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Understanding the HOTMA Educational Assistance Rules

Under the Housing Opportunity Through Modernization Act (HOTMA), specific rules govern how educational assistance is treated as income for Section 8 residents. HOTMA Educational Assistance Rule Overview HOTMA clarified and simplified the treatment of educational assistance in determining a household s income for many affordable housing programs, including most HUD programs, Rural Development Section 515, and the LIHTC program. Under the HOTMA rule: Exclusion of Educational Assistance:Most forms of educational assistance, including scholarships, grants, and work-study income, are excluded from the calculation of annual income. This exclusion applies to both the student and other household members. Limited Exceptions:The only types of educational assistance that may be counted as income are: Amounts exceeding the actual tuition cost, fees, books, and other required educational expenses. Payments for living expenses (e.g., housing, food, and transportation) that are included in the educational assistance package. Student Status and Eligibility: The rule applies to both dependent students and independent students. The educational assistance exclusion is broader for students under Section 8 over 23 with dependent children and generally includes all aid except for amounts used for living expenses. HOTMA s goal in modifying these rules was to reduce administrative complexity and ensure that educational aid meant to support academic success does not create a financial penalty for low-income families participating in HUD programs. Amounts Received Under Section 479B of the Higher Education Act (HEA) of 1965 Educational assistance received under the Higher Education Act is almost always excluded from income even if it exceeds the cost of actual educational expenses. The one exception is for Section 8 residents, where the full amount of educational assistance in excess of actual expenses is included in income. The one exception to this is for Section 8 residents over age 23 with dependent children. HEA assistance is always excluded for this category of resident, as it is for residents in all other affordable housing programs subject to HOTMA. Section 479B provides that certain types of student financial assistance are excluded in determining eligibility for benefits made available through federal, state, or local programs financed with federal funds. The types of financial assistance listed below are considered 479B student financial assistance programs. Federal Pell Grants Teach Grants Federal Work-Study Programs Federal Perkins Grants Student Financial Assistance received under the Bureau of Indian Education Higher Education Tribal Grants Tribally Controlled Colleges or Universities Grant Program Employment Training Program under Section 134 of the Workforce Innovation and Opportunity Act (WIOA) Any other awards under Section 479B Other student financial assistance may also be excluded from income, but only to the extent it pays for actual educational expenses. Such assistance includes grants or scholarships from the following sources: Federal government A State (including U.S. territories), Tribe, or local government A private foundation registered as a non-profit under 26 USC 501(c)(3) A business entity (such as a corporation, general partnership, limited liability company, limited partnership, joint venture, business trust, public benefit corporation, or non-profit entity). An institution of higher education Military assistance (e.g., GI Bill) Other monetary contributions will generally not be excluded from income, and may include - Financial support provided to a student in the form of a fee for services performed (e.g., work-study or teaching fellowship) that is not excluded under Section 479B of the HEA. Gifts, including gifts from family or friends. Covered Costs Costs that may be considered educational expenses include: Tuition Books Supplies Room Board Fees required and charged to a student by an institution of higher education. Property managers operating properties subject to HOTMA need to be familiar with the various types of financial assistance students will likely receive and whether or not such assistance may be excluded from income. Bottom Line The Housing Opportunity Through Modernization Act (HOTMA) streamlines the treatment of educational assistance as income for residents receiving housing support, such as Section 8. In general, most forms of educational assistance, including scholarships and grants, are excluded from income calculations for both the student and their household members. There are limited exceptions, which include amounts that exceed tuition costs and payments designated for living expenses. This rule applies to both dependent and independent students, with more extensive exclusions for Section 8 students over 23 who have dependents. HOTMA seeks to reduce administrative burdens and ensure that educational aid does not financially penalize low-income families.

