In late January 2023, the Biden administration released a Blueprint for a Renters Bill of Rights. This blueprint describes federal actions around five guiding renter protections: Safe, Quality, Accessible, and Affordable Housing; Clear and Fair Leases; Education; Enforcement and Enhancement of Renters Rights; the Right to Organize; and Eviction Prevention, Diversion, and Relief.
The Federal Housing Finance Agency (FHFA) announced it will identify the opportunities and challenges of adopting and enforcing tenant protections, including policies that limit egregious rent increases at properties with Government Sponsored Enterprise (GSE) backed mortgages going forward.
FHFA is also going to publish a GSE Look-Up Tool to determine if a property is backed by Fannie Mae or Freddie Mac financing and requires a 30-day notice to vacate for non-payment of rent. HUD will also issue a notice of proposed rulemaking requiring that PHAs and owners of project-based rental assistance properties provide no less than a 30-day notice of lease termination due to nonpayment of rent.
The blueprint also recommends that local governments take the following actions: (1) immediately seal eviction filings and only unseal them in the case of a decision against the tenant; (2) provide the right to counsel in eviction proceedings; and (3) prohibit source of income discrimination.
Following is a description of the "five principles" outlined in the Blueprint.
First Principle: Access to Safe, Quality, Accessible, and Affordable Housing
Renters should have access to housing that is safe, decent, and affordable and should pay no more than 30 percent of household income on housing costs. Owners of rental housing and state and local governments should ensure that homes for rent meet habitability standards and are free of health and safety hazards, such as lead or mold. In addition, owners should provide services and amenities as advertised or included in the lease (such as utility costs and functional appliances) and ensure that the residential housing unit is well maintained (including common areas). Renters should face minimal barriers when applying for housing and receiving housing assistance, which includes minimally burdensome application and documentation requirements and fair and equal tenant screening. Increases in rents should be reasonable, with the acknowledgment that rents may need to increase to cover operating costs. These increases should be transparent and fair to protect against gouging.
In 2019, almost 25% of renters spent half their income on rent. Nationally, rents rose 26% during the pandemic. Limited housing supply has created more competition for fewer available units, which gives owners even more leverage in deciding to whom to rent to, what lease terms to offer, and whether and how much to raise rents. At the same time, the housing stock in America is aging, and more rental housing is facing obsolescence or poor housing conditions.
Perhaps in recognition of the fact that private owners who do not operate under any programmatic regulations (i.e., conventional housing) are not responsible for making housing affordable. These owners operate rental housing for the profits that can be made from such housing. Offering incentives for affordability is the responsibility of the government, at the federal, state, and local levels. To accomplish this, the Biden Administration has proposed the largest expansion of the Housing Choice Voucher program in decades. In addition to this step, the Administration has proposed the following:
Second Principle: Clear & Fair Leases
Renters should have a clear and fair lease that has defined rental terms, rights, and responsibilities. Leases should not include mandatory arbitration clauses, unauthorized terms, hidden or illegal fees, false representations, or other unfair or deceptive practices. A lease should provide a transparent policy regarding security deposits, with those deposits being appropriately sized and placed in an interest-bearing account for the duration of the lease. The lease should also provide reasonable advance notice of actions related to the unit, including notice of entry for inspection by the housing provider and significant changes to the unit. Finally, the lease terms should be written in simple and clear language accessible to the renter, and the leasing process should ensure tenants understand the terms of the lease through a plain-language briefing.
A lease establishes the foundation for the housing provider and tenant relationship, highlighting the rights, responsibilities, and recourse that exists for both parties. A lease covers the terms for what is likely the largest single expense a household makes each month and over the course of a year. The trend of more leases with problematic provisions can be partially attributed to the increased use of shared forms, which are easily accessible through the internet and may include terms that are not legally enforceable in the state or locality in which the property is located.
To ensure fair leases to the greatest extent possible, the Administration is announcing the following new actions:
Owners and managers in the RD Section 515 Program should be prepared for this upcoming change. A good starting point is a review of the current HUD Model Lease for Multifamily Housing and the HUD Rights & Responsibilities Brochure. This will give operators of Section 515 housing an idea of what may be coming down the road.
