Yesterday, HUD announced that it intends to amend its 2015 regulations on affirmatively furthering fair housing, or AFFH. HUD is giving the public 60 days from publication of its advance notice of proposed rulemaking to provide comments on the current AFFH rule.  HUD seeks comments that will help it revise the rule to:

  • “Minimize regulatory burden” while more effectively fulfilling the AFFH requirements
  • Focus on “positive results” rather than “analysis of community characteristics”
  • Allow “greater local control and innovation”
  • Increase housing choice, including greater supply
  • “More efficiently use HUD resources”

This announcement comes after HUD first extended the deadlines for, then withdrew, its AFFH Local Government Assessment Tool, which had been the subject of some controversy related to the reporting burden associated with the tool and other criticisms.  The Local Government Assessment Tool is to be used by cities and other entities that receive Community Development Block Grants, HOME Investment Partnerships Program, Emergency Solutions Grants, or Housing Opportunities for Persons With AIDS formula funding from HUD.  HUD’s announcement also comes while HUD is being sued by advocacy groups related to these actions regarding the assessment tool.

The 2015 AFFH rule contemplated that public housing authorities, states and insular areas would also use a different tool to conduct assessments of fair housing, but those tools have not yet been finalized.

These actions by HUD do not eliminate the Fair Housing Act’s requirements for recipients of HUD funds to affirmatively further fair housing. Indeed, most recipients certify that they further fair housing in connection with various applications for HUD funds and other HUD submissions. Instead, HUD’s actions return most entities to the requirements in effect prior to the 2015 rule, in which they must conduct an analysis of impediments rather than use an assessment tool.

We are working on comments on the AFFH rule, and encourage any entities impacted by the AFFH rule to consider commenting on it.

Today, HUD issued an advanced notice of proposed rulemaking requesting public comments to its 2013 Final Rule which implemented the Fair Housing Act’s disparate impact standard. HUD indicates this rulemaking is in light of the Supreme Court’s  2015 decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., which held that disparate impact claims are cognizable under the Fair Housing Act. HUD is reexamining its rule to determine if any changes may be necessary.

HUD is specifically requesting public comments to the following six questions:

  1. Does the Disparate Impact Rule’s burden of proof standard for each of the three steps of its burden-shifting framework clearly assign burdens of production and burdens of persuasion, and are such burdens appropriately assigned?
  2. Are the second and third steps of the Disparate Impact Rule’s burden-shifting framework sufficient to ensure that only challenged practices that are artificial, arbitrary, and unnecessary barriers result in disparate impact liability?
  3. Does the Disparate Impacts Rule’s definition of “discriminatory effect” in 24 CFR 100.500(a) in conjunction with the burden of proof for stating a prima facie case in 24 CFR 100.500(c) strike the proper balance in encouraging legal action for legitimate disparate impact cases while avoiding unmeritorious claims?
  4. Should the Disparate Impact Rule be amended to clarify the causality standard for stating a prima facie case under Inclusive Communities and other Supreme Court rulings?
  5. Should the Disparate Impact Rule provide defenses or safe harbors to claims of disparate impact liability (such as, for example, when another federal statute substantially limits a defendant’s discretion or another federal statute requires adherence to state statutes)?
  6. Are there revisions to the Disparate Impact Rule that could add to the clarity, reduce uncertainty, decrease regulatory burden, or otherwise assist the regulated entities and other members of the public in determining what is lawful?

The 60 day comment period ends on August 20, 2018. Interested persons can submit comments to HUD electronically through http://www.regulations.gov or by mail.

 Ballard has been closely monitoring potential changes to the Rule and will continue to do so. We will also continue to work with clients on issues pertaining to the Rule.

This week, the National Fair Housing Alliance (NFHA) announced a settlement of a lawsuit against Travelers Indemnity Company in which it alleged that Travelers engaged in discriminatory conduct in violation of the Fair Housing Act (FHA).  NFHA accused Travelers of refusing to provide habitational insurance policies to District of Columbia landlords that rent to tenants who use Housing Choice Vouchers.  NFHA claimed that this policy had a disparate impact on African-Americans and women and served no legitimate business purpose. It was also alleged that the practice violated local fair housing law.

