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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.

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.

 

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.

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.

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 issued a Federal Register Notice offering initial implementation guidance for the Housing Opportunities through Modernization Act of 2016 (HOTMA) (Pub. L. 114-201). The notice highlighted both the HOTMA provisions that are self-implementing or otherwise already in effect, and outlined certain key HOTMA provisions that will require further action by HUD.

In addition to the five self-implementing HOTMA provisions noted in our previous blog post, the following HOTMA provisions are also currently in effect due to prior HUD rulemaking or notices:

  • Section 402: Inclusion of Public Housing Agencies (PHAs) and Local Development Authorities in Emergency Solutions Grants (ESG)
  • Section 501: Inclusion of Disaster Housing Assistance Program in Certain Fraud and Abuse Prevention Measures
  • Section 502: Energy Efficiency Requirements under the Self-Help Homeownership Opportunity Program
  • Section 701: Formula and Terms for Allocations to Prevent Homelessness for Individuals Living with HIV or AIDS

In addition to clarifying which HOTMA sections are immediately applicable, the notice also highlights guidance that PHAs and other housing providers can expect from HUD in the future. This guidance includes, but is not limited to, the following topics:

  • PHA discretion in applying different payment standards for family subsidy calculations when fair market rents have decreased
  • Improving coordination between PHAs and public child welfare agencies to carry out the Family Unification Program
  • Conditions and requirements for subawarding ESG funds to PHAs and local redevelopment authorities
  • Changes to the allocation formula for the Housing Opportunities for Persons with AIDS (HOPWA) program, and forthcoming HUD regulations on the reallocation of HOPWA funds to alternative grantees
  • Annual adjusted income caps for public housing tenancy, and regulations outlining subsidy calculations for over-income families remaining in their units
  • Funding Capital Fund Replacement Reserves, caps for capital improvements, plus accounting and reporting requirements for replacement reserve funds
  • Forthcoming Mortgagee Letter to establish specific percentages of owner-occupied units in FHA-insured condominiums

Part IV of the notice also discusses the type of implementation action HUD is considering for the HOTMA sections that require further rulemaking or guidance.  We will continue to monitor HOTMA’s implementation across various HUD programs.

As a follow-up to our March 24, 2016 post, on May 16, 2016, Ballard Spahr submitted comments to the U.S. Department of Housing and Urban Development (HUD) on proposed revisions to documents used in the Rental Assistance Demonstration (RAD) Program, including the Housing Assistance Payments (HAP) contracts, RAD Use Agreement, RAD Conversion Commitment, and Financing Plan. The proposed revisions to the RAD documents represent substantive changes, as well as the incorporation of established policies and riders into the body of the documents.  A full copy of Ballard’s comments can be accessed here.

All comments on the revised RAD documents submitted to HUD can be found on the Regulations.gov website.

On March 17, 2016, HUD published a notice in the Federal Register to announce that  as part of the process to renew the use of the form documents used under both the 1st and 2nd Component of its Rental Assistance Demonstration (RAD) Program, HUD is soliciting public comment on the revised,  and in some cases, newly created, documents used by program participants, including the HAP contracts, Use Agreement, RAD Conversion Commitment, and the Financing Plan submission portal.

RAD was created in order to give public housing authorities (PHAs) a tool to preserve and improve public housing properties and address the $26 billion dollar nationwide backlog of deferred maintenance. RAD also gives owners of three HUD “legacy” programs (Rent Supplement, Rental Assistance Payment, and Section 8 Moderate Rehabilitation) the opportunity to enter into long-term contracts that facilitate the financing of improvements.  Participation in RAD is voluntary. Participating PHAs and Multifamily Owners are required to submit documentation for the purpose of processing and completing the conversion. Through these documents, HUD evaluates whether the PHA or owner has met all of the requirements necessary to complete conversion as outlined in PIH Notice 2012-32 Rev 2 (June 15, 2015) Rental Assistance Demonstration—Final Implementation Notice (RAD Notice).

The public comment period is open for 60 days at which point HUD will review comments and incorporate changes as appropriate. HUD will then re-issue the documents for a 30-day public comment period.  Comments are due Monday, May 16th.

