News

HUD Advanced Notice of Proposed Rule Making - Strenthening Oversight of Over-Income Tenancy in Public Housing

HUD is considering a rule to ensure that households in public housing continue to need housing assistance after admission. This potential rule was prompted by a HUD Office of Inspector General (OIG) report stating that of 1.1 million families in public housing that were examined, 25,226 were over the qualifying income limit - some significantly. Comments on this ANPR are due at HUD no later than March 4, 2016.   Background   The Housing Act of 1937 is the primary statute governing public housing. The Act provides that public housing units be rented only to families who are low-income at the time of their initial occupancy. Public Housing Agencies (PHAs) must undertake periodic reviews of household income. The Act does not require eviction of families whose income exceeds the income limits after move-in.   On July 21, 2015, HUD s OIG issued an audit report indicating that a number of households had income significantly in excess of the maximum income limits, although they income qualified at move-in. In one identified case, a Nebraska millionaire occupied a $300 per month public housing unit. Current regulations do not prohibit a family from continued occupancy due to an increase in income after move-in. An increase in income may be minimal or temporary, and HUD believes that such increases should not be the basis for termination of public housing assistance. The purpose of this ANPR is to solicit comments on how to structure policies to reduce the number of households with incomes significantly in excess of income limits when those income limits have been exceeded for a sustained period of time.   HUD s position is that any changes that would require the termination of tenancy for over-income families should be enacted with caution so as not to impede a family s progress toward self-sufficiency.   Since November 26, 2004, PHAs have had the authority to terminate the tenancy of over-income families. However, they were not required to do so and had a good deal of discretion as to whether or not to terminate tenancy. While the 1937 Act did not require termination of tenancy for over-income residents, it did not prohibit PHAs from doing so. HUD indicates that many factors should be considered in developing these policies, including local market conditions, community stability, the source and duration of increased income, and whether the resident is elderly or disabled. HUD is considering revising its regulations in a way that would continue to give PHAs discretion on when to evict or terminate the tenancies of over-income families but narrow that discretion by providing circumstances that would require a PHA to terminate tenancy or evict an over-income family. It is clear from the wording of the ANPR that the two main areas for which HUD is seeking input are (1) how to define income that "significantly" exceeds the limit, and (2) how to define a "sustained period of time" with excess income. Another area of concern is what a reasonable period of time to find alternative housing would be.   HUD is not considering an alternative in the exceptions to eviction or termination of tenancy for families over the income limits if the family has a valid contract for participation in a Family Self-Sufficiency (FSS) program. Also, a PHA will not be able to evict a family that is over the income limit if the family is currently receiving the earned income disallowance.   In developing the final rules for the program, HUD will have to avoid being too restrained in their approach to higher income residents. HR 3700, the Housing Opportunity Through Modernization Act, sailed through the House on a 427-0 vote, and is expected to receive strong support in the Senate. Once passed, it is very likely that President Obama will sign it. Part of this legislation places limits on how long higher income families may remain in public housing. If Congress feels HUD is circumventing Congressional intent through regulation, additional statutory requirements could easily be imposed.   The legislation, if signed into law as expected, will also prohibit families with net assets in excess of $100,000 from living in public housing. At least for now, the law will apply only to public housing - not Section 8, Section 515 or the Low-Income Housing Tax Credit (LIHTC). However, history has shown that once rules for public housing are changed, they eventually are applied to other affordable housing programs.   One amendment that was adopted as part of the Bill keeps the $480 dependent deduction and increases the elderly/disabled deduction from $400 to $525.   The changes outlined here are likely to become law and regulation in 2016. Based on the current mood in Congress regarding regulatory reductions and cost cutting, 2017 may well be a year of change for the affordable housing industry.  

