Housing Plus

Housing Plus

Guidance and legal insight for all aspects of housing and community development

By the Housing Group at Ballard Spahr

McClain Weighs in on Potential Effect of Trump Budget Cuts on Affordable Housing

Posted in Budget, Government-Assisted Housing, Legislative Initiatives, Policy, Public Housing, RAD, Uncategorized

In an interview with U.S. News and World Reports on “The Future of Affordable Housing in the Trump Era,” Amy McClain, who leads Ballard Spahr’s government-assisted housing practice (and is a frequent Housing Plus blogger), cautions that while she doesn’t expect budget cuts to be as severe as those proposed, funding for affordable housing is under threat. Amy notes that the proposed cuts to public housing funds could undermine the Rental Assistance Demonstration (RAD), which allows a public housing project to convert its subsidy to long-term Section 8 assistance and leverage debt and equity in order to finance the project’s rehabilitation or replacement. The post-conversion rents for RAD projects are based on the amount of public housing operating and capital funds allocated to the project pre-conversion. As Amy notes in the article, “If the public housing operating subsidy and the public housing capital fund get diminished [in the budget], then the rents are no longer viable to convert to the Section 8 platform.” Amy also emphasizes the role that affordable housing proponents can play in the budget debate. “It’s going to come down to what the advocacy groups do and the level of education for members of Congress to make sure everyone is aware of the benefit of programs and the impact that the cuts would have,” she says.

Read more about the proposed cuts to HUD’s budget here.

Tax Reform – Proposed Legislation Protecting Affordable Housing

Posted in Historic Tax Credits, Housing Bonds, Legislative Initiatives, Low Income Housing Tax Credits, New Markets Tax Credits, Policy, Tax Credits, Tax Reform, Tax-Exempt Bonds

After legislation to repeal the Affordable Care Act was pulled from the House floor last Friday, news headlines across the country began reporting that tax reform is next on the Trump Administration’s agenda. As noted in our prior blog post, tax reform that changes the corporate tax rate, the tax-exempt bonds program and the tax-credit programs will have significant impacts on the production of the affordable housing across the country.

In an effort to protect affordable housing programs, legislators have introduced amendments to the Internal Revenue Code (“IRC”) that either (1) create savings to be reinvested in affordable housing programs or (2) expand the availability of housing tax credits and fix related technical issues.

The following bills were introduced in the past 60 days –

  1. The Affordable Housing Credit Improvement Act of 2017 (S. 548) (the “Cantwell-Hatch bill”). According to The Affordable Housing Tax Credit Coalition, the bill builds upon prior bills (S. 2962 and S. 3237), also introduced by Sentor Maria Cantwell (D) and Senator Orrin Hatch (R), and includes “a new provision addressing planned foreclosures, a provision raising the cap to 30 percent from 20 percent on Difficult to Develop Areas (DDAs), additional criteria for community revitalization plans, a provision which codifies, rather than leaving up to Treasury regulations, the prohibition against any state QAP from including local approval or local contribution requirements, and other technical changes.” A section by section summary can be found here.
  2. Affordable Housing Credit Improvement Act of 2017 (H.R. 1661). The purpose of the bill, as reported in a press release issued by co-sponsor Representative Pat Tiberi (R), is to “make the financing of affordable housing more predictable and streamlined, facilitate housing credit development in challenging markets like rural and Native American communities, increase the housing credit’s ability to serve extremely low-income tenants, and support the preservation of existing affordable housing.” The bill is co-sponsored by Representative Richard Neal (D). A section by section summary can be found here.
  3. Common Sense Housing Investment Act of 2017 (H.R.948). The goal of the legislation, introduced by Representative Keith Ellison (D), is to expand the mortgage interest deduction to lower income homeowners and reinvest an estimated $241 billion in savings over 10 years into affordable housing. More information on the bill can be found here.

Bi-partisan support for these bills, especially S.548 and H.R. 1661, suggest that tax reform protecting housing tax credits is good policy. Monitoring the evolution of these bills; the President’s plan for tax reform and the industry’s response to anticipated changes in the IRC will be telling of the future affordable housing programs, especially those authorized under the IRC.

