Some of the most successful affordable housing projects in the United States are the result of public/private partnerships. An integrated approach to affordable housing leads to the most thriving developments.
This "integrated approach" amplifies the connective role that housing plays in a community. Housing is a building block of a community’s infrastructure, a factor in public safety, a component of the healthcare continuum, a driver of employment, a solution to addressing climate change, and a bridge to economic mobility.
While affordable housing is generally defined as housing on which the occupant is paying no more than 30 percent of income for housing costs, such housing must also be decent, safe, and located in proximity to adequate employment and transportation options.
In addition to the major affordable housing programs (Section 42, Section 8, public housing), we should not overlook the Department of Housing & Urban Development (HUD) Community Planning & Development (CPD) programs, as well as state and local programs.
CPD programs form a strong secondary group of housing options for affordable housing developers and include:
How Can These Funds Be Accessed?
With the exception of Section 108 funds, annual CPD programs provide grants on a formula basis to qualifying jurisdictions. Private owners and landlords have no access to these funds - except through the qualifying jurisdictions.
State and local governments must develop and submit a Consolidated Plan every three to five years. As part of this plan, jurisdictions are required to (1) conduct an evaluation of its housing market and needs; (2) identify public policies at the local jurisdiction level that serve as barriers to affordable housing and identify the strategy to remove or ease the negative impact of such policies; and (3) comply with the affirmatively furthering fair housing mandate that sets out a framework for CPD grantees to take meaningful actions to overcome historic patterns of segregation.
Partnerships in CPD-Funded Housing Development
Annual CPD programs often serve as key components in development deals; for example, gap financing, commitment letters to secure private financing, or "last-in" dollars to finalize deal closings.
The key role of local government is to foster cooperation between public agencies and the private sector. To effectively layer the multiple funding sources often required in affordable housing developments, local administrators must understand the regulatory, eligibility, and reporting requirements of each source, as well as their operational limits. Unfortunately, many local officials do not possess this level of understanding and it falls on private sector actors to educate the locality about how the programs can work together.
Following is a discussion of some of the financing tools that can be funded through the annual CPD programs.
Bridge Loans (CDBG, HOME, HTF, §108)
Certain private funders (e.g., LIHTC investors) may be able to offer better terms if their contribution to a project is delayed significantly (the "time/value" of money). By offering low-cost "bridge" loans, government agencies can help developers access these improved terms by covering development costs during the delay period.
Bridge loans are CPD eligible but uncommon given the lengthy affordability restrictions associated with HOME and HTF, in particular.
Capital Subsidies (CDBG, HOME, HTF, §108)
Capital subsidies refer to grants and long-term forgivable or low-cost/cash flow loans that may be used as permanent sources in a development project. By reducing the amount of conventional financing required by a project, these subsidies can reduce project costs beyond the actual dollar amount contributed to the project. CPD funds may also be used to refinance existing mortgages in order to reduce interest payments in existing developments.
For LIHTC developments, federal grants may cause a reduction in the project’s eligible basis, which can result in a decrease in overall funding available for the project. For this reason, many communities provide federal subsidies to LIHTC projects in the form of low-cost loans - which are includable in eligible basis.
Operating Subsidies (HTF)
For projects that serve the lowest-income households, where rents are insufficient to cover operating expenses and debt service, government-provided operating subsidies can boost that revenue, thus increasing the project’s ability to leverage conventional financing. This may take the form of annual payments to affordable housing owners for the ongoing operation of a housing development serving extremely low-income households. The concept is similar to the public housing operating subsidy program.
Property Acquisition & Pre-Development Loans (CDBG, HOME, HTF, §108)**
These loans subsidize upfront costs. They work by providing low-cost or deferred payment loans for developers to cover early development costs before other long-term funding is available.
**Pre-development loans are not an eligible use for any of the CPD programs except for HOME Community Housing Development Organization (CHDO) funding. Such funding is not available for private developers or public agencies.
