News

Verification of Social Security and Supplemental Security (SSI) Payments

Verification of Social Security and Supplemental Security Income (SSI) Payments   Managers of affordable housing properties (e.g., Section 8, LIHTC, Section 515, etc.) often struggle with the verification of income from Social Security (SS) or SSI. While verification of such income is required, the Social Security Administration (SSA) has made it more difficult to obtain verification of the income. In fact, the SSA will no longer send income verifications to third parties - such as property managers - that request verification. And, since the gross benefit must be verified, using bank or debit card statements will not suffice, since those statements show "net" deposits - not gross. It is now up to the recipient of the benefit to request and obtain verification of benefits.   The best way to verify income from SS or SSI is with a "proof of income" letter. Benefit recipients may obtain these through their "My Social Security" account. These accounts must be established by the recipient using their own personal information and for their exclusive use. Property managers should not create or use an account on behalf of another person, even if they have been given written permission by that person to do so.   How to Create the Account   Managers may provide information to applicants or tenants to assist them in setting up the accounts. Following is the procedure that should be followed:   Go to socialsecurity.gov;   Click on "My Social Security;"   Click on "Create an Account;"   To create an account, new users must have a valid email address, a Social Security number, a U.S. mailing address, and be at least 18 years old.   Complete the online form.   Once the account is set up, a Benefit Verification Letter may be printed. The letter will be dated and will even verify if benefits are not received. Those who do not want or cannot create an online account may call 1-800-772-1213 Monday - Friday from 7 AM to 7 PM and a letter will be mailed to them within ten days.     When Benefits are Received   When calculating income from Social Security, especially after the annual Cost of Living Adjustment (COLA) has been announced, it is helpful to know when the benefits will be paid to the recipient.   Persons who received or applied for Social Security benefits on or before April 30, 1997, or those receiving both Social Security and SSI, will receive benefits on the third of the month. Those receiving only SSI will receive the benefit on the first of the month. People who applied for Social Security after April 30, 1997 will receive benefits based on their birthday. Those born on the 1st to the 10th of the month will receive the benefit on the second Wednesday; Those born on the 11th to the 20th of the month will receive the benefit on the third Wednesday; and Those born after the 20th of the month will receive the benefit on the fourth Wednesday of the month.   The only SS recipients still receiving paper checks are those who were over age 90 as of March 1, 2013. All others are paid either via direct deposit or a debit card (Express Pay Card).    

HUD Notice Grants Authority to Transfer Rental Assistance, Debt, Use Restrictions Between Projects

On March 31, 2015, HUD published a Notice in the Federal Register establishing the conditions under which HUD will approve a request for the transfer of project-based rental assistance, debt held or insured by HUD, statutorily required income-based use restrictions from one multifamily housing project to another (or between several such projects). The HUD Secretary has the authority to approve transfer requests for fiscal years 2014 through 2016, provided that the Secretary publish a notice in the Federal Register laying out the terms and conditions for HUD approval of such transfers no later than 30-days before such notice takes effect. The Notice becomes effective April 30, 2015. HUD approval of such transfers will be contingent on a number of factors, Including (1) Number and bedroom size of units; (2) the transferring project must be either physically obsolete or economically nonviable; (3) the receiving project or projects shall meet or exceed applicable physical standards established by the Secretary; (4) the owner or mortgagor of the transferring project shall notify and consult with the tenants residing in the transferring project and provide a certification of approval by all appropriate local government officials; (5) the tenants of the transferring project who remain eligible for assistance to be provided by the receiving project or projects shall not be required to vacate their units in the transferring project or projects until new units in the receiving project are available for occupancy; (6) HUD determines that the transfer is in the best interest of the tenants; (7) in most cases, any lien on the receiving project resulting from additional financing obtained by the owner shall be subordinate to any FHA-insured mortgage lien transferred to , or placed on, such project by HUD, except that HUD may waive this requirement if it is determined that a waiver is necessary to facilitate the financing of acquisition, construction, and/or rehabilitation of the receiving project or projects; and (8) use restrictions must be recorded that are of no less duration than existing use restrictions; (9) the transfer may not increase the cost of any FHA-insured mortgage, unless appropriations are provided in advance for any such increased cost. Owners interested in the potential for such transfer should carefully review the notice and contact their HUD Multifamily Hub/Program Center.    

