The 2013 HOME Final Rule established revised utility allowance requirements for the HOME Program. HUD Community Planning & Development recently provided updated guidance on the timeframe for implementation of the final rule and acceptable methodologies relative to the determination of utility allowances for HOME units.
Background
The HOME statute and 24 CFR Part 92 state that gross rent for HOME units includes both the rent and utilities or a utility allowance (UA) when there are tenant-paid utilities. Participating Jurisdictions (PJs) are required to establish the UAs and to update them annually. In establishing a UA, the PJ may use the HUD Utility Schedule Model (HUSM) or any of the methods approved for establishing an allowance under the Section 42 Low-Income Housing Tax Credit Program. This utility allowance requirement is found at 24 CFR part 92.252(d) and is applicable only to projects that received a commitment of HOME funds on or after August 23, 2013.
Guidance from HUD indicates that PJs must immediately implement the UA requirements for HOME commitments made on or after the August 23, 2013 date. This is now required for all projects that are completed and occupied. Once in place, owners must comply with the UA requirements at lease renewal or as soon as feasible.
PJs may not use the UA of the local Public Housing Agency (PHA) for these projects. However, projects for which HOME funds were committed prior to August 23, 2013, may continue to use the PHA allowance.
If PJs choose not to use the HUSM, the UA must be established using a project-specific method. Such a method must be based on actual utility usage or project-specific factors (e.g., size, orientation, building materials, HVAC systems, and local climate).
Responsibility for UA Determination
The HOME rule requires that the HOME UA be established by the PJ. However, the new HUD guidance allows PJs to require owners to complete initial utility allowances and send them to the PJ for review and approval. This essentially means that the PJs are not actually required to “establish” the allowance. Staff costs for determining the initial UA – prior to project completion – is a project eligible soft-cost.
PJs may:
- Determine a UA with PJ staff or qualified professionals; or
- Require owners to use a specific method or choose from acceptable methods; or
- Accept a UA approved by another funder (e.g., LIHTC Housing Finance Agency) as long as the calculation uses one of the HOME approved methods.
Acceptable Methods
A PJ may accept one or more methods or require a single method. However, only one method may be used for a project. The acceptable methods are:
- HUSM;
- Multifamily Housing Utility Allowance, as outlined in Notice H-2015-4 (if this method is used, all requirements of the Notice must be followed);
- Utility Company estimate;
- LIHTC Agency estimate; or
- Energy Consumption Model (Engineer Model)
Owners of projects with HOME funds awarded on or after August 23, 2013, should check with the appropriate PJ on how these UA requirements will be implemented if they have not already been put into place.