Significant New Housing Law Ready for President’s Signature

On July 14, 2016, the U.S. Senate passed HR 3700, the Housing Opportunity Through Modernization Act of 2016. It is expected that the President will sign the Act into law shortly at which time the statute will be sent to the Department of Housing & Urban Development to be placed into Regulation.

 

The Act contains seven Titles and makes some significant changes to some HUD housing programs, most particularly the Section 8 Multifamily Housing Program, Public Housing, and Vouchers. The seven Titles of the Act are:

 

• Title I: Section 8 Rental Assistance & Public Housing
• Title II: Rural Housing
• Title III: FHA Mortgage Insurance for Condominiums
• Title IV: Housing Reforms for the Homeless and for Veterans
• Title V: Miscellaneous
• Title VI: Reports
• Title VII: Housing Opportunities for Persons with Aids

 

This memorandum deals primarily with Title I, since changes in this area have the greatest impact on existing multifamily housing properties. The memo outlines changes from regulations that are currently in effect.

 

Title I

 

Initial Inspections

 

• Correction of Non-Life Threatening Conditions: Units that fail to meet the inspection standard for participation in the Housing Choice Voucher program will no longer result in a withholding of assistance payments unless the failure is the result of a life-threatening condition.
  • If a life-threatening condition exists, the PHA may withhold payments beginning 30-days after the deficiency is discovered. Once the correction has been made, payments will begin again.
  • If the dwelling unit is not brought into compliance with housing quality standards (HQS) within 60-days after the unit is deemed out of compliance (or such reasonably longer period as the agency may establish, the tenant will be required to move; and
  • The PHA will provide the tenant the necessary forms to allow the tenant to move to another dwelling unit and will transfer assistance to that unit.
• Protection of Tenants: If assistance is withheld due to the failure of a unit to pass inspection, the owner of the unit may not terminate the tenancy of the resident, but the tenant may terminate tenancy through notice to the owner.
• Termination of Lease or HAP Contract: If the owner does not correct the noncompliance within 60-days of the determination of noncompliance, the Agency must terminate the housing assistance payments (HAP) contract for the unit.
• Relocation: The agency must give families residing in such units 90-days (or longer) to lease a new unit. The 90-day unit begins upon termination of the HAP contract.
• Availability of Public Housing Units: If a family is unable to find a unit within the required timeframe, the PHA shall, at the option of the family, provide such family a preference for a public housing unit that becomes available after expiration of the 90-day timeframe.

• Assistance in Finding a Unit: Agencies will be able to provide assistance to families in finding a new residence, including the use of up to two months of any assistance payments that were withheld or abated due to the failure of the unit to meet HQS standards. Assistance may include security deposits and reimbursement for reasonable moving expenses. These provisions will not apply if the reason for the unit not meeting HQS was tenant-caused damage.
• Effective date: This section will take effect following HUD publication of Notice or Regulation implementing the requirements.

 

Income Reviews

 

• Income Reviews for Public Housing & Section 8 Programs:
  • Reviews of Family Income:
    • Annual reviews will still be required for all families, except for families with fixed income.
    • Households may request a review of income anytime the income or deductions of the family change by an amount that is estimated to result in a decrease of 10% or more in adjusted annual income (this is a change from the current $40 monthly reduction in income).
    • The income must be reexamined any time the income or deductions of the family change by an amount that will increase the annual income by 10% or more.
      • However, any increase in the earned income of a family will not require an interim recertification (this is a major change from current Section 8 rules). There will be an exception to this if the increase due to employment corresponds to a previous decrease that resulted in an interim recertification.
    • Calculation of Income:
      • Use of current year income – for purposes of initial occupancy, agencies or owners shall estimate income for the upcoming year.
      • Use of prior year income – for purposes of annual reviews, agencies or owners shall use the income of the family as determined for the preceding year, taking into consideration any interims performed during the preceding year.
      • Other Income – agencies or owners will have the authority to make other adjustments that are considered appropriate.
      • Safe Harbor – agencies or owners may use income determinations made for participation in other programs such as TANF, Medicaid assistance, and the SNAP (food stamp) program.
      • PHA & Owner Compliance – agencies and owners will not be considered out of compliance for de minimis errors made in the calculation of family incomes.
    • Adjusted Income:
      • There have been some significant changes to the determination of adjusted income:
        • Excluded amounts:
          • Income will not be imputed to assets unless the net family assets exceed $50,000 – this is an increase from the current $5,000. This amount will be adjusted by HUD annually based on the inflation rate.
          • Expenses related to the Aid and Attendance program for veterans who are in need of regular aid and attendance.
          • HUD will publish other statutory exclusions with the newly updated regulations.
          • Earned income of students – HUD will determine by regulation the amount of earned income of full-time students that is to be excluded; this amount is currently any earned income in excess of $480 per year.
            • HUD will also be able to determine the exclusion of any room and board for students.
          • The one-time deduction for an elderly family will increase from the current $400 to $525;
          • The dependent deduction will remain at $480 for the time being, but along with the elderly deduction, will be adjusted annually based on inflation, rounded to the nearest $25.
          • Health & Medical Expenses: in a major change, allowable medical expenses for an elderly or disabled family will now be the amount in excess of 10% of gross income instead of the current 3%. This will also be true for disability related expenses if such expenses enable a household member to work.
            • Hardship exemptions will be available based on the new HUD regulations.