 

Housing Plus welcomes housing attorney Maia Shanklin Roberts to the blogging team

Posted in Community Development, Energy Tax Incentives, Government-Assisted Housing, Historic Tax Credits, Low Income Housing Tax Credits, Policy, Tax Credits

shankun-roberts_maia_1We are excited that Maia Shanklin Roberts has joined Ballard Spahr LLP and our Housing Plus team. Maia’s background is in community development. She worked with the Maryland Department of Housing and Community Development and the Citywide Coordinating Committee on Youth Violence Prevention in Washington, D.C.

Maia is looking forward to bringing her keen insights about community development to blog readers. She has been involved in numerous affordable housing, adaptive reuse, and mixed-use transactions involving more than $800 million in federal, state, historic, and energy tax credit syndications, tax-exempt private activity bonds, and other public financing.

Please join us in welcoming Maia to the firm and our Housing Plus team.

 

Ballard Spahr and CSG Advisors Host Another Informative Western Housing Conference

Posted in Budget, FHA and GSE Financing, FHA-Insured Financing, Government-Assisted Housing, GSE Financing, Legislative Initiatives, Policy, Public Housing, RAD, Tax Credits

Last week, Ballard Spahr in conjunction with CSG Advisors hosted its 7th Annual Western Housing Conference in Phoenix, Arizona. The Conference brought together a wide range of public and private housing professionals facilitating a dynamic conversation on current developments in government-assisted housing.

The Conference opened with a “Washington Update” – a discussion on housing policy under the Trump Administration. Panelists Emily Cadik, Director of Public Policy at Enterprise Community Partners, and Peter Lawrence, Director of Public Policy and Government Relations at Novogradac & Company LLP, brought extensive insight into the political priorities driving forthcoming changes to government-assisted housing programs.

Significant takeaways from the discussion included:

  • The concern over a predicted decrease in HUD’s budget by $6 million, as outlined by the Washington Post on March 8th. Since the panel occurred, the Trump administration’s budget blueprint for fiscal year 2018 budget was released. Housing Plus posted a blog providing an overview of the budget blueprint on March 16, 2017.
  • The elimination of one or more of the tax credit programs, private activity bonds and/or the reduction of the corporate tax rate through tax reform will have significant impacts on the availability of equity financing needed to at least sustain affordable housing development at its current levels.
  • An infrastructure bill that includes housing may be an opportunity to meet any deficits created by HUD budget cuts to the Public Housing Capital Fund and Community Development Block Grant programs.
  • The spending caps under the existing Budget Control Act also pose a threat to government-assisted housing programs, especially in light of the proposed increases in defense spending and the resulting offsets that would be needed from non-defense discretionary spending.
  • Stakeholders should continue to invite legislators and members of Congress to ribbon cuttings and site visits in their districts. These visits are critical in gaining Congressional support for government-assisted housing programs.

The second session of the Conference focused on lessons learned from implementing the Rental Assistance Demonstration (RAD) program. Nicole Ferreira, Vice President for Development at the New York City Housing Authority, and Jenny Scanlin, Director of Development at the Housing Authority of the City of Los Angeles, each provided a case study from which they described the benefits and limitations of the program and the financial structures making each deal work. Beverly Rudman, Director of the Closing/Post Closing Department in HUD’s Office of Recapitalization, provided an update on the program and described particular challenges facing her office, which oversees the RAD program. The panel highlighted the following as effective tools for successfully underwriting a RAD deal and securing community and tenant buy-in: (1) Tenant Protection Vouchers, (2) the demolition and disposition process under Section 18 of the U.S. Housing Act of 1937, (3) seller take back financing from the Housing Authority and (4) federal and local redevelopment grants.

Panelists Tom Capp, Chief Operating Officer of Gorman & Company, C.J. Eisenbarth Hager, Director of Healthy Community Polices at Vitalyst Health Foundation, and Keon Montgomery, Housing Manager for the City of Phoenix Housing Department, then provided a local perspective on how private/public partnerships can be used to create sustaining change in communities. The panel emphasized the use of health studies in the predevelopment process to generate academic research on the specific needs of the impacted community and solicit funding from public and private partners to address those needs.