Among other provisions of the settlement, Travelers has agreed not to ask about the source of income of residents at D.C. properties that it considers insuring.  We would note that source of income discrimination is prohibited in the District of Columbia, but is not a federally protected class.

Our friends at the Ballard Consumer Finance Monitor have posted additional information about the lawsuit and the settlement.

Today, HUD issued a notice extending until after October 31, 2020, the deadline for cities and other participating jurisdictions to submit assessments of fair housing (AFH), the new reporting and assessment tool required by HUD’s 2015 affirmatively furthering fair housing (AFFH) rule. Some participating jurisdictions have already submitted AFHs, and the New York Times reports today that HUD says it will stop reviewing them.  Per a prior notice from HUD, AFHs for public housing authorities, states and insular areas have not yet been due.

Today’s notice reminds HUD recipients that they still must affirmatively further fair housing, but we cannot help but wonder if this is the Trump administration’s attempt to start rolling back the AFFH rule, which has been the subject of a fair amount of controversy since its publication.  The AFHs have also raised concerns for many, including PHAs concerned about the unfunded reporting burden and the potential for enforcement if goals outlined in the AFHs are not met.

On Thursday, November 9, 2017 HUD hosted a live webinar to provide an overview and discussion of the recently developed Completion Certification and the RAD Minority Concentration Analysis Tool. A video of the webinar can be found here along with slides from the presentation.

Construction Completion Certification. Once construction or rehabilitiation is complete, Section 1.13(B)(6) of the RAD Notice requires that Owners submit a completion certification including a cost certification and other information about compliance with requirements of the RCC.  The Office of Recapitalization recently created a module on the RAD Resource Desk entitled the “Rehab/Construction Completion Milestone” and also posted instructions on completing the certification.   Submitting the Completion of the Rehab/Construction Milestone information should be done no later than 45 days after completion of the work. The new module requires owners to provide information related to the completion of work, residents’ right of return, and Section 3 hiring achieved.  Owners should become familiar with the requested information regardless of where they are in the RAD conversion process to understand what data will be needed to complete the certification, including some information that dates back to the issuance of the CHAP.

RAD Minority Concentration Analysis Mapping Tool. HUD has released the RAD Minority Concentration Analysis Tool (the “Tool”) in order to help housing authorities assess whether a proposed site for new construction under RAD may be in an area of minority concentration.  The Tool will create a report of data required by the RAD Fair Housing and Civil Rights Notice (H/PIH 2016-17), including minority data from the Census for: 1) the Housing Market Area; 2) the census tract; 3) the area comprised of the census tract of the site together with all adjacent census tracts; and 4) an alternative geography if proposed by the housing authority. The Tool is available at https://www.huduser.gov/portal/maps/rad/home.html and requires creating a user account.

The new HUD administration has been pretty quiet on the regulatory front, with only a handful of regulations and notices issued since January. That may change soon. HUD is hard at work identifying regulatory changes that might be made to comply with Executive Order (EO) 13771, “Reducing Regulation and Controlling Regulatory Costs.”  The EO requires that two regulations be eliminated for each new regulation issued and that the overall costs of new regulations, including repealed regulations, this year be zero. In February 2017, the Office of Management and Budget issued guidance for implementing the EO, and now HUD  seeks the public’s input into which regulations it could modify or eliminate.  Recommendations are due June 14, 2017.

Over the years, a number of groups and agencies have submitted recommendations to HUD for regulatory reform, and this is a good time to reconsider those proposals.  Since the request is for modifications to regulations, not statutes, recommendations should focus upon regulations and guidance that is not required by federal law.  Areas Ballard Spahr has been thinking about recommending changes include:

  • Better ways to implement prevailing wage rate requirements at mixed-use projects where the prevailing wages need not be paid for the full project;
  • Streamlining of the demolition/disposition process for public housing;
  • Modifications to site and neighborhood standards;
  • Modification of the public housing asset management rules;
  • Requirements for designation of public housing as elderly-only; and
  • Thoughtful modifications to affirmatively furthering fair housing requirements.

