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.

July is right around the corner and we wanted to remind everyone of the HUD deadlines for closing RAD conversions by year end:

Required Action Deadline to close by
November 30, 2018
Deadline to close by
December 31, 2018
Upload all required Financing Plan
documents*
June 15 July 13
Receive a HUD-executed RCC** August 17 September 14
Submit complete closing package** September 1 October 1
All RAD documents approved and ready for HUD signatures** November 15 December 13

* Note: FHA applications should be submitted at roughly the same time as the Financing Plan documents. PHAs should coordinate with their FHA lender to stay on track.

** Note: An RCC that has already been extended up to or beyond 6 months past the date of issuance will have a lower priority for closing during CY2018.

These deadlines don’t always align with standard low income housing tax credit closings and can sneak up quickly.  Keep the following tips in mind to manage a successful year end conversion:

  • Know the RAD checklists (PBV and PBRA) and what transaction documents must be submitted to HUD.
  • Work out any title and survey issues before HUD submission.
  • Establish a detailed RAD timeline and engage with financing partners as soon as possible on the timeline.
  • Share the HUD-required ownership and control provisions that must be included in transaction documents with financing partners prior to the circulation of draft documents.
  • Share the HUD sample RAD Subordination Agreement with lenders as soon as possible.
  • If necessary, consider prioritizing circulation and review of transaction documents that must be submitted to HUD.
  • Account for the time between receiving final HUD approval and HUD signing and mailing documents – this can take over a week.
  • Aim to make an initial submission to HUD within 2 weeks of RCC issuance (if not sooner). A submission beyond 2 months of RCC issuance will have the transaction placed in “Delayed Submission” status.
  • Make HUD aware of any targeted and hard closing deadlines.

Cheers to a smooth year end!

HUD recently issued a set of answers to frequently asked questions to provide further guidance on a new method of disposing of public housing in conjunction with a RAD conversion (the “FAQ”).   Earlier this year, HUD issued Notice PIH 2018-04 (HA) (the “PIH Notice”) addressing a number of public housing demolition and disposition issues.  In particular, Section 3.A.3.c of the PIH Notice permits a housing authority implementing a Rental Assistance Demonstration (“RAD”) project that involves new construction or substantial rehabilitation (defined as involving hard construction costs inclusive of general requirements, overhead and profit, and payment and performance bonds exceeding 60% of the HUD-published Housing Construction Costs) without the benefit of a 9% low-income housing tax credit financing.

For such projects, HUD will allow up to 25% of the units within the RAD project to be disposed under Section 18 of the U.S. Housing Act of 1937 (the “Housing Act”) and eligible for Section 8 tenant-protection vouchers with a means of project-basing the vouchers to be administered pursuant to 24 CFR Part 983 (the “PBV”).  At least 75% of the units within the project are to convert in accordance with RAD. The PIH Notice relies on the RAD definition of “project” (defined as “a structure or group of structures that in HUD’s determination are appropriately managed as a single asset. In determining whether a combination of structures constitute a project, HUD will take into account types of  buildings, occupancy, location, market influences, management organization, financing structure or other factors as appropriate. For a RAD PBV conversion, the definition of ‘project’ in 24 CFR § 983.3 continues to apply for all references to the term in 24 CFR § 983.”)  The total number of replacement units created through the combination of the RAD and Section 18 disposition processes must also satisfy RAD’s “substantial conversion of assistance” standards, meaning that conversions may not result in a reduction of the number of assisted units, except by a de minimis amount.

The FAQ offers examples and explanations of opportunities that could further enhance the viability of a RAD conversion, including the following:

  • The “substantial conversion of assistance” requirements, for example, could be applied in a manner that would designate more than 25% of the units within a project as regular PBV units under 24 CFR part 983 by placing both the TPVs realized under the Section 18 disposition process, together with the 5 units or 5% RAD de minimis allowance under the regular PBV HAP (FAQ 5).
  • A RAD/Section 18 project would utilize two HAPs – the RAD form of HAP (using the CHAP rents to be adjusted annually pursuant to the Operating Cost Adjustment Factor or OCAF) and the standard Part 983 AHAP/HAP (with rents determined based on the lesser of reasonable rent and up to 110% of the fair market rent subject to annual adjustment) (FAQ # and Initial Processing Instructions).
  • TPVs issued for the public housing units removed pursuant to Section 18 of the Housing Act can be directly project-based when the property “substantially meets Housing Quality Standards” (FAQ 3).
  • The application of relocation protections for all residents across a project regardless of the type of unit occupied by the resident (FAQ 6).
  • While conversion of public housing under RAD does not trigger eligibility for the housing authority to receive Demolition Disposition Transition Funding (i.e., formerly known as Replacement Housing Factor funding) or Asset Repositioning Fee, the housing authority would have access to such funds for the portion of the units removed through Section 18 (FAQ 7).