 

 

Housing Choice Voucher Program

 

• PHAs will be able to establish a payment standard of not more than 120% of fair market rent when required as a reasonable accommodation for a disabled person, without HUD approval.
• Payment standards in excess of 120% of FMR will require HUD approval.

 

Effective date: HUD will issue notices or regulations implementing this section of the Act. These provisions will take effect at that time, but only at the beginning of a calendar year.

 

The Act requires that the Secretary of HUD conduct a study on the impact of the changes on elderly and disabled individuals not later than 12-months after the Act goes into effect.

 

Limitation on Public Housing Tenancy for Over-Income Families

 

A major change for the Public Housing Program is the requirement that higher income families already in occupancy will no longer be eligible for public housing. If the income of a family in public housing exceeds the income limit for two consecutive years, the rent of the family must be raised to the applicable market rent for the geographic area and terminate the tenancy of the family in public housing not more than six months after the second income determination. The income limit that may not be exceeded is 120% of the median income for the area, so it is not the low-income limit for the area. The HUD Secretary may establish higher income limits because of prevailing levels of construction costs, or unusually high or low family incomes, vacancy rates, or rental costs. Also, this regulation will not apply to over-income families living in public housing due to a lack of qualified low-income residents.

 

Limitation on Eligibility for Assistance Based on Assets

 

With regard to the Public Housing Program, units may not be rented and assistance may not be provided to households with assets in excess of $100,000 or who own a home that is suitable for occupancy, unless the family is receiving Section 8 assistance, is a victim of domestic violence, or is offering the home for sale.

 

Asset Exclusions

 

At least for public housing, the full value of retirement accounts will be excluded as an asset – not just the value if regular distributions are being taken. We will need to wait until HUD issues regulations to see if this will apply to Multifamily Housing (e.g., Section 8) as well as Public Housing.

 

Self-Certifications

 

It does appear that for both Multifamily Housing and Public Housing, families will be able to provide a certification that net assets do not exceed $50,000 in lieu of verification. This amount will be adjusted annually based on inflation. This is clearly a major change from the current requirement that permits such an affidavit when assets are $5,000 or less for public housing and vouchers (as well as the LIHTC program).

 

Project-Based Vouchers

 

The new law permits PHAs to assign up to 20% of voucher units as project-based (up from 15%). An additional 10% of units may be authorized as project-based to house homeless families, families with veterans, supportive housing to persons with disabilities or elderly persons, or in areas where vouchers are difficult to use.

 

Not more than the greater of 25 units or 25% of the units in any project may be provided project-based vouchers.

 

PHAs may enter into HAP contracts for up to 20-years for project-based assistance, subject to the availability of Congressional funding.

 

Preference for United States Citizens or Nationals

 

The new law will give preference or priority for assistance to citizens or national of the United States prior to any alien who is otherwise eligible for such assistance. This will impact waiting list administration.

 

This synopsis if for informational purposes only. Agencies, Owners, and Managers should make no changes in operational procedures at this time. None of the statutory changes outlined here will go into effect until HUD issues new Notices and regulations implementing the law.