Executive Order Establishes English as Official U.S. Language: Impact on HUD Programs

President Donald Trump signed an Executive Order on March 1, 2025, establishing English as the official language of the United States. This move has significant implications for federal agencies and their communication policies, especially for the Department of Housing and Urban Development (HUD) and Rural Development properties. Key Changes The Executive Order revokes Executive Order 13166, issued on August 11, 2000. That previous order mandated federal agencies, including HUD, to implement Limited English Proficiency (LEP) policies for their programs. Under the previous order, agencies were required to ensure that individuals with limited English proficiency could access their services. With the revocation, HUD will no longer mandate LEP policies for owners and Public Housing Authorities (PHAs) in HUD-assisted properties. Current Status and Recommendations It's important to note that the new Executive Order does not prohibit federal agencies from producing documents in languages besides English. However, they will no longer be legally obligated to do so. No immediate action is necessary for HUD and Rural Development property owners and managers who currently have LEP policies in place. I recommend maintaining current policies until formal guidance is issued. Both HUD and Rural Development are expected to provide official guidance on this change in the coming weeks or months. Project operators are advised to await this guidance before implementing any changes to their existing language access policies. Looking Ahead This policy shift signifies a substantial change in federal language requirements. Housing providers should remain informed about upcoming agency guidance that will clarify expectations and requirements going forward. Once formal guidance is released, property managers and owners should consult with their industry associations and legal advisors to ensure compliance. This article offers informational content based on current developments and should not be interpreted as legal advice. Property owners and managers should seek guidance from qualified legal professionals regarding specific compliance issues.

HUD Extends NSPIRE Affirmative Standards Compliance Deadline to October 2025

The U.S. Department of Housing and Urban Development s (HUD) Real Estate Assessment Center (REAC) has announced an extension of the compliance deadline for the National Standards for the Physical Inspection of Real Estate (NSPIRE) affirmative requirements. Initially planned for earlier implementation, the new deadline of October 1, 2025, gives property owners and managers in the Public Housing and Multifamily Housing programs extra time to align their properties with the updated standards. Background and Rationale for Extension The decision to extend the compliance period was influenced by the challenges property owners and managers encountered in meeting the new requirements. HUD recognizes the complexity of these updates and the operational adjustments needed, so it has opted to provide a grace period, allowing property stakeholders to address any deficiencies without immediate penalty. While property inspections conducted during this period will still identify deficiencies, they will not adversely affect inspection scores until the new deadline. Instead, flagged issues will be marked with a caret (^) symbol, indicating non-compliance that must be addressed before the final implementation date. It s important to note that the extension does not change HUD s existing policies regarding traditionally non-scored deficiencies. This means that requirements related to smoke detectors, carbon monoxide (CO) detectors, handrails, and call-for-aid devices remain unchanged and must continue to be addressed according to HUD s existing standards. Key Affirmative Requirements Under NSPIRE The NSPIRE affirmative requirements encompass a wide array of safety and habitability standards aimed at improving the quality of housing for tenants. These requirements pertain to various aspects of property maintenance, including site conditions, individual unit standards, building interiors, and exterior features. Below is a summary of the essential requirements: Site-Specific Requirements Installation of fire-labeled doors Electrical safety improvements, such as the installation of Ground Fault Circuit Interrupters (GFCI) and Arc Fault Circuit Interrupters (AFCI) are essential. Guardrails for elevated surfaces HVAC system compliance with specified standards Adequate interior lighting levels Minimum electrical and lighting standards to ensure habitability Detailed Unit Requirements Provision of hot and cold running water in bathrooms and kitchens Private bathroom facilities with required fixtures Properly installed smoke detectors in designated locations Special accommodations for hearing-impaired residents, including visual alert devices CO alarms installed per safety regulations Designated living room and kitchen area standards Electrical outlet and lighting provisions for Housing Choice Voucher (HCV) and Project-Based Voucher (PBV) program units GFCI protection in areas near water sources Adequate heating sources to maintain comfortable indoor temperatures Guardrails for elevated surfaces within units Fixed lighting in kitchens and bathrooms for enhanced visibility Building Interior Requirements Smoke detectors installed on each level of the property CO alarms strategically placed to maximize safety GFCI protection in locations with potential water exposure Guardrails for all elevated walking areas Permanently mounted lighting fixtures to improve illumination Restrictions on the use of unvented space heaters to mitigate fire hazards Exterior Requirements GFCI protection for outdoor outlets near water sources Guardrails for elevated exterior walking paths to prevent accidents Preparing for Full Implementation While the extended deadline postpones the enforcement of compliance-related penalties, property owners and managers should take advantage of this time to proactively address deficiencies and make necessary upgrades. By acting now, property stakeholders can ensure a smoother transition when the standards fully take effect in October 2025. The primary goal of these affirmative requirements is to enhance property resilience and increase tenant safety. By following these updated standards, property owners help create a healthier and more secure living environment for residents. HUD strongly encourages proactive compliance measures to prevent last-minute challenges and potential non-compliance issues when the deadline arrives. With this extension, HUD acknowledges the challenges housing providers face while reinforcing its commitment to uphold high standards of housing quality and tenant protection. Property owners and managers should use the extra time to assess, plan, and implement necessary improvements to ensure full compliance by the October 2025 deadline.