Rental Assistance (HOME)
Rental assistance makes units more affordable to a wider group of households, thus contributing to higher occupancy levels and faster lease-up; it may improve the reliability of rental payments; and in instances where the subsidized rent payment is higher than what the unit would generate without the subsidy, it increases rental revenue for the property.
Both project- and tenant-based rental assistance programs, such as Housing Choice Vouchers, are available through HUD’s Office of Public and Indian Housing and can complement CPD-funded assistance.
Although project-based rental assistance is not CPD-eligible, tenant-based assistance is HOME eligible.
Revolving Loans (CDBG, HOME, HTF, §108)
Revolving loans are repayable low-interest loans made to private developers. Repaid funds are then used to create a revolving loan fund that can be committed to different projects or developers. Revolving loans only require a government’s initial investment to be established, after which they become self-sustaining. Since they are not forgivable loans, they tend to give developers limited flexibility when used as pre-development funding.
LAYERED FUNDING STREAMS: OPTIONS TO LEVERAGE ANNUAL CPD FUNDING
Complex financing is typical in affordable housing deals. Successful developments often leverage annual CPD funds with other public and private sources.
Here are some of the most commonly used sources for development that may be paired with CPD funding:
Federal Home Loan Bank (FHLB) Affordable Housing Program (AHP)
The AHP is a competitive funding program for the production and preservation of affordable housing (both rental and homeownership), funded by the government-sponsored FHLB system. AHP funds can be either grants or low-interest loans and are often combined with LIHTC proceeds. Awards are made directly to the development team and do not go through a local government. However, localities often assist in shaping the resulting projects by collaborating with developers early in the process.
Historic Tax Credits (HTC)
HTCs provide capital funds for developers undertaking a substantial rehabilitation of a historic asset. Funds can be used to rehab historic residential buildings or adaptive reuse of other historic structures.
Housing Finance Agency (HFA) Risk Sharing - Section 542(C)
This state-administered program provides low-cost capital to spur the development of rental housing through risk-sharing arrangements between HUD and HFAs.
Investment Tax Credits (ITCs) and Other Energy Efficiency Funding
These are commonly referred to as "solar tax credits." ITCs and other funding mechanisms such as utility rebates, energy performance contracts, and Property Assessed Clean Energy (PACE) programs can be used as part of the funding stack for housing projects that commit to certain levels of energy efficiency and renewable energy generation. These financial incentives can provide a bonus benefit for LIHTC projects that are required to include energy conservation components by state allocation plans.
Low-Income Housing Tax Credit (LIHTC)
This is the big Kahuna of affordable rental housing programs. A huge percentage of affordable deals rely on the LIHTC as the lynchpin of feasibility. While the awards are made directly to developers, local governments often work with and lend their support to local developers to help shape the proposed project and make the applications more competitive.
New Markets Tax Credits (NMTCs)
Local organizations called Community Development Entities (CDEs) apply for NMTCs from the Community Development Financial Institution (CDFI) fund and invest the proceeds into public interest projects (including affordable housing construction) in qualified low-income communities.
Opportunity Zones (OZs)
OZs offer a tax incentive for people and corporations to invest in distressed communities across the country. Affordable housing development may be structured in a way to leverage these incentives when proposing housing in an OZ.
These bonds are issued by state or local government agencies, often in conjunction with an award of low-income housing tax credits. Tax-exempt bonds function like loans that are contracted by governments and then passed along to developers. With tax-exempt bonds, the investor who purchases the loan is exempt from federal income taxes on the interest earned from that loan. This results in higher returns for the investor when compared to many taxable bonds. The terms of the loan for tax-exempt bonds are typically more favorable to the borrower than the terms of taxable loans. This is basically a low-interest mortgage loan, which results in the potential lowering of rents since debt service is less.
