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!

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.

 

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.

 

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 Announces Nationwide Smoke-Free Policy in Public Housing

The most talked about HUD development this week has been Secretary Castro’s announcement on Wednesday, November 30th that HUD will require all public housing developments to be smoke-free environments. By early February, public housing agencies (PHAs) must implement smoke-free policies that ban listed prohibited tobacco products from public housing living units, indoor common areas, PHA administrative office buildings, and outdoor areas within 25 feet of these spaces. This rule will apply to all public housing, with the exception of Section 8 dwelling units in mixed-finance buildings.

HUD’s Final Rule can be accessed here.

  • HUD Soliciting Comments on HOTMA Public Housing Income Limit Provisions

This week, HUD also published a Federal Register notice that it is soliciting comments on the implementation of the public housing income provisions of the Housing Opportunities through Modernization Act (HOTMA). HOTMA mandates that once a family’s income exceeds 120 percent of the area median income for two consecutive years, the PHA must either terminate the tenancy or charge the family a higher monthly rent. HUD maintains the authority to adjust the 120 percent threshold if the HUD Secretary finds such adjustment necessary.

HUD requests that comments address:

  1.  whether HUD’s current proposed method of determining income limits (as stated in the notice) adequately considers local housing costs and makes appropriate adjustments for higher housing costs, and
  2. other factors HUD should consider when determining whether to make adjustments to the income limit (with specific examples of circumstances not currently captured in HUD’s proposed methodology).

Ballard Spahr’s Housing Group previously commented on HUD’s Advance Notice of Proposed Rulemaking on public housing income limits in March, before HOTMA’s passage.

  • HUD Interim Final Rule on HOME Program Commitment Requirement Changes

By statute, participating HOME Investment Partnership (HOME) jurisdictions must place grant funds under binding commitments within 24 months from the month in which the grant agreement was executed. On December 2, 2016, HUD published an Interim Final Rule changing the way the agency will determine compliance with the commitment requirement. The Rule revises HUD’s longstanding cumulative commitment methodology with a grant specific one that allows participating jurisdictions to select the year HOME grant funds will be committed to a specific project or activity. The Rule also eliminates the 5-year deadline for expenditures of HOME funds appropriated for FY 2015 and following years to better align with recent appropriations statutes and existing HUD deadlines for completing projects assisted with HOME funds.

This Rule affects HOME grants from Fiscal Year 2015 and beyond, and is scheduled to take effect on January 31, 2017. HUD is accepting comments to the interim rule until January 3, 2017 by mail or electronic submission through www.regulations.gov.

 

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.

The U.S. Department of Housing and Urban Development (HUD) recently issued this letter to public housing authority (PHA) Executive Directors regarding the five self-implementing portions of the Housing Opportunities through Modernization Act (HOTMA) (Pub. L. 114-201) that was signed into law on July 29, 2016. According to this guidance, which is also expected to be transmitted through a Federal Register notice soon, the following HOTMA sections are effective immediately:

Section 102(d) – Reasonable Accommodation Payment Standards

Section 107 – Establishment of Fair Market Rent

Section 110 – Family Unification Program for Children Aging out of Foster Care

Section 113 – Preference for US Citizens or Nationals (applicable in Guam only)

Section 114 – Exception to Public Housing Agency Resident Board Membership Requirements (applicable to PHAs in specified jurisdictions)

As the letter points out, all remaining HOTMA sections impacting the housing choice voucher and public housing programs will only become effective upon HUD’s issuance of an applicable notice or regulation for those provisions. Until then, PHAs must continue operate under current housing regulations.

 

The U.S. Department of Housing and Urban Development (HUD) recently issued a memo outlining its processing schedule for mixed-finance projects targeted to close by the end of 2016. According to HUD’s Office of Public Housing Investments, parties wishing to close a mixed-finance transaction by December 31, 2016 must:

  • Submit a complete Development Proposal by November 7, 2016. This deadline also applies to any Proposal revisions. Year-end approval is not guaranteed for project Proposals that HUD determines still need substantial revisions after its review.
  • Submit final, unexecuted evidentiary materials by November 14, 2016. If changes are made post-submission, HUD cannot assure its approval of those documents before December 30, 2016.

Due to staffing constraints during the last week of the calendar year, HUD strongly encourages parties to submit documents early and attempt to close before December 21st. A full copy of the HUD memo can be accessed here.

The Office of Inspector General (OIG) recently released an audit report of HUD examining the extent to which over-income families have been residing in public housing units. “Over-income” means the families were eligible low- income families at the time they were admitted to public housing but their incomes have increased above 80% of area median income during their tenants in public housing. Such occupancy is permitted by HUD regulations and is a discretionary policy that housing authorities may implement. The OIG conducted the review per the request of Congressman David P. Roe.

The OIG stated that as many as 25,226 over-income families have been receiving public housing assistance, according to HUD’s 2014 eligibility income limits. The report concludes with recommendations that HUD direct housing authority policy to better serve and provide opportunity for low-income individuals and families.

While the OIG report provides interesting income-based statistics for the over-income segment of the public housing population, the criticism against HUD is troubling since HUD regulations explicitly give public housing authorities discretion to determine whether to terminate over-income families in public housing. Policies that allow for over-income tenancy may support self-sufficiency goals, and address local housing market conditions. Additionally, families that are identified as over-income help deconcentrate subsidized housing.

RoadAs a follow up to our January 12, 2015 post, HUD published a proposed rule that seeks to alleviate administrative burdens and streamline requirements across the public housing, Section 8, and multifamily housing rental assistance programs. Many of HUD’s proposals stem from innovations implemented by Moving to Work (MTW) participants. The proposed rule makes these innovations available to non-MTW agencies and owners, which is particularly important in light of increasingly limited resources to serve low-income families.

Ballard Spahr’s comments to the proposed rule supports many of HUD’s proposals and suggests ways to further improve other proposals. We look forward to the next stage in the process and are hopeful the rule will lead to new ways of enhancing the delivery of services to the families living in the nation’s affordable housing stock.