HUD Delays Implementation of Final Rule Updating HOME Investment Partnerships Program

The U.S. Department of Housing and Urban Development (HUD) has announced a significant update to the HOME Investment Partnerships (HOME) program regulations. This final rule, which was originally set to take effect on February 5, 2025, has now been delayed until April 20, 2025. The delay follows President Trump's directive to freeze all pending regulations, affecting the timeline for implementation. The final rule was published in the Federal Register on January 6, 2025, and aims to modernize and streamline program requirements while ensuring better alignment with other federal housing initiatives. Here is a detailed overview of the changes and their implications for stakeholders. Key Highlights of the Final Rule Simplification and Streamlining: The updated regulations are designed to reduce administrative burden and complexity, making it easier for participants to navigate the program requirements. Changes include clarified guidelines and updated processes to improve efficiency and accessibility. Alignment with Other Federal Housing Programs: The revisions harmonize HOME program regulations with other federal housing initiatives, such as the Community Development Block Grant (CDBG) and Section 8 Housing Choice Voucher programs. This alignment facilitates cohesive and complementary use of federal housing resources. Implementation of Recent Statutory Amendments: The final rule incorporates recent amendments to the HOME statute, ensuring compliance with current legislative mandates. Applicability: The revised regulations apply to developments for which HOME funds are committed on or after 30 days following the new implementation date effectively starting April 20, 2025. Background on the Final Rule The final rule follows the publication of a proposed rule on May 29, 2024. HUD received and reviewed extensive feedback from stakeholders during the comment period, resulting in adjustments to ensure the regulations address both practical challenges and statutory requirements. Minor revisions were also made to CDBG and Section 8 program regulations to align with the updated HOME program rules. Implications for Affordable Housing Stakeholders For Developers: Developers planning to utilize HOME funds for projects must familiarize themselves with the updated requirements to ensure compliance. Streamlined processes may expedite project approvals and reduce administrative delays. For Public Housing Agencies (PHAs) and Local Governments: Agencies administering HOME funds will benefit from more precise regulations and enhanced alignment with other federal housing programs. Training and resources may be required to adapt to the new requirements. For Tenants and Communities: The updates aim to enhance the efficiency and effectiveness of HOME-funded projects, resulting in improved housing opportunities for low-income families. Next Steps HUD encourages all stakeholders to review the final rule in detail and assess its impact on their operations and strategies. Additional guidance and training materials are expected to be released to assist in the transition to the updated regulations. Given the implementation delay, stakeholders have extra time to prepare for the changes and ensure compliance with the new requirements. Conclusion The final rule represents a significant step forward in modernizing the HOME program and optimizing its role in addressing the nation s affordable housing needs. Although implementation has been postponed until April 20, 2025, stakeholders should continue preparing to align with the updated requirements and capitalize on the improved processes.

Understanding Medicare Advantage Flex Card Benefits in HUD Housing Income Determinations