HUD Changes REAC Protocol Regarding Units with Bedbugs

On January 21, 2016, HUD issued Inspector Notice No. 2016-01, "UPCS Inspector Protocol Bed Bug Infestation."   The Notice was effective on February 1, 2016, and applies to all properties that are subject to UPCS physical inspections. In states that have adopted the UPCS standards for Low-Income Housing Tax Credit Projects, this new guidance also applies for Section 42 purposes.   Background   In 2010, REAC issued Inspector Notice 2010-01 establishing inspection protocol requirements when an inspector is informed of bed bugs at a property that is being inspected. The Notice did not require that the inspector enter the unit. This Notice amends, in part, those requirements and now requires inspectors to enter all units in which bed bugs are reported.   This change is being made due to HUD s conclusion that the likelihood of bed bug transfer to an inspector from an infested unit is remote. The basis of this conclusion is thousands of inspections that have been conducted in units in which bed bugs were reported. Bedbugs are nocturnal and usually hide on upholstered furniture or beds. The are not very active and do not respond quickly to human hosts during the day. Also, a person s movements through the unit make it even more difficult for bed bugs to find a host.   Procedures   Effective February 1, 2016, inspectors are required to report the presence or existence of bedbugs at any property being inspected and enter any unit reported to have bed bugs that is part of the selected sample. Before beginning an inspection, inspectors should: Ask the property representative if there have been any reports of bed bugs in any units; Enter the result of the inquiry as "no bed bugs reported" or "yes, bed bugs reported;" If no bed bugs have been reported, the inspection should be carried out as normally done; If bed bugs are reported, REAC inspectors for HUD properties should follow the procedures outlined in the Notice regarding contacting the Technical Assistance Center for assignment of a TAC number. LIHTC inspectors should follow the protocol outlined by the Housing Finance Agency. Inspectors are to enter all units, reported to have bed bugs that are part of the selected sample of units to be reviewed and conduct the normal UPCS inspection. If the presence of bedbugs is discovered during the inspection, the inspector should follow the procedures outlined in the Notice (if a REAC inspection) or the procedures outlined by the HFA (if a Section 42 inspection). If the property representative refuses to enter the unit reported to have bed bugs, the inspector should note the inspection as "Unsuccessful."   The presence and treatment of bedbugs on a property will not be scored in the UPCS inspection.   Essentially, this Notice provides that units with a bed bug issue are no longer exempt from inspection, and a normal UPCS inspection should be conducted.   REAC inspectors may contact the REAC TAC at 1-888-245-4860 for answers to questions on this issue. State agency inspectors inspecting for Section 42 purposes should contact their Agency for guidance.