In particular, HUD proposes to make the following changes:

  1. Inclusion of Fair Housing, Civil Rights and Relocation Requirements in RAD Documents:

Consistent with HUD’s RAD Notice, HUD expects that RAD transactions will comply with fair housing, civil rights and relocation requirements and changes to the proposed documents are meant to assist in compliance therewith.   The changes under consideration include the following:

(i) Modifications to the various Housing Assistance Payments contracts to ensure appropriate enumeration of existing fair housing and civil rights requirements and clarification of such requirements;

(ii) Revision and expansion of the FHEO Accessibility and Relocation Plan Checklist to more comprehensively address all federal fair housing and civil rights reviews identified in the RAD Notice (including those derived from the Fair Housing Act, Title VI of the Civil Rights Act of 1964, HUD’s Equal Access Rule, and other authorities) and resident relocation compliance issues;

(iii) Revisions to the RAD Conversion Commitment to add certifications and representations to ensure compliance with fair housing and civil rights requirements until and after the RAD closing.

  1. Clarification of Davis-Bacon Standards – HUD is reviewing the Davis-Bacon Standards in the RCC and HAP Contracts to determine whether they are sufficiently clear or if further clarification is needed.

Form documents on which comment is requested include:

Ballard Spahr will be undertaking a review of the proposed forms and anticipates submitting comments with respect thereto.  We welcome thoughts of our clients and friends who may be interested in compiling joint comments.

Comments can be submitted electronically or to the following address:

Regulations Division
Office of General Counsel
U.S. Department of Housing and Urban Development
451 7th Street SW., Room 10276
Washington, DC 20410–0500

On March 4, 2016, Ballard Spahr submitted comments to the U.S. Department of Housing and Urban Development (HUD) Advance Notice of Proposed Rulemaking (ANPR) regarding over-income families in public housing. The comments addressed the importance of retaining existing public housing authority (PHA) regulatory discretion, inconsistency between the ANPR and other HUD program initiatives, benefits of over-income families provide to PHAs, and other public policy concerns. A full copy of Ballard’s comments can be accessed here. A total of 127 comments have been submitted to date. HUD recently extended the comment period until April 11, 2016.

 

 

 

 

 

On December 31, 2015, the U.S. Department of Housing and Urban Development (HUD) announced the availability of the Affirmatively Furthering Fair Housing (AFFH) Assessment Tool. The AFFH Assessment Tool is for use by local governments that receive CDBG, HOME, ESG, or HOPWA formula funding from HUD, and for joint and regional collaborations between (1) local governments and (2) one or more local governments with one or more public housing agencies.

The AFFH Assessment Tool is intended to assist program participants in developing their Assessment of Fair Housing (AFH) Plan, the substitute for the existing Analysis of Impediments, and complying with the AFFH Final Rule. The AFFH Assessment Tool seeks to identify fair housing issues such as racially and ethnically concentrated areas of poverty, patterns of integration and segregation, disparities in access to opportunity, and disproportionate housing needs. Note that until a program participant is required to submit an AFH Plan, it must still submit an Analysis of Impediments in accordance with existing HUD requirements.

In addition to the AFFH Assessment Tool, HUD released the AFFH Rule Guidebook and updated the AFFH Data and Mapping Tool.  The AFFH Rule Guidebook  provides guidance on complying with the AFFH Rule and completing an AFH Plan, and identifies overlap between the AFH Plan and other plans required for HUD programs. The AFFH Data and Mapping Tool is to be used alongside the User Interface and provides data and maps needed to complete the AFH Plan. Program participants will supplement the HUD-provided data with local data and knowledge to complete the AFH Plan. HUD provides an AFFH Data and Mapping Tool User Guide to assistant program participants.

Lastly, the User Interface provides an online portal for program participants to submit an AFH Plan and collaborate with other program participants.  The User Interface is currently only available to program participants that have an AFH Plan due in 2016. All other program participants are expected to have access to the system in time to begin planning their AFH. HUD will provide further instructions regarding access to the User Interface in Spring 2016. HUD also plans to hold a demonstration of the User Interface in the next few months. To participate in the demonstration, contact Yvonne.F.Hsu@hud.gov.