HUD to Publish Proposed VAWA Regulation

HUD Secretary Julian Castro announced on March 25, 2015 that HUD s proposed regulation implementing the Violence Against Women Act of 2013 (VAWA 2013) will shortly be published in the Federal Register. The rule will implement the VAWA 2013, which expands HUD s authority to protect survivors of domestic and dating violence, stalking, and sexual assault who are residing in housing assisted by HUD. VAWA 2013 also expands VAWA protections to HUD programs beyond HUD's public housing and Section 8 Programs, which were originally covered by VAWA. Affected programs also include the Rural Development Section 515 Program and the Low-Income Housing Tax Credit (LIHTC) Program. HUD is also publishing for comment two documents concerning tenant protections required by VAWA 2013 - a notice of occupancy rights and an emergency transfer plan. VAWA 2013 expands the protections for victims of domestic violence, dating violence, sexual assault, and stalking by requiring housing providers to have emergency transfer plans, and by providing reasonable time for tenants to establish eligibility for assistance under a VAWA-covered program where an assisted household has to be divided as a result of domestic violence. Summary of the Major Provisions of the Proposed Rule Key regulatory provisions to be addressed by the rule include proposed regulations that would:   *Include "sexual assault" as an action covered by VAWA protections, an action that was not included in the original VAWA 2005;   *Establish a definition for "affiliated individual" based on the statutory definition and that is usable and workable for programs covered by VAWA;   *Apply VAWA protections to the Housing Trust, which was not statutorily listed as a covered program;   *Establish a reasonable period of time during which a tenant (in situations where the tenant is not the perpetrator) may establish eligibility to remain in housing, where the tenant's household is divided due domestic violence, dating violence, sexual assault, or stalking, and where the tenant was not the member of the household that previously established eligibility for assistance;   *Establish what constitutes a safe and available unit to which a victim of domestic violence, dating violence, sexual assault, or stalking can be transferred on an emergency basis; and   *Establish what documentation requirements, if any, should be required of a tenant seeking an emergency transfer to another assisted unit. The Proposed Rule   Following are the regulatory changes that HUD proposes to make to HUD's regulations to fully implement VAWA 2013:   HUD's Cross-Cutting VAWA Regulations - 24 CFR Part 5, Subpart L The regulations in 24 CFR part 5, subpart L, establish the core requirements of VAWA and how the VAWA requirements are to be implemented generally. However, given the statutory parameters of the individual covered housing programs, the proposed regulation may provide for some VAWA protections to be applied differently from that provided in the part 5 regulations. The variations in implementation primarily pertain to the requirements governing lease bifurcation, emergency transfers, and who can request documentation pertaining to incidents of domestic violence, dating violence, sexual assault, or stalking. For some of the newly covered programs, greater responsibility to provide and oversee VAWA protections is placed on the entities that receive funding directly from HUD. For the other newly covered programs, more responsibility is placed on the housing owners or managers. HUD is particularly interested in receiving comments regarding VAWA 2013 implementation for these newly covered programs. Changes in Definitions   Affiliated Individual: VAWA 2013 replaces the term "immediate family member" with "affiliated individual." VAWA 2013 defines "affiliated individual" to mean, with respect to an individual: "(A) a spouse, parent, brother, sister, or child of that individual, or an individual to whom that individual stands in loco parentis [in place of a parent]; or (B) any individual, tenant, or lawful occupant living in the household of that individual." This change in language is intended to cover individuals lawfully occupying a unit but who may not necessarily meet a definition of "family." Under VAWA, immediate family members or affiliated individuals do not receive VAWA protections if the individual is not on the lease. However, if an affiliated individual is a victim of domestic violence, dating violence, sexual assault, or stalking, and the tenant is not the perpetrator of such actions, the tenant cannot be evicted or have assistance terminated due to the domestic violence, dating violence, sexual assault, or stalking suffered by the affiliated individual. Also, if the affiliated individual applies for housing assistance, they cannot be denied assistance on the basis of their having been a victim of domestic violence, dating violence, sexual assault, or stalking. VAWA protections do not apply to guests or unreported members of the household. Also, while a live-in aide or caregiver who resides in a unit may be a lawful occupant, such individual is not a tenant and the protections of VAWA do not apply.   