The Relationship Between Housing and Overall Quality of Life

The Relationship Between Housing & Quality of Life   When examining ways to increase affordable housing opportunities, ensuring that opportunity is not limited by where a person lives is critical. Unfortunately, today where people live depends on large part on their income, race, and ethnicity. A critical element in ensuring housing stability is the pursuit of policies that help all households find decent and affordable housing in neighborhoods that offer safety, stability, and opportunity.   There is a lot of anecdotal evidence that one of the best ways to achieve the goal of meeting the affordable housing needs of the country is a two-pronged approach. First, promote residential mobility and a deconcentration of poverty, while second, supporting reinvestment in racially segregated and economically impoverished neighborhoods. The basic building blocks of opportunity are high-quality housing, jobs, good schools, transportation, and healthcare.   In this article, I want to highlight some of the latest research that demonstrates the correlation between where a person lives and quality of life. I want to outline proposals from academia, government and interest groups relating to affordable housing and economic opportunity. Recommendations from these groups relate to the following areas: Use tax policy to increase the supply of affordable rental housing; Eliminate restrictive and exclusionary zoning that keeps households out of high-opportunity neighborhoods; The importance of the federal housing voucher program and how to better equip the program in ways that will help households access high opportunity neighborhoods; Examination of a comprehensive approach to revitalizing high-poverty communities; Preservation of affordable rental housing; Ensuring that the secondary market continues to support affordable rental housing; and Maintenance of single-family rentals as a source of affordable housing.   Not all Housing is Created Equal   A strong housing market helps families build wealth, attend good schools, and live in community s that are more conducive to long-term success. However, segregation and pockets of poverty remain significant problems. This residential segregation has been exacerbated by a long history of disinvestment, discrimination, and counter-productive public policy at all levels of government. One of the best studies I have seen on this problem is "The Making of Ferguson: Public Policies at the Root of its Troubles," by Richard Rothstein. The report outlines policies in Ferguson, MO that contributed to the racial divide of that city, and many of those same public policies have been implemented in cities across the country. Such policies include urban renewal plans that show little regard for existing residents and often result in involuntary displacement and higher rates of segregation.   America is in many ways a deeply segregated society, both by race and income. In the past 30 years, residential segregation by income has actually increased. Middle-income neighborhoods are in decline and rich and poor are increasingly isolated from other families. In fact, the income, wealth, and educational attainment of the highest income neighborhoods is increasing, while low-income areas are stagnating (see "Worlds Apart: Inequality between America s Most and Least Affluent Neighborhoods," Rolf Pendall and Carl Hedman, published by the Urban Institute in 2015).   Discrimination continues to play a major role in segregation. African Americans seeking homes are shown fewer units than white, and when they are shown homes, they are often steered away from white neighborhoods (see "Housing Discrimination Against Racial and Ethnic Minorities 2012," published by HUD in 2013). Also, wealthy communities continue to adopt exclusionary zoning regulations designed to keep the poor out. For those interested in reading more on this subject, an excellent article appeared in the Washington Post on August 13, 2014, "One of the Best Ways to Fight Inequality in Cities: Zoning," by Daniel Hertz.   Many Americans live in high poverty areas because those are the only neighborhoods with affordable rent. Government programs help create and preserve some affordable housing in higher income neighborhoods, but the numbers are too low to come close to meeting need. There is also a shortage of landlords willing to participate in the Section 8 Voucher Program, further limiting the potential for affordable housing in wealthier areas.   13.8 million Americans now live in high-poverty neighborhoods (defined as those where more than 40% of residents are poor), nearly twice as many as in 2000 (see "Architecture of Segregation: Civil Unrest, the Concentration of Poverty, and Public Policy," by Paul A. Jargowsky, published by The Century Foundation in 2015). Communities with high levels of poverty often lack amenities such as high-quality schools, day care centers, recreational facilities and access to high quality jobs. Instead, these areas are often identified by violence, stress, and environmental hazards. There is also often a lack of positive peer influences for children in these areas.   Children in poverty-stricken neighborhoods are also less successful in school, less likely to attend college, and more likely to drop out before high school graduation. Research by Harvard University economist Raj Chetty and others has shown that living in areas that are more segregated by race or income also reduces economic mobility (see "Where is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States," Raj Chetty, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez, published in The Quarterly Journal of Economics, in 2014). The same research noted above also found that people living in less segregated, low-poverty neighborhoods have a much better quality of life and more economic opportunity - even when they have lower incomes. Children in these households also perform much better academically than children in segregated, lower-income neighborhoods. Young children who move to higher income areas are much more likely to attend college and less likely to become single parents (see "The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunities Project," also by Chetty, Hendren, and Lawrence F. Katz, published by Cambridge in 2015).   The Impact of Rent Burden on Household Success   About 50% of all renters spend more than 30% of their income on housing, and 26% spend 50% of their income on housing. An analysis from Enterprise Community Partners and the Harvard University Joint Center for Housing Studies projects that the number of households spending 50% or more of their income on rent will increase from 11.8 million to 13.1 million by 2025 (see "Projecting Trends in Severely Cost-Burdened Renters: 2015-2025," Allison Charette and others, Enterprise Community Partners, 2015).   I recently wrote an article for The Tax Credit Advisor on the new HUD Rule regarding the Affirmatively Furthering Fair Housing Assessment Tool. This rule requires recipients of federal housing and community development funding to foster more inclusive communities, promote equal access to community assets, and combat segregation and concentrated poverty. Under the rule, communities need to examine residential patterns and determine whether their laws, policies, and practices are barriers to affirmatively furthering fair housing. If a community determines that a law, policy, or practice is a barrier, it must then take steps to address it. While the goal of the rule is laudable (ensure that low-income renters can live in higher opportunity neighborhoods and revitalize distressed communities), it may be an overreach and could be construed as "social engineering." There is considerable opposition in Congress to the rule and its long-term implementation is by no means assured.   