneously with publication of the proposed rule, the IRS issued Revenue Procedure 2016-15.   Rev. Proc 2016-15   This revenue procedure stipulates the maximum number of low-income units in a low-income housing project for which an HFA must conduct physical inspections and low-income certification reviews. The procedure also permits the physical inspection protocol established by HUD for REAC inspections to be accepted by HFAs for purposes of the Section 42 physical inspection requirements.   Background   In order to quality under the LIHTC program, a unit must be (1) rent-restricted; (2) occupied [or last occupied] by a qualified low-income household; (3) suitable for occupancy; and (4) used other than on a transient basis. The suitability of occupancy is determined by taking into consideration local health, safety, and building codes. Failure of one or more units to qualify as low-income units may result in a low-income housing project s ineligibility for the LIHTC, reduction in the amount of credit, and/or recapture of previously allowed credits.   IRS Regulation 1.42-5 requires an agency to conduct on-site inspections and perform low-income certification reviews (including documentation supporting the low-income certifications and the rent records for the tenants) for each low-income housing project.   The regulation requires an agency to conduct on site inspections of all buildings in a low-income housing project and review low-income certifications by the end of the second calendar year following the year the last building in the project is placed in service, and at least once every three years thereafter.   The regulation stipulates that the IRS may provide alternative means of meeting the review and inspection requirements and may provide exceptions to the requirements. However, the HFA must inspect no fewer than the minimum number of low-income units required by the IRS regulation.         The current regulation requires the HFA to select the low-income units for inspection in a random manner. The manner used for selection must not give advance notice that a low-income unit or low-income certifications for a particular year will or will not be inspected or reviewed. The HFA may give an owner reasonable notice that an inspection and review will occur so that the owner may notify tenants of the inspection or assemble certifications for review.   A major change in the regulation is that the IRS no longer requires that an agency select the same low-income units for on-site inspections and certification reviews. If the HFA chooses different low-income units for physical inspections and certification reviews, the units must be selected separately and in a random manner. An HFA may choose a different number of units for physical inspection and certification review, as long as at least the minimum number of low-income units is chosen in each case.   Regardless of whether there is overlap or non-overlap of selected units, except for reasonable notice, there should be no advance notification of the units to be inspected. The IRS position is that advance notice generally means no more than 30 days. Therefore, if an HFA chooses to select the same units for both physical and file inspections, the physical and file reviews may be done at the same time or separately, as long as both are done within the reasonable notice period. The period begins on the date the HFA informs the owners of the identity of the units for which the physical and file review will occur.                                                           Number of Low-Income Units for Inspection & Low-Income Certification Review   The minimum number of low-income units for which an agency must conduct physical inspections and file reviews is the lesser of: (1) 20% of the low-income units in the project rounded up to the nearest whole number of units; or (2) the minimum unit sample size set forth in the following chart:             # of Low-Income Units in Project # of Low-Income Units or Files to be Reviewed 1 1 2 2 3 3 4 4 5-6 5 7 6 8-9 7 10-11 8 12-13 9 14-16 10 17-18 11 19-21 12 22-25 13 26-29 14 30-34 15 35-40 16 41-47 17 48-56 18 57-67 19 68-81 20 82-101 21 102-130 22 131-175 23 176-257 24 258-449 25 450-1,461 26 1,462-9,999 27                   Inspection Standard   The REAC protocol is among the inspection protocols that satisfy all Section 42 physical inspection requirements. To be acceptable, the inspection must satisfy all of the following requirements: Both vacant and occupied low-income units in a low-income project must be included in the population of units from which units are selected for inspection; The inspection must comply with all requirements of the HUD REAC, including use of the most recent HUD UPCS inspection software; The inspection must be performed by HUD REAC approved inspectors; and The inspection results are sent to HUD, the results are reviewed and scored within HUD s secure system without any involvement of the inspector who conducted the inspection, and HUD makes its inspection report available. If the REAC inspection is used, the requirement that all buildings be inspected is removed, and the number of units inspected based on the REAC protocol will be acceptable (i.e., does not have to match the 1.42-5 sampling size requirements). Also, the manner in which the units are selected for inspection under the REAC protocol will be accepted.   The Agency will still have to conduct the review of tenant certifications.   Effective Date   The revenue procedure is effective on February 25, 2016. Agencies using the REAC protocol as part of the Physical Inspections Pilot Program may rely on these provisions for on-site inspections and low-income certification review occurring between January 1, 2015 and February 25, 2016.

