HOTMA Final Rule - Impact on the HOME Program

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.