News

A.J. Johnson Consulting Services, Inc. Welcomes Back Lori Neff

A.J. Johnson Consulting Services, Inc., a leader in affordable housing compliance consulting, is thrilled to announce the return of Lori Neff to our team. Lori rejoined the company on July 16, 2024, bringing diverse experience and expertise. A Familiar Face with Fresh Perspectives Lori worked as a Compliance Analyst with A.J. Johnson Consulting from 2003 to 2008 before establishing her own consulting firm. In the intervening years, she has expanded her skill set by working as a financial planner, loan officer, and insurance agent. This multifaceted background enhances our ability to provide comprehensive consulting services to our clients in the affordable housing industry. Expanding Our Expertise Lori's return significantly broadens our company's capabilities. Her expertise spans: Banking and financial services Property management Loan administration Insurance sales Client relationship management Additionally, Lori holds licenses as a Life & Health Insurance Officer and a Mortgage Loan Officer. She maintains affiliations with various professional associations in the mortgage and home-building industries, keeping her at the forefront of industry developments. A Specialized Role In her new position, Lori will work within our company's "Special Projects" section, focusing on extensive or unusual property reviews. Her responsibilities will include: Conducting tax credit, HOME, Section 8, and Section 515 compliance reviews Performing asset management reviews for various investor clients Handling complex cases that require in-depth analysis and expertise A.J. Johnson, founder of A.J. Johnson Consulting Services, Inc., commented on Lori's return: "We are more than pleased to welcome Lori back to the fold. Her diverse experience and deep understanding of our industry will ensure that our clients continue to receive the most comprehensive consulting services in affordable housing." Lori's return to A.J. Johnson Consulting Services, Inc. underscores our commitment to providing top-tier expertise and service to our clients. As the affordable housing landscape continues to evolve, we are confident that Lori's contributions will help our clients easily navigate complex compliance and management challenges. We invite our clients and industry partners to join us in welcoming Lori Neff back to the A.J. Johnson Consulting Services team.