In January 2025, the U.S. Department of Housing and Urban Development (HUD) clarified how Medicare Advantage (MA) supplemental benefits, particularly those administered through Flex Cards, should be treated when calculating income for HUD-assisted housing residents. This guidance helps housing providers accurately determine which benefits should be included or excluded from income calculations. Key Points for Income Calculations Rent and Utility Support When MA supplemental benefits are explicitly used for rent and utilities, these amounts must be included in income determinations. Only the amount spent on rent and utilities should be counted, not the total available benefit. Rent and utility expenditures may be documented through third-party verification or resident self-certification if third-party documentation is unavailable. Other Flex Card Benefits Benefits used for purposes other than rent and utilities (such as groceries, medical expenses, or over-the-counter medications) should be excluded from income calculations. Unused benefits that expire at month-end or year-end are not counted as income. Housing providers should assume Flex Card benefits are not being used for rent and utilities unless they have specific information indicating otherwise. Verification Requirements Housing providers should note that: Most MA supplemental benefits are excluded from income and do not require verification. Providers should not require beneficiaries to track or document routine Flex Card purchases for excluded benefits. Only benefits used explicitly for rent and utilities need verification. As part of the application and intake procedures, owners and managers should inquire whether applicants or residents use MA benefits for rent or utilities. When residents report using MA benefits for rent and utilities, providers should first attempt to obtain third-party documentation. Self-certification is acceptable when third-party documentation cannot be obtained. Example Scenario If a resident receives a $100 monthly Flex Card benefit: If they spend $50 on medical expenses and $0 on rent/utilities, the entire $100 is excluded from income. If they spend $30 on rent/utilities and $70 on other eligible expenses, only the $30 used for rent/utilities is counted as income. Any unused portion that expires is not counted as income. Practical Implementation Housing providers should: Update their policies and procedures to reflect these requirements. Train staff on the proper treatment of MA supplemental benefits. Develop appropriate verification procedures for benefits used for rent and utilities. Maintain clear documentation of included benefits. This guidance helps ensure consistent and appropriate treatment of Medicare Advantage supplemental benefits while minimizing the administrative burden on housing providers and residents.

A. J. Johnson Partners with Mid-Atlantic AHMA for December Training on Affordable Housing - March 2025

In March 2025, A. J. Johnson will partner with the MidAtlantic Affordable Housing Management Association for three live webinar training sessions for real estate professionals, particularly those in the affordable multifamily housing field. The following sessions will be presented: March 12: Intermediate LIHTC Compliance - Tailored for experienced managers, supervisory personnel, investment asset managers, and compliance specialists, this program builds upon the content covered in the Basics of Tax Credit Site Management. It includes a more thorough discussion of income verification issues, minimum set-aside concerns (including the Average Income Minimum Set-Aside), optional fees, and the use of common areas. The Available Unit Rule is explored in detail, along with the requirements for units occupied by students. Attendees will also learn how to establish rents at a tax-credit property. The changes impacting the LIHTC program due to HOTMA will also be covered in detail.  While this course includes some practice problems, it is more discussion-oriented than the Basic course. A calculator is necessary for this course. March 13: Interviewing Skills for Affordable Housing Managers - One of the most crucial skills any affordable housing manager can possess is interviewing applicants and residents to gather the information needed to determine eligibility. Unfortunately, this is also one of the most significant weaknesses of many affordable housing managers. To address this issue, this training has been developed. This three-hour session emphasizes the interview process and provides concepts and tools to assist managers during their interviews. The techniques apply to various interview settings, including initial eligibility interviews, interim certifications, and annual recertifications. The primary focus is on the initial eligibility interview, which is critical to the housing process. The skills taught in this session will also help managers detect fraud and handle interactions with third parties when resolving discrepancies. March 26: Advanced LIHTC Compliance - This full-day training is designed for senior management staff, developers, corporate finance officers, and others involved in decision-making regarding the structure of LIHTC deals. This training addresses complex topics such as eligible and qualified basis, applicable fraction, credit calculation (including first-year calculation), placed-in-service issues, rehabilitation projects, tax-exempt bonds, projects with HOME funds, Next Available Unit Rule, employee units, mixed-income properties, the Average Income Minimum Set-Aside, the vacant unit rule, and effective collaboration with State Agencies. These sessions are part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA and are 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) training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