Developing Creative Affordable Housing Models
In addition to the traditional housing development models noted above, a creative approach to funding strategies and a broad perspective on how that funding may be obtained is required. Following are some potential affordable housing models that both developers and localities should consider as they move forward with the creation of new ways to develop this much-needed resource.
Community Land Trusts (CLTs)
A CLT is an affordable homeownership or rental housing model in which a single entity, typically a non-profit or quasi-governmental organization (such as a PHA) maintains ownership of the land when a household (or developer) purchases that home that is on the land. The developer or homeowner pays a nominal amount to the CLT on a monthly or annual basis to lease the land. Long-term affordability is created by removing the cost of the land from the value of the development and by entering into long-term agreements that require the maintenance of affordability. Funding sources for the establishment of CLTs include CDBG, HOME, and HTF.
Employer-Assisted Housing (EAH) Programs
Development of EAH projects typically involve the subsidy of housing costs for employees who live in proximity to the workplace. Government agencies may offer incentives, such as dollar-for-dollar match of funds, encouraging the implementation of such programs, and maximizing the impact of the programs.
Land banks are quasi-public entities that acquire, manage, repurpose, and sell vacant or abandoned real estate. While not a financial mechanism in the strict sense, land banking can translate into significantly less expensive development of housing due to lower acquisition costs. For example, in Richmond, VA, the Richmond Land Bank (a program of the Maggie Walker Community Land Trust) receives vacant or tax-delinquent property from the City of Richmond and then transfers those properties to affordable housing developers. Similar land banks can be found across the United States.
Social Impact Bonds
This is a public-private partnership in which a government entity issues bonds that are purchased by investors. The funds provided by the investors are for projects that are expected to have a positive social impact and are repaid by the government when that impact is achieved. These bonds are often used for new or rehabbed affordable housing and supportive housing units. This type of partnership will often include metrics that go beyond the delivery of physical units, such as populations to be served, specific communities to be invested in, and employment opportunities generated.
The following project profiles demonstrate how communities layer various funding sources, including CPD programs, and employ creative models into planning and developing their own affordable housing.
Avondale Trace - High Point, NC
Erin Park - Eastpointe, MI
Brewster Woods at the Cape - Cape Cod, MA
The development is located on a formerly vacant lot in Cape Cod and is targeted at those who work in the community but cannot afford to live there, such as teachers, service workers, and healthcare workers. This is a common problem in resort communities.
Lincoln Place - Rutland, VT
Lincoln Place is an example of increasing affordable housing supply through the development of public property. The development was originally a school, which was abandoned and deteriorating. This historic structure now provides 19 units of affordable housing. Historic tax credits were obtained, which enabled the developer (Housing Trust of Rutland) to preserve elements of the former school. The Rutland Housing Authority provides project-based vouchers and the development also used Housing Trust Fund money, HOME funds, and CDBG.
Westview Village - Ventura, CA
These 286 affordable units were developed with a mix of funding, including CDBG, and are part of a RAD conversion. The property serves seniors, individuals, and families, including "entry-level" households.
Westview Village replaced the city’s oldest public housing development which was built in the 1950s. It was co-developed by the Housing Authority of the City of San Buenaventura and BRIDGE Housing Corporation. 34 single family homes are provided for "entry-level" families that will be deed restricted. The old public housing project had 180 units, so this new deal actually adds 106 units to the affordable housing stock.
The RAD program guarantees a return to the property for those displaced by the construction. Of the resident households that were temporarily displaced, 79 have already opted to move back to the property once construction has been completed. The remaining households are either choosing to remain in the public housing complexes to which they were relocated, purchasing their own homes, or accepting tenant-based rental assistance.
The total development costs are estimated to be $192 million of which $960,111 are HOME funds and $5,335,055 in CDBG funds.
The Connection Between Affordable Housing & the Community
Affordable housing is not just bricks and sticks - it is the point at which all community sectors come together and the backbone of our neighborhoods. The development of affordable housing impacts every element of a community’s development, from infrastructure to economic mobility. Let’s review some of the key elements of any community development program and see how affordable housing impacts those elements.