Verifying the Need for a Live-in Aide in Low-Income Housing Tax Credit Properties

Verifying the Need for a Live-in Aide in Low-Income Housing Tax Credit Properties   Most housing managers are aware that due to the requirements of fair housing law, properties must at times allow someone to live with a disabled resident in order to provide necessary services to that resident. The may be the case even when the person providing the supportive services would not normally be qualified to live at the property (e.g., a 25-year old living in a senior property). In the industry, such as person is often referred to as a "live-in aide," or "live-n caregiver."   Both federal and state law governs the process of reviewing and approving reasonable accommodation requests. The request to have a live-in aide is a reasonable accommodation request. It is important to note that when verifying the need for an accommodation, managers may not require an applicant or residents medical records. A simple statement of need by a medical professional is what may be requested; the medical professional should not provide any information relative to the medical condition of the resident.   Fair housing law also states that the need for a reasonable accommodation cannot be required if the person s disability is obvious or otherwise known to the housing provider. So, how far can an owner of a housing complex go in determining and verifying the need for a live-in aide?   One type of disability discrimination prohibited by the Fair Housing Act (FHA) is the refusal to make reasonable accommodations in rules, policies, practices, or services when such accommodations may be necessary to afford a person with a disability the equal opportunity to use and enjoy a dwelling. This requirement is outlined in 42 U.S.C. 3604(f)(3)(B).   The FHA defines a person with a disability to include (1) individuals with a physical or mental impairment that substantially limits one or more major life activities; (2) individuals who are regarded as having such an impairment; and (3) individuals with a record of such an impairment.   The term "physical or mental impairment" includes, but is not limited to, such diseases and conditions as orthopedic, visual, speech and hearing impairments, cerebral palsy, autism, epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, diabetes, HIV, mental retardation, emotional illness, drug addition (other than addiction caused by current, illegal use of a controlled substance) and alcoholism.   The term "substantially limits" suggests that the limitation is "significant" or "to a large degree."   The term "major life activity" means those activities that are of central importance to daily life, such as seeing, hearing, walking, breathing, performing manual tasks, caring for one s self, learning and speaking. [The Supreme Court has questioned but has not yet ruled on whether "working" is considered to be a major life activity. If it is a major life activity, the Court noted that a claimant would be required to show an inability to work in a "broad range of jobs" rather than a specific job].   For purposes of the FHA, a "reasonable accommodation" is a change, exception, or adjustment to a rule, policy, practice, or service that may be necessary for a person with a disability to have an equal opportunity to use and enjoy a dwelling, including public and common use spaces. Since rules, policies, practices, and services may have a different effect on persons with disabilities than on other persons, treating persons with disabilities exactly the same as others will sometimes deny them an equal opportunity to use and enjoy a dwelling.   In the case of the issue of Live-in Aides, the affected rule or policy is the HUD rule (which governs income eligibility for Low-Income Housing Tax Credit [LIHTC] projects,) that requires the counting of all members of a household for purposes of income when determining the eligibility of a household. Since a live-in aide is not considered a household member for eligibility purposes under the LIHTC program, their ability to reside in a unit is dependent on the granting of a reasonable accommodation to a disabled resident. I will cover the specific HUD requirements relative to documentation of a live-in aide below.   A housing provider may deny a request for a reasonable accommodation if the request is not made by or on behalf of a person with a disability or if there is no disability-related need for the accommodation. A request for a reasonable accommodation may also be denied if providing the accommodation is not reasonable - i.e., it would impose an undue financial and administrative burden on the housing provider or it would fundamentally alter the nature of the provider s operations.   When may a housing provider require verification of the need for an accommodation? A housing provider is entitled to obtain information that is necessary to evaluate if a requested reasonable accommodation may be necessary because of a disability. If a person s disability is obvious, or otherwise known to the provider, and if the need for the requested accommodation is also readily apparent or known, then the provider may not request any additional information about the requester s disability or the disability-related need for the accommodation.   