Average Income Final Regulation - Unit Designation Requirements

person A.J. Johnson today 11/11/2022

This is the third in my series of articles on the new Average Income Regulation. In this article, I will review the requirements relating to the designation of units.

Designation of Imputed Income Limitations and Identification of Units

The final regulations require the initial designation of a unit to be made no later than when a unit is first occupied as a low-income unit. The regulations also revise the timing of the designation so that it is no longer required by the end of the first year of the credit period, and instead is based on when a unit is first occupied as a low-income unit. (Owners and managers should note that this may be before or after the beginning of the first year of the credit period).  The designation must also be communicated annually to the HFA, and the HFA may establish the time and manner in which information is provided to it. This change will allow a taxpayer to make designations after having a chance to evaluate the market for a particular unit.

Importantly, the temporary regulations also provide Agencies with the discretion, on a case-by-case basis, to waive in writing any failure to comply with the temporary regulations’ recordkeeping and reporting requirements.  The waiver may be done up to 180 days after discovery of the failure, whether by taxpayer or Agency. At the discretion of the applicable Agency, this waiver may treat the relevant requirements as having been satisfied.

Timing of Designations of Income Limitations

The final regulations permit the changing of a unit’s imputed income limitation in certain circumstances. For an unoccupied unit that is subject to a change in imputed income limitation, the final regulations provide that the taxpayer must designate the unit’s changed imputed income limitation prior to occupancy of that unit. For an occupied unit that is subject to a change in imputed income limitation, the taxpayer must designate the unit’s changed imputed income limitation prior to the end of the taxable year in which the change occurs.

Changing a Unit’s Imputed Income Designation

The proposed regulations did not allow income limitations to be changed after they had been designated.

Under the final regulations, a taxpayer may change the imputed income limitation designation of a previously designated low-income unit in any of the following circumstances:

(1) In accordance with future written instructions from the IRS.

(2) In accordance with an HFAs publicly available written procedures, if those procedures are available to all of the Agency’s projects that have elected the average income test.

(3) To comply with the requirements of the Americans With Disabilities Act of 1990; the Fair Housing Amendments Act of 1988; the Violence Against Women Act; the Rehabilitation Act of 1973; or any other State, Federal, or local law or program that protects tenants and that is identified by the IRS or an Agency in a manner described in (1) or (2) above.  The tenant protections that apply to an average-income project and that redesignation may enhance do not necessarily have any specific connection to section 42. 

For example, the protections may be ones that apply to all multifamily rental housing, or they may apply to the project at issue because some congressionally authorized spending supported the project with Federal financial assistance. Even if tenant protection does not legally apply to a particular average-income project but does apply to analogous multifamily rental housing, the owner of the project may redesignate income limitations to implement the protection for the project’s residents.

(4) To enable a current income-qualified tenant to move to a different unit within a project keeping the same income limitation (and thus the same maximum gross rent), with the newly occupied unit and the vacated unit exchanging income limitations.

(5) To restore the required average income limitation for purposes of identifying a qualified group of units either for purposes of satisfying the average income set aside or for purposes of identifying the units to be used in computing applicable fraction(s). This rule is limited to newly designated, or redesignated, units that are vacant or are occupied by a tenant that would satisfy the new, lower imputed income limitation.

Any new designation of units must be reported to the HFA in a manner required by the HFA. For example, an HFA may allow the project owner to describe a current year’s information by reporting differences from the prior year’s information or by reporting that there is no difference from the prior year.

As noted above, on a case-by-case basis, the Agency has the discretion to waive in writing any failure to comply with the reporting requirements up to 180 days after discovery of the failure, whether by the owner or Agency. If an Agency exercises this discretion, the reporting requirements will be considered to have been met.

Latest Articles

2023 Income Limits Will Be Delayed

The U.S. Department of Housing & Urban Development (HUD) normally publishes annual income limits in early April of each year. However, complications with calculating the limits due to COVID-19 will cause a delay in the release of the limits in 2023. According to HUD, the limits will be released on or about May 15, 2023. HUD normally uses American Community Survey (ACS) Data from three years prior to the income limit release to determine family median incomes and income limits. However, the Census Bureau did not release the 2020 one-year ACS data due to data collection difficulties because of the COVID-19 pandemic. For this reason, HUD will use 2021 ACS data to determine the 2023 median income and income limits for low-income housing tax credit (LIHTC) properties. Why is this important? Owners of LIHTC properties will have to wait a little longer than usual to determine the income and rent levels available to them for 2023. While increases in income limits nationally are expected to be less than in prior years, most areas should still see some increase in limits, which will allow for a modest increase in rents in 2023.