After paying for housing, the average severely cost-burdened low-income household has barely more than $15 per day to meet all other basic needs - including food, transportation, health care, and savings. This calculation is based on the Joint Center for Housing Studies of Harvard University, "America s Rental Housing: Evolving Market and Needs" (2013). Based on this same study, a low-income renter living in affordable housing can spend two-thirds more on food, double the amount on health care, and nearly triple the amount on transportation, as are those who are rent-burdened.     While most low-income households have limited access to high opportunity areas, households that receive Housing Choice Vouchers tend to fare much better. However, there are still barriers to the ability of voucher holders to access better communities. High costs and a shortage of landlords willing to participate in the voucher program are primary impediments.   Industry-Wide Policy Recommendations   There are many proposals in the affordable housing industry on how to address the issues of affordability and availability. Chief among these are recommendations regarding how to use tax policy to increase the supply of affordable rental housing.   Due to funding limitations, only 25% of households that are eligible for federal rental assistance actually receive it (see "Chart Book: Federal Spending is Poorly Matched to Need," by Barbara Sand and Will Fischer, published by the Center on Budget and Policy Priorities, 2013). Waiting lists for federal assistance are incredibly long, and many localities have closed these lists because most people on the list cannot expect to receive assistance due to the wait times. Between 90,000 and 95,000 affordable units are created or preserved by the Low-Income Housing Tax Credit Program (LIHTC), but due to limitations on the amount of credit made available by Congress, the program cannot address the current shortage of 4.5 million affordable units. This information is available from HUD in "Data Sets: Low-Income Housing Tax Credits."   Following are recommendations for improving tax policy to address some of the affordable housing needs the nation is currently facing.   Expand and improve targeting of the LIHTC Program.   Any overall program for addressing the issue of affordability must focus on increasing the supply of affordable units. The most practical way to do this is to significantly expand the LIHTC program. The LIHTC program is the most successful affordable housing program in U.S. history, and one of the most supported by the nation s lawmakers. A major reason for the strong support of the program is the fact that private owners of the properties have strong incentives to make the project s successful, and it is the private industry that faces losses if the projects fail. The program also tends to create high-quality and well-planned developments.   The Bipartisan Policy Center s Housing Commission has proposed a 50% increase in LIHTC allocations, which would preserve or create an additional 350,000 to 400,000 affordable units over a ten-year period (Bipartisan Housing Commission, "Housing America s Future: New Directions for National Policy, " 2013). The President s budget proposals have proposed allowing states to convert some of their private activity bond authority to allocable tax credits, thus increasing the amount of credit available to the states.   Current proposals relative to the LIHTC program also recognize the fact that not all states have the same needs relative to affordable housing. Tax credits are currently allocated to states based on population, but this formula does not recognize the disparity in need. For this reason, any additional tax credits as the result of a program expansion should be allocated proportionately to states based on their ability to demonstrate a shortage of affordable and available units for very low-income households. Some scholars have suggested changing the allocation to this proportional methodology for all LIHTC allocations - not just any increase in allocation. For an examples of this, see Bruce Katz and Margery Austin Turner, "Rethinking U.S. Rental Housing Policy: Build on State and Local Innovations," published by the Brookings Institution in 2007.   While almost half of all residents in LIHTC projects are very low-income, the program itself is not designed in a way to create housing that is affordable to the lowest income renters. Without additional subsidies - such as housing vouchers - tax credit affordability can be problematical. One way to improve affordability in the tax credit program is to permit "income averaging." Under this option, landlords would use income from rents that are charged to higher income tenants to offset the cost of providing rents that are affordable to lower-income residents.   Congress recently made permanent the 9% credit, improving program efficiency. Congress could also make permanent the 4% credit, furthering improving the program (currently the 4% credit changes on a monthly basis, and is never actually 4%).   LIHTC investments also can help support comprehensive revitalization of distressed neighborhoods. More than 45 states give priority to the rehabilitation and preservation of existing housing in their allocation plans. (For additional information on State allocation plans, see Tracy Kaufman, "Preservation Incentives in State Qualified Allocation Plans" [Washington: National Housing Trust, 2011]).   Renters Tax Credit   The largest federal housing program is the Mortgage Interest Deduction (MID) Program for homeowners. Currently, more than 75% of federal housing expenditures support homeownership. More than half of these expenditures benefit high-income households that earn more than $100,000 per year and have little difficulty affording housing. The MID is the nation s largest housing subsidy, costing $70 billion annually (the LIHTC has cost $100 billion in nearly 30 years). In addition to the MID, homeownership support includes deductions for property taxes and exclusion of capital gains on sales of principal residences, which together cost another $65 billion per year. Legislation changing the tax code to better benefit renters would contribute greatly to the ability of lower-income renters to afford housing.   There have been a number of proposals for a renter s tax credit, and some states already offer tax refunds or deductions to certain renters. The Center on Budget and Policy Priorities has developed a detailed plan for a federal credit program. The proposal is outlined in "Renters Tax Credit Would Promote Equity and Advanced Balanced Housing Policy," by Barbara Sard and Will Fischer in 2013. The proposal presents a plan whereby states would assist very low-and extremely low-income households pay an affordable share of their income for rent by providing tax credits to landlords who lease to low-income renters, charging the renters no more than 30% of their income for housing.   