HOME Funds Trigger Section 504 Compliance

person A.J. Johnson today 08/27/2022

One of the most common questions I get from clients with HOME funding for their project is whether Section 504 requirements apply when HOME funding is present. THE ANSWER IS ALMOST ALWAYS - YES!

What is Section 504?

Section 504 of the Rehabilitation Act of 1973 is a federal law, codified at 29 U.S.C. § 794, that prohibits discrimination on the basis of disability in federally assisted programs or activities. Specifically, Section 504 states: "No otherwise qualified individual with a disability in the United States. . .shall, solely by reason of her or his disability, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program, service or activity receiving federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Postal Service." This means that Section 504 prohibits discrimination on the basis of disability in any program or activity that receives financial assistance from any federal agency, including HUD as well as in programs conducted by federal agencies.

Who is a recipient of federal financial assistance?

The Section 504 regulations define "recipient" as any State or its political subdivision, any instrumentality of a state or its political subdivision, any public or private agency, institution organization, or other entity, or any person to which federal financial assistance is extended for any program or activity directly or through another recipient, including any successor, assignee, or transferee of a recipient, but excluding the ultimate beneficiary of the assistance. (24 C.F.R. § 8.3.) Thus, a HUD-funded public housing agency or a HUD-funded non-profit developer of low-income housing is a recipient of federal financial assistance and is subject to Section 504's requirements. Therefore, a public housing agency is covered by Section 504, for example, in the operation of its Section 8 voucher program or activity. However, a private landlord who accepts Section 8 tenant-based vouchers in payment for rent from a low-income individual is not a recipient of federal financial assistance merely by virtue of receipt of such payments. Similarly, while a developer that receives Community Development Block Grant (CDBG) or HOME funds for the rehabilitation of an owner-occupied unit is a recipient for purposes of Section 504, a family that owns the unit is not a recipient because the family is the ultimate beneficiary of the funds.

What physical accessibility requirements must a new federally assisted housing development meet in order to be in compliance with Section 504 requirements?

New construction of multifamily rental housing with five or more total units (not five or more HOME units) must be designed and constructed to be readily accessible to and usable by persons with disabilities. The common areas in the building must be made accessible, as well as a certain number of units.

For a federally assisted new construction housing project, Section 504 requires 5% of the dwelling units, or at least one unit, whichever is greater, to be accessible for persons with mobility disabilities. An additional 2% of the dwelling units, or at least one unit, whichever is greater, must be accessible for persons with hearing or visual disabilities.  The project must also meet all Section 504 requirements in HUD’s implementing regulation, such as requirements regarding dispersal and utilization of accessible housing units.

If a federally assisted housing project is targeted for substantial alteration, what does Section 504 require in terms of accessible units?

 Under Section 504, alterations are substantial if they are undertaken on a project that has 15 or more units and the cost of the alterations is 75% or more of the replacement cost of the completed facility. (See 24 C.F.R. § 8.23(a)). The new construction provisions of 24 C.F.R. § 8.22 apply. Section 8.22 requires that a minimum of 5% of the dwelling units, or at least one unit, whichever is greater, shall be made accessible to persons with mobility disabilities and an additional 2% of the dwelling units, or at least one unit, whichever is greater, shall be made accessible to persons with hearing or visual disabilities.

Recipients shall pay for reasonable modifications and accommodations needed by the individual (e.g., a ramp to a unit) unless providing that accommodation would be an undue financial and administrative burden or a fundamental alteration of the program.  During the development phase, these costs are eligible HOME costs.

In summary, if you are developing or operating a multifamily property with five or more total units, and the project has any amount of HOME funding, the entire project is subject to the requirements of Section 504. In addition to the required percentage of accessible units, this means that owners of the project are required to pay the costs of modifications and accommodations for all units in the project - not just the HOME-designated units.

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