Friday news roundup 9/12/14

HERA infographic

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In case you missed the update to our recent blog post about increased admin fees, we’ll repeat it here: there is NO time limit on using the new funding. We had originally stated that HUD would recapture unused amounts after December 31, 2014. Our apologies for the error.

Affordable Housing Finance: David Gasson reflects on how the LIHTC program fared in the 113th Congress and looks ahead to the 114th

Harvard Joint Center for Housing Studies: The U.S. population has aged significantly (interactive map)

NCSHA: The U.S. is not prepared to meet the housing needs of an aging population

NHC: Even grandmothers get the (NIMBY) blues

NLIHC: Congress returns with full agenda and little time

Off the Charts: How the federal budget process works—and what happens when it doesn’t

Friday news roundup 8/15/14

In a Federal Register notice today, the Department of Housing and Urban Development (HUD) published the proposed fair market rents (FMRs) for federal fiscal year (FFY) 2015 (October 1, 2014, through September 30, 2015). As the notice reminds us:

The primary uses of FMRs are to determine payment standards for the housing choice voucher (HCV) program, to determine initial renewal rents for some expiring project-based Section 8 contracts, to determine initial rents for housing assistance payment contracts in the Moderate Rehabilitation single room occupancy program, and to serve as rent ceilings in the HOME program.

In addition to listing the proposed FFY 2015 FMRs for all areas (see Schedule B), today’s notice:

  • Explains that the proposed FFY 2015 FMRs reflect the estimated 40th and 50th percentile rent levels trended to April 1, 2015
  • Announces that the proposed FFY 2015 FMRs do not reflect any updates to the methodology used to calculate FMRs
  • Lists the proposed FFY 2015 small area FMRs for the 5 demonstration participants (see Schedule B Addendum)
  • Lists the proposed FFY 2015 FMRs for manufactured home spaces in the HCV program (see Schedule D)

The accompanying FMR data set has been posted to HUD’s Policy Development and Research (PD&R) FMR page and includes the following items:

If you wish to submit comments on the proposed FMRs, you have until September 14 to do so. Final FMRs will become effective on October 1. For instructions on how and where to submit comments, see the “Addresses” section in today’s notice. For complete documentation of the development of the FMRs proposed for your area, visit this page at the HUD User Web site. In other news:

NLIHC: Senators urge Secretary Castro to issue final AFFH rule

Novogradac: NCSHA data reveals growth in LIHTC allocations and units produced

Rooflines: The dangerous rhetoric of escaping to opportunity

How to Avoid Noncompliance: Low-Income Housing Tax Credits (LIHTC) and Hot Topics from IRS Newsletters

NMA trainers Samantha Pratter and Sheryl Putnam at last year’s NMA Housing Conference

NMA trainers Samantha Pratter and Sheryl Putnam at last year’s NMA Housing Conference

Trainer and consultant Samantha Pratter has been a part of the NMA team since 2008. As NMA’s writing supervisor, Samantha oversees publications from concept and creation through the ongoing revision process, including NMA Master Books, model policies, course books, and handbooks. She recently wrote for the NMA blog about the key differences between the project-based voucher (PBV) program and the (HCV) housing choice voucher program.

As NMA’s professional development manager, Sheryl Putnam spearheaded the development of our new Blended Occupancy Management and Fundamentals of Low-Income Housing Tax Credit (LIHTC) Management certification seminars. Prior to joining Nan McKay and Associates in 2011, she managed the compliance department for a state housing finance agency, providing compliance oversight activities for the LIHTC, PBRA, and HOME programs. Sheryl will be presenting several sessions at the 2014 NMA and GoSection8 Housing Conference, including this one and How to Avoid Noncompliance: Blended Occupancy.

Ensuring Compliance and Maximizing Financial Resources

How to Avoid Noncompliance: Low-Income Housing Tax Credits (LIHTC) and Hot Topics from IRS Newsletters
Presenters, Sheryl Putnam and Samantha Pratter

The LIHTC Newsletter, which the Internal Revenue Service (IRS) has been publishing since 2000, is an excellent resource for addressing many issues owners face and also provides a valuable forum for networking, sharing information about IRC 42, and communicating guidance. This session will focus on some of the important topics covered in recent newsletters, including information on CHG 4 to the HUD Handbook 4350.3, the exception for married students under the student rule, using new income limits, first-year certifications, reporting noncompliance with utility allowance requirements, treating buildings as part of a multiple building project, and the available unit rule.