If the requester s disability is known or readily apparent to the provider, but the need for the accommodation is not readily apparent or known, the provider may request only information that is necessary to evaluate the disability-related need for the accommodation. An example was provided in the "Joint Statement of the Department of Housing & Urban Development and the Department of Justice - Reasonable Accommodations Under the Fair Housing Act." The example states, "A rental applicant who uses a wheelchair advises a housing provider that he wishes to keep an assistance dog in the unit even though the housing provider has a "no pets" policy. The applicant s disability is readily apparent but the need for an assistance animal is not obvious to the provider. The housing provider may ask the applicant to provide information about the disability-related need for the dog." This is a relevant example with regard to the need for a live-in aide, since while a resident may be clearly disabled, housing providers are rarely qualified to determine whether a live-in aide is needed in order for the resident to have full use and enjoyment of the premises. The HUD and DOJ position regarding the information a housing provider may request in support of a requested accommodation is that while a housing provider may not ordinarily inquire as to the nature and severity of an individual s disability, the provider may request reliable disability-related information that (1) is necessary to verify that the person meets the Act s definition of disability, (2) describes the needed accommodation, and (3) shows the relationship between the person s disability and the need for the requested accommodation. Depending on the individual s circumstances, information verifying that the person meets the Act s definition of disability can usually be provided by the individual himself or herself (e.g., proof that an individual under 65 years of age receives SSI or Social Security Disability Insurance benefits or a credible statement by the individual). A doctor or other medical professional, a peer support group, a non-medical service agency, or a reliable third party who is in a position to know about the individual s disability may also provide verification of a disability. In most cases, an individual s medical records or detailed information about the nature of a disability is not necessary for the inquiry.   Once a housing provider has established that a person meets the Act s definition of a disability, the provider s request for documentation should seek only the information that is necessary to evaluate if the reasonable accommodation is needed because of a disability. Such information must be kept confidential and must not be shared with other persons unless they need the information to make or assess a decision to grant or deny a reasonable accommodation request or unless disclosure is required by law.   HUD Handbook 4350.3, Chg. 4, 3-6.E.3.a outlines the HUD definition of and requirements for the approval of a live-in aide. Based on HUD regulation, (which must be followed when determining who to count for income eligibility purposes for LIHTC properties), a live-in aide is a person who resides with one or more elderly persons, near-elderly persons, or persons with disabilities, and who: (1) is determined to be essential to the care and well-being of the person(s); (2) is not obligated for the support of the persons(s); and (3) would not be living in the unit except to provide the necessary supportive services.   To qualify as a live-in aide, the owner must verify the need for the live-in aide. Verification that the live-in aide is needed to provide the necessary supportive services essential to the care and well being of the person must be obtained from the person's physician, psychiatrist or other medical practitioner or health care provider. The owner must approve a live-in aide if needed as a reasonable accommodation in accordance with 24 CFR Part 8 to make the housing accessible to and usable by the family member with a disability. The owner may verify whether the live-in aide is necessary only to the extent necessary to document that applicants or tenants who have requested a live-in aide have a disability-related need for the requested accommodation. The owner may not require applicants or tenants to provide access to confidential medical records or to submit to a physical examination.   A live-in aide qualifies for occupancy only as long as the individual needing supportive services requires the aide's services and remains a tenant. The live-in aide may not qualify for continued occupancy as a remaining family member.   Income of a live-in aide is excluded from annual income.   As noted above, HUD regulations require that verification of the need for a live-in aide be obtained from a medical professional in order to not count the aide as a household member for eligibility purposes. Since this is an issue that impacts the income eligibility of a household, and LIHTC properties are required to determine income in accordance with HUD requirements, owners should obtain verification of the need for a live-in aide. Some owners may take the position that if it is clear that the applicant/resident needs a live-in aide, verification by a medical professional cannot be required. This is correct, but care should be taken in this area. The primary weakness with this position is that few housing managers are qualified to provide an opinion of need relative to a live-in aide. A person who appears to have very a debilitating disability may well be able to care for themselves, while a person with no apparent disability may need a live-in aide. For this reason, I recommend that except in very unusual cases, a medical professional s verification of the need for a live-in aide be obtained for LIHTC properties.    