Understanding HUD Special Claims

Understanding HUD Special Claims: A Comprehensive Guide for Property Owners and Managers Financial losses due to vacancy, unpaid rent, and tenant damages in subsidized housing can significantly impact property owners. The U.S. Department of Housing and Urban Development (HUD) recognizes this challenge and offers a solution through its special claims process. This article delves into the intricacies of HUD special claims, providing essential information for property owners and managers to navigate this reimbursement system effectively. What are HUD Special Claims? HUD special claims are a reimbursement mechanism designed to compensate owners of eligible HUD projects for financial losses resulting from vacancy loss, unpaid rent, and tenant damages. While filing these claims is not mandatory, it is highly recommended. Management agents who neglect to file special claim requests fail to collect funds the property owner is entitled to and may also violate the terms of their Management Agreement. Eligibility Criteria The special claims process is available for several project types, including: Section 8 Section 202/8 Section 202 PAC Section 202 PRAC Section 811 PRAC To be eligible for a special claim related to unpaid rent, other charges, or damages, the former tenant must have been: Receiving rental assistance at the time of move-out or Had rental assistance terminated before moving out due to failure to comply with program requirements, such as: Not providing necessary information about family composition and income Failing to provide social security numbers Refusing to sign consent forms, verification forms, or HUD-50059 Not establishing citizenship or eligible immigration status Failing to move to an appropriately sized unit within 30 days of notification Special Requirements for Unpaid Rent and Other Charges To successfully claim for unpaid rent and other charges, owners/agents must meet several criteria: Proper Security Deposit Collection: The tenant must have provided the appropriate security deposit. Failure to do so may result in a reduced claim amount. Debt Collection Efforts: Owners/agents must certify they have billed tenants for unpaid rent and taken reasonable steps to collect the debt, including: Sending a certified letter detailing unpaid charges, demanding payment, and involving a collection agency if the tenant fails to pay. Compliance with State and Local Laws: The claim must adhere to state and local laws regarding security deposit deductions. Allowable Charges: "Other charges" may include fees for unreturned keys, late payments (if permitted by lease and local law), and previously billed damages that remain unpaid at move-out. Non-Allowable Charges: Legal fees, collection agency fees, unpaid utility bills, and costs for photographing unit damage are not eligible for claims. Special Requirements for Tenant Damages For damage claims, additional requirements apply: Certification of Tenant Negligence: Owners/agents must certify that the claimed damages resulted from tenant negligence or abuse. Extraordinary Repairs Only: Claims should be limited to repairs and replacements beyond normal wear and tear. No Duplication of Reimbursement: Owners cannot claim for damages already reimbursed through insurance, Reserve for Replacements, or Residual Receipts accounts. Proper Tenant Notification: Failure to provide tenants with an itemized list of damages will result in claim denial. Supporting Documentation To substantiate claims, owners/agents must provide comprehensive documentation, including: For Unpaid Rent: Signed HUD-50059 form showing required security deposit Proof of security deposit collection Copy of certified letter sent to tenant Documentation of collection agency efforts HUD approval for other charges (if applicable) For Damages: Move-in and move-out inspection reports Security deposit disposition notice Repair cost breakdown (invoices, receipts, or owner/agent certification) Claim Limitations and Timeline The total claim amount for unpaid rent and damages is capped at the monthly contract rent when the tenant vacated or had assistance terminated, minus the security deposit plus any interest earned. This limitation ensures fair compensation while preventing excessive claims. Importantly, HUD or the Contract Administrator must receive claim forms within 180 calendar days of the unit becoming available for occupancy. This timeline emphasizes the need for prompt and efficient claim processing. Conclusion The HUD special claims process offers property owners and managers a valuable opportunity to recover financial losses in subsidized housing scenarios. By understanding the eligibility criteria, documentation requirements, and claim limitations, housing professionals can effectively utilize this system to maintain financial stability and operational efficiency. While the process may seem complex, diligent record-keeping and adherence to HUD guidelines can streamline the claim submission process. As the housing landscape evolves, staying informed about such reimbursement mechanisms becomes increasingly crucial for successful property management in the affordable housing sector. For more detailed information and updates, property owners and managers are encouraged to consult the HUD Special Claims Processing Guide (HSG-06-01) and stay abreast of any policy changes or updates from HUD.

Rural Development Releases 2024 Income Limits

The Rural Development Service of the United States Department of Agriculture has released the 2024 income limits for the Rural Development Multifamily Housing (Section 515) program. The limits were effective July 12, 2024, and may be found at RD-MFHLimitMap.

A. J. Johnson Offers Live Webinar on Tenant-on-Tenant Harassment

A. J. Johnson will conduct a webinar on June 20, 2024, on Navigating the Challenges Dealing with Tenant-on-Tenant Harassment in Multifamily Housing. The Webinar will be held from 1:00 PM to 2:00 PM Eastern time. Attending a webinar on Tenant-on-Tenant Harassment is crucial for multifamily housing professionals for several reasons: Understanding Legal Responsibilities: Gain insight into federal, state, and local laws regarding tenant harassment and the responsibilities of housing providers in preventing and addressing such issues. Enhancing Tenant Safety: Learn strategies to create a safe and respectful living environment, thereby reducing the risk of harassment and ensuring the well-being of all tenants. Improving Conflict Resolution Skills: Develop skills to effectively mediate and resolve conflicts between tenants, which can prevent harassment situations from escalating. Protecting Property Reputation: Learn the impact of tenant harassment on the property's reputation and how proactive management can enhance community perception and tenant satisfaction. Minimizing Legal Risks: Learn about the potential legal ramifications of tenant-on-tenant harassment and how to mitigate these risks through proper documentation, response protocols, and preventative measures. Compliance and Best Practices: Stay updated on best practices and compliance requirements to ensure the property meets all legal standards and fosters a harassment-free environment. Enhancing Staff Training: Acquire knowledge that can be used to train staff members to recognize, prevent, and respond effectively to tenant harassment. Creating a Positive Community: Foster a positive, inclusive, and respectful community culture that can improve tenant retention and satisfaction. By attending this webinar, multifamily housing professionals can equip themselves with the necessary tools and knowledge to handle tenant-on-tenant harassment effectively, ensuring a harmonious living environment and safeguarding their property s reputation and legal standing. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