Our free one-on-one consulting sessions at the second annual NMA and GoSection8 Housing Conference in Chicago are filling up fast! Sheryl’s already fully booked, but Samantha and other industry experts are still available, so sign up now and save your seat. Register online or email sales@nanmckay.com for more information.

How to Avoid Noncompliance: Low-Income Housing Tax Credits (LIHTC) and Using the 8823 Guide in LIHTC Developments

NMA trainers Samantha Pratter and Sheryl Putnam at last year’s NMA Housing Conference

NMA trainers Samantha Pratter and Sheryl Putnam at last year’s NMA Housing Conference

Trainer and consultant Samantha Pratter has been a part of the NMA team since 2008. As NMA’s writing supervisor, Samantha oversees publications from concept and creation through the ongoing revision process, including NMA Master Books, model policies, course books, and handbooks. She recently wrote for the NMA blog about the key differences between the project-based voucher (PBV) program and the (HCV) housing choice voucher program.

As NMA’s professional development manager, Sheryl Putnam spearheaded the development of our new Blended Occupancy Management and Fundamentals of Low-Income Housing Tax Credit (LIHTC) Management certification seminars. Prior to joining Nan McKay and Associates in 2011, she managed the compliance department for a state housing finance agency, providing compliance oversight activities for the LIHTC, PBRA, and HOME programs. Sheryl will be presenting several sessions at the 2014 NMA and GoSection8 Housing Conference, including this one and How to Avoid Noncompliance: Blended Occupancy.

Ensuring Compliance and Maximizing Financial Resources

How to Avoid Noncompliance: Low-Income Housing Tax Credits (LIHTC) and Using the 8823 Guide in LIHTC Developments
Presenters, Sheryl Putnam and Samantha Pratter

As a tax credit owner, avoiding noncompliance in the LIHTC program is a top priority. The Guide to Completing Form 8823, which is a compilation of references with explanations for applying the rules, can provide valuable information on how noncompliance in the program is identified and categorized. The session will include an overview of the Form 8823 and the accompanying guide, as well as a discussion of topics addressed in the 8823 Guide such as changes in household composition, moves, and utility allowances.

Sheryl, Samantha, and other industry experts will be available for limited free one-hour consulting sessions at the 2014 NMA and GoSection8 Housing Conference. Registered participants can sign up on a first-come, first-served basis, so don’t delay! Register online or email sales@nanmckay.com for more information.

How to Avoid Noncompliance: Blended Occupancy

Sheryl Putnam

NMA professional development manager Sheryl Putnam will be presenting a session on blended occupancy at this year’s NMA Housing Conference

As NMA’s professional development manager, Sheryl Putnam spearheaded the development of our new Blended Occupancy Management and Fundamentals of Low-Income Housing Tax Credit (LIHTC) Management certification seminars. Prior to joining Nan McKay and Associates in 2011, she managed the compliance department for a state housing finance agency, providing compliance oversight activities for the LIHTC, PBRA, and HOME programs. Sheryl recently wrote a series for the NMA blog about blended occupancy projects and will be presenting the following session at the 2014 NMA and GoSection8 Housing Conference.

Ensuring Compliance and Maximizing Financial Resources

How to Avoid Noncompliance: Blended Occupancy
Presenter, Sheryl Putnam

Managing housing developments with multiple funding sources can be complicated. Requirements from multiple oversight agencies need to be satisfied, and there’s an overall lack of guidance on how to operate blended developments, since each monitoring agency audits for compliance with its own program requirements. Because penalties for noncompliance can be severe, this session will explore some of the most complicated compliance areas, including:

  • Applying income limits and income targeting requirements
  • Applying correct rent limits/restrictions
  • Understanding and applying the LIHTC and Section 8 student rules
  • Differences in income and asset calculation and verification
  • Applying utility allowances correctly

Sheryl and other industry experts will be available for limited free one-hour consulting sessions at the 2014 NMA and GoSection8 Housing Conference. Registered participants can sign up on a first-come, first-served basis starting July 14. Register online or email sales@nanmckay.com for more information.