States would receive a capped amount of credits based on their share of the national population, with a minimum allocation for small states. States would then provide credits directly to tenants - who would use them to rent housing - or provide them to landlords - who would offer specific units at affordable rents. This proposal sounds similar to the LIHTC, but would not be tied to the cost of development in the way that the LIHTC is. While it would not add to the affordable housing stock, it would create the number of units that would be affordable to lower income renters. According to the Center on Budget and Policy Priorities, a credit in the amount of $5 billion annually would assist 1.2 million low-income households.   Eliminate Restrictive & Exclusionary Zoning   A large body of research indicates that restrictive zoning and land use policies drive up the cost of housing, making it very difficult for lower-income families to find affordable housing in high-opportunity areas. For those interested in delving into this issue, some excellent research has been done, including the following:   Joseph Gyourko and Raven Malloy, "Regulation and Housing Supply." Working Paper 20536 (National Bureau of Economic Research Working Paper, 2014. John M. Quigley and Larry A. Rosenthal, "The Effects of Land Use Regulation on the Price of Housing: What Do We Know? What Can We Learn?" Cityscape 8 (1) (2005).   Approximately 38% of local governments in the nations 50 largest metropolitan areas have zoning codes that are low-density only, restricting density to less than 8 dwelling units per acre. Many of these areas zoning codes also prohibit the construction of typical apartment complexes. For more information on this data, see Rolf Pendall, Robert Puentes, and Jonathan Martin, "From Traditional to Reformed: A Review of the Land Use Regulations in the Nation s 50 Largest Metropolitan Areas," 2005.   Another problem in many areas is "NIMBYism," - Not in My Back Yard. Local opposition to affordable developments remains a significant barrier to the construction of housing in certain areas.   Increase Funding for the Housing Choice Voucher Program   The federal Housing Choice Voucher Program plays a critical role in helping low-income families afford quality, safe housing. In 2015, only 25% of households that qualify for rental assistance actually receive it. While Congressional funding for the program has never been enough to come close to meeting the need, tight budget caps and sequestration have further depressed funding. Experts estimate that more than 100,000 vouchers were eliminated due to sequestration.   Most affordable housing experts have called for expansion of the program. The Bipartisan Policy Center s Housing Commission has proposed providing vouchers for all currently unassisted, cost-burdened, extremely low-income renters (those with incomes below 30% of the median income for their area). Such an expansion would provide 3 million additional vouchers at a cost of $22 billion per year, less than 32% of the federal homeownership subsidies. While an expansion of this type would require considerable investment, the cost pales by comparison to the $70 billion spent annually on the MID.   HUD has taken some steps to expand the use of the voucher to higher-income areas. One action that HUD will be taking is basing the value of a voucher on the ZIP code in which a tenant rents, rather than on a uniform standard that is set across an entire metropolitan area; this variable valuation will help voucher holders afford units in more expensive neighborhoods. A demonstration of this concept in Dallas showed that this change helps voucher holders move to safer and low-poverty neighborhoods.   HUD also recently simplified the portability procedure for using a voucher outside of the original jurisdiction that issued it.   Approaches to Revitalization of High-Poverty Communities     In "An Opportunity Agenda for Renters," Center for American Progress stated, "Revitalizing distressed communities requires a comprehensive set of strategies that helps residents live in communities that enable them to access better life opportunities." What this essentially means is that as important as affordable housing is, when it stands alone without providing reasonable access to jobs, health service, etc., the efficacy of the affordability is diminished.   Affordable housing should be an integral part of a revitalization plan, and a good revitalization plan recognizes the barriers that residents of high-poverty communities experience, including limited access to quality housing and transportation, high rates of crime, barriers to securing employment, poor schools, and limited economic activity.         Preservation of Existing Housing Stock   There are a number of existing programs that are designed to preserve affordable housing; these programs need to be funded.   The nation s unsubsidized affordable housing stock is, in many cases, in a state of disrepair, lacks access to capital, and faces rising rents and conversion to owner-occupied housing. The subsidized stock is threatened by expiring restrictions on affordability as well as disinvestment and disrepair (see "Preserving Affordable Rental Housing: A Snapshot of Growing Need, Current Threats, and Innovative Solutions," published by HUD in 2013). Between 1999 and 2008, nearly 30% of units renting for less than $400 were lost from the nation s affordable housing stock (Harvard University Joint Center for Housing Studies, State of the Nation s Housing 2012: Key Facts," 2012). More than 200,000 units have been lost from the nation s stock of public housing since the mid-1990s. There are 2.1 million units of subsidized affordable housing whose restrictions expire in the next ten years; half of these units are in high-rent neighborhoods where owners earn below-market rents, meaning they are likely to be lost from the affordable stock unless there is a concerted effort to preserve them as affordable (Harvard University Joint Center for Housing Studies, "State of the Nation s Housing, 2015").   Failure to preserve existing affordable housing is a waste of federal resources that have already been invested. It is also bad from an economic standpoint. Over the long-term, constructing a new affordable unit costs 25% to 45% more than acquiring and preserving an existing affordable unit (see "Comparing the Life-Cycle Costs of New Construction and Acquisition-Rehab of Affordable Multifamily Rental Housing," by Charles Wilkins and others).   The backlog of needed repairs for the nation s public housing totals more than $26 billion, yet the Public Housing Capital Fund, which provides funding for upgrades and repairs, is severely underfunded. An expansion of Low-Income Housing Tax Credits would assist in meeting these preservation needs, but LIHTC projects typically require additional funds from programs like HOME to be viable for the lowest-income residents.   Summary   National policies need to be developed that will create opportunities for low-income renters to access safe and affordable housing in high quality neighborhoods. It is these neighborhoods that provide the support systems needed for lifestyle success. It is not a choice between promoting residential mobility and reinvesting in distressed neighborhoods. The most successful policies will be those that enable more households to access affordable housing in high-opportunity communities while at the same time creating more opportunities in low-income areas. This goal can be achieved by taking a multi-pronged approach to addressing the affordable housing crisis. This approach includes using the tax policy to increase the supply of affordable rental housing, eliminate restrictive and exclusionary zoning, increase funding for housing choice vouchers, take a more comprehensive approach to revitalizing high-poverty communities, and focus on the preservation of existing affordable housing.  