HUD Proposed Changes to HOME Program are Comprehensive

On May 15, 2024, HUD published a preview of a Notice of Proposed Rulemaking proposing significant changes to the HOME Program. The proposed rule is expected to be published in the Federal Register before June, and public comments are due no later than 60 days after that publication. The proposed rule would make changes in many areas: Community Housing Development Organization (CHDO) Requirements: Major revisions to CHDO requirements are proposed to streamline processes and improve efficiency. HOME Rents Approach: A new methodology for setting HOME rents is being introduced to better align with current housing market conditions. Small-Scale Rental Projects: Requirements for small-scale rental projects will be simplified, making it easier for developers to comply. HOME Tenant-Based Rental Assistance (TBRA) Programs: The proposed changes will provide greater flexibility in TBRA programs, allowing for more effective tenant support. Community Land Trusts (CLTs): New flexibilities and simplified provisions are being proposed to encourage their use and effectiveness. Tenant Protections: The rule would significantly strengthen tenant protections by mandating a HOME tenancy addendum with a uniform set of protections to be included in leases of all HOME-assisted rental housing units. For tenants receiving TBRA, a streamlined set of protections will be required. Advanced Property Standards: HUD proposes incentives for meeting higher property standards incorporating green building practices, enhanced energy efficiency, and innovative construction techniques for new construction, reconstruction, and rehabilitation projects. Homeownership Housing Resale Requirements: Clarifications to resale requirements for homeownership housing are included to ensure transparency and consistency. Technical Amendments and Simplifications: The proposed rule will make technical amendments and simplifications to align with the changes introduced in the 2013 HOME Final Rule. These proposed changes are part of a broader effort to modernize and improve the HOME program, incorporating updates from the Housing Opportunity Through Modernization Act of 2016 (HOTMA), the Economic Growth Regulatory Relief and Consumer Protection Act, and the National Standards for the Physical Inspection of Real Estate (NSPIRE) Final Rule. Additionally, the rule updates citations to align with recent changes to the Office of Management and Budget (OMB) regulations at 2 CFR part 200. HUD plans to publish further rulemaking to ensure consistency across all regulations. The proposed changes are detailed in the Proposed Regulation, with further revisions anticipated following the implementation of the HOTMA and NSPIRE Final Rules. While all the proposed changes are important, what follows is a discussion of the proposed changes in four specific areas: (1) Small-scale housing, (2) HOME rents, (3) Tenant Protections, and (4) Advanced Property Standards. Small-scale housing. HUD proposes to add the definition of "small-scale housing," which would be defined as a rental housing project containing no more than four units or a homeownership project with no more than three rental units on the same site. HUD proposes this definition to permit these projects to follow streamlined procedures for income determinations, ongoing physical inspections, and written tenant waiting lists. The definition and the streamlined provisions would facilitate the participation of owners of small rental properties (e.g., accessory dwelling units, duplexes, triplexes, or other small rental projects) in the HOME program. For small-scale projects, HUD would provide an exception from requiring a PJ to adopt a more frequent inspection schedule for properties with health and safety deficiencies. If all health and safety deficiencies are corrected, the proposed rule permits but does not require more frequent inspection schedules. HUD plans to develop a specific list of deficiencies for small-scale rental housing that a PJ would inspect. The proposed rule would reduce burdens on landlords of small-scale housing by allowing for the reexamination of tenant income every three years rather than annually. Tenant-Based Rental Assistance: Eligible Costs and Requirements (24 CFR 92.209). The proposed rule would revise 92.209(c)(1) to eliminate the requirement that adjusted income be determined annually for families receiving TBRA. Because TBRA contracts are limited by statute to two years and must be executed every time a tenant enters into a new lease, the proposed rule would permit a PJ to provide TBRA to a family and not