Third Principle: Education, Enforcement, and Enhancement of Rights
The Administration position is that Federal, state, and local governments should do all they can to ensure renters know their existing legal rights and to protect renters from unlawful discrimination and exclusion that can take many different forms.
The Fair Housing Act (FHA) bans discrimination based on race, color, religion, sex (including sexual orientation and gender identity), disability, familial status, and national origin, including practices that have an unjustified disparate impact on a protected class. The Administration proposes to expand the FHA to prohibit discrimination based on source of income.
In order to implement this third principle, HUD is finalizing a rule to clarify that the Fair Housing Act continues to bar practices with unjustified discriminatory effects notwithstanding efforts to weaken its reach. In addition, HUD has published a proposed Affirmatively Furthering Fair Housing rule to strengthen and better align grantee planning efforts to advance fair housing goals.
The federal government has advanced other rights beyond those protected by the Fair Housing Act. For example, discrimination against a holder of a Housing Choice Voucher is banned in the federal Low-Income Housing Tax Credit (LIHTC) program, which is the largest affordable housing production program in the country. The Administration has announced the following new actions:
Tenant Background Checks:
Source of Income Discrimination:
Fourth Principle: The Right to Organize
The Administration believes that renters should have the right to organize without obstruction or harassment from their housing provider or property manager and should not risk losing housing over organizing.
Tenants in different types of HUD and RD programs have recognized rights to organize. The Administration is not proposing that the government impose this requirement on non-assisted properties. They are taking the following steps:
It should be noted that these actions will not apply to LIHTC properties.
Fifth Principle: Eviction Prevention, Diversion, and Relief
Before the pandemic, roughly 900,000 evictions were completed against tenants every single year. In order to reduce the number of evictions, the Administration is taking the following actions:
Bottom Line - This "Renters Bill of Rights" will have a direct impact on federally assisted housing, with some minor effects across the non-federal universe of rental housing. The most immediate impact will be felt in the rural housing community due to the Rural Development Service development of a Model Lease and "Rights & Responsibilities" brochure. At the same time, the push to create "best practices" relative to applicant background screening should lead landlords to examine current practices - before they are forced to do so by state or local agencies.
With regard to the LIHTC program, The Treasury Department will meet with tenants, advocates, housing providers, and researchers to discuss ways to further the goals of tenant protections, including those around source of income, as well as broader issues of affordability and eviction prevention with respect to the LIHTC incentive.
HOTMA Final Rule - Impact on the Housing Trust Fund (HTF) Program
The Department of Housing & Urban Development (HUD) has released a Final Rule implementing the Housing Opportunity Through Modernization Act of 2016 (HOTMA). This final rule was published in the Federal Register on February 14, 2023. With the exception of changes relating to Non-Public Housing Over Income families (which take effect on March 16, 2023), this final rule takes effect on January 1, 2024. The Housing Opportunity Through Modernization Act (HOTMA) was signed into law on July 29, 2016, amending many aspects of Multifamily Housing programs (as well as programs administered through the Offices of Public and Indian Housing and Community Planning and Development). HOTMA was intended to streamline processes and reduce burdens on housing providers. On September 17, 2019, HUD issued a proposed rule to update its regulations according to HOTMA s statutory mandate. The final rule, published on January 9, 2023, considers public comment received on the proposed rule and provides additional guidance for implementing Sections 102, 103, and 104 of HOTMA. Which Programs will be Affected by the Final Rule? The Section 8 PBRA (including RAD), Section 202/811 PRAC, 202/8, 202/162 PAC, Senior Preservation Rental Assistance Contract (SPRAC), and Section 811 Project Rental Assistance (811 PRA) programs will see changes due to HOTMA. This is the seventh in a