2016 HUD Imputed Interest Rate

HUD published Notice 2016-01 on January 19, 2016, announcing that the passbook savings rate effective February 1, 2016, will remain at .06%. The notice applies to all Project-Based Section 8 programs, Section 101 Rent Supplement Program, Section 202 Programs, Section 811 PRAC, Section 811 PAC, and Section 811 PRA, Section 236, and Section 221 (d) (3) BMIR projects. It will also apply to the Low-Income Housing Tax Credit and Rural Housing Service Section 515 Programs. Under 24 CFR 5.609(b)(3), when determining annual income for families who receive assistance in a Multifamily Housing subsidized unit, the owner includes in annual income the greater of either: (1) actual income resulting from all net family assets; or (2) a percentage of the value of such assets based upon the current passbook savings rate as determined by HUD when a family has net assets in excess of $5,000. The passbook savings rate of .06% is to be used for all move-in, initial, annual, and interim recertifications when a family has net assets in excess of $5,000.  

Graffiti Removal and Restoration

Graffiti Removal & Restoration When providing training on preparing properties for physical inspections, I always spend a little time talking about graffiti removal. I have recently received a number of email requests from clients for suggestions on how to remove graffiti from sites. In this article, I want to discuss some of the best ways to rapidly remove graffiti from sites and some ways to make it harder to mark up properties with graffiti.   Many graffiti removal and restoration efforts can leave surfaces looking as bad, if not worse, then before the work began. To ensure successful removal and protect surfaces from graffiti is a three-step process: (1) Identify the surface type and substance to be removed; (2) select the appropriate removal method; and (3) apply a protective coating. Also, some cities have established removal and restoration guidelines for historic buildings; be sure to know the local guidelines.   Identify the Surface Type and Substance to be Removed   Almost any surface can be defaced with graffiti - brick, stone, concrete, aluminum or vinyl siding, pavement, wood, and glass are examples. Surfaces can be smooth or textured, painted or unprotected. Most graffiti is applied with spray paint. However, vandals also use markers, stickers, shoe polish, lipstick, stencils and etching products. The longer graffiti remains on a surface, the harder it is to remove, so quick action is critical.   The method of removal depends both on the surface type and the substance to be removed.   Select a Removal Method   Except for paint, most anti-graffiti removers are not available at local home improvement stores. These are specialty industrial products and are often sold in bulk to cites, counties, or graffiti removal companies.   Graffiti removal products that are sold in retail outlets are generally good only for small clean up tasks. Fortunately, most apartment graffiti falls into this category.   There are three common removal methods:   Paint-out: this method is good for covering graffiti on smooth, painted surfaces. It is relatively low-cost and represents a safer option than some of the chemical removers.   Chemical Removers: the stronger the solvent, the faster it will dissolve or remove the paint. Some of the stronger solvents require personal protection. If a solvent or cleaner is poorly matched to a particular surface, the aesthetic results may be unappealing. Use of a professional graffiti removal company is often recommended when solvents are involved. For small jobs, such as removing spray paint and markers from light poles and utility boxes, a chemical removal product with cloth or scrubber will often be adequate (Easy-Off Oven Cleaner can work well).   Pressure Washing: pressure washing with a water/solvent combination (sometimes baking soda) may be used to remove graffiti. If used extensively, pressure washing can wear down surfaces.   Apply a Protective Coating   There are two types of protective coatings - temporary and permanent.   Temporary coatings are protective, but come off when graffiti is removed and must be reapplied. Permanent coatings are not affected by the removal process.   Most coatings are not available at local retailers. Some paint products have properties similar to anti-graffiti coatings, but that is not their primary use and they will not be marketed in that way.   Following are suggestions on how to remove graffiti from some of the more common surfaces found at apartment communities:   *Aluminum Siding: Paint remover (sparingly), followed by a water rinse;   *Glass: use a razor blade to scrape off; paint thinner may also be used;   *Masonry (brick, marble, stone, concrete, etc.): Low-pressure power washing; sand or soda blasting [may create a shadow]; paint remover or chemical solvent with brush, followed by a water rinse and painting;   *Metal: Paint thinner or chemical graffiti remover; power wash; paint-over;   *Pavement: Chemical remover and power washing; soda blasting;   *Vinyl Siding: sparing use of chemical solvents (they may remove the vinyl coating); if painting, use primer first; and   *Wood: if wood is painted and unweathered, try mineral spirits. Also, low-pressure power washing, sanding or repainting.   If there is graffiti on historic masonry or other valuable structures or etching on glass, I strongly recommend using the services of a professional.   In summary, the key to successful graffiti removal is fast action, an understanding of the surface to be cleaned, and knowledge of the various cleaning methods.

