HUD Clarifications Regarding Completion of Utility Allowances

I sent a memo to clients on June 29, 2015, regarding HUD Notice H 2015-04, which was published by HUD on June 22, 2015. This Notice outlined revised HUD requirements relative to the Methodology for Completing a Multifamily Housing Utility Allowance (UA). Since then, HUD has provided clarifying information regarding the Notice. Some of the most relevant guidance follows:

1. The Notice was effective on June 22, 2015. However, the requirement to implement the methodology outlined in the Notice depends on the anniversary date of the HAP Contract for the property.

• If the anniversary date of the Contract is on or before December 19, 2015, the owner may follow the new methodology, or follow the existing methodology.
• If the contract anniversary date is after December 19, 2015, the methodology outlined in the Notice must be followed.

 

2. When requesting approval of a UA, the owner/agent (OA) must submit all backup information required to demonstrate how the new allowance was calculated. This may include:

• Copies of tenant data received from utility providers; or
• Copies of printouts showing a summary of monthly data if the tenant was able to obtain data online from the utility provider for the previous 12 months, or ten months (at a minimum); or
• If the O/A obtained actual monthly utility bills from a tenant, the O/A may provide a spreadsheet summarizing the average of the monthly bills. The actual bills do not need to be submitted but must be retained in the tenant file for the term of tenancy plus three-years and will be subject to HUD or Contract Administrator (CA) review.
• A combination of the three methods noted above may be used.

 

3. If only ten months of utility information is obtained, an average of the ten months should be used to determine the allowance. Partial months should not be used.

 

4. No unit should be used in the UA sample if at least ten months of utility information cannot be obtained.

• If using the HUD provided UA Worksheet that was attached to the Notice, and owners are using less than 12-months of information (e.g. ten months), no value should be entered for the months during which the unit was vacant (do not enter $0). There is an unprotected version of the worksheet available and if this is used, the formula may be changed so that the average is calculated only on non-zero months.

 

5. HUD does not require that estimated amounts for certain appliances (e.g., air conditioning or in-unit washes/dryers) be removed from the total utility bill. No agency, CA or HUD office should impose such a requirement.

 

6. Once the average cost for a unit type has been derived in dollars and cents, the final result should be rounded to the nearest dollar (>=>50, round up; <=.49, round down).

 

7. When selecting sample units, no unit that has been vacant for more than two months of the prior 12-months may be used in the sample. At least ten months full of data is required for each unit.

 

8. If a property has multiple floor plans for units with the same number of bedrooms, and they appear on the rent schedule as different unit types, they must be treated as different unit sizes in the sample.

 

9. HUD has stated that the UA analysis covers only units that receive a UA, but goes on to say that only HUD-assisted units may be included in the analysis.

• Additional guidance will be required for this since some LIHTC properties may have HUD-assisted and non-HUD-assisted units, all of which require a UA.

 

10. When requesting tenant permission for release of information, O/As may use the HUD Sample form, an owner generated form or a form required by the utility company.

 

11. If utility rates increase my 10% or more in mid-year, owners must update the allowance. For example, if electric rates increase by 15%, the 15% increase will be applied only to electric costs (not gas, propane, etc.).

• The following evidence may be submitted in support of the change:
  • Utility bills from the month prior to the rate change and the first month after; or
  • Other verification of the increase from the utility provider.

 

12. While the Notice states that tenants receiving assistance under the Department of Health & Human Services Low-Income Home Energy Assistance Program (LIHEAP) must report this assistance as income and it must be counted as income, HUD has confirmed that assistance from this specific program is excluded income; the Notice is incorrect on this issue.