The last panel focused on the changes in the affordable housing finance market. Monty Childs, Director of Loan Origination and Structuring at Freddie Mac, John Ducey, Manager of Multifamily Affordable Housing-Credit at Fannie Mae, Sarah Garland, Senior Vice President at PNC Bank, Catalina Velma, Vice President of Public Housing at the National Equity Fund, and Cody Wilson, Director at Stifel, Nicolaus & Company, each provided a unique perspective on the impact of recent and prospective economic changes (e.g. tax reform, HUD budget cuts and rises in interest rates) on the equity, bond and lending markets, as well as the increased challenge in financing small and rural projects. The panel also discussed financing tools like Tax-Exempt Loans (Freddie Mac), Reduced Occupancy Affordable Rehab (ROAR) Execution (Fannie Mae) and FHA 221(d)(4) Loans (HUD), which have been found to address some of the challenges faced in the market.

A copy of the conference materials can be found here.

If you have any questions regarding the information above, or want more information on how to register for next year’s conference, please contact Jennifer Boehm at boehmj@ballarspahr.com.

Administration’s OMB budget blueprint proposes 13% cut and elimination of many HUD programs

Posted in Community Development, Government-Assisted Housing, Legislative Initiatives, Policy, Public Housing

 

The Office of Management and Budget (“OMB”) released the Trump administration’s budget blueprint today, providing a general overview of the budget request it intends to present to Congress later this Spring.  As outlined, the blueprint calls for a 13.2% reduction through cutting over $6 billion in funding to the U.S. Department of Housing and Urban Development (“HUD”).

The blueprint describes elements that together comprise reductions to HUD programs realized, in part, by eliminating the following programs:

  • the Community Development Block Grant (“CDBG”) program ($3 billion);
  • the HOME Investment Partnerships Program (“HOME”), Choice Neighborhood Initiative, and Self-help Homeownership Opportunity Program (combined $1.1 billion reduction);
  • Section 4 Capacity Building for Community Development and Affordable Housing ($35 million).

These cuts account for over $4 billion of the total $6 billion.  The remaining cuts are likely to be drawn, in part, from the public housing capital and operating funds as suggested by the leaked budget proposals obtained by The Washington Post last week.

The blueprint also proposes the elimination of the independent Neighborhood Reinvestment Corporation and U.S. Interagency Council on Homelessness, as well as the elimination of the Community Development Financial Institutions Fund within the U.S. Treasury Department.

The OMB blueprint with regard to HUD states, “[t]he Budget also recognizes a greater role for State and local governments and the private sector to address community and economic development needs.” What is missing from this statement is that CDBG and HOME funds are disbursed through States and local governments.  Without these funds, the ability of State and local governments to meet the pressing needs of their communities are significantly hindered.

Keep in mind that the main budgetary piece of business before Congress will be (1) extending the continuing resolution of the FY 2017 budget set to expire April 28, 2017 or (2) finalizing adoption of a  Transportation, HUD FY17 appropriations bill.  The proposals in the budget blueprint will not come before Congress before then.

And, when Congress does consider an appropriations bill, it may initially consider the OMB budget blueprint, but the budget that will evolve through the Congressional process can look very different from the OMB proposals. Constituents have an opportunity to advocate to their Senators and Representatives the value of these programs for the people in their communities and the contributions these programs make to the economy.  At the end of the day, the final appropriations bill set out in the conference report developed by the House and Senate requires adoption by both chambers, with the Senate required to adopt it by three-fifths (or 60 votes), highlighting the need for bipartisan support.

RAD closing deadlines for CY 2017

Posted in Government-Assisted Housing, Public Housing, RAD, Section 8

HUD’s Office of Recapitalization recently released a memo to all CHAP awardees setting forth closing deadlines for CY 2017 RAD transactions. Awardees should be especially  mindful of these intermediate deadlines to ensure that their RAD projects can be promptly processed.

 

Step

Deadline to close by June 30, 2017 Deadline to close by Nov. 30, 2017 Deadline to close by Dec. 31, 2017
Upload all required Financing Plan documents Completed June 15 July 15
Receive a RAD Conversion Commitment (RCC) Completed August 15 September 15
Submit complete closing package April 15 September 1 October 1
All RAD documents approved and ready for HUD signatures June 22 November 16 December 14

Other key takeaways from the memo include the following:

  • Projects that wish to have RAD rents funded with Section 8 subsidy beginning in January 1, 2018 must close by November 30, 2017.
  • In addition to the priority categories listed in Section 1.11 of the RAD Notice, HUD will prioritize projects adhering to the deadlines and those with demonstrable critical deadlines beyond the control of the housing authority and its development team.
  • HUD may require an update to the Financing Plan and re-issuance of the RAD Conversion Commitment (RCC) if the RCC has aged over 6 months.