series of articles I am writing on the sweeping changes that will be made to HUD affordable housing programs. This article will focus on the revised rules regarding the Housing Trust Fund (HTF) Program. In the final rule, HUD clarifies that for the HTF Program, the definition of Live-in Aide, foster adult, foster child, full-time student, and net family assets will be the same as the meaning of these terms for the HUD multifamily housing programs. Use of Annual Income in the HTF Program HTF grantees use the annual income of families to determine eligibility for: (1) occupancy of HTF-assisted rental units; (2) purchase of a homeownership unit; and (3) receiving homebuyer downpayment assistance. In the final rule, HUD is amending the HTF regulations to align with HOTMA s income and net family assets provisions in order to reduce the administrative burden of calculating income when HTF funds are layered with other HUD programs. The final rule specifies that if a family is applying for or living in an HTF-assisted rental unit, and the unit is assisted under the Public Housing Program, the HTF grantee must accept the PHA s determination of income and adjusted income in accordance with the requirements of the PH program. The same is true if the family is assisted under a Federal tenant-based rental assistance program. Likewise, if a family applying for an HTF unit is living in a project with a Federal or State project-based rental subsidy, the grantee must accept the PHA, owner, or rental subsidy provider s determination of the family s annual and adjusted income under that program s rules. While HTF grantees must enter into regulatory agreements with owners, developers, or sponsors of HTF-assisted rental housing, HUD is recommending that grantees also enter into agreements with PHAs, owners, or rental subsidy providers in order to facilitate the sharing of income and rent determinations to ensure the project is able to meet the HTF rental occupancy requirements established in the HTF written agreement and other HTF program requirements. Also, although the HTF program has no asset limitations, families that are participating in a program with asset limitations noted in the final rule may be denied assistance under that program. However, if such families are eligible based on the regulations of the HTF program, they may not be excluded from an HTF unit - even if they are denied Federal rental assistance. If the family has assistance terminated by the operator of the rental assistance program, the grantee must determine the family s income in accordance with HTF requirements. For HTF units not assisted through another HUD program, grantees must (1) continue to comply with the HTF requirements to determine the annual income of families by examining at least two months of source documents at initial occupancy and every six years of the HTF affordability period; (2) project the prevailing rate of income of the family; and (3) specify which of three methods to determine annual income (i.e., source, self-certification, written statement) will apply to subsequent income determinations (other than at initial occupancy and every six years) during the HTF affordability period. The final rule does incorporate revisions to the definition of net family assets that are applicable to other HUD programs - i.e., income to assets will not be imputed unless the assets exceed $50,000. Imputing will be based on the HUD Section 8 imputed rate. Grantees will also be able to accept self-affidavits of assets if the household assets do not exceed $50,000. Unless an HTF unit is layered with other HUD funding that is subject to this final rule, an HTF grantee has the option to use either the definition of adjusted gross income contained in the IRS Form 1040, or the definition of annual income used in the Section 8 program. The final rule clarifies that income determinations made in the HTF program are valid for six months. This will not apply if the income determination is being made in accordance with the rules of another program at the property. Finally, while not a new provision, HTF regulations already specify that for projects with project-based rental subsidies, the HTF grantee may continue to permit the project owner to charge the maximum rent permitted under the Federal or State project-based rental subsidy program. Bottom Line: While not extensive, the changes made to the HTF program by the final rule are substantive and both grantees and operators of HTF -assisted rental projects should familiarize themselves with these new rules -- keeping in mind that they do not go into effect until 2024.
