HUD Publishes Major Rule Changes for Public Housing, Housing Choice Voucher and Multifamily Housing Programs

On March 3, 2016, HUD published in the Federal Register a new rule on Streamlining Administrative Regulations for Public Housing (PH), Housing Choice Voucher (HCV), Multifamily Housing (MFH) and Community Planning & Development (CPD) Programs.

The Department of Housing & Urban Development Appropriations Act, 2014, made several changes to the United States Housing Act of 1937. HUD published notices implementing these changes on May 19, 2014, and June 25, 2014. A HUD proposed rule on January 6, 2015, codified the changes in regulation. This final rule makes changes to the January 2015 proposed rule, and will be effective on April 3, 2016.

Background

The 2014 Appropriations Act made changes to the 1937 Act, such as allowing for biennial physical inspections of certain assisted properties and permitting alternative inspection methods; codifying the definition of extremely low-income (ELI); capping utility allowances at the lesser of unit size on the voucher or the size of the unit leased by the family.

The rule affects the public housing program, the Housing Choice Voucher Program, some CPD programs and the following MFH programs:

• Project-based Section 8;
• Section 8 Moderate-Rehabilitation;
• Rent Supplement;
• Section 202 (both PAC & PRAC);
• Section 811 (both PRA & PRAC);
• Section 236;
• Rental Assistance Program (RAP); and
• Section 221(d)(3) and (d)(5).

Major Changes Made by the Final Rule Affecting Multifamily Housing Programs

• Definition of Extremely Low-Income (ELI): The 2014 Appropriations Act changed the definition of ELI to mean a very low-income family whose income does not exceed the higher of 30% of Area Median Income (AMI) or the poverty level. This final rule adds the term “very low-income” to the definition of who is eligible under the ELI definition. This means that households with income between 30% and 50% of AMI will be eligible as ELI. [No action is required by owners since HUD will reflect this in the published program income limits].

• Use of Actual Past Income: the proposed rule would have required owners to use one definition of annual income (either actual past income or projected income) for all families in a program. Comments to the proposed rule objected to the use of past income due the difficulty in determining proper rent based on past income and correlating current expenses such as child care and medical expenses to past income. Given the concerns to the proposed rule, HUD has decided not to adopt the use of actual past income in the final rule. This means that owners and PHAs will continue to project income using guidance currently in place.
• Streamlined Annual Reexamination for Fixed Incomes: The proposed rule permitted PHAs and owners to conduct streamlined income redeterminations for fixed-income households (once every three years). The final rule revises this provision to provide PHAs and owners with the option of conducting a streamlined income redetermination for any fixed-income source, regardless of whether a family or individual also has a non-fixed source of income. This means that the regulation no longer requires a family to have 100% of its income from fixed sources. The final rule also adopts an expanded list of fixed income sources. In addition to pensions and retirement, income from annuities or other retirement benefit programs, insurance policies, disability or death benefits or other similar types of periodic receipts will all be considered fixed income. If a family member receives an income from any of these sources and the income consists solely of periodic payments at reasonably predictable levels, the income source may be considered “fixed.” The regulation still requires verification of medical expenses and other deductions from gross income for fixed-income families. Procedures currently in place may be used for such verifications. HUD will not adopt the use of self-certification of medical expenses and other deductions due to the risk of improper payment of subsidy. The final rule makes clear that a full examination of income must be conducted upon admission to a program. PHAs and owners that choose to adopt the streamlined income redetermination, a full reexamination of family income must be performed at least every three years. Owners should also remember that non-fixed income, such as employment, will still require annual verification.
• Family Declaration of Assets Under $5,000: The final rule will permit the Public Housing and Housing Choice Voucher programs to accept family affidavits when assets are $5,000 or less. At admission, all assets of a family will be verified as is the current practice. The final rule also requires a PHA to obtain third party verification of all assets every three years.
  • While this rule currently applies only to public housing and HCV programs, the Office of Multifamily Housing Programs, which operates various rental assistance programs (including Section 8), will issue an interim final rule to expand this provision to multifamily programs.

In addition to the changes outlined above that impact the MFH programs, a number of changes are specific to public housing and the Housing Choice Voucher Program. A brief description of those changes follows:

• Utility Reimbursements: PHAs will have the option of making utility reimbursement payments “quarterly,” rather than monthly for reimbursements of $45 or less per quarter. If the PHA opts to make the payments on a quarterly basis, the PHA must institute a hardship policy. This change is optional and PHAs may continue to make UA reimbursements monthly. Alternative reimbursement methods such as debit cards may be used, but no fees may be required of a tenant as a result of the alternative method. PHAs may also continue to make payment directly to the utility company. It should be noted that HUD is exploring the possibility of expanding this option to MFH programs.
• Public Housing Rents for Mixed-Income Families: the final rule permits PHAs to accept a tenant’s self-certification of compliance with community service requirements. HUD is requiring PHAs to review a sample of self-certifications and validate their accuracy with using third party verification procedures.
• Biennial Inspections and Use of Alternative Inspection Methods: PHAs may conduct HQS inspections on a biennial rather than an annual basis. Alternative inspections (e.g., LIHTC or HOME inspections) may also be relied on if HCV units are included in the population of units forming the basis of the sample. HUD approval for any alternative method is required.
• Housing Quality Standards (HQS) Reinspection Fees: The final rule states that a reinspection fee may be charged only if an owner stated that a deficiency had been fixed and the deficiency is found during reinspection to still exist or if a reinspection conducted after the expiration of the timeframe for repairs reveals that the correction has not occurred.
• Exception Payment Standards for Providing Reasonable Accommodations: the final rule allows a PHA to approve a HCV payment standard of not more than 120% of the FMR without HUD approval if required as a reasonable accommodation.
• Family Income & Composition: the final rule eliminates the requirement that s voucher agency conduct a reexamination of income whenever a new family member is added. This rule already exists for Public Housing.
  • Note: MFH programs must continue to conduct interim recertifications when there is a change in household composition.
• Earned Income Disregard {EID} (applies to public housing, HCV ([not project-based vouchers], Section 811 Supportive Housing Program, HOME, and HOPWA): The final rule will provide tenants with the ability to start and stop employment and still retain the benefits of the EID. However, these residents may only receive the benefit for up to 24 consecutive months from the date of initial increase in annual income. If an individual becomes eligible to receive the EID, the 24-month period will not stop if the circumstances that triggered the EID cease; however, if the individual experiences an event that would again provide an EID benefit during the 24-month period, the individual will be provided the rent incentive. This change is retroactive to families that began the 24-month period prior to the final regulation.

These are fairly extensive changes to current regulations, especially for public housing agencies administering the HCV and public housing programs. HUD will be updating applicable Handbooks to incorporate these changes into the various programs, but in the meantime, program participants should review the final rule and begin establishing procedures implementing the required changes. Changes are minimal for the MFH programs (such as project-based Section 8) and virtually non-existent for the Low-Income Housing Tax Credit Program (which follows the guidance provided by HUD Multifamily Housing).