Affordable housing contributes to communities in important ways, both as a physical asset and a form of economic activity. Affordable housing development is often accompanied by infrastructure improvements that affect the larger community in positive ways. Among these benefits are improving neighborhood walkability and accessibility by updating sidewalks and streetscapes, increasing the availability of green and open spaces, and bringing transportation hubs and economic investment to areas with traditionally low investment or declining neighborhoods. Environmental advocates, chambers of commerce, and transportation planners often support affordable housing development by understanding its value as a conduit for improved infrastructure.
A lack of decent, affordable housing can have wide-ranging impacts on the security of a community as a whole and the safety of its most vulnerable members. The availability of affordable housing may correlate to a reduction in crime. Eliminating barriers to housing for persons with correctional backgrounds can lead to reduced recidivism, which is why proper development of criminal screening procedures is so important. Housing chronically homeless individuals leads to reduced incarceration and reliance on emergency medical care, with substantial monetary savings to local taxpayers.
Housing has long been recognized as one of the social determinants of health and well-being. Housing stability and affordability, the quality of one’s home, and neighborhood characteristics such as walkability, safety, and environmental quality all impact the overall health of residents. When people have increased access to medical services, rather than having to rely on emergency room care as is often the case with people experiencing homelessness, healthcare costs decrease for both the individual and the healthcare system. It is becoming increasingly common for affordable housing developments, particularly for seniors and more vulnerable populations, to include a healthcare component such as a clinic.
Partnering with large neighborhood or area employers to develop workforce housing can be very successful if local employers are brought into the effort. Convincing local employers to participate is possible since it is in the best interest of the employers to have available affordable housing. Two critical elements are important to employers:
Amazon has already figured this out with their "Amazon Housing Equity Fund." Amazon provides low-rate loans, grants, and partnerships to local governments and nonprofit agencies. The fund is providing more than $2 billion in below-market loans and grants to preserve and create more than 20.000 affordable homes for individuals and families earning moderate to low incomes in communities where the company has a large presence.
Housing and transportation are huge contributors to the total domestic carbon footprint affecting U.S. households. The federal government incentivizes affordable housing developers to incorporate green, energy efficiency attributes into new communities. The energy efficiency upgrades also reduce costs of heating and cooling, increasing long-term affordability for residents. Modern designs also provide for better stormwater management, structural improvements, and updated emergency systems.
Safe, stable, affordable housing - whether rented or owned - improves long-term outcomes for low-income children in educational attainment, family stability, and future earnings.
Bottom Line: Developers (both for-profit and non-profit) and operators of affordable housing should take a hard look at the possible public options that are available to assist in making housing development and operations more feasible. As noted in this article, there are various financing tools that can be assisted using HUD’s Community Planning & Development Programs. HUD-funded annual CPD programs provide critical financing options to increase the supply of new affordable housing. These programs are certainly worth a look by those in the business of creating and managing affordable housing.
A. J. Johnson to Offer Webinar on Tenant-on-Tenant Harassment and Sexual Harassment in the Workplace
A. J. Johnson will be conducting a webinar on July 11, 2023, on Tenant-on-Tenant Harassment and Sexual Harassment in the Workplace. The Webinar will be held from 1:00 PM to 4:00 PM Eastern time. Dealing with tenant-on-tenant harassment is an evolving area of fair housing law. Landlords are generally familiar with how their actions can be construed as discriminatory. But how should landlords react when one resident is violating the fair housing rights of another resident?Title VII of the Civil Rights Act of 1964 prohibits discrimination based on sex in the workplace - including sexual harassment. The law applies to employers with 15 or more employees. In addition to having a written sexual harassment policy, companies should also have an effective complaint procedure.Many businesses in the United States have no policies regarding sexual harassment, and such harassment occurs in the highest levels of corporate management. However, the risk of not having such a policy far outweighs the effort required to implement one.These risks are greater now than ever before. Victims of sexual harassment may now recover damages (including punitive damages) and the Supreme Court has made it easier to prove injury.This three-hour training is designed to help property owners and managers understand the current legal state of these two issues and to establish policies to limit potential liability. The session will include a discussion of the three most relevant court cases relating to tenant-on-tenant harassment as well as cases that outline employer risk regarding harassment in the workplace. Participants will also be provided with recommended policies to limit potential liability. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule.