HOTMA Final Rule - Impact on the HOME Program
The Department of Housing & Urban Development (HUD) has released a Final Rule implementing the Housing Opportunity Through Modernization Act of 2016 (HOTMA). This final rule was published in the Federal Register on February 14, 2023. With the exception of changes relating to Non-Public Housing Over Income families (which take effect on March 16, 2023), this final rule takes effect on January 1, 2024. The Housing Opportunity Through Modernization Act (HOTMA) was signed into law on July 29, 2016, amending many aspects of Multifamily Housing programs (as well as programs administered through the Offices of Public and Indian Housing and Community Planning and Development). HOTMA was intended to streamline processes and reduce burdens on housing providers. On September 17, 2019, HUD issued a proposed rule to update its regulations according to HOTMA s statutory mandate. The final rule, published on January 9, 2023, considers public comment received on the proposed rule and provides additional guidance for implementing Sections 102, 103, and 104 of HOTMA. Which Programs will be Affected by the Final Rule? The Section 8 PBRA (including RAD), Section 202/811 PRAC, 202/8, 202/162 PAC, Senior Preservation Rental Assistance Contract (SPRAC), and Section 811 Project Rental Assistance (811 PRA) programs will see changes due to HOTMA. This is the sixth in a series of articles I am writing on the sweeping changes that will be made to HUD affordable housing programs. This article will focus on the revised rules regarding the HOME Program. In the final rule, HUD clarifies that for the HOME Program, the definition of Live-in Aide, foster adult, foster child, full-time student, and net family assets will be the same as the meaning of these terms for the HUD multifamily housing programs. Use of Annual Income in the HOME Program Participating Jurisdictions (PJs) use the annual income of families to determine eligibility for: (1) occupancy of HOME-assisted rental units; (2) purchase of a homeownership unit; (3) receiving homebuyer downpayment assistance; and (4) obtaining rental assistance when there is tenant-based rental assistance (TBRA). The HOME regulations permit a PJ to use one of two definitions for annual income for each rental project or program assisted with HOME funds: (1) adjusted gross income in IRS Form 1040; or (2) annual income as defined in the HUD multifamily housing programs. In this final rule, HUD is requiring that PJs use the HUD multifamily definition of income whenever HOME funds are layered with funds of a program that is required to use the multifamily definition. Also, if a project has a State project-based rental subsidy, the PJ must use the subsidy provider s income determination under the rules of the State program. This final rule allows a PJ to accept a Federal TBRA provider s income determinations if the family is applying for or living in a HOME-assisted rental unit and the family is being assisted by a Federal TBRA program (e.g., Housing Choice Vouchers). Notice that the use of the PHA income determination is not required in this case -- it is permitted. However, a PJ must ensure that these units comply with HOME rent limitations. While PJs must enter into regulatory agreements with owners, developers, or sponsors of HOME-assisted rental housing, HUD is recommending that PJs also enter into agreements with PHAs, owners, or rental subsidy providers for Federal TBRA when income will be calculated in accordance with HOME rules and not the rules of the TBRA program. This may be necessary to ensure the project is able to meet the HOME rental occupancy requirements relating to fixed/floating and High/Low HOME units. If PHAs administering HCV and owners of projects with PBRA accept annual income determinations made by administrators of other Federally assisted programs (e.g., TANF or SNAP), the PJ must also accept those income determinations. Also, although the HOME program has no asset limitations, families that are participating in a program with asset limitations noted in the final rule may be denied assistance under that program. However, if such families are eligible based on the regulations of the HOME program, they may not be excluded from a HOME unit - even if they are denied Federal rental assistance. If the family has assistance terminated by the operator of the rental assistance program, the PJ must determine the family s income in accordance with HOME requirements. The final rule permits PJs to accept self-certification of assets for families with assets that do not exceed $50,000 without taking further steps to verify the accuracy of the declaration. Hardship Exemptions When Using Adjusted Income When PJs are required to calculate a family s adjusted income, the PJ may grant the financial hardship exemptions allowed by the final rule for public housing and multifamily housing programs. These are the hardship exemptions that relate to the threshold to receive health and medical care expenses as well as families that apply for a continued childcare expense deduction. To use this authority, the PJ must develop policies and procedures for qualifying and granting hardship exemptions. Source Documents No Longer Required in Year Six of the Affordability Period Current HOME rules require that family income be fully documented at move-in and then every sixth year of the project s affordability period. The final rule eliminates the requirement to review source documentation every sixth year of the affordability period. Bottom Line: While not extensive, the changes made to the HOME program by the final rule are substantive and both PJs and operators of HOME-assisted rental projects should familiarize themselves with these new rules -- keeping in mind that they do not go into effect until 2024.