What does the deregulation of HQS inspections mean for our industry?

Until last week, when HUD published the implementation notice for the changes mandated by the 2014 appropriations act, housing authorities were required to inspect units at the time of initial lease-up and thereafter at least once every twelve months. The new notice relaxes that requirement, specifying that an HQS inspection must occur at least once every two years.

It also provides PHAs with the option of relying on comparable inspections done by other agencies, such as those performed for the HOME or low-income housing tax credit (LIHTC) programs, if the other inspection uses similar standards to HUD’s housing quality standards (HQS). This will be true for both initial and ongoing inspections.

PHAs are still responsible for ensuring that subsidies are paid only for units meeting HQS. The hope is that PHAs will focus inspections on the most risky units, while improving compliance overall.

In addition to this widely discussed change from annual inspections to biennial inspections, there’s also the issue of self-certification, with relatively undefined guidelines. HUD offered some guidance last year with the issuance of Notice PIH 2013-17, which provided instructions for the use of photos during the HQS inspection process and included the key point that PHAs may use them to verify that deficiencies have been corrected.

These HQS deregulations are intended to save costs, reduce administrative burdens, and streamline rental programs. While they are now available for implementation by PHAs on a limited basis, further guidance and rule making is expected from HUD. However, we now have enough information to discuss and plan for these changes. How will they affect the affordable housing industry and, more importantly, how will they affect the families we serve?

Over the last year, the housing choice voucher program felt some of the most immediate and severe consequences of sequestration. Industry groups estimate that, due to sequestration, the program served about 70,000 fewer families as compared to a year earlier. Reductions in administrative fees have caused financial stress throughout the industry. Ultimately, the entire program has taken a beating over the last few years, and PHAs are struggling to find ways to continue operations and the business of serving families.

Providing access to affordable housing in safe, secure, and sanitary condition remains the mission of our agencies and the foundation of the HCV program. PHAs need to balance available resources to ensure that families have HAP contracts, that lease-ups are done correctly and on time, and that all other requirements are in place. As an industry, we find ourselves considering several weighty questions: How do we balance deregulation of HQS inspections with what’s right for the family? How do our decisions reflect the mission statement at each individual agency? At what point do we lose sight of our mission statement?

In other words, just because we can, does that mean we should?

It’s a delicate balance. We’re faced with a moral dilemma which is driven by economics, need, and desire to help as many families as possible. And we recognize that it’s not a perfect environment in today’s world and certain things have to give.

Tip #1: Consider your PHA’s mission statement.

Most agencies have always viewed themselves as the protector of their clientele, meaning that they are the guiding force that ensures all families have safe, secure, and sanitary housing. That’s the mission statement of HQS inspections; it’s been the mission statement from the beginning. In moving forward with these new pieces of deregulation, it’s important that PHAs consider their own mission statements as they’re designing and crafting ways to take advantage of these available resources. Just because these new options are available, are they always the best choice for our agencies and for the families in our program?

The agencies I’ve been working with recently are grappling with this question, and the answer isn’t always immediately clear. Agencies are trying to put their resources in the very best places, and while no one is particularly excited about not doing reinspections or not confirming that repairs have been done, the budgets just don’t allow us to do everything we’d like to do. These are very difficult decisions for agencies to make.

The real question is: Where do we put the family in the

mission statement, and how does that apply to deregulation?

Is it always a good idea, and if it is, is it always an all-or-nothing?

Ultimately, we should strive to find a balance between the new options available to us and how we can apply them to the program while staying true to our mission statement.

Tip #2: Don’t assume, “Biennial is good, because it’s going to save us money.”

Biennial inspections are something we’ve seen handled in two different ways. In some cases, the PHA just cuts inspections down the middle — every odd number gets inspected this year, and the next year the other batch gets inspected. That’s a more extreme option.

