NMA Blog

Editor’s Note: Due to HUD’s recent publication of 2018 annual adjustment factors, we are reprising this FAQ from August 2015. The links have been updated for this year’s notice.

QUESTION     You mentioned during a webinar that the only limit on rent increases in the HCV program is rent reasonableness. Our PHA restricts rent increases to the annual adjustment factors (AAFs) published by HUD. We have this policy in our administrative plan and have imposed this limit for years. We feel that this helps to control program costs and helps to control rents in the community as a whole. Why isn’t this permissible as long as it is stated in the administrative plan?

ANSWER     This is an example of a policy that was valid when written, but which is now obsolete. AAFs were used in the old certificate program to determine (or limit) owner rent increases. The certificate program came to an end 17 years ago. AAFs have never been used in the voucher program.

Each year HUD publishes a Federal Register notice discussing the AAFs. Here is an excerpt from this year’s notice, published November 8:

Housing Choice Voucher Program: AAFs are not used to adjust rents in the tenant-based or the project-based voucher programs.

Since agency policies must comply with regulatory requirements, PHAs do not have discretion to impose limits on rent increases in this manner. The applicable regulation is at 24 CFR 982.308(g):

The owner must notify the PHA of any changes in the amount of the rent to owner at least sixty days before any such changes go into effect, and any such changes shall be subject to rent reasonableness requirements.

The following is an excerpt from Section 12.5 of HUD’s HCV Guidebook:

INCREASES IN RENT TO OWNER
An owner may increase the unit rent any time an increase is allowed under the terms of the lease. The owner must give the PHA at least 60 days advance notice of any changes in the amount of rent to the owner. The allowed rent increase is the lesser of the following:

• The reasonable rent as determined by the PHA; or
• The amount requested by the owner.

Also please note the table in Chapter 1 of the guidebook, comparing the certificate and HCV programs:

Rent Increases:

CERTIFICATES: Annually on the anniversary date, the PHA uses annual adjustment factors published by HUD to approve rent increases which are subject to a rent reasonableness test.

HCV: Rent increases are not limited by the annual adjustment factor but are subject to a rent reasonableness test.

The current rule is intended to increase program participation by owners of properties in lower-poverty areas. The “market” rent is to be charged for both assisted and unassisted tenants.

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On Friday in the Federal Register, HUD’s Office of Public and Indian Housing (PIH) published several technical corrections and clarifications to the Housing Choice Voucher (HCV) provisions of the Housing Opportunity Through Modernization Act (HOTMA) it had issued on January 18. These changes are in part based on public comments from the first notice. In brief, the corrections and clarifications are as follows:

• The original notice used the phrase ‘‘50 percent or more’’ to define a level of control that constitutes a controlling interest and would thus indicate PHA ownership. The threshold for control should be ‘‘more than 50 percent’’ rather than ‘‘50 percent or more.’’
• The original notice inadvertently excluded from the list of excepted units those units that have received assistance under Section 201 of the Housing and Community Development Amendments of 1978. Today’s notice adds the Flexible Subsidy program in both lists.
• The original document inadvertently referred to the ‘‘site of the original public housing development’’ instead of ‘‘site of the original development.’’ To avoid any indication that this requirement is only applicable to former public housing units as opposed to all the covered forms of HUD assistance, ‘‘public housing’’ is removed from this part.
• The original guidance states that ‘‘if the FSS family fails to successfully complete the FSS contract of participation or supportive services objective and consequently is no longer eligible for the supportive services, the family must vacate the unit…and the PHA shall cease paying housing assistance payments on behalf of the ineligible family.’’ To avoid misinterpretation that could imply that a PHA could, under HOTMA, establish a supportive services exception based exclusively on participation in FSS, rather than in combination with another supportive services option where participation is voluntary, and to avoid being misconstrued that this conflicts with current FSS requirements, which do not allow termination from the housing assistance program for failure to complete the FSS contract of participation, HUD has amended this language to eliminate the ambiguities.
• The definition of new construction units was previously inconsistent in the January 18 guidance, and has been updated to be both correct and consistent in sections referring to project-based voucher (PBV) assistance.
• HUD stated in the original document that in order to avail itself of the exemption of the competitive award of PBVs, the PHA must “be planning rehabilitation or construction on the project with a minimum of $25,000 per unit in hard costs.” However, because this would not be applicable in a situation where the PHA is replacing a public housing site or property, or a site with PHA-owned or controlled existing housing, several corrections to Section H of the notice have been made.
• Other typographical errors have also been corrected, as specified in today’s notice.

In a separate correction entry for the January 18 notice, PIH also noted that the original document had been published in the Proposed Rules section of the Federal Register, when it should have appeared in the Rules section. The effective date for the original notice—April 18, 2017—remains unchanged.

