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With over 100 years of combined experience in the affordable housing industry, our team can help you confidently manage risk.

  • A. J. Johnson

    President

  • Betty Johnson

    Vice-President

  • Chris Johnson

    Senior Asset Management Consultant

  • Jen Johnson

    Compliance Analyst

  • Linda Moss

    Compliance Analyst

  • Tanisha Johnson

    Compliance Auditor

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HUD Provides Guidance on Non-Rent Fees for Subsidized Multifamily Housing Programs

In February 2024, the Department of Housing and Urban Development (HUD) provided guidance on existing policies regarding the fees that owners may and may not charge tenants. None of the guidance is new or reflects any change in HUD regulations. The purpose of the guidance is twofold: (1) to remind owners of the current requirements relative to fees and (2) to seek input from stakeholders on any possible changes to the requirements. Following is an overview of existing HUD policy regarding fees in addition to rent. Application Fees: Owners may not require fees or other costs to accept and process applications. These costs are considered project expenses. Charges at Initial Occupancy: Owners may not collect any money from tenants at initial occupancy other than rent and the maximum HUD-allowed security deposit unless they receive HUD approval to do otherwise. Pet Deposit: An owner of housing specifically designed for occupancy by the elderly and persons with disabilities may require tenants to pay a refundable pet deposit. The pet deposit applies only to tenants who own or keep cats or dogs in their units. HUD Handbook 4350.3 outlines the maximum amount of the pet deposit that may be charged by an owner on a per-unit basis. An owner may use the pet deposit only to pay reasonable expenses directly attributable to the pet's presence on the property, including (but not limited to) the cost of repairs and replacements to, and fumigation of, the unit and the cost of animal care facilities. Owners must return the unused portion of a pet deposit to the tenant within a reasonable time after the tenant moves from the property or no longer owns or keeps a pet in the unit. Screening Fees: Owners may not charge applicants for costs associated with screening applicants, including screening for criminal history or verifying income and eligibility. Hence, owners must not require applicants to pay credit report charges, charges for home visits, charges to obtain police reports or other costs associated with the above functions. These costs are considered project expenses. Security Deposit: Owners may collect a security deposit during the initial lease execution. However, the owner must collect a refundable security deposit at the time of the initial lease execution for the following programs:Section 8 New Construction with an AHAP executed on or after November 5, 1979;Section 8 Substantial Rehabilitation with an AHAP executed on or after February 20, 1980;Section 8 State Agency with an AHAP executed on or after February 29, 1980;Section 202/8;Section 202 PAC;Section 202 PRAC; and Section 811 PRAC. Owners may collect the security deposit on an installment basis. The security deposit amount established at move-in does not change when a tenant s rent changes. The amount of the security deposit to be collected is dependent upon: The type of housing program; The date the AHAP or HAP contract for the unit was signed and The amount of the total tenant payment or tenant rent. The HUD Handbook 4350.3, Figure 6-7, outlines the security deposit amount that may be collected for each program. When a tenant transfers to a new unit, an owner may: Transfer the security deposit, or Charge a new deposit and refund the deposit for the old unit. Assistance Animals: Owners may not require an applicant or tenant to pay a fee or a security deposit as a condition of allowing the applicant or tenant to keep an assistance animal. However, if an assistance animal causes damage to the unit or common areas of the dwelling, the owner may charge the individual for the cost of repairing the damage if the owner regularly charges tenants for any damage they cause to the premises. Attorney/Legal Costs: There may be no lease provision that the tenant agrees to pay all attorney and other legal costs if the owner brings legal action against the tenant, even if the tenant prevails. However, as a party to a lawsuit, a tenant may be obligated to pay attorney s fees or other costs if the tenant