HOME Income/Rent Limits - Effective Date Reminder
While HUD has published the 2023 HOME Income and Rent limits, they do not go into effect until June 15. Participating Jurisdictions (PJs) are not authorized to use the new limits until that date. Property owners with HOME funds should check with the governing PJ on June 15 regarding changes in income and rent limits for HOME units.
How Land Use and Zoning Reforms Can Increase the Availability of Affordable Housing
At present, there is a shortfall of more than 1.5 million affordable housing units in the United States (see Overcoming the Nation s Daunting Housing Supply Shortage, Urban Institute, 2021). As a result of the housing shortage, families pay more for housing and have less savings. They struggle to attain homeownership and find it difficult to access jobs. Local land use regulations and zoning rules contribute to the national housing supply crisis by artificially limiting housing construction and increasing costs. This article will summarize the impacts of restrictive land use policies and outline reforms that state and local governments may adopt to increase the supply of affordable housing. Much of the information in this article is taken from a study by The Department of Housing & Urban Development (HUD) and published by the HUD Office of Policy Development & Research. Relevant Research Restrictive land use and zoning laws are major drivers of the national housing shortage. Short-sighted local policies increase the cost of housing, limit economic growth, accelerate climate change, and maintain residential segregation. According to "The Impact of Building Restrictions on Housing Affordability, (Wharton Real Estate Review 7: 5-14, by Edward Glaeser and Joseph Gyourko), the relationship between restrictive land use and zoning regulations and housing prices is especially significant in areas with higher demand. The greatest impact is on lower-income renters and starter homes for first-time homebuyers. Recent research has demonstrated how restrictive zoning limits a worker s ability to move to regions experiencing job growth, which has stunted national economic productivity and growth. (See "Housing Constraints and Spatial Misallocation , American Economics Journal: Macroeconomics 11 (2): 1-39, by Chang-Tai Hsieh and Enrico Moretti). This lack of affordable housing also limits a worker s ability to find housing near employment centers. This creates longer commutes and limits the ability of employers to attract workers. This forced living in car-dependent locations increases transportation costs and carbon emissions. Many places use zoning restrictions to limit the types of housing that can be built to keep lower-income, often Black and brown, households from moving in. This forced segregation has well-documented negative outcomes for children, and segregation via land use and zoning codes reduces access to neighborhoods that are associated with improved resident trajectories, negatively impacting regions household incomes, educational attainment, public safety, and health outcomes. In short, restrictive zoning can have Fair Housing Act implications. Innovation is Occurring In response to increasing housing affordability pressures and the widespread recognition of the role that restrictive zoning has played and continues to play in driving up housing costs and perpetuating segregation, cities, and counties across the country are taking a hard look at their zoning laws and adopting reforms that can help increase housing supply. While local governments play the most significant role in regulating land use, state governments are beginning to play a role in land reform. Importantly, state governments are more insulated from the "not in my backyard pressures that often dominate local politics; states typically have broad authority to set the rules by which local governments can regulate land uses, and they can create accountability mechanisms to incentivize local, pro-housing reforms. When combined with incentives and subsidies to enhance affordability, land use, and zoning reforms can significantly impact housing affordability. The most common local reforms being used to increase affordability include the following: Increases in Multifamily Zoning: In many parts of the country, it is impossible to build any housing other than single family. A New York Times article in June 2019, "Cities Start to Question an American Ideal: A House with a Yard on Every Lot, by Emily Badger and Quactrung Bui, revealed that as much as 75 percent of land in major American cities is zoned exclusively for single-family dwellings, and this share is likely much higher outside of large cities. State and local reforms that eliminate or reduce the predominance of single-family zoning create more affordable housing in more places. In 2022, HUD and the Census Bureau published "New Privately-Owned Housing Units Started: Units in Buildings with 2-4 Units. This study revealed that there were only 16,000 units started in buildings with 2-4 units across the United States, less than 20 percent of the level of construction of these residential buildings in the 1970s. After legalizing up to four units of housing, Minneapolis, Minnesota, and Portland, Oregon, both saw increases in permits for duplexes, triplexes, and other newly allowed housing types. Portland also allows developers to build up to six units per lot if a portion of those units is reserved for tenants with lower incomes. Maine