 

Regulatory comments due in March & other housing news updates

Posted in Fair Housing, Government-Assisted Housing, Legislative Initiatives, Policy, Public Housing, Section 8, Tax Credits, Tax Reform

Comments on the following HUD and housing related guidance are due this month.

  • HOTMA implementation for Section 8 Voucher Programs – Due March 20, 2017

On January 18, 2017, HUD issued a proposed rule to implement certain sections of the Housing Opportunities through Modernization Act of 2016 (HOTMA) that affect the tenant-based Housing Choice Voucher (HCV) and Project-Based Voucher (PBV) programs. Among other changes, the proposed rule amends the definition of public housing authority (PHA) owned housing, and institutes new provisions regarding housing quality inspection requirements for both the HCV and PBV programs. HUD is seeking public comment on a variety of questions surrounding the implementation requirements and future changes of both programs.

Comments may be submitted to HUD  electronically at www.regulations.gov (Docket No. FR-5976-N-03) or by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500.

  • Moving to Work (MTW) Demonstration Operations Notice – Due March 24, 2017

As noted in our previous blog post, HUD is soliciting comments to its Operations Notice for the expansion of the MTW Program. The full list of questions for which HUD seeks public comment is listed in Appendix C of the Notice. Comments can be submitted electronically at www.regulations.gov (Docket No. FR-5994-N-01)  or by mail to the same address noted above.

  • DOJ Proposed Rule amending Section 504 Regulations – Due March 20, 2017

On January 19, 2017, the U.S. Department of Justice (DOJ) issued a notice of proposed rulemaking to revise its regulations at 28 CFR Part 42 that implement Section 504 of the Rehabilitation Act of 1973. Section 504 prohibits discrimination based on disability in all programs and activities that receive federal financial assistance. Key revisions include amending the interpretation of the applicable definition of  “disability”;  updating accessibility standards for new construction and alteration of buildings and other facilities; and editing various provisions and terminology to promote consistency with judicial decisions and the Americans with Disabilities Act and related amendments.

Comments may be submitted to DOJ (1) electronically through www.regulations.gov (Docket No. OAG 154); (2) by regular mail to Disability Rights Section, Civil Rights Division, U.S. Department of Justice, P.O. Box 2885, Fairfax, VA 22031-0885; or (3) by overnight, courier, or hand delivery to Disability Rights Section, Civil Rights Division, U.S. Department of Justice, 1425 New York Avenue NW., Suite 4055, Washington, DC 20005.

The following lists additional housing news our readers may have missed recently —

  • Dr. Ben Carson Confirmed as HUD Secretary

On March 2, 2017, Dr. Ben Carson was sworn in as the 17th Secretary of the U.S. Department of Housing and Urban Development. According to  HUD’s press release, Secretary Carson intends to embark on a listening tour of various HUD field offices and communities throughout the country.

  • Affordable Housing Credit Improvement Act of 2017 introduced in U.S. Senate

In an effort to help reform the low-income housing tax credit, Senators Maria Cantwell (D-WA) and Orrin Hatch (R-UT) introduced the Affordable Housing Credit Improvement Act of 2017 (S. 548), along with several other Democratic and Republican co-sponsors on March 7th. The bill includes and expands upon similar legislation introduced by the Senators last year (S. 2962 and S. 3237). Visit the Affordable Housing Tax Credit Coalition’s S. 548 advocacy page for more in-depth summaries of the bill’s provisions and comparisons between the current bill and 2016 legislation. Interested persons can also track the bill’s progress at www.congress.gov.

  • Public Housing Authorities prevail in Operating Reserves Litigation

In late January, the United States Court of Federal Claims ruled in favor of approximately 350 public housing authorities on the merits of a motion for summary judgment against the U.S. Department of Housing and Urban Development (HUD). Led by housing industry groups, the complaint alleged that HUD breached its Annual Contributions Contract with the PHAs for fiscal year 2012 when the formula used for budget calculations and allocations did not property follow HUD regulations and thus reduced the operating fund subsidies the PHAs were eligible for in that year. A full copy of the Court’s decision can be accessed here.  Plaintiffs’ attorneys were advised to file a status report in February 2017 to advise how the Court should proceed with the case.