loses the suit. Owners may accept payment of court filing, attorney, and sheriff fees from tenants who wish to avoid or settle an eviction suit provided it is permitted under state and local laws, and the fees appear reasonable and do not exceed the actual costs incurred. Bad Behavior: Owners may not charge tenants for bad behavior, such as foul language, noise, or failure to supervise children. Checks Returned for Insufficient Funds: Owners may impose a fee on the second time, and each additional time thereafter, a check is not honored for payment. The owner may bill a tenant only for the amount the bank charges for processing the returned check.HUD or a Contract Administrator (CA) may authorize additional charges if such charges are consistent with local management practices and are permitted under state and local law. Owners of Section 202/8, Section 202 PAC, Section 202 PRAC, and Section 811 PRAC projects may never charge fees for checks returns for insufficient funds. Damages: Whenever damage is caused by carelessness, misuse, or neglect by the tenant, household member, or visitor, the tenant is obligated to reimburse the owner within 30 days of receiving a bill from the owner. The owner s bill is limited to actual and reasonable costs incurred by the owner for repairing the damages. Facilities & Services: Owners may not charge tenants separately for equipment and services included in the rent. Owners may charge tenants for other services or facilities (e.g., cable TV or use of community space in the project) only if all of the following conditions are met:Part C of the most recently approved rent schedule includes the services, facilities, and charges.A schedule of those charges has been posted or distributed to the tenants.The tenant can use those facilities or services if they are optional. If not previously authorized, the charges must be approved by HUD before implementation. Owners may charge for parking only in unsubsidized projects where HUD previously approved it. They may also charge for car heaters in cold climates where parking spaces are equipped with them. Infestation Treatment: Owners may not charge a tenant for the extermination cost unless the owner can demonstrate that the tenant's carelessness or neglect caused the infestation. Keys & Lockouts: Owners may charge tenants for answering lock-out calls and providing extra keys. At the time of move-out, the owner may charge the tenant for unreturned keys. Late Payment of Rent: Owners may charge a late fee if the tenant has been given at least five calendar days as a grace period to pay the rent. The rent must be received by the fifth day, not postmarked on that day. On the sixth day, the owner may charge a fee not to exceed $5.00 for the period of the first through fifth day that the rent is not paid. After that, the owner may charge a fee of $1.00 per day for each additional day the rent remains unpaid for the month. HUD or CAs may approve a higher initial late fee if (1) it is permitted under state and local laws, (2) it is consistent with local management practices, and (3) the total late charge assessed for the month does not exceed $30.00. An owner may deduct accrued, unpaid late charges from the security deposit at the time of move-out if such a deduction is permitted under state and local laws. An owner may not evict a tenant for failure to pay late charges. Owners of Section 202/8, Section 202 PAC, Section 202 PRAC, and Section 811 PRAC projects may never charge late rent payment fees. Meals Fee: Owners of properties for the elderly or persons with disabilities for which HUD approved a mandatory meals program before April 1, 1987, may charge a HUD-approved meals fee. The tenants pay such costs, and the fees are not rent. Meeting Space for Tenant Organizations: An owner may charge a reasonable fee, approved by HUD, as may normally be imposed for using such facilities in accordance with procedures prescribed by HUD for the use of meeting space. Other Charges: Owners may require tenants to pay other charges if:HUD or CA has approved the charges, and The schedule of charges is either:Listed in the lease agreement or Has been distributed to all tenants in accordance with the modification of the lease requirements and procedures listed in paragraph 6-12D of Handbook 4350.3. HUD s Office of Multifamily Housing Programs is seeking feedback from stakeholders regarding these policies. Owners and Agents of affected programs may provide comments and feedback to HUD at AssetManagementPolicy@HUD.gov. Responses are due by March 29, 2024.

