U.S. Department of Housing and Urban Development (HUD)

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.

 

As we head into the fourth quarter, HUD sent out an e-mail reminder Friday afternoon about flexibility when establishing Housing Assistance Payments (HAP) contract effective dates in Rental Assistance Demonstration (RAD) transactions. The January 2017 revision to the RAD Notice at Section 1.13(B)(5) gives Project Owners the ability to establish a HAP contract effective date of either 1) the first day of the month after closing, or 2) the first day of the second month following closing.  For example, this flexibility allows RAD transactions that close in October to have a HAP effective date of either November 1 or December 1.

The fourth quarter has historically been the busiest time for closing RAD transactions, and HUD made this policy change to try to relive come pressure from the November closing schedule. In the reminder, HUD suggested that those with hard November closing deadlines should consider closing in October but maintaining a December HAP effective date. HUD strongly encouraged working toward an October closing if a December 1 HAP effective date is critical to the transaction.

The HUD reminder also reiterated the milestones established by HUD in March for yearend closings:

 

Step

Deadline to close by Nov. 30, 2017 Deadline to close by Dec. 31, 2017
Receive a RAD Conversion Commitment (RCC) August 16 September 15
Submit complete closing package September 1 October 1
All RAD documents approved and ready for HUD signatures November 16 December 14

HUD’s methodology for prioritizing yearend closings are based on several factors, including:

  • Adherence to the deadlines set forth in the table above.
  • Prioritization categories for CHAP processing listed in Section 1.11 of the RAD Notice.
  • Critical deadlines beyond the control of the PHA and its development team (note that HUD will require documentation of these deadlines when considering this factor).
  • Lower priority will be given to transactions when the original RCC expiration date has been extended past 90 days from issuance.

Ballard Spahr will continue to monitor any further guidance issued by HUD regarding yearend RAD closings and update our readers.

On September 11, 2017, HUD published a Notice designating the 2018 Qualified Census Tracts (QCTs) and Difficult Development Areas (DDAs) for the Low Income Housing Tax Credit (LIHTC) program. Qualified Census Tracts are those areas where either (1) 50% or more of the households have incomes below 60% of the area median gross income or (2) the poverty rate is at least 25%. Difficult Development Areas are those areas with high construction, land and utility costs relative to the area median gross income.  Both QCTs and DDAs are eligible for an increase in basis and available tax credits of up to 30%.  The Notice specifically details HUD’s methodology in determining the QCTs and DDAs through the use of fair market rents, FY2017 income limits, census counts, and other income and poverty data. An interactive map, full listing of the 2018 QCTs and DDAs, and other historical data can be accessed at https://www.huduser.gov/portal/datasets/qct.html.

These 2018 designation lists are effective for allocations of LIHTC credit after December 31, 2017, or in the case of bond transactions where tax-exempt bonds are issued and the building is placed in service after December 31, 2017. The HUD Notice also explains the effectiveness of the designations for areas not specifically on a 2018 QCT or DDA list, along with illustrative examples of the consequences of the effective date for areas that either gain or lose QCT or DDA status.

 

 

The Senate Committee on Appropriations unanimously voted on July 27, 2017 to approve its FY2018 Transportation, Housing and Urban Development (THUD) bill.  The bill eliminates the cap in the Rental Assistance Demonstration (RAD) program, which has been supported by Secretary Carson, and also removes RAD’s sunset date.  In addition to the advancements in RAD, some additional rental assistance highlights of the bill include:

  • Increase in tenant-based Section 8 vouchers to $21.365 billion ($1.07 billion above the FY2017 enacted level);
  • Increase in public housing funding to $6.45 billion ($103.5 million above the FY2017 enacted level);
  • Increase in project-based Section 8 to $11.5 billion ($691 million above the FY2017 enacted level);
  • Increase in Housing for the Elderly to $573 million ($70.6 million above the FY2017 enacted level); and
  • Increase in Housing for Persons with Disabilities to $147 million for  (nearly $1.0 million above the FY2017 enacted level).

The Senate Committee on Appropriations released an overall summary of the bill that can be found here.  Unlike the drastic cuts seen in the House’s THUD bill, the Senate’s bill delivers increased overall funding of $60.058 billion ($3.5 billion higher than the House). This funding level represents an increase of $2.407 billion over current levels.  While many speculate neither the Senate nor the House will move their respective THUD bill to the floor, the Senate’s funding levels represent a step in the right direction for those that rely on many HUD programs.

  • 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 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.

 

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.

 

RoadSection 243 of the FY2014 Appropriations Act for the United States Department of Housing and Urban Development authorized certain statutory changes to the United States Housing Act of 1937. HUD issued notices implementing these changes on May 19, 2014, and June 25, 2014. This proposed rule published in the Federal Register on January 6, 2015, begins the process of codifying the statutory changes which seek to alleviate administrative burdens and streamline requirements across HUD programs such as public housing,  Section 8, and multifamily housing rental assistance programs. The rule generally proposes the following:

Proposed Changes to Public Housing, Housing Choice Voucher, and Multifamily Program Regulations

  • Allows for easier verification of Social Security Numbers for children under 6 years old.
  • Re-defines “extremely low-income families” to a family whose income does not exceed the higher of 30% of area median income or the poverty level.
  • Re-defines “annual income” to either actual past income or projected income.
  • Permits exclusion of education fees in excess of tuition from the definition of income.
  • Streamlines the process for annual reexamination of annual income for families with 100% fixed income.