Bifurcate: The rule amends the definition of "bifurcate" to remove reference to a "public housing or section 8 lease" since VAWA 2013 makes bifurcation of a lease an option in all covered housing programs, subject to permissibility to bifurcate a lease under the program requirements and/or state and local laws, as may be applicable. VAWA Protections - New Protections   Notice of Occupancy Rights and Certification Form: VAWA 2013 requires that HUD develop a notice of rights available under VAWA. The housing provider must distribute this notice to applicants and residents. HUD has developed a proposed notice and the notice is part of the proposed regulation. HUD is taking the position that the notice must be provided with no substantive change to the content. However, housing providers may customize the notice to reflect the specific assistance provided under the particular covered housing program, and to their program operations that may pertain to the notice of occupancy rights.   You may recall that I prepared a recommended Notice of Occupancy Rights while awaiting the HUD developed notice. Once the final HUD notice is issued, housing providers should use the HUD provided Notice and tailor it to their needs.   HUD has also developed a Certification Form for use by applicants and residents to certify status as a victim of domestic violence. Changes Relating to the Emergency Transfer Plan   VAWA 2013 requires HUD to develop a model emergency transfer plan, which it has done as part of this proposed regulation. The model plan retains most of the components of the statute as written. However, the statutory language refers to "reasonable confidentiality measures" to ensure that the housing provider does not disclose the location of the dwelling unit or a tenant to a person who commits the act of domestic violence, dating violence, sexual assault or stalking. HUD is replacing the word "reasonable" with "strict" confidentiality measures. This indicates the importance HUD gives to the protection off these victims. Documenting the Violence   VAWA 2013 does not make significant changes to the documentation procedures required by the 2005 law, but there are some changes.   Any request from a housing provider to an applicant or tenant for documentation of entitlement to protection must be made in writing. Once requested, the applicant or tenant has 14 business days to submit the required documentation, but the housing provider may extend this deadline. Permitted documentation remains the same as in my prior memo on VAWA. Form HUD-50066 is used for programs covered by HUD's Office of Public and Indian Housing. HUD-91066 is used for covered housing programs administered by HUD's Office of Multifamily Housing. HUD is in the process of updating this into one form to be used for all HUD housing programs. This proposed certification form will be contained in Appendix C to the proposed rule. Remedies Available to Victims   One of the primary statutory remedies for victims of domestic violence, if the person removed as a result of lease bifurcation is the eligible recipient of assistance, is that the remaining member(s) be given reasonable time to qualify for the housing program. If they do not qualify, they should be given reasonable time to find suitable replacement housing. The problem is that each covered program has its own rules regarding eligibility. HUD is clearly unsure how to handle this and is seeking comprehensive comments on the issue in the proposed regulation. It is unlikely that we will have clear guidance on this issue until publication of the final rule, and perhaps not even then. HUD is proposing 90-days as the reasonable period for remaining tenants to establish eligibility. [Owners of LIHTC and Rural Development Projects will need guidance from the IRS and Rural Development, but indications are that those agencies will defer to HUD timeframes). As proposed, the rule provides for 60 calendar days, commencing from the date of bifurcation of the lease, for the tenant to establish eligibility to remain in the unit in which the tenant is now residing. If eligibility cannot be established, the rule provides for 30 calendar days, commencing from the 61st day from the date of bifurcation of the lease for the tenant to find alternative housing. HUD is proposing division of the time period for the tenant to obtain housing so that the tenant has sufficient opportunity to explore both options, provided by statute, for the tenant to obtain housing.   The proposed rule would allow, but not require, housing providers to grant an extension for up to 30-days, subject to the program regulation of the covered housing program. However, for certain programs that are likely to have waiting lists (public housing and voucher), the proposed rule provides a maximum 90-days, with no extension.   All owners and managers involved in covered housing programs should review the proposed regulation.  