 

Yesterday, the Trump administration released its proposed budget for the 2019 fiscal year. Overall, the budget proposes an $8.8 billion (18.3%) reduction in the HUD budget from the 2017 enacted level, a more drastic cut than the $6 billon HUD budget reduction the Administration proposed for fiscal year 2018. Significant proposals in the budget include:

  • Elimination of several programs including the Community Development Block Grant (CDBG), HOME Investment Partnership Program, Public Housing Capital Fund and Choice Neighborhoods
  • $17.5 billion in Section 8 annual contribution contract renewals (an $800+ million decrease from 2017 enacted level)
  • $10.866 billion in project-based rental assistance (a $50 million increase from the 2017 enacted level)
  • $110 million decrease in Housing Choice Voucher administrative fees
  • $100 million request for the Rental Assistance Demonstration (RAD) program to cover the incremental subsidy for public housing properties that would otherwise be unable to covert to Section 8 assistance
  • Proposed elimination of the unit cap for RAD conversions and September 30, 2020 deadline for RAD application submissions
  • In addition to the elimination of the Capital Fund, $1.7 billion in reductions to the Public Housing Operating Fund
  • $75 million request for the Family Self-Sufficiency program (same as 2017 enacted level)
  • $10 million request for the Jobs Plus Initiative (a $5 million decrease from the 2018 Senate recommendation)
  • Maintained funding levels for lead-based paint mitigation efforts
  • Unspecified funding request to evaluate and improve the EnVision Centers recently launched by Secretary Carson
  • $20 million increase to the Federal Housing Administration (FHA) operations (although a new fee would be imposed on FHA lenders)
  • Requirement that non-disabled persons receiving HUD assistance contribute more than 30% of their adjusted income to their housing costs

Other housing and community development components of this budget include an elimination of the Community Development Financial Institutions (CDFI) Fund grant and direct loan program, $1.8 billion request for veteran’s homelessness programs, and a funding increase for the U.S. Department of Agriculture (USDA) single family housing guaranteed loan program. A full copy of the budget proposal and related materials are available at be www.whitehouse.gov/omb/budget.

Remember that Congress is responsible for passing the budget; this is just a proposal. It remains to be seen if Congress will adopt the President’s proposal. We will continue to provide updates the budget throughout the appropriations process.

 

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.

Just in time for the end of the federal fiscal year (September 30), the HUD Office of Inspector General (OIG) issued a flurry of internal and external audit reports over the last few weeks on a wide variety of topics. They include:

Our friends at NAHRO have alerted us that a new RAD notice will be issued tomorrow, August 23, 2017. The notice requires PHAs who already submitted a RAD letter of interest to preserve their spot on the wait list to submit a RAD application within 60 days if they want to continue in the RAD program. Guidance is also provided for setting rents for all RAD applications awarded outside of the previous 185,000 RAD cap, or for revocations or withdrawals after May 5, 2017 below that cap; rent levels for all such awards will be set at FY 2016 funding levels.  Per the appropriations notice that extended the RAD cap, the outside deadline for final submission of multiphase award applications is extended to September 30, 2020.

Today, the HUD Office of Inspector General (OIG) published a bulletin indicating that it is unclear if undocumented immigrants have access to certain HUD Community Planning and Development (CPD) programs – namely the Housing for Persons with AIDS (HOPWA) and homeless assistance programs.

The bulletin explains that undocumented immigrants do not typically have access to HUD programs such as public housing or Section 8 because such programs are explicitly unavailable to such immigrants.  For many HUD-assisted programs, there is a regulation that specifies which types of non-citizen families may have access to those programs and that instructs PHAs and owners on how to prorate assistance to families that include eligible and ineligible persons.

Exempt from this regulation, however, are programs that provide assistance that protects life and safety – essentially emergency services.  The OIG explains that, unlike the public housing and Section 8 programs, “there does not appear to be any clear guidance” as to whether undocumented immigrants can (or cannot) access programs that are funded through HUD’s community development programs and administered through nonprofits, including HOPWA and homeless assistance. Accordingly, the OIG recommends that HUD clarify this issue.

On August 9, HUD issued to Congress its 16th report on worst case housing needs in the United States, based on 2015 data.  Households with “worst case needs” are those that are very low income, do not receive government housing assistance and either pay more than 1/2 of their income for rent or live in severely inadequate conditions, or both.  Findings include:

  • Severe housing problems are increasing despite a decent economy.
  • In 2015, 8.30 million households had worst case needs. This is an increase from 7.72 million in 2013.  The record high for worst case needs is 8.48 million in 2011.
  • Worst case needs affect all types of households, whether examined by age and ethnicity, household structure, or location
    within metropolitan areas or region.

The report identifies a shift from homeownership to renting as the biggest cause of the increase in worst case needs.  For those of us who work with assisted housing or low-income families, its findings are unfortunately not a big surprise.  However, it underscores the significant unmet needs of so many low-income families.