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.

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 has been quite active this month publishing a variety of new rules and housing notices. The following is a list of some of HUD’s most recent guidance.

For certain public housing authorities (PHAs) with less than 250 public housing dwelling units, this notice offers guidance on the flexible uses of capital and operating funds for large improvements and other eligible expenditures.

For certain metropolitan areas experiencing high housing choice voucher (HCV) concentrations, this final rule allows rents to be determined by zip codes instead of the 50th percentile formula for the entire metropolitan area. According to HUD, using zip codes to define the Small Area Fair Market Rent (FMR)  will allow the agency to provide a more accurate subsidy to reduce the number of voucher families residing in areas of high poverty concentration. The rule also implements the Housing Opportunity through Modernization Act of 2016 (HOTMA) provisions related to FMRs and regulatory changes to the HCV program payment standard adjustments.

This rule amends HUD regulations to include the requirements of the 2013 reauthorization of the Violence Against Women Act (VAWA), which extended VAWA protectections beyond public housing to tenant-based and project-based Section 8 programs as well.

See our recent blog post for more detailed information on these updated RAD civil rights and reolocation requirements.

This PIH notice discusses revisions to form HUD-52725 used to report executive compensation. For calendar year 2015 compensation data collection, PHAs must complete the HUD-52725 form online and submit it electronically by December 9, 2016.

On a case by case basis, HUD will allow for the amendment and restatement of a property’s LIHPRHA Use Agreement to allow the project owner to receive proceeds from the refinance of the property, unlimited annual distributions from surplus cash, and funds accumulated in a residual receipts account. This notice outlines the circumstances under which HUD will allow such amendment and restatement, and approve LIHPRHA preservation transactions.

Pursuant to this notice, HUD allocated $500 million in CDBG-DR funds to assist long-term recovery efforts in Louisiana, Texas, and West Virginia. The notice also outlines the grant award process, and describes eligible disaster recovery activities, alternative requirements, and applicable waivers available to potential grantees.

This rule extends HUD’s equal access protections to HUD’s Native American and Native Hawaiian program regulations to ensure that eligible persons and families have access to housing programs regardless of sexual orientation, gender identity, or marital status.

 

Yesterday HUD published the much anticipated RAD Notice Regarding Fair Housing and Civil Rights Requirements and Relocation Requirements Applicable to RAD First Component – Public Housing (the “Notice”).  The Notice is intended to provide guidance regarding key fair housing and civil rights statutory and regulatory requirements, explain the situations in which HUD is requiring front-end fair housing and civil rights reviews, and provide information regarding the types of information that must be submitted to facilitate HUD’s review of certain fair housing and civil rights requirements in connection with public housing conversions under the First Component of RAD.  The Notice is  also intended to provide guidance in response to requests for clarity among RAD participants on the review process, including how HUD evaluates whether or not to further invest on a particular site.

The Notice is effective immediately and applies to all projects that have applied for conversion under the First Component of RAD but have not yet converted. The Notice will not affect any front-end civil rights approvals provided by HUD prior to November 10, 2016. However, with respect to relocation activities, where a Financing Plan has been submitted and accepted for full review as of November 10, 2016, an exception from the Notice can be sought and the project may continue to be governed by Notice H 2014-09/PIH 2014-17 with respect to relocation activities, but not with respect to fair housing and civil rights requirements.

HUD is hosting a webinar on the Notice on Thursday, November 17th at 2PM ET and you can register to participate via the following link: https://attendee.gotowebinar.com/register/4139672652250681347

HUD also published a Solicitation of Comment seeking public comment on the Notice with a focus on the clarity of the information provided in the Notice.  Comments are due December 14, 2016.

Ballard Spahr will be undertaking a review of the Notice and anticipates posting additional material on the substance of the Notice, as well as submitting comments as necessary.  We welcome thoughts of our clients and friends who may be interested in compiling joint comments.