Rent to Own vs. Seller Financing

The Difference Between "Seller Financing" and "Rent-to-Own"   Chapter Five of HUD Handbook 4350.3, Chg. 4 outlines various requirements relative to the determination of value and income for assets. One of the more unusual assets managers of affordable housing developments may encounter is a mortgage or deed of trust. Also known as "seller financing," this situation occurs when an individual sells a piece of real estate, but instead of the purchaser obtaining a mortgage from a bank, the seller loans money to the purchaser through a mortgage or deed of trust. This may also be referred to as a "contract sale."   A mortgage or deed of trust held by a family member is included as an asset. Payments on this type of asset are often received on a monthly basis and include both interest and principal. As stated by HUD, the value of the asset is the unpaid principal as of the effective date of the certification. Each year this balance will decline as more principal is paid off. The interest portion of the payment is counted as actual income from the asset.   But, what about a "rent-to-own" situation? How does this differ from a contract sale for purposes of determining income?   In a seller financing situation, the purchaser legally owns the home and the seller and purchaser sign a legal mortgage agreement that specifies the term of the loan, interest rate, monthly payments, and additional clauses - just like a traditional mortgage. The purchaser is responsible for upkeep and taxes, unlike a rent-to-own, where the landlord is responsible for both. When a seller finances the sale of a home, the asset for the seller is the deed of trust - the home is an asset for the purchaser.   In a rent-to-own situation, also known as a "lease-purchase," the owner retains ownership of the home and acts as a landlord. This is a legally documented transaction under which the property is leased in exchange for a weekly or monthly payment, with the option to purchase at some point during the agreement. A major difference between this and seller financing is that the lessee can terminate the agreement by simply returning the property.   Structure of a Rent-to-Own The tenant lives on the property and pays toward purchasing at a fixed price within a specific period of time, usually one to five years. As part of the contract, the renter may be required to make a nonrefundable deposit, often included as part of a downpayment at the end of the lease term. At the end of the lease term, the tenant has a right of first refusal to purchase the property at an agreed upon sales price, or walk away and forfeit the deposit.   In a true lease-option, there is a clear line between a lease and a purchase. First, a tenant has a written lease and a written sales agreement, and the lease specifies a termination date. A lease-option rent amount is expected to reflect market value rents for the neighborhood. Also, the tenant acquires no equity or interest in the property during the lease term, nor are they responsible for investing their own money in improvements or repairs.   When faced with a situation where it is unclear whether it is seller financing or a lease-purchase, managers should examine the structure of the arrangement. Is there a lease? Who is responsible for upkeep and repairs? Examining the structure of the arrangement will assist management in determining whether to treat the situation as a contract sale or a rental. If it is clearly a sale, the value of the deed of trust (the asset) should be determined as noted above, and the income from the asset is the interest that the purchaser will pay during the 12-month period following the effective date of the certification. If it is a lease, the asset is the property, and the cash value of the property is the value of the asset. The rent paid is income to the asset (verified operating expenses may be deducted from the rental income in order to determine net income to the asset).   In summary, a key to understanding whether there is seller financing or a rent-to-own arrangement is a determination regarding who owns the property. Once this is known, management can easily judge whether to treat the real estate or the deed of trust as an asset.  

