News

A. J. Johnson to Offer Live Webinar on Criminal Screening Policies in Multifamily Housing

A. J. Johnson will be conducting a webinar on August 31, 2021, on Criminal Screening in Multifamily Housing - Recommended Policies & Procedures.  The Webinar will be held from 1:00 PM to 2:30 PM Eastern time. Property owners may (and should) screen applicants for criminal behavior but must be careful when doing so - and must have transparent and defensible policies relative to screening for past criminal conduct. This 1.5-hour webinar will assist owners and property managers in understanding what is required when implementing a criminal screening policy. The training will outline the HUD guidance relative to criminal screening and will review the type of policies that are - and are not - acceptable. The discussion will center on (1) the types of crimes that are appropriate for screening; (2) the HUD policy regarding the use of arrest records in criminal screening; (3) dealing with convictions for non-dangerous crimes; and (4) the use of individual assessments for rejected applicants. Following the session, participants will be better prepared to develop a criminal screening policy that will not run afoul of fair housing law. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

The Sovereign Citizens Movement and Affordable Housing

A number of our clients have contacted us recently to ask how to handle the applications of individuals who claim to be "sovereign citizens," and state that the government has no right to verify their eligibility for affordable housing, such as Section 8 or LIHTC. I have seen this often enough lately that an article on sovereign citizens and how to handle them for affordable housing eligibility purposes is warranted. Sovereign Citizens believe that they - not judges, juries, law enforcement, or elected officials - should decide which laws to obey and which to ignore. Most sovereign citizens also don t believe they should have to pay taxes. The contemporary sovereign belief system is based on a decades-old conspiracy theory. Sovereigns believe that the American government set up by the founding fathers, under a common-law legal system, was secretly replaced. They think the replacement government swapped common law for admiralty law, which is the law of the sea and international commerce. They follow the basic precept that U.S. judges and lawyers are foreign agents who deny the court challenges of sovereigns out of treasonous loyalty to hidden and illegitimate government forces. It is impossible to know how many sovereigns there are in the U.S. today, in part because there is no central leadership. There are a variety of local leaders with individualized views on sovereign citizen ideology and techniques. Their recommendations often include tax evasion, adverse possession (squatting on a property that does not belong to them), or ignoring laws regarding driver's licenses, vehicle registration, or license plate possession. They base these activities on their belief that free men and women, as they call themselves, are not bound by the laws in question. It is estimated that there may be as many as 500,000 sovereign citizens, with a hardcore group of about 100,000. When sovereigns are angry with government officials (or others who deny their rights as sovereigns), their revenge most often takes the form of "paper terrorism." Sovereigns file retaliatory, bogus property liens that may not be discovered by the victim until they attempt to sell or mortgage their property or take out a loan. These liens can be for millions of dollars. For this reason, it is recommended that property owners who reject the application of a sovereign due to their refusal to verify eligibility check for possible liens against the property for a period of one to two years after the rejection. Sovereigns have also signed up for Section 8 as landlords for properties they do not own. Over the course of four years, the Department of Housing & Urban Development (HUD) has recovered $17 million from sovereigns for housing-related fraud. Despite what they may believe, so-called Sovereign Citizens are not exempt from federal, state, or local law. If such a person applies for occupancy at an affordable housing property of any type, including HUD, Rural Development, or LIHTC, they are subject to the same rules as any other person. They must be able to demonstrate eligibility based on verified information and must submit to the same screening and occupancy criteria as any other applicant. Due to the nature of their beliefs, when dealing with such individuals, managers should contact their corporate office and involve their attorney in the process.

A. J. Johnson to Present Webinar on Hoarding – A Fair Housing Challenge.

A. J. Johnson will be conducting a webinar on August 3, 2021, on Hoarding - A Fair Housing Challenge.  The Webinar will be held from 1:00 PM to 2:30 PM Eastern time. In May 2013, the American Psychiatric Association (APA) confirmed that Compulsive Hoarding is a mental disability and a protected class. More than 15 million Americans suffer from the mental health problem of hoarding and potential problems from hoarding include noxious odors, pest infestation, mold growth, increased risk of injury or disease, fire hazards, and even structural damage.Hoarding is the one class of disability that requires landlords to offer an accommodation - even if an accommodation is not requested!This 1.5-hour live webinar is designed to assist multifamily managers in understanding how to deal with hoarding problems in a way that will prevent liability under fair housing law. The session will define hoarding and provide detailed recommendations on how to deal with a hoarding problem. It will outline examples of accommodations for hoarding, how to engage in the "interactive process" with residents who hoard, and the steps necessary to remove uncooperative residents. Finally, a recent court case regarding hoarding will be reviewed as an illustration of the potential difficulties managers face in hoarding situations.This is an evolving area of fair housing law, and this webinar will provide the guidance necessary to approach the problem in a systematic way that will give multifamily operators the best chance at avoiding the legal traps the exist when dealing with this unique disability. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