Dealing with Federal Immigration Agents at Apartment Communities

Not surprisingly, we are starting to receive inquiries from property managers about how they should respond if federal immigration officials enter a property searching for individuals without legal immigration documents. Immigration and Customs Enforcement (ICE) raids at apartment communities are becoming more common and have already taken place in Alexandria, VA, New York City, Chicago, Boston, Miami, Los Angeles, Atlanta, and Phoenix. According to sources within the Trump administration, significant immigration raids are scheduled for three U.S. cities each week. Such raids will almost certainly affect some apartment communities. In addition to ICE, agencies taking part in the raids include the U.S. Marshals Service, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), Customs and Border Protection, the Drug Enforcement Administration (DEA), and the FBI. Apartment community property managers and staff must know how to respond if such raids happen on their property. Unlike what you may see on TV, federal agents do not have unrestricted access to private property or homes. As property managers, you are responsible for safeguarding your residents' privacy. I will outline the key rights and appropriate responses for property managers when interacting with ICE agents. My focus will be on legal compliance while protecting tenant privacy. This guidance is general in nature and is not meant to replace advice from your company s counsel. First, property managers should politely ask for and carefully examine: The agents' credentials - official identification and badge numbers A judicial warrant is signed by a judge or magistrate (not merely an administrative warrant). An administrative warrant is a formal written document that authorizes a law enforcement officer from a designated federal agency, such as an ICE agent from DHS, to make an arrest or seizure. This type of warrant is issued by a federal agency like DHS and can be signed by an immigration judge or immigration officer. Unlike a judicial warrant, an administrative warrant does not permit a search. Therefore, an ICE agent armed only with an administrative warrant cannot conduct a search based on that warrant. Nonetheless, in certain circumstances, the administrative warrant allows the agent to effectuate a seizure or arrest. It is important to note that an immigration warrant does not equate to a judicial warrant; an immigration warrant does not permit a search of nonpublic areas. If an ICE officer or any other immigration agency officer arrives at your property requesting entry to search your premises or to obtain evidence with only an immigration warrant, you have the right to refuse entry and reject compliance with the warrant since it does not grant the officer the authority to enter or conduct a search. Without a valid judicial warrant, property managers can: Decline to provide access to private areas of the property Refuse to share tenant information or records Politely state, "I do not consent to entry without a judicial warrant." Document the interaction, including agent names, badge numbers, and time. If presented with a judicial warrant, managers should: Verify it lists the specific address and areas to be searched. Only allow access to the areas specifically listed. Keep a copy of the warrant. Take detailed notes of the interaction. Contact the property owner and legal counsel. Throughout any interaction: Remain professional and calm. Do not physically obstruct agents. Do not provide false information. Take notes or record the interaction if it is legal in your state. Document everything in writing afterward. A valid judicial warrant must be signed by a federal or state judge or magistrate (not just an ICE agent) It must have the correct property address, including unit numbers if applicable Check the date - warrants have expiration dates. Look for "U.S. District Court or the appropriate state court" in the header Verify it has a case number Confirm the judge's signature is present (not a stamp or electronic signature) Tenant Privacy Rights: Property managers cannot give consent for searches of individual tenant units. Tenant lease agreements generally include privacy protections Managers should not provide:Tenant rental applicationsLease agreementsPayment recordsUnit numbersPersonal informationAccess to security cameras or footage Keys to individual units If ICE presents a subpoena rather than a warrant: Subpoenas do not grant immediate entry rights You can state, "I need time to review this with legal counsel." Typically, a compliance timeframe is listed. Contact your attorney before providing any documents. Important Documentation Steps: Write down the names and badge numbers of all agents present Note the exact time and date Record which areas of the property were accessed Document any requests made by agents Keep copies of all paperwork presented Note any statements made by either party List any witnesses present Here's how to prepare property staff for potential encounters with ICE agents: Staff Training Protocol: Have a clear written policy for all staff members Designate specific personnel authorized to interact with law enforcement Create a contact chain showing who to call (property manager, legal counsel, owner) Practice scenarios through role-playing exercises Post emergency contact numbers at the front desk/office Specific Staff Instructions: Never volunteer information Direct all law enforcement to the property manager Don't run or create panic if agents arrive Don't provide access codes or keys Keep a logbook for all law enforcement interactions If approached alone, say, "Let me get my supervisor - they're authorized to assist you." Emergency Response Plan: Keep the property attorney's number easily accessible Have a backup manager designated Maintain an updated list of translation services if needed Keep blank incident report forms ready Have a working camera or phone ready to document Maintain copies of "Know Your Rights" materials Communication Protocol: Establish how to notify residents of law enforcement presence Create a system for documenting all interactions Set up secure storage for tenant information Develop a media response plan Have a process for informing property ownership This article offers comprehensive guidance for property managers on interacting with Immigration and Customs Enforcement (ICE) agents and other federal law enforcement agencies. The key points emphasize that property managers should: Understand the critical distinction between judicial and administrative warrants, with only judicial warrants permitting searches of private areas. Protect tenant privacy rights by not voluntarily sharing personal information or rental documents or providing access to private spaces without proper judicial authorization. Maintain professionalism while knowing their rights to refuse entry or information sharing without proper judicial warrants. Implement thorough documentation practices for all law enforcement interactions. Develop clear protocols for staff training, emergency response, and communication channels. The guidance emphasizes the significance of preparation through staff training, written policies, and established communication protocols. Property managers are urged to work closely with legal counsel when needed and maintain detailed records of all interactions. This document serves as a practical resource for property managers to navigate their legal obligations while protecting tenant privacy rights and ensuring professional operations during potential immigration enforcement activities. Since it is likely that immigration enforcement actions at an apartment community may involve agents bypassing management and proceeding directly to apartments, I am working with Immigration attorneys to develop a checklist for residents that will outline their rights if confronted with immigration authorities. After completing that document, I will post it on our website and you may make it available to your residents.