Recap of HUD’s Early January Guidance

Posted in Government-Assisted Housing, Policy, Public Housing, RAD, Section 8

Earlier this month, the US Department of Housing and Urban Development (HUD) issued a number of final rules and notices as summarized below.

Final Rules

  • HUD Revises Lead-Based Paint Regulations

Effective on February 3, 2017, HUD’s final rule amends the agency’s Lead Safe Housing Rule currently at 24 CFR Part 35. Changes to the lead-based paint regulations include revising the definition of “elevated blood lead level” and establishing more rigorous testing procedures for assisted units housing children under age 6 with high blood lead levels.  Public housing authorities (PHAs) are required to comply with the updated lead-based paint policies and procedures by July 13, 2017.

  • HUD Final Rule on Broadband Infrastructure Requirement

On December 20, 2016, HUD issued a final rule requiring the installation of broadband infrastructure (i.e. cables, fiber optics, wireless infrastructure) whenever a multifamily rental housing property funded or supported by HUD undergoes new construction or substantial rehabilitation. While the rule applies to most HUD programs, compliance is not required if (i) broadband installation would result in fundamental alteration in the nature of the program or undue financial burden, (ii) installation is not feasible due to the location of the new construction or substantial rehabilitation, or (iii) installation is infeasible due to the structure of the housing being rehabilitated. Also exempted from the rule are multifamily rental housing properties only carrying a HUD-insured FHA mortgage or a HUD-guaranteed loan. HUD also issued a technical correction to the final rule on January 12th.

  • Federal Housing Administration (FHA) Strengthens Home Equity Conversion Mortgage Program (HECM)

HUD’s final rule codifies in full various changes to HECM program regulations and policies adopted pursuant to the Reverse Mortgage Stabilization Act of 2013 (Public Law 113-29), as well as additional guidance previously issued through assorted mortgagee letters under the Housing and Economic Recovery Act of 2008 (Public Law 110-89).  These changes become effective on September 19, 2017.

  • Freedom of Information Act  (FOIA) Amendment

Issued on January 12, 2017, this final rule implements the changes found in the FOIA Improvement Act of 2016 (Public Law 114- 185) as applied to HUD.

Notices

  • MTW Program Expansion Proposed Operations Notice

HUD is currently soliciting comments to its proposed Operations Notice for the Expansion of the Moving to Work (MTW) Demonstration program. The 2016 Appropriations Act (Public Law 114-113), authorized HUD to expand the MTW program by an additional 100 agencies over a seven year period.  As a first step of the expansion, HUD published this Operations Notice which proposes significant amendments to existing MTW program framework in an attempt to develop simplified approaches to administering housing assistance. Among other changes, the new MTW framework would grant certain general waivers to MTW agencies, and reduce data collection and reporting requirements. Comments are due by mail or electronically by March 24, 2017.

  • HUD Seeks Comments for MTW “Substantially Serving” Methodology

In another MTW related notice, HUD is currently seeking comments and recommendations for a revised methodology it will use to help measure the performance of MTW agencies. By statute, MTW agencies are required to assist substantially the same number of eligible low-income families as non-MTW agencies. HUD’s current methodology found in PIH Notice 2013-02 relies on historic public housing and housing choice voucher utilization rate data. New recommendations and comments to HUD’s proposed evaluation methods are due by February 21, 2017. Comments and recommendations may be delivered by mail or electronically to: Moving to Work Office, Office of Public and Indian Housing, Department of Housing and Urban Development, 451 Seventh Street SW., Room 4130, Washington, DC 20410–0001 or email at mtw-info@hud.gov.

This recent PIH notice establishes the verification procedures PHAs must take whenever  a potential or current resident request housing assistance as a result of being a VAWA self-petitioner.

  • Allocations and Other Guidance for CDBG Recovery Grantees

Effective as of January 23, 2017, this notice allocates Community Development Block Grant (CDBG) disaster recovery funds to multiple Southern states to assist with long-term recovery. The notice outlines specific state-by-state dollar allocations and amends the grant award and administration requirements previously published in Federal Register Notice 81 FR 83254.