A. J. Johnson to Host Live Webinar on Verifying and Determining Income for Affordable Housing Applicants and Residents.

A. J. Johnson will be conducting a webinar on July 29, 2021, on Verifying and Determining Income for Affordable Housing Applicants and Residents.  The Webinar will be held from 1:00 PM to 3:30 PM Eastern time. A critical aspect of every affordable housing manager's job is the determination of income for applicants and residents. This 2.5-hour training covers how income is defined for virtually all affordable housing programs, including the LIHTC, Section 8, HOME, and Rural Development programs, and provides guidance on how to both calculate and verify various types of income. Specific instruction is included for employment income, military pay, pensions and Social Security, self-employment, and child support. A full discussion of how household membership impacts the income determination will be included, as well as a review of the basic rules regarding the calculation of income. This section features guidance on using year-to-date information when projecting income. The course concludes with practice problems to ensure a full understanding on the part of the student and there is plenty of time for Q&A. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training Schedule."

Exclusion of Military Basic Allowance for Housing for LIHTC Properties

While the exclusion of the military Basic Allowance for Housing (BAH) for Low-Income Housing Tax Credit (LIHTC) properties in certain areas of the United States has been around for 13 years, there is still some confusion as to which properties may benefit from this exclusion. This article will recap the basic requirements and clarify some potential confusion. Section 3005(a) of the 2008 Housing Act amended the LIHTC program requirements to exclude the military Basic Allowance for Housing payments from income for certain qualified LIHTC buildings. A qualified building is defined as any building located: In any county which contains a qualified military installation to which the number of members of the Armed Forces assigned to units based out of such qualified military installation increased by 20% or more between December 31, 2005, and June 1, 2008; orAny counties adjacent to the county described in #1 above. For these purposes, a "qualified military installation" means any military installation or facility that had at least 1,000 members of the Armed Forces of the United States assigned to it as of June 1, 2008. Qualifying military bases were identified in IRS Notice 2008-79. However, the list was not an exclusive list and any qualified military installation which satisfied the percentage requirements outlined above is eligible to receive similar treatment regardless of the fact that it was not identified in the IRS Notice. The following list identifies military installations that are deemed to be qualified military installations that satisfied the 20% population increase requirement for purposes of the exclusion of BAH in determining income for LIHTC (and some tax-exempt bond) properties. The IRS will update the list if it receives additional information indicating that other military installations should receive the same treatment. Note - owners and managers should confirm the eligibility of these locations with their Housing Finance Agency: U.S. Air Force Academy, Colorado - Colorado Springs, Co (El Paso County with adjacent counties of Elbert, Crowley, Douglas, Fremont, Lincoln, Pueblo, and Teller).Fort Shafter, HA - Hawaii (Honolulu County and adjacent counties of Maui and Kauai).Fort Riley, KS - Geary & Riley Counties, KS with adjacent counties of Wabaunsee, Morris, Dickenson, Clay, Marshall, Pottawatomie and Washington.Annapolis Naval Station (including U.S. Naval Academy), MD - located in Anne Arundel County with adjacent counties of Baltimore, Calvert, Kent, Howard, Prince George s, Queen Anne s and Talbot.Fort Jackson, SC - located in Richland County, SC with adjacent counties of Kershaw, Fairfield, Sumter, Lexington, Calhoun, and Newberry.Fort Bliss, TX - located in El Paso County, with adjacent counties of Hudspeth, Dona Ana (New Mexico), and Otero (New Mexico).Fort Hood, TX - located in Bell County, with adjacent counties of McLennan, Falls, Milam, Williamson, Burnet, Lampasas, and Coryell.Dam Neck Training Center Atlantic, Virginia - Located in Virginia Beach, with adjacent cities of Norfolk and Chesapeake; also Currituck County, NC.Naval Station Bremerton, Washington - located in Kitsap County, with adjacent counties of Island, Snohomish, King, Pierce, Mason, and Jefferson. Tax-exempt bond-financed properties with the LIHTC are eligible for this exclusion, but bond properties without the LIHTC are not eligible for the exclusion.