Cash for Rent - Can Apartment Communities Refuse

Cash for Rent - Can Apartment Communities Refuse?   It has long been considered a "best practice" in the multifamily housing world not to accept cash rent payments. There are many good reasons not to accept rent payments in cash, including reduction in theft potential by both employees and outsiders. However, since cash is "legal tender" in the United States, there are those who believe that a refusal to accept an offer of cash as a rent payment could be construed as a refusal to accept rent, thus negating the obligation of the tenant to pay it.   There are a lot of businesses that refuse to accept cash as part of a business transaction. Airlines often will not accept cash for in-flight purchases of food and drink. Apple announced that it would not accept cash for I-Phones, and would only accept payment by credit card. If cash is legal tender, how can they do this? The answer is quite simple actually; federal legal tender laws do require creditors to accept payment denominated in dollars, but don t specify the form of payment that is required. In other words, dollars must be accepted, but not cash.   It is actually the term "legal tender" that leads to the confusion. The dollar bill (which is more accurately a Federal Reserve Note) includes the language "this note is legal tender for all debts, public and private." This makes the currency official. It basically means that a creditor must accept Federal Reserve notes in satisfaction of debt, and cannot require that payment be made by some type of foreign currency.   The "legal tender" statute of the United States says: "United States coins and currency (including Federal Reserve notes and circulating notes of Federal Reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."   In essence, U.S. businesses must accept "dollars," but do not have to accept "cash." U.S. notes and coins are a valid and legal offer of payment for debts when offered to a creditor. However, although creditors are legally obligated to accept dollars, they absolutely do not have to accept those dollars in the form of cash. Generally, vendors may place reasonable conditions on the manner in which they will accept dollars, and one of those conditions can be that they will accept dollars electronically (credit card) or, as the U.S. Treasury states on their website, " Private businesses are free to develop their own policies on whether or not to accept cash unless there is a state law which says otherwise.   I have researched the issue, and have been unable to find any state law that requires the acceptance of cash payments. There actually have been court cases in which the courts rejected challenges to no-cash policies.   As for apartment communities and rent, there is no requirement that rent be accepted in the form of cash. Landlords are certainly free to accept cash if they wish, but it is not a recommended policy. However, to prevent possible challenges to a refusal to accept cash, I recommend that leases clearly state the methods in which rent may be paid. Once the tenant accepts the lease and its provisions, they clearly have no recourse if a landlord refuses to accept cash payments.    

Discrimination Based on Race

Over the next few months, I intend to do 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 will be 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. This is the first of the six articles, and it focuses on race and color.   Discrimination Based on Race and Color   Since enactment of the Fair Housing Act in 1968, most claims under the Act have been brought on the basis of race. The vast majority of these claims have been brought by or on behalf of African-Americans, although some have been brought by whites that claimed "reverse" discrimination. It should be noted that while "color" is a separate protected characteristic, many of the race based claims either were or could have been brought based on color. One example of a case that could be brought solely based on color would be the example of a light-skinned African American refusing to rent to dark-skinned African Americans.   There is often a "blurring" of race- based cases. In addition to color, many also involve issues relating to national origin - another protected characteristic, which will be specifically discussed in a separate article.   HUD s most recent nationwide study, which was based on thousands of paired tests in dozens of metropolitan areas in 2000, showed that in rentals, whites were favored over blacks 21.6% of the time and over Hispanics 25.7% of the time. While this study is now 16 years old, there is no question (based on current court cases) that racial discrimination is still a major issue when it comes to housing.   When making a determination as to whether an individual s rights have been violated based on race, the issue is simply whether the proof is sufficient to show that the defendant did indeed act "because of" race, thereby incurring liability under the Fair Housing Act. One important exception to this simple test is the situation where a defendant admits discriminating based on race, but defends that decision on the ground that is was necessary to achieve the stable, integrated housing patterns that the Fair Housing Act intended. This benign discrimination is the subject of this article.   "Benign" Discrimination   The term "benign" discrimination is often used to describe race-based housing programs that are used to promote integration. In the context of what some would consider to be "reverse" discrimination, the term "benign" means compassionate or benevolent. This is a very controversial concept and has produced a great deal of commentary. The landmark case in this area is United States v. Starrett City Associates (1988). When the Second Circuit Federal Court found that this type of well-meaning discrimination violated the Fair Housing Act, such voluntary race-based programs virtually died, making this issue far less important in recent years.   The case revolved around a private landlord s efforts to cap the percentage of black and Hispanic residents in order to prevent "white flight." In addition to this case, there were similar attempts by public housing authorities that assigned tenants on racial grounds in order to promote integration in specific properties. Some non-profit housing agencies implemented similar policies.   All these programs had two elements in common: (1) they were designed to promote housing integration, and (2) they did so by purposefully considering race or national origin in the provision of housing or housing related services. While the supporters of the FHA strongly favored proactive integration, the Act itself made any type of intentional discrimination illegal.   There was a significant amount of stress between these two conflicting ideals, i.e., the desire for integration, but the prohibition against discrimination as a way of achieving integration. In Shannon v. HUD (1970), the Third Circuit held that the FHA and other laws prevented HUD from funding a housing project in a minority neighborhood without first considering the impact the development would have on racial concentration in the area. The Court supported this position by noting that 3608 of the FHA requires an affirmative duty on the part of HUD to promote fair housing. Therefore, federal housing administrators could not ignore the negative impact of racial concentration in minority areas. Following this case, HUD issued a set of regulations designed to comply with the Court s directive.   Three years later, in Otero v. New York City Housing Authority, the Second Circuit held that a public housing agency could favor white applicants over blacks for units in a particular project if the policy was necessary to avoid "tipping" the balance in favor of one race in the project.   It was during this period (the early 1970s) that HUD issued a set of "Affirmative Fair Housing Marketing Regulations", which required participants in various federal housing programs to make special efforts to reach out to certain racial and ethnic groups. These groups are those that are now referred to as "those least likely to apply" to certain projects. The intention of these plans is not to discriminate, but to inform certain groups of housing opportunities that they may not otherwise know of.   The Starrett City case noted above made clear that while not all race conscious methods of promoting integrated housing are barred by the FHA, the statute does not permit "rigid racial quotas of indefinite duration to maintain a fixed level of integration by restricting minority access."   In summary, it is clear that some very narrow cases of tenant selection using a race-conscious preference might be appropriate by a housing provider that has engaged in past discrimination against racial or national origin minorities. It is also acceptable, even in the absence of past discrimination, that a housing provider provide enhanced opportunities for groups protected by the FHA if its current residents include a disproportionately small percentage of such groups and its plan is narrowly tailored to remedy this imbalance. This is the purpose behind the Affirmative Fair Housing Marketing Plans required of properties with federal assistance. However, quotas are clearly illegal and not permitted under any circumstances.

Boosting Rent (and Therefore Value) for Apartments Through Design and Improvements

Boosting Rent (and Therefore Value) for Apartments Through Design and Improvements   Whether purchasing or renting, the nation s 75 million Millennials have strong opinions about what they expect in terms of housing. This age group (mid-20s to mid-3os) constitutes a major percentage of the rental market today. Developers (when developing new properties or renovating existing) and owners engaged in upgrades should be informed by a recent Consumer Reports survey of 1,573 Millennials about what they most want in a home. While the survey dealt mostly with preferences relating to homeownership, the results are also applicable to the features most desired in apartments, including the moderate income affordables, such as Low-Income Housing Tax Credit (LIHTC) developments.   Kitchens   As noted by Consumer Reports, "The Kitchen is Still King." A "modern/updated kitchen" was the top desired feature for more than a third of those surveyed. Appliances, countertops, and flooring are the key components of a top notch kitchen. The most desirable elements include: Stainless steel appliances, which give an upscale feel to any kitchen. A recent development is black stainless steel, which does not show fingerprints as much as the traditional stainless steel. Countertops - While granite and marble remain the standard of desirability, these materials are now being challenged by quartz. This material is more heat and scratch resistant and requires less upkeep. The price ranges from $40 to $100 per square foot installed, but because it is still relatively unique, quartz countertops can significantly enhance marketability.   