On January 13, 2017, HUD announced the approval of the AFFH Assessment Tool to be used by PHAs. The notice also discusses changes made to the AFFH Assessment Tool based on public comments received. Notwithstanding this notice,  PHAs are not required to conduct or submit any assessments of fair housing until further written HUD guidance and data is provided.

HUD Publishes Further Revisions to RAD Notice

Posted in Community Development, Fair Housing, Government-Assisted Housing, Low Income Housing Tax Credits, Public Housing, RAD, Section 8, Tax Credits

In an announcement on January 12th, the U.S. Department of Housing and Urban Development (HUD) published a significant third revision to the Rental Assistance Demonstration (RAD) Notice (PIH 2012-32/ H 2017-03 Rev-3). According to HUD, the RAD notice was revised in order to maintain the increased pace of RAD transactions in a manner that is consistent and flexible. The revised notice is effective upon its forthcoming publication in the Federal Register, though several eligibility criteria will remain subject to a 30-day public comment period. Some of the substantive changes to the RAD Notice include the following:

  • Project-Based Voucher (PBV) Unit Cap

The revised RAD notice eliminates the standard 25% limit so that there is no longer any cap on the number of units in a project that may receive PBV assistance.  Before this latest modification, RAD allowed up to 50% of the units in a project to receive PBV assistance; provided 100% of the units could receive such assistance if at least 50% of the units were occupied by (i) elderly or non-elderly disabled households or (ii) families receiving supportive services.

  • Resident Notification

The revised RAD notice expanded the notification requirements public housing authorities (PHAs) must give residents at a project identified for conversion. Most significantly, before submitting a RAD application, PHAs must now disclose to residents any preliminary intent to (i) include a transfer of assistance; (ii) partner with a third party entity that will have a general partner/managing member interest in the new project owner; (iii) make changes in the number or configuration of any assisted units; (iv) impose any  change potentially impacting the household’s ability to reoccupy the unit; (v) the scope of work; and (vi) implement any deminimis reduction of units vacant for more than 24 months at the time of the RAD application. PHAs must issue a RAD Information Notice and General Information Notice (if required) according to the RAD Fair Housing, Civil Rights, and Relocation Notice (H/PIH 2016-17)  to inform residents of their rights in connection with the conversion. PHAs are also required to have an additional resident meeting prior to submitting its Financing Plan, and conduct subsequent meetings with residents to discuss any material changes to utility allowance calculations or substantial changes to the conversion plan.

  • Right to Return & Rescreening

Under the new RAD notice, existing public housing residents at a project converting to RAD who will occupy non-RAD PBV units or non-RAD PBRA units following conversion are protected against post-conversion occupancy exclusion due to revised rescreening, income eligibility, or income targeting policies.  Thus, even those public housing residents that will reside in non-RAD units post-conversion will preserve this right to return.

  • Use of PHA Acquisition Proceeds

Any cash acquisition proceeds a PHA receives in excess of seller take-back financing must be used for “Affordable Housing Purposes.” The definition of “Affordable Housing Purposes” is now set out in the definitions section of the Notice and applies in more instances.  The revised RAD Notice defines “Affordable Housing Purposes” as those activities that support the predevelopment, development, or rehabilitation of other RAD conversions, public housing, Section 8, Low Income Housing Tax Credits (LIHTC) or other federal or local housing programs that either (i) serve households with incomes at or below 80% of the area median income or (ii) provide services or amenities that will be used primarily by low-income households as defined by the United States Housing Act of 1937.

  • Expanded Criteria for Ownership or Control Requirement

The latest revisions to the RAD Notice describes further circumstances under which a public or non-profit entity acting directly or through a wholly owned affiliate can meet the ownership or control requirements, including if it (i) holds a fee simple interest in the land; (ii) is the ground lessor pursuant to a ground lease with the project owner; (iii) has legal authority to direct the financial and legal interests of the project owner with respect to the RAD units; (iv) owns 51% or more of the general partner/managing member interest in a limited partnership or limited liability company; (v) owns less than 51% of a general partner/managing member interest but holds certain HUD-approved control rights; (vi) owns 51% or more of the total ownership interests and holds certain HUD-approved control rights; or (vii) enters other ownership and control arrangements as approved by HUD.

