HUD’s Moving to Work (MTW) Office has been busy! Earlier this month, HUD published for public comment a revised Operations Notice that will govern an expanded MTW program. Just a few days ago, HUD published the much-awaited notice inviting the first round of new applicants for the expanded MTW program. Continue Reading HUD Publishes MTW Operations Notice and Request for First Round of New MTW Applicants

 

The Census Bureau, in conjunction with researchers from Harvard and Brown Universities, this week published a national “opportunity atlas” that tracks outcomes for children in adulthood based on nationwide data. The atlas can be used to find, down to the census tract level, information on positive and negative outcomes for children, with information such as earnings, incarceration rates by parental income, race and gender. See also the New York Times discussion of how the Seattle Housing Authority is using the atlas to allow higher housing choice voucher rents in certain neighborhoods.  Pretty interesting data as we start to implement Opportunity Zones, revise the affirmatively furthering fair housing rule, consider small area FMRs for the voucher program, and plan for new affordable housing developments.

A pending lawsuit against HUD challenging its suspension of its local tool for affirmative fair housing assessments has been dismissed.  Earlier this year, HUD first extended the deadlines for, then withdrew, its Affirmatively Furthering Fair Housing (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.  Advocates challenged HUD’s actions in a lawsuit.

Last week, the court granted HUD’s motion to dismiss the case. The court found that HUD had authority to withdraw the tool.

The dismissal comes as HUD has reopened the 2015 AFFH regulations for public comment.  Comments are due October 15, 2018, and we encourage all who are interested in this topic to submit comments.

 

As indicated earlier this week, HUD is seeking comments to inform revisions to its Affirmatively Furthering Fair Housing rule. We have been waiting for official publication of the advance notice of proposed rulemaking (ANPR) in the Federal Register to determine when these comments will be due. HUD today published the ANPR.  We now know comments are due October 15, 2018.

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.

The Rental Assistance Demonstration (“RAD”) is well known for the option to convert public housing subsidy to a long-term Section 8 Housing Assistance Payments contract (“HAP Contract”) — but RAD also allows owners to convert their Moderate Rehabilitation (“Mod Rehab”) and Moderate Rehabilitation Single Room Occupancy (“SRO”) contracts to a Section 8 HAP Contract.  HUD estimates that there are over twenty thousand units of Mod Rehab and SRO units across the country with no cap on the number of units that can convert through RAD (see database of units here).

Converting Mod Rehab and SRO contracts to long-term Section 8 HAPs through RAD can present advantages to both the owners of the project and the public housing authorities (“PHA”) that administer the existing contracts.  Below are just a few of the possible benefits for owners and PHAs:

Benefits to Owner:
Long-term RAD HAP Contract:

  • Likely higher rents
  • Provides stability
  • Can be used to secure/leverage financing for rehabilitation
  • Preserve affordable housing
Benefits to PHAs:
For Project Based Voucher (PBV) conversions:

  • New vouchers added to PHA’s Annual Contributions Contract (ACC)
  • PHA receives ongoing administrative fee
  • Contract administration responsibilities align with standard PBV program

For Project Based Rental Assistance (PBRA) conversions:

  • HUD administers HAP contract
  • PHA relieved of contract administration

Ballard Spahr recently hosted a webinar with HUD on the RAD conversion process for Mod Rehab and SRO projects.  You can find a recording of the webinar and the associated slides on the Ballard Spahr website.  We are happy to answer and questions you might have on the conversion process.

 

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).

 

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.

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.