Virginia Housing Looking for Compliance Staff

Virginia Housing (formerly Virginia Housing & Development Authority) has three positions open in Compliance & Asset Management. If interested, you may access the position descriptions at https://us63.dayforcehcm.com/CandidatePortal/en-US/VHDA. Virginia Housing (VH) is one of the premier Housing Finance Agencies in the nation and I have had the privilege of working with them for more than 40 years. The Agency provides an excellent work environment and has a comprehensive benefits program, including medical, dental, vision, and prescription drug coverage. VH also has both long- and short-term disability plans and various options for retirement plans. If you (or someone you know) are looking for an excellent opportunity on the public side of the affordable housing field, I encourage you to check out the open positions at VH and consider applying.

Rural Development Suspends Interim Recertification Requirements for COLA Recipients

On November 10, 2022, the Rural Development Service released an Unnumbered Letter granting a temporary exception to tenant recertification requirements. On October 13, 2022, the Social Security Administration announced there will be an 8.7% increase in Social Security and Supplemental Security Income (SSI) benefits in 2023. This will increase the average SS payment by more than $140 per month starting in January. The RD Section 515 program requires that tenant households be recertified at least annually or when household income changes by $100 or more per month. Since the increase would require recertifications for most Social Security recipients, the Agency is temporarily waiving the recertification requirement for tenants whose household income, regardless of income type, has increased by more than $100 but less than $200. Accordingly, during the Exception period, tenants will not be required to recertify unless their household income changes by $200 or more per month. This temporary waiver will be in place for all of 2023 and will expire on December 31, 2023. During the period of the waiver, tenant households must be recertified at least annually or whenever a change in household income of $200 or more per month occurs. The requirement that borrowers must recertify for changes of $50 per month if the tenant requests that such change be made, is still in effect. Keep in mind, the exception does not waive the requirement for the annual renewal certifications. Owners will receive a copy of this notice from RD. Once received, the notice must be posted in a conspicuous location at the property and a copy of the notice must be provided to all tenants.