On the other hand, I work with several MTW agencies that, given this flexibility, chose to focus their efforts on properties that have not been maintained in HQS (that is, they have failed the first inspection) and developed their guidelines accordingly. For example, one agency said, “If you fail the first inspection, we’re going to come back out in six months.” They want to stay right on top of it. If you pass the first inspection, then you’re eligible for the biennial. This reduces the potential for fraud and abuse by landlords.

In the high level, we have two points of deregulation that

are available: self-certification components (without a clear

idea of what that should look like) and biennial inspections,

which have been available to Moving to Work (MTW)

agencies for years and will now be available to all PHAs.

My concern, in the bigger picture, is when you start merging biennial inspections and self-certification. If an agency decides to do biennial inspections but keep reinspections, at least there’s a check and balance. Or if an agency says they’ll do annual inspections but allow landlords to self-certify, again, there’s a check and balance. It’s when you start combining both those options that you begin to see how things can unravel.

In the worst-case scenario, you could have a property that fails for significant deficiencies. The landlord opts to participate in the self-certification program. He signs an affidavit that repairs have been made, no reinspection has been put into place, and you end up with a property that hasn’t been looked at in two years and isn’t safe, secure, or sanitary.

When we push deregulation options to the furthest extreme, it’s vital that we consider the risk of paying HAP on a property that doesn’t meet minimum HQS and is putting families in danger of living in such conditions for a period of two years before someone even goes out to check.

Tip #3: Think through what your agency would need to manage a well-run self-certification program.

With self-certification, the idea is that we’re eliminating the reinspect process, which would save time, effort, and energy for agency staff. But before making a decision, consider what the self-certification option might look like at your agency. Remember, you still have to have an affidavit or an inspection within the 30 days. Even self-certification doesn’t allow you to send out a notice and then not have a follow-up. So if you wait 21 days to find out if the certification comes in, and it doesn’t, then you’re out of time to give reasonable notice to the landlord and the tenant that the inspection is going to move forward.

The primary issue with self-certification, then, is the need it creates for a new tracking system. The most viable one I’ve seen is that you actually schedule the reinspection, provide the self-certification documentation with a drop-dead date (say, 21 days), and if they haven’t provided the self-certification documents within that time period, then the reinspection automatically moves forward. Otherwise you run into a situation where you don’t have adequate time to notice it and you’re going to be falling outside of the 30-day reinspection notice required by HUD.

So does self-certification actually save time? You’ve got clerical staff touching these documents two, three, four times — picking up the file, scheduling the reinspection, managing and tracking the self-certification, possibly including images to document proof of repair and appending them to the file, and going in and canceling the reinspection. And they’re doing all this manually, because no housing software has a solid tracking system for self-certification — it’s something that’s just hit the boards, and everyone’s doing it a little differently. There’s room for a lot of things to slip through the cracks and have a direct impact on SEMAP findings.

Another issue with self-certification is the question of who’s going to sign the affidavit — owner, tenant? We’re asking someone who’s never been to HQS training to certify that a repair meets HQS standards. So the other approach I’ve seen is agencies asking for proof of repair, such as a photograph or a receipt. But now somebody has to gather the documentation, we still have the notice issue, we still have the reinspection issue, and now you have to have staff focus on tracking every single fail to determine whether or not a self-certification came in, and if it did come in, did the documentation meet minimum standards for your agency to mark it as a pass?

That’s a lot of subjective review. It’s time-consuming, and it puts an agency at substantial liability because now your agency is making a decision as to whether or not a landlord has provided adequate verification of repair.

Of course, we’ll know more about the potential benefits and drawbacks of HQS deregulation after HUD integrates stakeholder input into a final rule. But for the time being, these questions should give us plenty to think about.

As project manager of NMA Inspections, Michael Petragallo leverages over 20 years of experience providing HQS inspection services and more than 1.5 million successfully completed HQS, UPCS, and rehabilitation inspections. Our team of NMAI inspectors have an average background of 12 years’ experience conducting inspections, are highly qualified and certified in HQS and/or UPCS, and have completed required sensitivity and sexual harassment training as well as extensive criminal background checks before beginning work. For more information about NMA Inspections, please visit our website or contact us directly at sales@nanmckay.com.