A. J. Johnson Partners with Mid-Atlantic AHMA for December Training on Affordable Housing - April 2024

During the month of April 2024, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association for two live webinar training sessions intended for real estate professionals, particularly those in the affordable multifamily housing field. The following sessions will be presented: April 16, Violence Against Woman Act - This two-hour webinar guides owners and managers of affordable housing developments subject to the requirements of VAWA. It covers the background of the law and discusses who the law protects. A full discussion of notice requirements, all required (and prohibited) documentation, lease bifurcation issues, actual and imminent threats, emergency transfer plans, and enforcement mechanisms. Recommendations relating to confidentiality procedures are also provided, as are the basic requirements of a VAWA Plan. April 18: Limited English Proficiency (LEP) and Section 504; Understanding the Requirements for Multifamily Housing - Two of the most misunderstood laws relating to federally assisted affordable housing are the rules regarding Limited English Proficiency (LEP) and the Section 504 requirements. This three-hour live webinar will cover the requirements of each and outline the basic steps affordable housing managers must take to remain compliant with both sets of rules. Most individuals living in the U.S. read, write, speak, and understand English. There are many, however, for whom English is NOT their primary language. For this reason, affordable housing operators with federal assistance are required to comply with the federal government's Limited English Proficiency (LEP) requirements. All programs and operations of entities that receive financial assistance from the federal government, including but not limited to state agencies, local agencies, and for-profit and non-profit entities, must comply with the LEP requirements. Sub-recipients must also comply (i.e. when federal funds are passed through a recipient to a sub-recipient). As an example, Federal Housing Administration (FHA) insurance is not considered federal financial assistance, and participants in that program are not required to comply with Title VI's LEP obligations unless they receive federal financial assistance as well (such as project-based Section 8). This section of the webinar will assist affordable housing owners and managers in their understanding of LEP requirements and will cover the following areas: (1) Ensuring plan compliance; (2) the "four-factor" analysis; (3) translation "safe harbors"; (4) monitoring and updating the Plan; and (5) issues relating to reasonableness. The training will also outline exactly which programs and properties are - and are not- subject to LEP requirements. Section 504 of the Rehabilitation Act of 1973 is usually just referred to as "Section 504." Section 504 provides rights to persons with disabilities in federally funded programs and activities, including HUD and RD programs. Specifically, Section 504 states, "No otherwise qualified individual with a disability in the United States ... shall, solely by reason of her or his disability, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program, service or activity receiving federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Postal Service." Section 504 is not the only law prohibiting disability discrimination in programs receiving HUD and RD funds or financial assistance. Other federal laws that require nondiscrimination based on disability include the Fair Housing Act, the Americans with Disabilities Act, and the Architectural Barriers Act. However, this training focuses on Section 504 requirements, including (1) the properties that are subject to Section 504, (2) what is meant by the term "integrated setting," (3) what is meant by program accessibility, (4) who covers costs relating to Section 504 compliance, (5) the definition of an "accessible unit," (6) what physical accessibility features are required, and (7) Section 504 applicability to rehab deals. At the end of this session, participants will understand the requirements of both LEP and Section 504 and will be better able to serve the intended beneficiaries of these two laws and protect the interests of property owners. These sessions are part of a year-long collaboration between A. J. Johnson and MidAtlantic AHMA designed to provide affordable housing professionals with the knowledge needed to manage the complex requirements of the various agencies overseeing these programs effectively. Persons interested in any (or all) training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