Floor Plans   Developers in the planning stages of a new property are well advised to create an "open floor plan with flexible living space," second only to kitchens on the list of desired features. While many of the features in this category are limited to single family structures, designing the second or third bedroom as a dedicated office will be attractive to the growing number of people who work from home. When designing spaces intended for uses other than sleeping, don t forget the outlets for computers and printers. Believe it or not, one of the main complaints about a lot of new apartments is the lack of strategically located outlets. The new buzzword in this area is "flex rooms." Such spaces can serve as guest rooms, game rooms, exercise rooms, or a child study room.   Laundry Rooms   Dedicated laundry rooms are a virtual must for the new generation of renters. They are no longer accepting the traditional on-site laundry and even the in-unit washer/dryer hookup no longer invites enthusiasm. Matching washer/dryer sets can now fit into almost any space and should be part of any new development.   Energy Efficiency   If renters pay utilities, lower energy costs are a major selling point. According to a 2015 survey by the National Association of Home Builders (NAHB), energy efficiency was second only to a "safe community" in the elements of housing that would most influence a purchase decision. To some degree, the same is likely true for a rental decision.   The more extreme the weather, the higher the value of energy efficiency. Adequate insulation, windows with low-E coatings, and efficient water heaters lead the way in this category. When it comes to windows, Energy Star certified windows can lower bills by 7 to 15%. Owners of LIHTC properties should be especially diligent with regard to energy savings since every dollar by which a utility allowance is reduced will be another dollar in collected rent.   Stress Free Living   Hard to maintain countertops and wall-to-wall carpet used to be symbols of luxury, but virtually all generations now look at them as extra work. Also, the more recently the HVAC systems have been updated, the more marketable an apartment is. It is not enough to just update systems - to the extent possible, upgrades should be made with high quality equipment, such as American Standard and Trane. While more expensive upfront, they pay for themselves over the long-haul. More carpets are being replaced with long-wearing hardwood flooring with a durable factory finish. Engineered wood flooring, which uses a thin veneer of real wood or bamboo over structural plywood, will not wear as well as solid wood, but it looks the same and costs less making it a better choice for affordable apartments. They can also enable a 3 to 5% increase in rents.   Build for "Aging in Place"   By 2040, there will be 80 million seniors (21% of the population). Eliminating staircases, walker unfriendly doorways and slippery step-in baths and showers benefit people of all ages, and will allow people to remain longer in their homes. Major design elements for seniors include: Walk-in showers: Curbless showers eliminate the threshold between the shower and surrounding bathroom and are not only wheelchair accessible, but are sleek and streamlined. Ground floor master bedrooms - developers of townhomes and other two story residential structures should always place the master bedroom on the ground floor. This is one of the most desired features among baby boomers (those born from 1946 to 1964). Comfort Height Toilets - these toilets are a few inches taller, which makes getting on and off easier. These can be installed in any unit (not just those for seniors), and will not have a negative impact on marketability.   Paint   When marketing apartments for rent, use neutral color schemes. Whites and off-whites remain the top selling interior colors and will appeal to most renters - at least when making the initial decision to rent. Once rented, don t be afraid to let residents make the unit their own, by choosing the color of their apartment at lease renewal. Just be sure it is a color that can be covered with the neutral colored paint when they move. Also, when painting, use high quality paints - both for indoor and outdoor painting.   Curb Appeal   Decks, patios, seating areas and grilling spaces all add to the outdoor appeal of an apartment community. Pools are no longer the attraction they once were, and are expensive to maintain. Gas fire pits surrounded by seating are much more highly favored today.   Curb appeal is the single most important element in the appearance of an apartment community. Trimming overgrown shrubs, keeping the fa ade in good repair and painting front doors on a regular schedule can keep the property looking good and not deter drive-by prospects. Keeping property signage fresh and the siding in good repair are also important steps in the process. Also, replacing turf grass with native ground covers or pea gravel (not for family properties) can reduce maintenance cost while adding visual interest.   Technology   While all potential residents (but Millennials in particular) want technology in their homes, be careful. Technology can become outdated almost as soon as it is installed. Wireless Internet is a must, and programmable thermostats (such as Nest) can give the impression of a high-tech apartment.   In summary, apartment owners and developers can learn from the homeownership industry - especially with regard to the amenities that are coveted by today s renters. More and more, the homes sought by renters mirror those of homeowners, and the amenity packages need to be similar. Kitchens, baths, finishes and technology can give an edge to apartment owners who stay up-to-date with the wishes of their customers.