HUD publishes HERA final rule

Yesterday in the Federal Register, the Department of Housing and Urban Development (HUD) published the long-awaited final rule implementing changes from the Housing and Economic Recovery Act of 2008 (HERA). While the majority of regulatory changes apply to the project-based voucher (PBV) program, the final rule also makes two conforming changes applicable to the tenant-based HCV program.

HERA’s self-implementing provisions were described in a Federal Register notice published on November 24, 2008. On May 15, 2012, HUD published a proposed rule covering HERA provisions that were not self-implementing. Today’s notice finalizes the proposed rule, with changes, and also makes conforming changes to establish HERA’s requirements by regulation.

➤  Changes Applicable to Tenant-Based Program: The final rule revises HUD’s Part 5 income regulations to exclude deferred disability payments from the Veterans Administration. This change was implemented in 2008. Today’s rule also makes streamlining changes to rent reasonableness determinations for units receiving low income housing tax credits (LIHTC).

➤  PBV Changes to Part 983 Regulations:

  • The final rule corrects a regulatory error that excluded “cooperative housing” from the PBV program. Units in cooperative housing are eligible for PBV assistance.
  • The rule makes several regulatory changes to implement the substitution of the word “project” for “building.” These changes cut across several areas of program operation. For example, where the prior rule capped non-excepted PBV units at 25 percent of the units in a “building,” the cap is now at 25 percent of the units in a “project.” A project is defined as a single building, multiple contiguous buildings, or multiple buildings on contiguous parcels of land.
  • The notice clarifies the term “commencement of construction” for purposes of contract execution. Commencement of construction occurs when excavation or site preparation (including clearing of the land) begins. A PHA may not attach or pay PBV assistance for units for which construction or rehab has commenced prior to execution of the agreement to enter into a housing assistance payments contract (AHAP).
  • The final rule gives PHAs the discretion to state in the HAP contract that rent to owner shall not be decreased below the initial rent. Rent to owner may not exceed reasonable rent unless the PHA has included this clause in the HAP contract. The establishment of a rent “floor” was mandatory in the proposed rule but the final rule leaves the issue to the PHA’s discretion.
  • The notice also provides guidance on removal of units from the HAP contract when the family’s income increases and tenant rent equals or exceeds rent to owner. The unit must be removed from the HAP contract 180 days after the last HAP payment. Under the existing rule, another unit may be substituted. The final rule adds a provision for fully-assisted projects: the PHA may reinstate the unit to the HAP contract once the ineligible family moves out.
  • In another change to occupancy rules, the notice provides that elderly or disabled families living in excepted units may continue to occupy the unit after the elderly or disabled family member dies or moves out. The change was made in response to concerns that under the current rule, such families were required to vacate because they no longer qualified for the excepted unit. PHAs now have the discretion to allow the family to continue to occupy the unit and to continue to count the unit as an excepted unit for as long as the family lives there.
  • The final rule also makes minor changes to the regulation covering families occupying units which are overcrowded, under-occupied, or contain accessibility features which the family does not need. The final rule draws a distinction between families who are offered tenant-based assistance to move and those who are offered other forms of continued housing assistance.
    • If the family is offered a tenant-based voucher, the PHA must terminate the HAP for the wrong-sized or accessible PBV unit at the earlier of the voucher expiration date or the date the family vacates the PBV unit. If the family does not move by the voucher expiration date, the PHA must remove the unit from the HAP contract.
    • If the family is offered other, non-voucher housing assistance and does not accept the offer or vacate the PBV unit within a reasonable time (as defined by the PHA), the PHA must terminate the HAP at the end of the reasonable time period. The PHA must also remove the unit from the HAP contract.

The final rule will become effective on July 25.

To receive more updates and analysis like this on the latest HUD news, subscribe to NMA’s PIH Alert and receive a daily email with breaking stories and other important information for PHAs and housing professionals. Have you entered our contest to win a free year’s subscription to the PIH Alert? Don’t delay, the contest ends June 30!

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