and California both legalized building two units on lots previously zoned as single-family, the latter of which could enable 700,000 new market-feasible homes. Oregon and California have enabled denser multiunit housing in certain areas of cities, including near transit. Development by-Right: By-right development enables housing that complies with zoning and development regulations to be built without discretionary approval. This leads to faster and more reliable development results. For example, in CT, land zoned for single-family housing almost never requires a public hearing before approval, but almost all projects with more than three units must have public hearings. CA on the other hand has made available large tracts of land for housing development by approving by-right housing development in any area currently zoned for parking, retail, or office buildings. These developments are exempt from environmental reviews and are required to provide affordable units. Adaptive Reuse: Cities and states can also enable housing production or conversion on land previously zoned for other uses. Due to the new "work-from-home era, demand for commercial real estate is down, which leads to a decrease in property values and real estate tax collections. Office-to-residential conversions could help to solve the dual crises of vacant office space and lack of affordable housing, but the number of buildings suitable for conversion is limited due to restrictive zoning and challenges with building footprints (e.g., reconfiguring building systems and the need for windows in every bedroom). Los Angeles Adaptive Reuse Program relaxed zoning and other requirements and streamlined the process for developers, leading to the development of more than 46,000 units since 1999. Eliminate Restrictive and Unnecessary Parking Requirements: Most cities have minimum parking requirements (parking spaces required per residential unit), which often mandate more parking spots than market demand would otherwise bear. An article by Jeffrey Spivak, "People Over Parking, in Planning Magazine in 2018, found that garage parking drives up rents by approximately 17 percent, and other studies have found even larger impacts of minimum parking requirements on rent. Buffalo, New York; Hartford, Connecticut; and Seattle, Washington, have eliminated parking requirements either near transit or across the city and have seen reductions in parking and construction costs in new projects while avoiding using valuable urban land for parking rather than more productive uses. Washington, Oregon, and California have limited parking requirements near transit, while Connecticut enacted parking reform that affects all housing regardless of its proximity to transit. Minimum Lot Sizes: Minimum lot sizes are common in local zoning codes and require that each household occupy more land than is otherwise necessary, This has been a traditional method for localities to prevent the development of affordable housing. Reducing minimum lot sizes enables the construction of more "starter homes and decreases the per-household cost of providing water and other utilities. In 1998, Houston, Texas, reduced minimum lot sizes from 5,000 to 1,400 square feet, which facilitated the development of more than 25,000 new units since then. In 2019, Helena, Montana, abolished nearly all minimum lot sizes, and Billings, Montana, moved from minimum lot sizes to a lot width requirement. Several other states, including Vermont and New Hampshire, have introduced bills to limit minimum lot sizes. Transit-Oriented Development: Equitable transit-oriented development promotes affordable housing options in proximity to transit, encouraging people-centered neighborhoods, and reducing displacement in historically disinvested communities struggling with rising housing costs. Both Chicago and Massachusetts have had success with transit-oriented policies. Chicago has legalized more types of housing near transit and has eliminated onsite parking requirements near public transit. A 2021 Massachusetts law incentivized hundreds of municipalities served by the Massachusetts Bay Transportation Authority to create at least one higher-density multifamily zoning district by right within walking distance of public transportation. Streamlining Processes: Permitting adds costs and uncertainty to the development process. Some states are setting time limits on how long cities and counties have to review permit applications (Florida is an example). In 2016, 1,200 affordable dwelling units were built in CA. The state then changed the rules reducing permitting time and limiting utility fees and 12,300 ADUs were built in 2019. Bottom Line: HUD plays a vital role in promoting affordable housing in collaboration with other federal agencies. They allocate significant funds annually, including block grants, to support affordable housing. HUD mandates grantees to identify obstacles to affordable housing and is now offering grants to communities for removing these barriers. The American Rescue Plan added substantial funding through HOME-ARP and the State and Local Fiscal Recovery Fund to enhance the housing supply. However, strict land use and zoning regulations limit the effectiveness of these funds in addressing the nation s housing shortage. Housing operators and local officials should cooperate in the reduction of these unnecessary regulations in order to enhance the potential for the production of affordable housing.
