On May 15, 2012, HUD published a Proposed Rule on the implementation of the HERA 2008 changes to the Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher Programs. The proposed rule may be found in the Federal Register, Vol. 77, No. 94, dated May 15, 2012. Comments on the proposed rule are due at HUD by July 16, 2012.
The Housing & Economic Recovery Act of 2008 (HERA) made several changes to the U.S. Housing Act of 1937 that affect programs administered by HUD’s Office of Public and Indian Housing (PIH), and one change that affects project based assistance programs administered by HUD’s Office of Housing, including the Section 8 project-based program (this will also effect LIHTC properties since tax credit properties for the rules of the Section 8 project-based program for purposes of rent determination. While LIHTC housing is not directly affected by the rules governing PIH properties, tax credit properties are indirectly affected since voucher residents are a common part of a tax credit property’s tenant base, and a number of tax credit properties use project-based vouchers (PBV).
Following are the proposed changes most likely to impact LIHTC projects:
- The definition of “annual income” will be amended to exclude, from the definition of income, any deferred Department of Veterans Affairs (VA) disability benefits that are received in a lump-sum amount or in prospective monthly amounts. Tax credit properties and project-based Section 8 should already be excluding this income since it was a statutory exclusion effective July 30, 2008. The full amount of periodic VA disability payments continues to be included as income.
- The rule permitting “existing housing” to use PBVs is proposed to be tightened through use of the following definition of “existing housing:”
- A housing unit is considered an existing unit for purposes of the PBV program, if at the time of notice of PHA selection, the unit:
- Will comply with HQS within 60-days of the date of such selection, and the total amount of work that must be performed to cause the unit to comply with HQS does not exceed $1,000 per assisted unit (including the unit’s prorates share of any work done on common areas or systems); and
- There is no plan to perform rehabilitation work on the unit within one year after HAP contract execution that would cause the unit to be in noncompliance with HQS and that would total more than $1,000 per assisted unit (including the unit’s prorates share of any work done on common areas or systems).
- PHAs may select – without competition – a proposal for housing assisted under a federal, state, or local government housing assistance, community development, or supportive services program that required a competition for selection under that program. This is particularly important for LIHTC developments awarded competitive credits.
- In order for this rule to apply, the project must have been selected for the other program within three years of the PBV selection date, and the award of benefits for the other program was not contingent on the receipt of PBV assistance.
- Under no circumstances may PBV assistance be provided to a public housing unit, an important consideration for properties with HOPE VI funding.
- A PHA may use the higher Section 8 rent for tax credit units if the LIHTC rent is less than the amount that would be permitted under Section 8. However, in no case may rent paid by a PHA exceed rent permitted under the Rent Reasonableness Test, except in cases where, upon redetermination of rent to owner, the reasonable rent would result in a rent below the initial rent paid for the unit.
- For units receiving §42 assistance or HOME assistance, a rent comparison with unassisted units is not required if the voucher rent does not exceed the rent for other LIHTC or HOME-assisted units in the project that are not occupied by families with tenant-based assistance.
- If the rent requested by an owner exceeds the LIHTC rents for non-voucher families, the PHA must perform a rent comparability study and the rent shall not exceed the lesser of (1) reasonable rent as determined pursuant to a rent comparability study and (2) the payment standard established by the PHA for the unit size involved.
- PHAs may enter into a HAP contract of no less than one year nor more than 15 years. Extensions may be entered into for a cumulative total of no more than 15 additional years.
These are the major elements of the proposed rule that could impact owners of LIHTC properties. However, the rule proposes a number of other changes that managers and owners working extensively with the Housing Choice Voucher Program should be familiar with. Other areas addressed by the proposed regulation include:
- PBV definitions;
- Description of the PBV Program;
- Maximum amount of PBV assistance;
- Types of housing eligible for PBV assistance;
- Discussion of excess public assistance (subsidy layering review requirements);
- PHA-owned units;
- Owner certification requirements;
- Removal of units from HAP contracts;
- Prohibition on leasing to family members of the owner;
- Lease requirements;
- Owner termination of tenancy and eviction rights;
- Continuation of HAP payments when tenant income increases to the point where assistance is not paid; and
- Overcrowded/under-occupied/accessible units.