HUD HOTMA Rules Clarify and Change the Treatment of Assets

Introduction HUD Notice H 2013-10 expands upon the Final Rule for implementing the Housing Opportunity Through Modernization Act (HOTMA). This final rule makes some changes to the way managers of HUD-assisted housing will deal with assets on HUD-assisted properties. Since LIHTC properties are required to follow HUD rules relative to the determination of income, these changes also apply to tax credit properties. Net family assets are defined as the net cash value of all assets owned by the family, after deducting reasonable costs that would be incurred in disposing of real property, savings, stocks, bonds, and other forms of investment, except as excluded by regulation. Assets with Negative Equity While assets with negative equity are still considered assets, the cash value of real property or other assets with negative equity are considered to have zero value for purposes of calculating net family assets. Negative numbers are never used in the calculation of asset value. Assets Owned by a Business Entity If a business entity (e.g., LLC or LP) owns an asset, then the family s asset is their ownership stake in the business. The actual assets of the business are not counted as family assets. However, if the family holds the assets in their name (e.g., they own 1/3 of a restaurant) rather than in the name of the business entity, then the percentage value of the asset owned by the family is what is counted toward the net family assets (e.g., one-third of the value of the restaurant). Jointly Owned Assets For assets jointly owned by the family and one or more individuals outside of the assisted family, owners must include the total value of the asset in the determination of net family assets, unless the asset is otherwise excluded, or unless the assisted family can demonstrate that the asset is inaccessible to them, or that they cannot dispose of any portion of the asset without the consent of another owner who refuses to comply. If the family demonstrates that they can only access a portion of an asset, then only that portion s value shall be included in the calculation of net family assets. Exclusions from Assets Required exclusions from net family assets include the following: The value of necessary items of personal property; The value of all non-necessary items of personal property with a total combined value of $50,000 or less, annually adjusted for inflation; The value of any retirement plan recognized by the IRS, including IRAs, employer retirement plans, and retirement plans for self-employed individuals; The value of real property that the family does not have the effective legal authority to sell. Examples of this include (1) co-ownership situations {including situations where one owner is a victim of domestic violence} where one party cannot unilaterally sell the property, (2) property that is tied up in litigation, and (3) inherited property in dispute; The value of any education savings account under Section 530 of the IRC 1986, the value of any qualified tuition program under Section 529 of the IRC, and the contributions to and distributions from any Achieving a Better Life Experience (ABLE) account authorized under Section 529A of the IRC; The value of any "baby bond" account created, authorized, or funded by the federal, state, or local government (money held in trust by the government for children until they are adults); Interests in Indian trust land; Equity in a manufactured home where the family receives assistance under the Housing Choice Voucher Program; Equity in a property under the Homeownership Option where the family receives assistance under the Housing Choice Voucher Program; Family Self-Sufficiency accounts; Federal or state tax refunds or refundable tax credits for 12 months after receipt by the family; The full amount of assets held in an irrevocable trust; and The full amount of assets held in a revocable trust where a member of the family is the beneficiary, but the grantor and trustee of the trust is not a member of the family. Necessary & Non-Necessary Personal Property Necessary personal property is excluded from assets. Non-necessary personal property with a combined value of more than $50,000 (adjusted by inflation) is an asset. When the combined value of non-necessary personal property does not exceed $50,000, it is excluded from assets. All assets are categorized as either real property (e.g., land, a home) or personal property. Personal property includes tangible items, like boats, as well as intangible items, like bank accounts. For example, a family could have non-necessary personal property with a combined value that does not exceed $50,000 but also own real property such as a parcel of land. While the non-necessary personal property would be excluded from assets, the real property would be included - regardless of its value, unless it meets a specific exclusion. Necessary personal property are items essential to the family for the maintenance, use, and occupancy of the premises as a home; or they are necessary for employment, education, or health and wellness. Necessary personal property includes more than mere items that are indispensable to the bare existence of the family. It may include personal effects (such as items that are ordinarily worn or used by the individual), items that are convenient or useful to a reasonable existence, and items that support and facilitate daily life within the family s home. Necessary personal property does not include bank accounts, other financial investments, or luxury items. Determining what is a necessary item of personal property is very fact-specific and will require a case-by-case analysis. Following are examples of necessary and non-necessary personal property (not an exhaustive list). Necessary Personal Property Vehicles used for personal or business transportation; Furniture and appliances; Common electronics such as TV, radio, DVD players, gaming systems; Clothing; Personal effects that are not luxury items (e.g., toys and books); Wedding & Engagement rings; Jewelry used in religious or cultural celebrations or ceremonies; Medical equipment & supplies; Musical instruments used by the family; Personal computers, tablets, phones, and related equipment; Educational materials; and Exercise Equipment Non-Necessary Personal Property RVs not needed for day-to-day transportation, including motor homes, campers, and all-terrain vehicles; Bank accounts or other financial investments (e.g., checking/savings account, stocks/bonds); Recreational boats or watercraft; Expensive jewelry without cultural or religious significance or which