Service Coordinators - A Plus for Affordable Senior Housing

Multi-family properties with federal assistance can benefit greatly from the presence of an on-site service coordinator. These coordinators provide supportive services and act as advocates for vulnerable residents. These coordinators are members of the management team and play a significant role in keeping at-risk residents housed and healthy. According to a report by the Joint Center for Housing Studies at Harvard, during the recent pandemic, 40% of the residents at properties served by Service Coordinators " did not have the food, medicine or household supplies they would need to isolate for a week. It was the service coordinators who handled the procurement and distribution of food, medicine, and household goods for these residents. If you operate a federally assisted site for older adults or the disabled, your property could benefit greatly from a service coordinator - if you do not already have one. In this article, I will provide an overview of HUD s Senior Coordinator in Multifamily Housing Services Program. I will explain the benefits of having a service coordinator on staff, what a service coordinator does, and funding sources for such a position. HUD s Service Coordinator Program HUD established its Service Coordinators in Multifamily Housing Program (SCMF) in 1990. HUD has the authority to use Section 8 funds to employ service coordinators in most HUD-assisted and conventional public housing developments designated for the elderly and disabled. Primary guidance for the program may be found in the SCMF Resource Guide. This guide supplements the HUD Management Agent Handbook 4381.5, REV-2, CHG-2. The resource guide may be found at https://files. hudexchange.info/resources/documents/ Service-Coordinators-in-Multifamily-Housing-Program-Resource-Guide.pdf. Service coordinators provide seven key functions: Proactively engage with residents. The coordinators make it a priority to build relationships with residents through frequent interactions that are formal and informal. Conduct assessments and develop service plans. They conduct annual assessments with residents and use this assessment information to develop plans for making referrals and helping residents obtain services and resources. Develop a property-wide profile. The coordinator will create a picture of resident needs across the housing community and develop responsive, community-wide programming. Establish partnerships with community-based service organizations. Make referrals for support services. Coordinators will also monitor whether residents have followed up on those referrals. Educate and advocate for residents. The coordinator will organize onsite educational events provided by community-based organizations. Coordinate closely with other project staff. The coordinators are active members of the site management team and will meet regularly with other staff to share information and discuss issues that affect the residents. Benefits of Service Coordinators A primary benefit of a service coordinator is linking residents to needed social services. This is an important part of keeping the elderly in their homes and aging in place. These service coordinators are full-time staff members with specialized training in linking residents with the services they need. Services that can be arranged include: home-delivered meals; transportation; public assistance such as Medicaid, food stamps/SNAP, and Medicare Part D prescription drug plan; home healthcare; house cleaning services; and assistance with medical bills or insurance claims. According to the American Association of Service Coordinators (AASC), in 2021, 93 percent of residents with service coordinators continued living independently instead of moving to facilities with higher care levels. This not only provides a significant benefit to residents but also helps prevent costly evictions. Who is Eligible for a Service Coordinator? HUD-assisted housing sites that are designated for older adults and people with disabilities are eligible to participate in the Service Coordinators in Multifamily Housing Program. There are two main funding sources for the Service Coordinators in Multifamily Housing Program: Operating Budget: residual receipts, budget-based rent increases, and debt service savings may be used to fund the coordinator position. The service coordinator becomes a permanent part of the management team, and the cost of the service coordinator program becomes a standard budget expense.Owners must obtain HUD approval to add a service coordinator program to any site s budget, regardless of whether or not an increase in rental rates is proposed.Owners of Section 202 PRAC projects can include a service coordinator program in their operating budget at any time after the project is fully occupied.HUD may approve the use of residual receipts to fund some or all of a site s service coordinator program. Owners with funds in their residual receipt accounts must use all available residual receipts prior to receiving any service coordinator grant funds. HUD Grants: Owners may apply for grants awarded through a HUD-issued Notice of Funding Availability (NOFA). Service coordinator grants are made for an initial three-year term and provide funding for the salary, fringe benefits, and related administrative costs associated with employing a service coordinator. Grants are renewed annually thereafter if no other funding source is available to cover costs. Program Monitoring All service coordinator programs in multifamily housing are expected to adhere to the same requirements as outlined in the SCMF Program Resource Guide. HUD conducts monitoring reviews of service coordinator programs to ensure they serve their intended purpose. The frequency of reviews will depend on the nature of a site s day-to-day operations and service coordinator program activities. Staffing the Positions A site owner will hire a service coordinator through job listings like any other staff. The hiring of qualified professionals is critical to the success of the SCMF program. In general, there should be one full-time service coordinator for every 50 to 100 residents. However, at sites with large numbers of residents with mental health conditions or other high needs, a smaller ratio may be appropriate. What do Service Coordinators Not Do? Provide direct services; Act as recreation or activity directors; Duplicate existing community services; Provide nursing care; Handle resident funds; Manage leasing agents; Provide transportation to residents; Organize or lead resident organizations; or Act of Power of Attorney for residents. Service Coordinator Qualifications Minimum requirements for Service Coordinators include - A bachelor s degree in social work or a degree in psychology or counseling, preferably; however, individuals without a degree but with appropriate work experience may be hired; Two to three years experience in providing social services to families; Demonstrated working knowledge of social services and resources in your area; and Demonstrated ability to advocate, organize, problem-solve, and "provide results for families. Training in cultural competency and bilingual skills are also assets for many service coordination positions, and in larger properties, service coordinator aides are often hired to assist the coordinator. Aides should have appropriate education or experience working with elderly people and/or persons with disabilities. College students working towards a degree in social work, or a health-related field may look to gain hands-on experience and may be able to receive academic credit for an internship or work-study program. Service Coordinator Training Requirements All new-hire service coordinators must have met a minimum of 36 training hours of classroom/seminar time before hiring or must complete these minimum training requirements within 12 months of initial hiring, on age-related and disability issues. Recently completed college courses on aging, mental health, or other relevant topics relating to the needs of the residents may be counted toward the 36-hour training requirement. HUD requires service coordinators to remain current on changing statutes at all levels of government and current practices in aging and/or disability issues. Service coordinators should receive 12 hours of continuing education each year, and fair housing training is a must. Bottom Line Every HUD property that serves the elderly or disabled can benefit from the services of a service coordinator. If your property does not currently have a service coordinator, serious thought should be given to creating the position either through the current project budget or by applying in the next round of HUD funding.

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