Understanding Military Income and Allowances

I get many questions from managers regarding how to deal with and verify income for members of the military. Understanding the military pay system is confusing even for those in the military; it can be impossible for persons not familiar with military jargon. So, here is a little primer on how to verify the income of members of our military.   The first step is to have the military member provide copies of their last four to six Leave and Earning Statements (LES). Every member of the military has access to these on their "MyPay" account. The LES is a comprehensive statement of a member's leave and earnings showing entitlements, deductions, allotments (these fields are not used for Reserve and National Guard members), leave information, tax withholding information, and Thrift Savings Plan (TSP) information. Members of the military are encouraged to keep their LES each month, so many will have them without going on-line.   The LES normally covers one calendar month, and will show the basic pay as well as all allowances. These are the categories of pay that will normally be counted. The LES will contain many acronyms that may be unfamiliar to managers; there are more than 60 allowances, special and incentive pays, but here are some of the more common:   *Clothing Allowance: this is an annual payment and is available only to enlisted personnel. It varies by branch of service (the Marine Corp is the highest and Air Force is the lowest) and by sex (female is higher than male). It ranges from $245 per year (Basic rate for a male in the Air Force) to $637 per year (Standard allowance for a female Marine). This will only show up on the LES for the enlistment month of the member, so be sure to get a copy of that LES or go to the defense department website (militarypay.defense.gov/pay) to find the appropriate allowance.   *Hardship Duty Pay (HDP): This is paid to service members assigned to locations where living conditions are substantially below those conditions in the U.S. Examples are Haiti, Rwanda and Serbia.   *Assignment Incentive Pay (AIP): This is paid to service members for unusual assignments. For example, service members who have involuntarily extended tours in Iraq and Kuwait will receive an addition $200 per month in HDP and $800 per month in AIP. AIP is capped at a maximum of $3,000 per month.   *Hazardous Duty Incentive Pay (HDIP): This is generally $150 per month for duties such as parachute jumping, explosives demolition, and flight deck duty.   *Family Separation Allowance (FSA): this is provided to members when their dependents cannot live with them or near their permanent duty station. This allowance is $8,33 per day, capped at $250 per month.   *Basic Allowance for Subsistence (BAS): This is $357.55 per month for enlisted personnel and is to offset the cost of meals.   *Basic Allowance for Housing (BAH): This is for members who do not receive government-provided housing. The amount depends on location, pay grade and whether the member has dependents. The amount can vary greatly. For example, the allowance for an E-1 with dependents in Petersburg, VA is $1,275 per month, but the same family would have an allowance of $3,474 in New York City.   *Hostile Fire/Imminent Danger Pay (HFP/IDP): IDP is available at the rate of $7.50 per day up to $225 per month, and is available to personnel assigned to a designated IDP area. HFP is determined by the local commander based on whether a member is subject to hostile fire. This is $225 per month, without a daily rate. Members cannot receive both HFP and IDP in the same month. For purposes of housing programs governed by HUD regulations, such as Section 8, RD Section 515 and LIHTC, HFP is the only allowance that is excluded from income.   Keep in mind that Reserve and National Guard also receive LES statements. When verifying the income of Guard and Reserve, don't forget the ask for the LES that shows the two week annual active duty for training ("ACDUTRA"). This can be substantial and may have an impact on eligibility.