Proposed Changes to Public Housing and Housing Choice Voucher Program Regulations

  • Permits housing authorities to make utility reimbursements of $20 or less per quarter on a quarterly basis rather than a monthly basis.
  • Limits the Earned Income Disregard (EID) to 24 consecutive months from the date that a participant qualifies for the EID for programs other than HOPWA.  The rule would also afford PHAs discretion in phasing in rent increases during the second 12 month period, provided the participant has remained continually employed.
  • Permits housing authorities to accept a family’s declaration of assets under $5,000 without taking additional steps to verify the accuracy of the declaration.

Proposed Changes to Public Housing Program Regulations

  • Permits housing authorities to use flat rents for families that include members with and without citizenship or eligible immigration status.
  • Permits housing authorities to establish flat rents equal to no less than 80% of the applicable Fair Market Rents and to phase in the flat rents to the extent it would increase a family’s rent by more than 35% in any one year.
  • Permits tenants to provide self-certifications to demonstrate compliance with  community service requirements.
  • Streamlines grievance regulations with regard to informal settlements, grievance procedures for failure to request a hearing, and matters relating to transcripts, copies, and the conduct of the hearing.
  • Limits the number of vacant units eligible for operating subsidy to no more than 3% of the total units per project.

Proposed Changes to Housing Choice Voucher Program Regulations

  • Permits housing authorities to limit resident move-ins to assisted units certain days of the month, such as the first day of the month.
  • Permits housing authorities to conduct biennial inspections and rely on an inspection conducted in connection with another program.
  • Permits housing authorities to charge reasonable fees to an owner who indicates that a HQS violation has been fixed, but a reinspection indicates that the violation has not been fixed.
  • Permits housing authorities to approve a payment standard of no more than 120% of the Fair Market Rents without HUD approval if required as a reasonable accommodation for a family with a disabled member, provided the PHA conducts a rent reasonableness analysis.
  • Permits housing authorities to conform Housing Choice Voucher regulations to less prescriptive public housing regulations regarding interim examinations of income whenever a family member with income is added to an HCV family.
  • Permits utility allowances to be based on the size of the unit and either the type of the unit, as is currently required, or a streamlined version of “unit type”, limited to “attached” or “detached.”

Interested persons are invited to submit comments regarding the proposed rule. Comments are due on March 9, 2015 and must be submitted 1) 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 or 2) by electronic submission at www.regulations.gov.  The January 6th notice identifies certain key areas for which HUD is most interested in receiving comments.

On December 23, 2014, HUD issued a new notice clarifying its Davis-Bacon enforcement strategy for developments participating in the second component of the Rental Assistance Demonstration involving Rent Supplement and Rental Assistance Payments projects. While the initial legislation establishing RAD, the fiscal year 2012 appropriation bill, specifically requires Davis-Bacon compliance at all component 1 properties, the provisions of the legislation authorizing RAD’s second component are not as specific and text within the RAD 2012-32 (HA) notice establishing the RAD parameters does not specifically apply Davis-Bacon to the second component. HUD’s latest publication clarifies that, prior to January 1, 2015, Davis-Bacon will primarily apply to the first component only.

Pursuant to the Housing and Economic Recovery Act of 2008 and subsequent HUD rules and notices, the development of project-based voucher projects with nine or more assisted units are required to comply with Davis-Bacon wage and reporting requirements. These regulations also required Davis-Bacon wages for development or rehabilitation activity at “existing housing” projects.

With respect to RAD conversions, the notice indicates that HUD will proceed as follows:

  • 1st component RAD projects. As specified in the authorizing legislation, any Public Housing or Moderate Rehabilitation projects undergoing a RAD conversion must comply with Davis-Bacon wage and reporting requirements.
  • 2nd component RAD projects. Rent Supplement, Rental Assistance Payment, and Moderate Rehabilitation properties converting to tenant-based voucher assistance under this component must utilize Davis-Bacon wages if they are approved after December 31, 2014. HUD will enforce Davis-Bacon requirements at 2nd component RAD projects that qualify as “existing housing” under the project-based voucher program only if (a) the RAD application made explicit mention of the Davis-Bacon Act or (b) the project was approved by HUD on or after June 25, 2014, or (c) the project was approved by HUD prior to December 31, 2014, and involved low-income housing tax credits that will expire on or after December 31, 2014.

The notice also cautions, however, that it does not stay enforcement actions by the U.S. Department of Labor, so it is still possible that RAD second component projects that follow the Notice’s requirements could still be subject to enforcement actions. It should also be noted that this Notice, like all notices, is HUD guidance and does not have the force of law.

For more information, visit HUD’s Rental Assistance Demonstration or Labor Standards and Enforcements webpages.

House ConstructionThe U.S. Department of Housing and Urban Development has published a rule that makes numerous changes to grant administration, procurement, and contracting requirements. The rule repeals the requirements found at Part 84 and Part 85 and replaces them with the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards found at 2 CFR Part 200. These changes will directly affect state, local, and Indian tribal governments, as well as nonprofit organizations and public housing agencies that receive federal awards. Industry stakeholders including real estate developers, property management companies, and lenders should also take heed.

To read Ballard Spahr’s Legal Alert on the rule, click here. To read the rule in full, click here to for the Federal Register.