HUD Sends Reminder on Owner Obligations Regarding Tenant Screening and Notice Requirements
The Department of Housing & Urban Development (HUD) recently published a reminder for HUD multifamily-assisted property owners of relevant legal requirements relating to the use of tenant screening reports and the disclosure of the contents of those reports to tenants. For example, multifamily-assisted property owners must provide written notice of denial under HUD rules, and any housing provider that uses reports to make adverse tenant decisions must provide adverse action notices under the Fair Credit Reporting Act (FCRA). The most efficient way to comply with both obligations is to include the FCRA notice in writing as part of the denial letter that owners are required to send to denied applicants. Notice Obligations Under HUD Rules Under HUD rules, multifamily owners must promptly notify applicants in writing of the denial of admission from Multifamily Housing rental assistance programs. Owner's written rejection notices must include the following information: (1) the specific reason(s) for the rejection; (2) the applicant s right to respond to the owner in writing or request a meeting within 14 days to dispute the rejection; and (3) that persons with disabilities have the right to request reasonable accommodations to participate in the informal hearing process. Note: owners should also remember the VAWA notice requirements for rejected applicants. In addition, any meeting with the applicant to discuss the applicant s rejection must be conducted by a member of the owner s staff who was not involved in the initial decision to deny admission to the property. The owner must advise the applicant in writing of the final eligibility decision within five business days of the owner's response or meeting. Recommended Best Practice When a multifamily assisted property owner denies an applicant, HUD strongly encourages the owner to: Provide written adverse action notices as part of the denial letter; and Provide a copy of any tenant screening report that was relied on when the adverse determination was made. A written notice paired with a report copy allows owners to demonstrate they have fulfilled their legal obligations under the FCRA and also permits applicants to understand the basis for any denial, fully assert their rights with tenant screening companies, and more effectively correct their records. Notice Obligations Under FCRA Under FCRA, landlords or property managers are required to inform rental applicants what played a role in the rejection of the applicant. This requirement is known as the "adverse action notice. Failure to provide the notice correctly may subject owners to legal liability under state and federal law. As Federal Trade Commission (FTC) guidance explains, the adverse action notice must include the following information: The name, address, and phone number of the screening company; That a consumer can receive a free copy of the report from the tenant screening company within 60 days; That a consumer has the right to dispute any information that is incorrect; and That the tenant screening company did not make the decision to take the adverse action and cannot give specific reasons for it. Bottom Line Property owners must provide written notice of denial under HUD rules and include adverse action notices under the FCRA if reports are used for adverse tenant decisions. It is recommended to include the FCRA notice in the denial letter to comply efficiently. The FCRA notice must include the screening company's information, the right to a free report copy, the right to dispute incorrect information, and that the company cannot provide specific reasons for the adverse action.
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