Got questions about HOTMA? All of NMA's HCV classes have been updated for the new payment standard rules. Register at least 45 days in advance for most seminars and you’ll receive a 10 percent discount. (The discount does not apply to seminars hosted by housing authorities or associations.)

We’re pleased to announce the release of NMA's seminar calendar for the third quarter of 2017. You can view a list of the affordable housing training that Nan McKay and Associates is offering from now through September on this page at our website.

Start planning your summer training now and save! If you register at least 45 days in advance for most seminars, you’ll receive a 10 percent discount. (The discount does not apply to seminars hosted by housing authorities or associations.)

All Nan McKay classes have been updated for the latest HUD rules and notices. Our Fair Housing and Reasonable Accommodation class, the most comprehensive training on fair housing regulations available, has been updated for the recent notices on LEP, sexual harassment, and nuisance ordinances. All of our HCV classes have been updated for the new payment standard rules from HOTMA and the recent Federal Register notice for the student rule.

Having trouble finding the class you want? We can bring the seminar to you. Email sales@nanmckay.com for more information about our affordable onsite training options.

On Wednesday in the Federal Register, HUD's Office of Public and Indian Housing (PIH) published a notice implementing several of the provisions of the Housing Opportunity through Modernization Act (HOTMA) that impact the housing choice voucher (HCV) and project-based voucher (PBV) programs, in addition to requesting comments on both current and future implementing requirements. The HOTMA implementation notice is broken down topic-by-topic, followed by specific questions for comment in each corresponding section. The first sections of the notice address:

• Allowing PHAs to approve tenancy and commence HAP payments when a unit fails HQS, but only if it has non-life-threatening deficiencies.
• Authorizing occupancy prior to inspection if the unit passed under an alternate inspection within the previous 24 months.
• Amending the definition of units owned by the PHA so that the unit is PHA-owned only if unit is in a project that is: owned by the PHA, owned by an entity wholly controlled by the PHA, or owned by an LLC or limited partnership in which the PHA or entity wholly controlled by the PHA holds a controlling interest in the managing member or general partner.

The notice also addresses numerous statutory changes to the project-based voucher (PBV) program set forth under HOTMA, covering implementation requirements for the following:

• Changing the terminology in the statute from “structure” to “project.”
• Changing the PHA HCV program limitation on PBV vouchers from a 20 percent funding limitation to a 20 percent unit limitation calculation and allowing for additional project-basing of vouchers by raising the limit an additional 10 percent for homeless families, families with veterans, supportive housing for persons with disabilities or elderly persons, or in areas where vouchers are difficult to use.
• Changing the income-mixing cap on the number of PBV units in a project to be the greater of 25 units in a project or 25 percent of the units in a project (the project unit cap), and making changes to the categories of PBV units that are excepted from this project unit cap.
• Allowing the PHA to provide for an initial PBV contract of up to 20 years and to further extend that term for an additional 20 years.
• Allowing the PHA to establish a selection preference for families who qualify for voluntary services, including disability-specific services, offered in conjunction with assisted units, provided that the preference is consistent with the PHA plan.
• Allowing the PHA to attach assistance to structures in which the PHA has an ownership interest or control without following a competitive process.
• Allowing PHAs to project-base HUD–VASH and FUP vouchers in accordance with statutory and regulatory requirements of the PBV program without additional requirements for approval by HUD.

The implementing requirements set forth in today’s notice become effective April 18, 2017. Comments on the specific questions posed in the notice are due by March 20.

Got questions about HOTMA? All of NMA's HCV classes have been updated for the new payment standard rules. Register at least 45 days in advance for most seminars and you’ll receive a 10 percent discount. (The discount does not apply to seminars hosted by housing authorities or associations.)

We’re pleased to announce the release of NMA's seminar calendar for the second quarter of 2017. You can view a list of the affordable housing training that Nan McKay and Associates is offering from now through June on this page at our website.

Start planning your spring training now and save! If you register at least 45 days in advance for most seminars, you’ll receive a 10 percent discount. (The discount does not apply to seminars hosted by housing authorities or associations.)

All Nan McKay classes have been updated for the latest HUD rules and notices. Our Fair Housing and Reasonable Accommodation class, the most comprehensive training on fair housing regulations available, has been updated for the recent notices on LEP, sexual harassment, and nuisance ordinances. All of our HCV classes have been updated for the new payment standard rules from HOTMA and the recent Federal Register notice for the student rule.

Having trouble finding the class you want? We can bring the seminar to you. Email sales@nanmckay.com for more information about our affordable onsite training options.