  • Maximum Developer Fee

For LIHTC transactions, undeferred portions of earned developer fee are now capped at the greater of (a) 15% of total development costs less acquisition payments to the PHA, developer fees and reserves; and (b) the lesser of (i) $1 million and (ii) 15% of the total development costs without any offsets for acquisition payments to the PHA, developer fees and reserves. Developer fee limits applicable under the prior version of the RAD Notice continue in effect for all transaction in which the RAD Conversion Commitment (RCC) was issued within 60 days following the current revisions to the Notice and which close prior to the later of 60 days after the revised Notice and 60 days after the RCC.

Developer fee remains subject to the LIHTC allocating agency’s schedule for payment. For non-LIHTC deals, the total earned developer fee can be up to 10% of total development costs less any acquisition costs, reserves, or developer fee payments. The revised RAD Notice also states that earned developer fee is also not subject to any federal restrictions, whereas RAD Notice Rev-2 only stated that it was not to be counted as program income.

  • Capital Needs Assessment (CNA) Exemptions

The revised RAD Notice allows HUD to exempt projects from the need to conduct a Capital Needs Assessment where the total number of RAD and other PBV-assisted units constitute less than 20% of total units at project, or a higher amount at HUD’s discretion. It is also important to note that under this revision, all CNA exemptions listed are discretionary not automatic, and must be confirmed with the assigned RAD Transaction Manager for the project conversion.

To review additional changes made in the latest version of the RAD Notice, HUD has also offered a blackline comparison to Revision 2.  

HUD Publishes Guidance on Disposition of Particular Public Housing Property

Posted in Public Housing, RAD

On November 29, 2016, HUD published Notice PIH 2016-20 (HA) on the subject 2 CFR 200.311(c)(1) Disposition Instructions for the Public Housing Agency (PHA) Retention of Certain Public Housing Real Property (that is no longer used or was never used for public housing dwelling purposes) Free from Public Housing Use Restrictions (the “Notice”).  The Notice covers instances in which a PHA desires to retain particular property rather than sell, transfer or ground lease the property to a separate entity.

A main example for such disposition is property that once comprised public housing dwelling units assisted under Section 9 of the 1937 Act that are no longer receiving the benefit of any Section 9 assistance because the assistance was transferred through the Rental Assistance Demonstration (“RAD”). The Notice provides the following additional examples of public housing property that are eligible for disposition and retention by the PHA under the Notice:

  • administrative buildings, central warehouses, garages, community buildings or other non-dwelling structures that the PHA no longer needs to support its public housing units;
  • vacant land that formerly comprised public housing units that have been demolished with HUD approval under HOPE VI, Choice Neighborhoods grants, or Section 18 demolition under the 1937 Act;
  • “excess” vacant land that was acquired by the PHA with public housing funds from the 1937 Act, but was never developed with units operated as public housing; and
  • “excess” vacant land that was not released from the Declaration of Trust as part of a RAD.

Unless an exception is granted by HUD, a request to retain the property will require the PHA to compensate HUD based on applying the percentage of HUD’s participation in the cost of the original purchase (and costs of any improvements, including subsequent modernization) of the public housing property to the fair market value of the project or property. This calculation will often result in the PHA compensating HUD 100% of the fair market value of the property, since generally public housing property has been funded exclusively with public housing funds.

The PHA can request an exception to the compensation requirement under two scenarios. The first is if the public housing property proposed for retention will include development of rental housing or homeownership units that will be operated as housing affordable to low-income families (e.g., families with incomes at or below 80% of area median income with rents generally not to exceed 30% of 80% of area median income). The second scenario in which HUD will consider an exception to HUD compensation is if retention of the property will allow for a non-dwelling use that primarily serves or supports the service of low-income families.  HUD may require the recordation of a use restriction against the property, typically for not less than 30 years, if HUD grants a compensation exception.

To retain property as described in the Notice, PHAs must submit an Inventory Removal Application Form (HUD-52860) and HUD-52860 Addendum-G electronically and the Notice details the information to be included in the application, which includes, but is not limited to, specific authorization for the retention in the PHA Plan, an estimate of the fair market value based on an appraisal and a letter of support from the chief executive officer of the unit of local government.