Employee Unit Rent

As I indicated in a memo I sent to clients on November 7, 2014, the IRS will not consider the charging of rent or utilities for employee or security officer units to be an audit issue. This position is stated in the IRS Section 42 Audit Guide. The IRS recently released to the public a Chief Counsel Memorandum dated June 2, 2014 in which the Chief Counsel stated "Charging resident managers or maintenance personnel rents, utilities, or both for units in a qualified low-income building does not make the units residential rental units and not facilities reasonably required for the project under 1.103-8(b)(4)(iii)." The memorandum goes on to state, "The character and size of a project are, among other things, relevant in determining whether any property, including an employee-occupied unit, is functionally related and subordinate to the project..." The memorandum also confirms that such units are not considered residential rental units but facilities reasonably required for the project. For this reason, the general public use requirement does not apply to such units. Clearly, the key issue for the IRS is whether the units meet the "facility reasonably required" test. Based on this, I strongly recommend obtaining HFA approval prior to setting any unit aside as an employee (or security officer) unit. I also recommend that - despite the IRS position - rent not be charged to such units unless approved by your HFA.

Davis-Bacon Requirements for Project Based Vouchers

HUD issued a Notice in the March 9, 2015 Federal Register providing further guidance on when Davis-Bacon wage requirements may apply to existing housing developments. This guidance relates to the final rule published by HUD on June 25, 2014 amending the regulations governing the Section 8 Project-Based Voucher (PBV) program, largely due to changes made in the PBV program by HERA 2008. The final rule published in 2014 conformed the regulations of the Section 8 Tenant-Based Voucher (TBV) and PBV programs to the statutory program changes made by HERA. One of the changes made by the 2014 final rule pertained to labor standards. HUD clarified that Davis-Bacon requirements may apply to existing housing (which is not subject to an Agreement to Enter into Housing Assistance Payments [HAP] Contract) when the nature of any work planned to be performed prior to execution of a HAP contract, or after HAP contract execution, constitutes development of the project. Repair work on a project selected as an existing project may constitute a development activity. If the repair work is determined to be development activity, the repair work must comply with the Davis-Bacon Wage Act requirements. The March 9 HUD Notice provides a clearer definition of the term "development." The term is defined in the PBV program as construction or rehabilitation of any PBV housing after the proposal selection date. HUD has found that given the current, broad definition of "existing housing," the potential for circumvention of rehab program requirements exists. This potential circumvention stems from the fact that PHAs may classify a project as "existing housing" and this classification does not preclude owners and developers from performing work that may fall within the scope of Davis-Bacon. This Notice makes it clear that Davis-Bacon requirements cannot be avoided simply by classifying a project as an existing housing project under the PBV regulation. The scope and timing of the contemplated development work are important measures in determining whether Davis-Bacon requirements apply to existing housing under the PBV program. The Notice also defines "scope" as the elements of the proposed work, that is, the specific activities that are involved. Work that constitutes remodeling that alters the nature or type of housing units in a PBV project, reconstruction, or a substantial improvement in the quality or kind of original equipment and materials, falls within the purview of "development." Development activity on a PBV project does not include replacement of equipment and materials rendered unsatisfactory because of normal wear and tear by items of substantially the same quality.   Timing HUD has determined that any development initiated on existing units within 18 months after the effective date of the HAP contract on projects consisting of nine or more units assisted under a PBV HAP contract is considered development for purposes of Davis-Bacon wage rate applicability and such wages must be paid to laborers and mechanics employed to perform development work.   PBV Existing Housing & the (Rental Assistance Demonstration) RAD Program The Notice makes clear that rehabilitation constitutes "development" of a Section 8 project including projects where the rehab is contemplated as part of the conversion of an existing project to a PBV contract under RAD. Such rehab is subject to Davis-Bacon requirements, regardless of whether the housing would qualify as "existing housing." Owners contemplating participation with local PHAs in a PBV project or in the RAD program should be aware of the requirements of HUD relative to conformance with Davis-Bacon wage rates. Depending on the area, these rates can have a significant impact on the total development cost of a project.  