Understanding Vicarious Liability

Understanding "Vicarious Liability" - A Key Element of Harassment Liability Under Fair Housing Law   In October 2015, HUD issued a proposed rule to create a new fair housing regulation that will apply to both private and federally assisted communities. The new regulation - if made final - will encompass two major issues: It will establish formal standards for harassment under fair housing law, and will make it clear that all harassment, whether due to sex, race, national origin, disability, familial status, or any other protected characteristic, will be illegal; and It will clarify when housing providers and other entities or individuals may be held liable for harassment.   Liability for Fair Housing Violations   Anyone may be held directly liable for his or her own fair housing violations. For example, an individual manager or maintenance employee may be sued for making discriminatory statements or treating prospects or residents differently based on race, color, religion, national origin, sex, familial status or disability. Likewise, owners may face liability if they have rules that discriminate against applicants or residents based on a protected characteristic. Owners may also fact liability for the actions of others, including employees and other agents. This higher level of liability is known as "vicarious liability," and is a little understood element of common law. The purpose of this article is to assist housing operators and others associated with the provision of housing in their understanding of vicarious liability.   Traditional legal standards recognize two levels of liability - direct liability for one s own misconduct and vicarious liability for the misconduct of others. The standards for both types of liability follow well-established legal principles and do not add any new forms of liability under fair housing law.   Direct Liability   There are three ways, under fair housing law, in which an individual or entity may be directly liable for a fair housing violation. A person is directly liable for his own conduct that results in a discriminatory housing practice. Individual employees, managers, owners and others all are directly liable for their own discriminatory conduct. A person may also be directly liable for the misconduct of others. Such misconduct could be the behavior of an employee or agent, or a third party, such as another resident.   When a claim is based on the actions of an employee or agent, a person may be considered directly liable for failing to take prompt action to correct and end a discriminatory housing practice by that person s employee or agent, if the person knew or should have known of the discriminatory conduct. In other words, community owners are directly liable for the actions of employees and other agents when they knew or should have known about the discriminatory conduct, but did not take action to stop it.   A person also may be directly liable for failing to take prompt action to end a discriminatory housing practice by a third party, such as another resident, if the person knew or should have known about the conduct.   A key element of direct liability is knowledge; it must be clear that the person knew or should have known about the discriminatory behavior in order to demonstrate direct liability. This is not the case for vicarious liability.   Vicarious Liability   Vicarious liability is a form of strict, secondary liability that arises under the common law doctrine of 'agency.' The Latin term used in the law is respondeat superior - the responsibility of the superior for the acts of their subordinate, or, in a broader sense, the responsibility of any third party that had the "right, ability or duty to control" the activities of a violator.   The HUD proposed regulation provides that a person may be vicariously liable for a discriminatory housing practice by the person s agent or employee, regardless of whether the person knew or should have known of the conduct that resulted in a discriminatory housing practice, consistent with agency law.   HUD is making it clear that the general principles of agency law apply to fair housing cases. Under well-established agency law, the vicarious liability occurs when the discriminatory actions of the agent are taken within the scope of the agency relationship, or are committed outside the scope of the agency relationship but the agent was aided in the commission of such acts by the existence of the agency relationship.   Certain elements must generally be present to demonstrate vicarious liability, including (1) the act or action occurred while the employee [or agent] was at the workplace and within the hours of the employee's schedule; (2) the employer must have employed the employee at the time of the incident. In other words, the employee had a reason to be at work at the time; and (3) the injury was a result of the act or actions of the employee [or agent] in the capacity that the employee or agent was hired. However, HUD has indicated that with regard to fair housing, vicarious liability will be expanded to include actions by employees or agents when not working during their normal work schedule. For example, a maintenance staffer using keys held as part of his job to enter a resident's apartment after hours.   There is hope, in the form of a Supreme Court ruling from 2003. In the case of Meyer v. Holley, Mr. and Mrs. Holley was an interracial couple that tried to purchase a house in California but were discriminated against during the process. A real estate corporation listed the house for sale. The couple sued the corporation, the employee who allegedly committed the discrimination, and the President of the real estate corporation, for unlawful discrimination. The President was the sole owner of the Corporation and neither participated in nor authorized the alleged conduct. The case ultimately went to the Unites States Supreme Court, which was asked to decide whether the owners or officers of entities were automatically liable for the wrongful acts of their employees or agents, even if the owners or officers were not involved in and did not direct or authorize the unlawful discriminatory conduct. The Court ruled that the owners or officers of a corporation may only be held liable for Fair Housing violations if they directed or controlled the person with respect to the unlawful act. The Court concluded that the owner/broker of the real estate company was not liable for the unlawful acts of the real estate agent. Keep in mind that one of the key components, in this case, was that the operating entity was a corporation. The corporate structure itself provides some protection to its officers relative to personal liability.   Protection Against Vicarious Liability   Unfortunately, the possibility of vicarious liability cannot be fully eliminated no matter how diligent an owner is relative to hiring, screening, and training. However, the potential can be minimized by properly training and supervising all employees - not only managers and leasing staff. Anyone who interacts with the public or with residents, including maintenance workers and contractors, should be well supervised. Special care must be taken when hiring outside contractors, who may well be considered agents.   Any complaints regarding discrimination or harassment should be addressed immediately. An investigation should be conducted and, if warranted, adequate steps should be taken to eliminate the offensive conduct.   Ultimately, the key to prevention of liability is screening of employees (including criminal screening), training of employees, and supervision of employees. As for contractors and agents, supervision becomes even more critical, since there is often little opportunity for management companies to screen and train contractors.  

Affirmatively Furthering Fair Housing Assessment Tool - Announcement of Final Approved Document, December 31, 2015

On December 31, 2015, HUD issued a Notice in the Federal Register announcing the final approved Affirmatively Furthering Fair Housing Assessment Tool. This is the Assessment Tool to be used by local governments that receive Community Development Block Grants (CDBG), HOME funds, Emergency Solutions Grants, or Housing for Persons with Aids (HOPWA) formula funding from HUD when conducting and submitting their own Assessment of Fair Housing (AFH). For purposes of this Assessment Tool, no AFH will be due before October 4, 2016.   The requirement to conduct and submit an AFH is set forth in HUD s Affirmatively Furthering Fair Housing (AFFH) regulations, and this Assessment Tool formal guidance can be found at www.hudexchange.info/programs/affh/.   Agencies affected by this Notice, including Public Housing Agencies (PHAs) that administer any of the above noted programs on behalf of localities, should obtain the Assessment Tool and become familiar with its requirements.

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