redetermine adjusted income during the contract s period of assistance. Tenants will be able to request interims when income goes down, but PJs will not have to conduct interims for increases in income during the contract term. Change in HOME Rent Rules: Unlike the current HOME rule, which permits HOME rents to be exceeded only for low-HOME units when there is project-based rental assistance, the proposed rule will permit HOME rents to be exceeded anytime there is project-based rental assistance. This change would apply to both Low and High-HOME units. Tenant Protections: The Department proposes significant revisions to the tenant protections and selection provisions in 92.253, consistent with the priorities in the Administration s Renters Bill of Rights. These tenant protections are based on the Department s review of existing HUD programs (e.g., the Section 8 PBV and public housing programs). To implement the tenant protections, HUD proposes requiring all tenants in HOME-assisted rental housing units or receiving TBRA to have a new HOME tenancy addendum appended to their lease. Among the proposed tenant protections: Leases will contain more than one convenient method to communicate directly with the owner or the property management staff, including in-person, by telephone, email, or through a web portal. The proposed rule will outline new tenant protections regarding the physical condition of units, including a requirement that owners provide tenants with expected timeframes for maintaining and repairing units as soon as practicable. When a life-threatening deficiency in the physical condition of the unit impacts the tenant, owners are required to relocate the tenant into safe housing, which may be either on or off-site. Families can reside with a foster child, foster adult, or live-in aide in the unit. The revised HOME Lease Addendum will include a section outlining when owners may enter a tenant s unit. Reasons include routine inspections and maintenance, repairs, and showing units to prospective tenants. At least two days' notice will be required, including the purpose for entering the unit. An exception to the notice requirement will be made for emergencies. The proposed rule would require that an owner who enters a unit when the tenant and all adult household members are absent from the unit must provide a written statement to the tenant explaining the date, time, and purpose of their entry into the unit. Properties with HOME funds will not be able to have separate amenities such as gyms, pools, spas, elevators, rooftop gardens, storage areas, and playrooms that only non-assisted tenants can use or access. Tenants can organize, create tenant associations, convene meetings, distribute literature, and post information at a project. The proposed rule would include new security deposit requirements. The security deposit amount could not exceed two months' rent, and surety bonds or security deposit insurance would be prohibited. Owners cannot terminate the tenancy of HOME tenants without good cause, and the rule outlines many examples of "good cause." Advanced Property Standards: All projects built or rehabilitated with HOME funds must comply with all state and local building codes. PJs will be required to perform physical inspections on an annual basis. Property standards and inspections will generally be done per NSPIRE standards. Carbon Monoxide detectors will be required in all HOME-assisted units. Although reconstruction is considered rehabilitation for the HOME program, the property standards for new construction will be applied to all HOME-assisted reconstruction projects. When entering a rental assistance contract, PJs must annually provide physical inspections of all HOME-assisted units. This requirement applies to tenant-based rental assistance only. The proposed rule would require the initial inspection of HOME-assisted rental housing within 12 months of project completion and once every three years thereafter. If deficiencies are observed in any of the inspectable areas, a follow-up onsite inspection to verify that deficiencies are corrected must occur within 12 months. The PJ may establish a list of non-hazardous deficiencies for which correction can be verified by third-party documentation (e.g., paid invoice for work order) rather than re-inspection. Bottom Line These changes aim to modernize and improve the HOME program, incorporating updates from recent legislative acts and ensuring consistency across all regulations. Owners should review these proposed changes thoroughly to understand their implications and provide feedback during the public comment period.