2015 Income Limits

On March 6, 2015, HUD published the 2014 income limits for HUD programs as well as for the Low-Income Housing Tax Credit and Tax-Exempt Bond programs. The limits for the LIHTC and Bond projects are published separately from the limits for HUD programs.   LIHTC and Bond properties use the Multifamily Tax Subsidy Project (MTSP) limits, and are held harmless from income limit (and therefore rent) reductions. These properties may use the highest income limits used for resident qualification and rent calculation purposes since the project has been in service. HUD program income limits are not held harmless.   Projects in service prior to 2009 may use the HERA Special Income Limits in areas where HUD has published such limits. Projects placed in service after 2008 may not use the HERA Special Limits.   Projects in rural areas that are not financed by tax-exempt bonds may use the higher of the MTSP limits or the National Non-Metropolitan Income Limits.   Owners of LIHTC projects may rely on the 2014 income limits for all purposes for 45 days after the effective date of the newly issued limits. This 45-day period ends on April 20, 2015.   The limits for HUD programs may be found at http://www.huduser.org/portal/datasets/il.html. The limits for LIHTC and Bond programs may be found at http://www.huduser.org/portal/datasets/mtsp.html.   Please feel free to contact me with any questions.   AJ

Update of Housing Trust Fund - February 18, 2015

As I noted in an earlier article, HUD has published interim regulations regarding how the Housing Trust Fund (HTF) program will be administered when funds are made available (hopefully in 2016). A final rule is anticipated before Summer 2015. Developers and agencies in the affordable housing field need to begin now the job of influencing how the program will work in your state.   HUD estimates that $120 million will be allocated the HTF in 2016. The money will be provided to states in the form of grants to increase and preserve the supply of affordable rental housing and homeownership opportunities for extremely low and very-low income families. Funds will be distributed by formula to states or state designated entities to be used mostly for the construction, preservation, and rehabilitation of affordable rental housing. Some key points about the program:   States will have great discretion over how the funds will be used; If total program funding is less than $1 billion, all program beneficiaries will have to be extremely low-income (30% of median income). If total funding is more than $1 billion, at least 75% of funds must support extremely low-income households, and remaining amounts may support very low-income households (50% of median income). At least 80% of HTF must be used for rental housing and no more than 10% for first-time homebuyers. Up to 10% may be used to cover Agency administrative costs. The funds may be used for grants, equity investments, loans, advances, interest subsidies, deferred payment loans, and other HUD approved assistance. Eligible costs include development costs, acquisition costs, refinancing costs, relocation costs, and some operating costs. HTF funds may only be used for public housing unless it is the rehab of existing public housing under the HUD RAD or Choice Neighborhoods Initiative programs. However, HTF funds may be used to leverage the use of other subsidies such as low-income housing tax credits. (It is expected that combining HTF and LIHTC will be a major component of the program).   Funds will be allocated to States based on a formula that will include five factors:   Shortage of standard rental units affordable to extremely low-income household (this will be the most heavily weighted factor); Shortage of standard rental units affordable to very low-income households; Number of extremely low-income renter households that are rent-overburdened, living in crowded housing, or living without complete plumbing or kitchen facilities; Number of very low-income renter households that are rent-overburdened; and Cost of construction.   No state will get less than $3 million, including DC, Puerto Rico, Northern Mariana Islands, Guam, the Virgin Islands, and American Samoa.   At this point, I recommend that those interested in the program contact your State Housing Finance Agency to see if they will be administering the program in your state. If they are, stay abreast of how they will implement the program so that you will be prepared to move when funding is available. If your HFA will not be the administering agency, find out who will be and get in touch with them.