HUD Implementation Guidance for Housing Opportunity Through Modernization Act of 2016

In the October 24, 2016 Federal Register, HUD published initial implementation guidance for the Housing Opportunity Through Modernization Act of 2016 (HOTMA). President Obama signed HOTMA into law on July 29, 2016, but only certain parts of the law are currently effective. The purpose of this HUD guidance is to identify the sections of the law that are effective immediately and those that will require further action by HUD in order to become effective.

This guidance is effective October 24, 2016.

 

Introduction

 

Some of the laws most significant amendments include setting a maximum income level for continued occupancy in public housing, expanding the availability of Family Unification Program (FUP) vouchers for children aging out of foster care, changes to the housing quality standards for Section 8 Voucher Units, multiple changes to the Project-Based Voucher program, modification of the requirements for mortgage insurance for condominiums, creation of a Special Assistant for Veterans Affairs in HUD, and changing the allocation formula for the Housing Opportunities for Persons with AIDS (HOPWA) program.

 

General Implementation Issues

 

HOTMA makes several of its provisions effective upon enactment (July 29, 2016). Other statutory changes made by HOTMA become effective only after the issuance of a notice or regulations by HUD, or at the start of the calendar year following the publication of a notice or regulations.

 

Provisions of HOTMA Effective Upon Enactment or Already in Effect – No HUD Action Required to Implement

 

1. Reasonable Accommodation Payment Standards – permits PHAs to establish a payment standard of up to 120% of the Fair Market Rent (FMR) as a reasonable accommodation for a disabled person, without HUD approval. A PHA may also establish an exception payment standard in excess of 120% as a reasonable accommodation with HUD approval.
2. Establishment of Fair Market Rent – provides that in the Housing Choice Voucher (HCV) program no PHA is required, as a result of a reduction in the FMR, to reduce the payment standard applied to a family continuing to reside in a unit under a HAP contract at the time the FMR was reduced. Under prior law, if a reduction in the FMR caused the PHA payment standard to exceed 110% of FMR, the PHA was required to reduce the payment standard so that the payment standard was within the payment range of the new FMR. PHAs may choose, but are no longer required, to reduce the payment standard for a family who remains under HAP contract at the family’s second annual reexamination. Owners of LIHTC properties with voucher residents should make note of this change.
3. Family Unification Program for Children Aging out of Foster Care – makes changes to the FUP, revising the length of the term that a FUP-eligible youth may receive FUP assistance from 18 months to 36 months. The change applies to youth currently receiving FUP assistance as well as any new participants. The law also revises the eligibility requirements. Previously, FUP-eligible youth had to be at least 18 years old and not more than 21 and have left foster care at age 16 or older. Under the new law, FUP-eligible youth must: Be at least 18 years old and not more than 24; have left foster care at age 16 or older or will leave foster care within 90-days; and be homeless or at risk of being homeless.
4. Preference for United States Citizens or Nationals – this change applies only to Guam and establishes a preference or priority in receiving financial assistance for any citizen or national of the United States over aliens.
5. Exception to Public Housing Agency Resident Board Member Requirement – provides for an exception for certain jurisdictions (Housing Authority of the County of Los Angeles or any PHA in Alaska, Iowa, and Mississippi) from the resident board member requirements.
6. Inclusion of PHAs and Local Development Authorities in Emergency Solutions Grants (ESG) – authorizes local governments that receive ESG funds to subaward all or a portion of those funds to PHAs and local redevelopment authorities.
7. Inclusion of Disaster Housing Assistance Program in Certain Fraud and Abuse Prevention Measures – provides that the Disaster Housing Assistance Program shall follow the rules of the McKinney Homeless Assistance Act for the purpose of income verifications.
8. Energy Efficiency Requirements Under Self-Help Homeownership Opportunities Program (SHOP) – prohibits HUD from requiring units developed under the SHOP program to meet energy efficiency standards other than those contained in the Cranston-Gonzalez National Affordable Housing Act.
9. Formula and Terms for Allocations to Prevent Homelessness for Individuals Living with HIV or AIDS – makes several changes to the HOPWA program, including (1) alterations to the allocation formula, (2) continued eligibility of FY 2016 grantees, and (3) authorization to award funds to alternative grantees.

 

 

Provisions That Require HUD Guidance or Rulemaking

 

For these provisions, PHAs, multifamily owners, or grantees may not use the provisions of HOTMA until HUD issues a rule or notice.

 

1. Initial Inspections of Section 8 Voucher Units – authorizes assistance payments for up to 30-days if an annual inspection reveals non-life-threatening defects and to authorize occupancy of units prior to an inspection by a PHA if the property has met the requirements of an alternative inspection (e.g., LIHTC inspection) in the previous 24-months. HUD is considering the appropriate method for implementation.
2. Enforcement of Housing Quality Standards (HQS) for Section 8 Voucher Units – outlines timeframes for correcting deficiencies discovered by inspections. The law requires life-threatening deficiencies to be corrected within 24 hours and sets the time for correcting other deficiencies at 30-days unless the PHA determines otherwise. It also provides families with 90-days to relocate to a new unit if an owner fails to correct the defaults and permits PHAs to use up to two months of any assistance amounts withheld or abated for costs directly associated with relocation. HUD is developing regulations relative to this change.
3. Income Reviews – revises the frequency of family income reviews and the calculation of income. The law requires that the reviews of family income must be conducted upon admission and annually thereafter, depending on certain decreases or increases in annual adjusted income. It also changes the definitions for the public housing and Section 8 programs of income and adjusted income for each member of the household who is 18 years or older and unearned income for each dependent who is less than 18. HUD is considering the best method for implementation.
4. Income Review for Project–Based Housing – the law eliminates the requirement that reviews of family income shall be made no less frequently than annually. HUD is considering the best method for implementation.
5. Limitation on Public Housing Tenancy for Over–Income Families – sets the maximum amount of annual adjusted income for continued occupancy in public housing at 120% of area median income (AMI). If a family’s annual adjusted income exceeds the maximum amount for two consecutive years the family will not be eligible for public housing. PHAs will have the option of terminating the family’s tenancy or allowing them to remain at a higher rent. HUD will issue additional information on this requirement in the future.
6. Limitation on Eligibility for Assistance Based on Assets – the law sets limits on the assets that families residing in assisted housing may have. This requirement must be put in place by rulemaking.
7. Units Owned by PHAs – provides that the term ‘owned by a public housing agency’ refers to units in projects that are owned by a PHA, by an entity wholly controlled by a PHA, or by a limited liability company or limited partnership in which a PHA (or PHA controlled entity) holds a controlling interest. PHAs should continue their current practices until HUD issues additional guidance.
8. PHA Project Based Assistance – the law makes several statutory changes to the Project Based Voucher (PBV) program. HUD is considering the appropriate implementation method.
9. Public Housing Capital & Operating Funds – HUD will issue new rules regarding use of capital funds for establishing replacement reserves.
10. Use of Vouchers for Manufactured Housing – the law extends the definition of “rent” for vouchers to include monthly payments for purchasing a manufactured home, tenant-paid utilities, and monthly rent for real property. This is not effective until HUD issues an implementation notice.

 

Other elements of the law that also require HUD implementing regulation include (1) Modification of FHA Requirements for Mortgage Insurance for Condominiums; (2) Definition of Geographic Area for Continuum of Care Program; and (3) HOPWA Allocations.

 

Most changes to the Project-Based Section 8 Program made by the new legislation will not take effect until HUD publishes implementing regulations or notices. Many of these may not occur until 2017 or 2018.