has no family significance; Collectibles, such as coins or stamps; Equipment/machinery that is not part of an active business; and Items such as gems, precious metals, antique cars, artwork, etc. Trusts Any trust (both revocable and non-revocable) that is not under the control of the family is excluded from assets. For a revocable trust to be excluded from net family assets, no family or household member may be the account s trustee. A revocable trust that is under the control of the family or household (e.g., the grantor is a member of the assisted family or household) is included in net family assets, and, therefore, income earned on the trust is included in the family s income from assets. This also means that PHAs/MFH Owners will calculate imputed income on the revocable trust if net family assets are more than $50,000, as adjusted by inflation, and actual income from the trust cannot be calculated (e.g. if the trust is comprised of farmland that is not in use). Actual Income from a Trust If the Owner determines that a revocable trust is included in the calculation of net family assets, then the actual income earned by the revocable trust is also included in the family s income. Where an irrevocable trust is excluded from net family assets, the Owner must not consider actual income earned by the trust (e.g., interest earned, rental income if the property is held in the trust) for so long as the income from the trust is not distributed. Trust Distributions & Annual Income A revocable trust is considered part of net family assets: If the value of the trust is considered part of the family s net assets, then distributions from the trust are not considered income to the family. Revocable or irrevocable trust not considered part of net family assets: If the value of the trust is not considered part of the family s net assets, then distributions from the trust are treated as follows: (1) All distributions from the trust s principal are excluded from income. (2) Distributions of income earned by the trust (i.e., interest, dividends, realized gains, or other earnings on the trust s principal), are included as income unless the distribution is used to pay for the health and medical expenses for a minor. Actual & Imputed Income from Assets The actual income from assets is always included in a family s annual income, regardless of the total value of net family assets or whether the asset itself is included or excluded from net family assets unless that income is specifically excluded. Income or returns from assets are generally considered to be interest, dividend payments, and other actual income earned on the asset, and not the increase in market value of the asset. Imputed income from assets is no longer determined based on the greater of actual or imputed income from the assets. Instead, imputed asset income must be calculated for specific assets when three conditions are met: (1) The value of net family assets exceeds $50,000 (as adjusted for inflation); (2) The specific asset is included in net family assets; and (3) Actual asset income cannot be calculated for the specific asset. Imputed asset income is calculated by multiplying the net cash value of the asset, after deducting reasonable costs that would be incurred in disposing of the asset, by the HUD-published passbook rate. If the actual income from assets can be computed for some assets but not all assets, then PHAs/MFH Owners must add up the actual income from the assets, where actual income can be calculated, then calculate the imputed income for the assets where actual income could not be calculated. After the PHA/MFH owner has calculated both the actual income and imputed income, the housing provider must combine both amounts to account for income on net family assets with a combined value of over $50,000. When the family s net family assets do not exceed $50,000 (as adjusted for inflation), imputed income is not calculated. Imputed asset income is never calculated on assets that are excluded from net family assets. When actual income for an asset which can equal $0 can be calculated, imputed income is not calculated for that asset. Owners should not conflate an asset with an actual return of $0 with an asset for which an actual return cannot be computed, such as could be the case for some non-financial assets that are items of nonnecessary personal property. If the asset is a financial asset and there is no income generated (for example, a bank account with a 0 percent interest rate or a stock that does not issue cash dividends), then the asset generates zero actual asset income, and imputed income is not calculated. When a stock issues dividends in some years but not others (e.g., due to market performance), the dividend is counted as the actual return when it is issued, and when no dividend is issued, the actual return is $0. When the stock never issues dividends, the actual return is consistently $0. Self-Certification of Net Family Assets Equal to or Less Than $50,000 Owners may determine net family assets based on a self-certification by the family that the family s total assets are equal to or less than $50,000, adjusted annually for inflation, without taking additional steps to verify the accuracy of the declaration at admission and/or reexamination. Owners are not required to obtain third-party verification of assets if they accept the family s self-certification of net family assets. When Owners accept self-certification of net family assets at reexamination, the Owner must fully verify the family s assets every three years. Owners may follow a pattern of relying on self-certification for two years in a row and fully verifying assets in the third year. The family s self-certification must state the amount of income the family anticipates receiving from such assets. The actual income declared by the family must be included in the family s income unless specifically excluded from income under HUD regulations. Owners must clarify, during the self-certification process, which assets are included/excluded from net family assets. Owners may combine the self-certification of net family assets and questions inquiring about a family s present ownership interest in any real property into one form. Bottom Line Owners and managers of properties that are subject to HOTMA should familiarize themselves with these new asset rules and ensure they are in place. HUD properties will be required to implement the rules when they put the HOTMA changes into effect in 2024. LIHTC properties should consult the appropriate HFA to determine when the new rules must be followed.

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