A. J. Johnson Partners with Mid-Atlantic AHMA for Affordable Housing Training - July 2024

In July 2024, A. J. Johnson, a renowned expert in the field, will join forces with the esteemed Mid-Atlantic Affordable Housing Management Association to conduct training for real estate professionals. This session, tailored for those in the affordable multifamily housing field, will be delivered through a live webinar. The following session is scheduled: July 16: Budgeting 101 for Multifamily Housing This comprehensive three-hour course provides a foundational understanding of budgeting and financial management specific to affordable multifamily housing. It will equip property managers with the essential skills to evaluate and manage operating funds, maximize net operating income (NOI), and ensure accurate financial reporting. Key Discussion Areas: Introduction to Budgeting & Financial Management:Importance of tracking income and expenses Overview of cash receipts, expenditures, reserves, and security deposits Evaluation of Operating Funds: Understanding profitability and return on investment (ROI) for rental real estate The Cash Flow Chart:Definition and significance of Net Operating Income (NOI) Owner s assessment of pre-tax and after-tax cash flow Gross Potential Rental Income: Calculation and importance of maximum rent income Vacancy & Collection Loss:Measures of vacancy (physical and economic) Impact of vacancies and collection losses on gross potential rental income Miscellaneous Income: Sources of additional income beyond scheduled rent Effective Gross Income: Calculations involving vacancy and collection loss and miscellaneous income Operating Expenses: Categories of operating expenses, including payroll, maintenance, utilities, and more Net Operating Income (NOI): Importance of maximizing NOI as a measure of management success Debt Service: Explanation of debt service and its impact on financial management Cash Flow: Calculation of cash flow and its importance in financial management Income and Expense Categories: Detailed discussion on various income and expense categories Budgeting:Types of budgets: operating, capital, and long-range Annual budgeting process and importance of quarterly updates Operating Budget: Monthly planning and detailed allocation of income and expenses Annual Budget:Historical vs. zero-based budgeting Review and approval process with property owners Capital and Long-Range Budget: Planning for future capital expenditures and long-term financial forecasting Summary: Key takeaways on maximizing NOI, effective budgeting, and financial management in multifamily housing Learning Objectives: Develop Financial Management Skills: Understand the basics of budgeting, financial tracking, and reporting. Maximize Property Income: Learn techniques to increase NOI and manage operating expenses efficiently. Effective Budget Planning: Gain knowledge on creating accurate operating, capital, and long-range budgets. Improve Financial Decision-Making: Enhance ability to make informed financial decisions to benefit property operations. Target Audience: Property Managers Financial Officers Asset Managers Compliance Officers in the multifamily housing sector Conclusion: Budgeting 101 for Multifamily Housing provides essential training for managing the financial aspects of affordable housing properties. By the end of the course, participants will be equipped with the knowledge and tools necessary to ensure financial health and sustainability for their properties. This session is part of a year-long collaboration between A. J. Johnson and MidAtlantic AHMA designed to provide affordable housing professionals with the knowledge needed to effectively manage the complex requirements of the various agencies overseeing these programs. Persons interested in this training may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

Navigating Fair Housing in Digital Advertising - Ensuring Non-Discriminatory Ad Delivery