A. J. Johnson Partners with Mid-Atlantic AHMA for April Training on Affordable Housing
During the month of April 2023, A. J. Johnson will be partnering with the MidAtlantic Affordable Housing Management Association for three training sessions intended for real estate professionals, particularly those in the affordable multifamily housing field. The three sessions will be presented via live webinars. The following sessions will be presented: April 11: Affirmative Fair Housing Marketing Plans - Understanding the Requirements - The Fair Housing Act requires federal agencies to administer all programs and activities relating to housing and urban development in a manner that "affirmatively furthers fair housing. This means that it is not enough to prevent segregation - the government must encourage "integration. Each owner who participates in HUD or Rural Development multifamily housing programs must develop and provide a description of the Affirmative Fair Housing Marketing Plan (AFHMP) for the property to comply with the requirements of the Law. A cornerstone of an AFHMP is the requirement to market a property to those "least likely to apply. This 1.5-hour course outlines the basic requirements of an AFHMP, including marketing strategies, the meaning of "least likely to apply, and updating the Plan. Completion of the course will assist managers in a full understanding of how to comply with HUD rules regarding these important plans. April 19: Compliance with Federal and State Fair Housing Requirements - This course will equip attendees with the knowledge and understanding needed to avoid fair housing violations.The course curriculum is centered around the regulations in the two major fair housing laws, The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) and Section 504 of the Rehabilitation Act of 1973. The course also includes a discussion of the additional state and local protected characteristics. In addition, relevant portions of the Americans with Disabilities Act (ADA) are covered.The purpose of the Fair Housing Act is to eliminate housing discrimination, promote economic opportunity, and achieve diverse, inclusive communities. Professional fair housing training assists in this mission by ensuring that housing professionals understand both the rights of the public relative to fair housing and the duties and responsibilities of real estate professionals. April 20: Violence Against Women Act (VAWA) - Guidance for Non-HUD Properties Subject to the Law - The Violence Against Women (VAWA) Reauthorization Act of 2013 expanded VAWA protections to many different affordable housing programs - including the Low-Income Housing Tax Credit (LIHTC) Program. While HUD has provided detailed requirements on VAWA implementation at HUD properties, there has been no uniform guidance for LIHTC owners and managers. A proposal before Congress would legislate that LIHTC Extended Use Agreements contain VAWA requirements. The IRS has not provided guidance and while many state agencies are requiring VAWA plans, they are not providing information on what the plans should look like. This two-hour training - when combined with the course materials- will review VAWA requirements and recommend best practices for developing VAWA plans at LIHTC and other non-HUD properties. The session will be presented by A. J. Johnson, a recognized expert in the affordable housing field and the author of "A Property Manager s Guide to the Violence Against Women Act. These sessions are 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 any (or all) of these training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.
CDFI Fund Receives Record Number of Applications for NMTC Program in 2022 Round
The CDFI Fund, a branch of the U.S. Department of the Treasury, has announced that it has received a record number of applications for the CY 2022 round of the New Markets Tax Credit (NMTC) Program. The program is designed to promote economic development in distressed communities by offering tax credit allocations to Community Development Entities (CDEs) for investments in eligible areas. A total of 197 applications were submitted for the program, with CDEs from 44 states, the District of Columbia, Guam, and Puerto Rico applying for a share of the $5 billion in allocation authority available for the 2022 round. However, these applicants requested an aggregate total of $14.8 billion in NMTC allocation authority, almost three times the available amount. The NMTC Program was created by Congress in 2000 to encourage individual and corporate taxpayers to invest in CDEs, offering a tax credit equal to 39% of the cost of the investment over a seven-year period. The CDEs must then use the investment to make qualified investments in low-income communities. The CDFI Fund administers a competitive application and review process to select successful applicants, and the $71 billion in tax credit allocation authority awarded through the program has been used to promote economic development in distressed communities across the United States. This amount includes $3 billion in Recovery Act Awards and $1 billion of special allocation authority for the Gulf Opportunity Zone. The demand for the NMTC Program highlights the continued need for economic development in distressed communities across the United States. For more information about the NMTC Program, visit the CDFI Fund s website at www.cdfifund.gov/nmtc.
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