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.
HUD Issues New HOTMA Implementation Guidance
On September 29, 2023, HUD published Housing Notice 2023-10, Implementation Guidance: Sections 102 and 104 of the Housing Opportunity Through Modernization Act of 2016. The Notice contains implementation guidance for everything but the Section 104 asset limitation. HUD will provide additional guidance on the asset limitations at a later date. HUD does affirm that the asset limitations will apply to the Section 202/8 program. While HOTMA does go into effect on January 1, 2024, HUD recognizes that PHAs and owners will need time to put all the new policies into place. The Notice provides guidance on these delayed timeframes, including the requirement that MFH owners (owners of Project-Based Section 8 properties and other properties governed by the HUD Office of Multifamily Housing) update Tenant Selection Plans and EIV Policies & Procedures by March 31, 2024. HUD also published a List of Discretionary Policies to Implement HOTMA. This identifies areas in which owners have policy discretion; owners must state in the Tenant Selection Plan how they will exercise such discretion. Owners and managers of impacted properties should obtain a copy of the Notice and the list of discretionary policies. We will be updating the HOTMA training provided by A. J. Johnson Consulting Services to include this new guidance and will publish updates of the changes on our website.
HUD Delays NSPIRE Implementation for Certain Programs
The U.S. Department of Housing and Urban Development (HUD) has announced an extension of the compliance date for the National Standards for the Physical Inspection of Real Estate (NSPIRE) for select programs to October 1, 2024. This extension is applicable to the HOME Investment Partnerships Program (HOME), Housing Trust Fund (HTF), Housing Opportunities for Persons with AIDS (HOPWA), Emergency Solution Grants (ESG), and Continuum of Care (COC) programs. The purpose of this extension is to provide jurisdictions with additional time to implement these standards, which will govern inspections and evaluations of HUD-assisted housing. NSPIRE plays a crucial role in helping HUD streamline and consolidate its inspection standards and procedures. Additionally, it incorporates provisions of the Economic Growth and Recovery, Regulatory Relief, and Consumer Protection Act into all of HUD's programs. Programs other than those noted above that are subject to NSPIRE must still adopt the new standard by October 1, 2023.
A. J. Johnson Partners with Mid-Atlantic AHMA for October Affordable Housing Training
During the month of October 2023, A. J. Johnson will be partnering with the Mid-Atlantic Affordable Housing Management Association for a Low-Income Housing Tax Credit (LIHTC) training intended for real estate professionals, particularly those in the affordable multifamily housing field. The session will be presented via live webinar. The following session will be presented: October 18: Intermediate LIHTC Compliance - Designed for more experienced managers, supervisory personnel, investment asset managers, and compliance specialists, this program expands on the information covered in the Basics of Tax Credit Site Management. A more in-depth discussion of income verification issues is included as well as a discussion of minimum set-aside issues (including the Average Income Minimum Set-Aside), optional fees, and use of common areas. The Available Unit Rule is covered in great detail, as are the requirements for units occupied by students. Attendees will also learn the requirements relating to setting rents at a tax-credit property. This course contains some practice problems but is more discussion-oriented than the Basic course. A calculator is required for this course. This session is part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA that is 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 session may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.
Medical Marijuana - Is It a Fair Housing Issue?
Medically prescribed marijuana use is permitted in 37 states and the District of Columbia, specifically for medical purposes. In addition, 18 states (Alaska, Arizona, California, Colorado, Connecticut, District of Columbia, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New Jersey, New Mexico, Oregon, Vermont, Virginia, and Washington) have also legalized recreational marijuana. Property managers often inquire about whether individuals can be denied housing based on their marijuana use, considering the drug s legal status in the state where the property is located. The answer is both "yes and "no. Recreational marijuana users may be denied occupancy, but individuals with a physician s prescription for medical marijuana should not automatically face denial. While the Fair Housing Act (FHA) does not explicitly address drug use in housing, the legislative history used by HU, courts, and tribunals to interpret the law clearly indicates that the exclusion of current illegal drug users does not apply to individuals using controlled substances that are legally prescribed by a physician. According to an office House of Representatives report, "the exclusion does not eliminate protection for individuals who take drugs defined in the Controlled Substances Act for a medical condition under the care of or by prescription from, a physician. The report also asserts that "the use of a medically prescribed drug clearly does not constitute illegal use of a controlled substance. However, there are limitations to this protection for medical marijuana use: The marijuana must be legally prescribed by a physician for a specific medical condition authorized by state law. The person must use the marijuana solely for the prescribed condition. Usage should be confined to the person s own apartment and not common areas. The individual must not possess or cultivate more than the maximum amount permitted by law. Selling or distributing marijuana to others is not allowed. In contrast, recreational marijuana users do not enjoy the same legal protections as medical marijuana users, and they may face housing denial. However, this legal landscape can be complex. For this reason, managers should thoroughly explore state and local laws in places where recreational marijuana is legal. Property managers also need to consider one important factor when renting to individuals using medical marijuana. If the property is designated as non-smoking, permitting the smoking of medically prescribed marijuana on the premises would not constitute a "reasonable accommodation as it fundamentally alters the property s operations. Medically prescribed marijuana can be consumed in various forms, including food, pills, powder, topicals, and tinctures. Bottom Line: While medical (and even recreational) marijuana is permitted in many states, only users of medical marijuana are protected by the Fair Housing Act. And even users of medical marijuana must follow specific rules when using the marijuana at properties. Owners and managers of multifamily properties should develop written policies governing the use of medical marijuana at their properties, and those policies should be carefully reviewed by attorneys familiar with state and local laws relating to the issue of medical marijuana.