Rent Rules Under Final HOME Rule

The final HOME rule changes the HOME Program rent determination rules. One change permits the use of a PHA utility allowance for HOME units. The second and more significant change allows owners to collect more than the HOME rent for tenants who receive project-based rental assistance - even if the resident lives in a High HOME unit. The rules for establishing rent for a HOME unit are as follows: High HOME Rent Limits: The rent must not exceed the lesser of the fair market rent for comparable units in the area or 30% of the adjusted income of a family whose annual income equals 65% of the median income for the area. Low HOME Rent Limits: In rental projects with five or more HOME-assisted units, at least 20% of the units must be occupied by very low-income families. The rent for these units must not exceed 30% of the annual income of a family whose income equals 50% of the median income for the area, or the rent contribution of the family must not be more than 30% of the family s adjusted income. Alternatively, if the unit is LIHTC, the rent must not exceed the gross rent for rent-restricted residential units as determined under 26 U.S.C. 42(g)(2). SRO Projects: The rent limit for SRO units with both sanitary and food preparation facilities is the zero-bedroom fair market rent. The limit for units with only one or neither of these facilities is 75% of the zero-bedroom fair market rent. Utility Allowances: The participating jurisdiction must establish maximum monthly allowances for utilities and services (excluding telephone, cable, and broadband) and update them annually. The utility allowance can be based on the HUD Utility Schedule Model, the local public housing authority s utility allowance, or another HUD-approved method. Note the change from the prior HOME rule, which did not permit using the PHA allowance. Review and Approval of Rents: The participating jurisdiction must review and approve rents proposed by the owner to ensure they do not exceed the rent limits minus the utility allowances. Subsequent Rents During the Period of Affordability: The HOME rent limits are recalculated periodically, and the participating jurisdiction must provide project owners with updated rent limits. Owners must annually provide information on rents and occupancy of HOME-assisted units to demonstrate compliance. Adjustment of HOME Rent Limits for an Existing Project: HUD may adjust the HOME rent limits for a project if necessary to support the continued financial viability of the project. Relation of Tenant Income to Rent: Each tenant's income must be determined initially and annually during the affordability period. However, the participating jurisdiction may permit an owner of small-scale housing to re-examine each tenant s annual income every three years instead of annually. The tenant s income will determine the rent that may be charged. Over-Income Tenants: If a tenant s income increases above the low-income (80%) limit, the tenant must pay a rent equal to the lesser amount payable under State or local law or 30% of the family s adjusted income. A tenant may pay more than the maximum HOME rent in the following situations: If the tenant participates in a rental assistance program and contributes no more than 30% of their monthly adjusted income or 10% toward rent, the maximum rent due from the tenant is their contribution under that program. Unlike the prior rule, this now applies even to High-HOME units. If a tenant's income increases above the low-income (80%) limit, the tenant must pay a rent amount equal to the lesser of the amount payable under State or local law or 30% of the family's adjusted income. For tenants in HOME-assisted units subject to rent restrictions under section 42 of the Internal Revenue Code (LIHTC units), the rent must comply with those restrictions. For floating HOME units, the rent must not exceed the fair market rent for comparable, unassisted units in the neighborhood. These revised rent rules go into effect for HOME projects on February 5, 2025.