Introduction: The U.S. Department of Housing and Urban Development's Office of Fair Housing and Equal Opportunity has released crucial guidance on how the Fair Housing Act applies to digital advertising in the housing and real estate sectors. With the increasing use of automated systems and artificial intelligence (AI) in ad targeting and delivery, it is essential to understand the potential risks of discriminatory practices and take proactive measures to ensure fairness. Understanding the Risks: It's crucial to grasp how new technologies enable advertisers to target specific audiences while excluding others, potentially leading to discrimination in housing-related ads. The Fair Housing Act prohibits discrimination based on protected characteristics such as race, color, religion, sex, national origin, familial status, or disability. By understanding these risks, you can proactively ensure fairness and avoid potential legal issues. Discriminatory ad targeting can manifest in various ways, including denying information about housing opportunities, targeting vulnerable consumers for predatory products, discouraging potential consumers, and steering home-seekers to specific neighborhoods. Audience Targeting Tools: Ad platforms offer audience categorization tools that segment potential audiences based on various characteristics like gender, age, income, and location. While these tools can be useful, they can also lead to discrimination if used to exclude or target specific groups based on protected characteristics. Advertisers and platforms should be cautious when utilizing these tools for housing-related ads and avoid segmenting audiences based on protected characteristics or proxies. Custom and Mirror Audience Tools: Custom and mirror audience tools allow advertisers to target specific audiences or find similar audiences based on existing data. However, if protected characteristics limit the source audience, these tools can perpetuate discrimination. Advertisers and platforms should carefully analyze the composition of source lists and ensure they are not unjustifiably limited based on protected characteristics. Regular audits of ad delivery outcomes can help identify and mitigate discriminatory practices. Algorithmic Delivery Functions: Ad platforms employ machine learning and AI to determine which ads are delivered to consumers. However, these algorithmic delivery functions can also result in discriminatory outcomes. Ad platforms should ensure their algorithms do not direct housing-related ads based on protected characteristics, leading to steering, pricing discrimination, or other discriminatory practices. Regular testing and adjustments are necessary to minimize disparities and ensure fairness. Recommendations for Advertisers and Platforms: Advertisers need to utilize platforms that actively manage the risk of discriminatory practices to ensure non-discriminatory ad delivery. Ad platforms, on the other hand, play a crucial role in this process. They should create separate processes for housing-related ads, avoid targeting options based on protected characteristics, conduct regular testing, adopt less discriminatory alternatives for AI models, ensure fair pricing practices, and maintain transparency through documentation and auditing. Ad platforms can contribute significantly to fair housing practices by fulfilling these responsibilities. Conclusion: By diligently following the guidance provided by the U.S. Department of Housing and Urban Development, advertisers and ad platforms can contribute to fair housing practices and mitigate the perpetuation of discrimination in digital advertising. This commitment to fairness ensures compliance with the law and fosters a more inclusive and equitable digital advertising landscape. It is crucial to be aware of the risks, implement proactive measures, and work towards non-discriminatory ad delivery to ensure equal access to housing opportunities for all.

Maximize Efficiency and Savings - Sign Up for HUD's Energy and Water Benchmarking Service for Multifamily Properties

HUD recently provided information on its Energy and Water Benchmarking Service, available for sites participating in HUD s Multifamily project-based rental assistance programs. The free service provides participating owners with data on energy and water consumption at their sites. While up to 9,000 properties are eligible for the service, it's concerning that only just over 700 properties have taken advantage of this opportunity. I encourage all eligible property owners to sign up for the Energy and Water Benchmarking Service to ensure they are not missing out on this valuable resource. The Green and Resilient Retrofit Program (GRRP) is a game-changer, offering over $800 million in grant funding and $4 billion in loan commitment authority. It is the first HUD program to invest in energy efficiency, renewable energy generation, climate resilience, and low-embodied-carbon materials in HUD-assisted multifamily housing. This program presents a significant opportunity for property owners to improve their properties and potentially gain financial benefits. Provided Data Leads to Actionable Improvements The service's data is not just numbers but a practical tool that helps owners identify opportunities for energy efficiency improvements. These improvements can benefit residents and promote green investment in individual properties or entire portfolios. Once the data is provided, owners can confidently use it to apply for GRRP grants and loans, knowing they are making informed decisions based on real data. Offers annual property analysis reports identifying usage trends and energy and water savings opportunities. Establishes eligibility for or prepares owners to use federal, state, and utility energy efficiency programs. It supports early compliance with local ordinances as more localities across the country become interested in the energy usage data of multifamily properties. Provides technical assistance, training, and other resources. When an owner signs up for the service, they will receive personalized support in assessing the efficiency of their buildings for up to four years. HUD s contractor, Leidos, will support property owners and management by contacting utilities to access the necessary energy and water use data and provide cost and energy savings recommendations. Registration Information There is no deadline for signing up for the service, but limited funding is available. Owners who delay signing up for the service may miss the opportunity or not be able to take advantage of the full four years of the initiative. Owners and managers interested in the program should email their interest and the property ID(s) to mfbenchmarking@hud.gov.