Child Tax Credit Excluded Income for Housing Purposes

The American Rescue Plan of 2021 (ARP) provides a monthly payment from the enhanced child tax credit and these payments are landing in family bank accounts during the week of July 12, with the first payments arriving on July 15. HUD has determined, in accordance with Federal law, that the monthly child tax credit is to be excluded from the annual income calculation for affordable housing programs. Section 7527A of the ARP provides a monthly payment of up to $300 per month from July 2021 through December 2021. 26 U.S. Code 6409 states, "notwithstanding any other provision of law, any refund (or advance payment with respect to a refundable credit) made to any individual under this title shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds."  Due to the requirements of this law, the child tax credit is excluded income for purposes of any housing utilizing federal benefits or assistance, including the Low-Income Housing Tax Credit program (LIHTC). Parents of children ages 5 and younger can receive up to $300 per month per child and $250 per month per child ages 6 to 17. The payments max out at $3,600 annually for each child under six and $3,000 for those ages six to 17. The credit is fully refundable, meaning families can still benefit even if they have no earned income or do not owe income taxes. The expanded credit ends in December, but President Biden has called for a four-year extension, which would need Congressional approval. In addition to the Child Tax Credit, owners and operators of affordable housing should keep in mind that the Federal Pandemic Unemployment Compensation of $300 per week is also excluded income.

Reducing Insurance Premiums - A Key to Improving Property Cash Flow

Nationally, insurance premiums for multifamily housing make up about 4% of the total operating expenses owners face in the operation of these properties, well behind the big-ticket items like taxes (32%) and salaries/personnel (25%). Despite being a low percentage of overall operating expenses, insurance premiums are one of the costs most susceptible to owner decisions. While initial property design can play a key role in controlling the rising cost of insurance, there are affirmative steps that owners of existing properties can take to lower current premiums. In terms of frequency, the leading risk exposure that owners of affordable rental housing face is from slips, trips, and falls. In cold climates, radiant heating options for exterior walking surfaces are an excellent way to limit ice formation on stairways and walking areas. Radiant heating can be used virtually anywhere - concrete, patio stones, pavers, dirt, and grass. Restaurants with open-air dining were among the first to install radiant heating systems in outdoor areas. The heating system melts snow as it lands and keeps ice from forming. This technology can be used to keep walkways, steps, and even driveways snow and ice-free all winter long. It is clearly preferable to install such systems when a property is being built, but in cold climates, where concrete and other surfaces are repaired or replaced often, scheduling installation during capital improvements is feasible and can reduce the frequency of future repair needs. Also, in cold areas of the country, infrared cameras are great tools for identifying freeze-prone areas and water infiltration. Window control opening devices are being built into newer windows and can prevent falls from windows by children. HUD has indicated that REAC inspectors will not take a hard position relating to ease of egress when these devices are in place to protect children. These devices limit the window opening to 4 inches or less when the sash is opened, but may be disengaged, allowing the window to open fully for egress or cleaning. Uses of Infrared Technology Regular inspections of walls and ceilings with infrared cameras can detect moisture and deal with any leaks before they cause major damage. In cold weather, these cameras can locate drafty areas of buildings or potential locations of missing insulation which could lead to frozen pipes. Site security can be enhanced with access control, lighting, CCTV cameras, and burglar alarms. Insurance professionals also say that suspicious activity hotlines and mass notification systems can also reduce premiums. Waterflow monitoring and shutoff devices provide alerts to toilet and bathtub overflows, as will leak detection devices. While slips and falls are the biggest risks by frequency, the heaviest liability burden comes from fires. Cooking, electrical, and smoking are the primary causes of fires in apartments, with cooking fires presenting the most problems. Smart burners that are used as replacements for regular heating elements on electric stovetops can limit the temperature of the heating element, so cooking oil will not heat enough to cause flames. Knob controls can also limit temperatures and prevent child activation. Automatic shutoff devices can regulate time and temperature and even have motion-sensing capabilities. Auto-out fire stop cans are an excellent tool that can be easily installed above cooking surfaces. They are activated when a fire ignites a wick on the cans. With regard to electrical fires, the biggest red flags are Federal Pacific Electric (FPE) breakers and aluminum wiring. Some insurance companies will not ensure apartment communities built before the mid-1970s unless they prove that they do not have aluminum wiring. As for smoking, the easiest (and best) policy is just to ban smoking at the property. Residue testing kits are available and will dissuade tenants from smoking. Fire Stops - Excellent Tool But Easy to Steal Fire stops above stoves are an excellent fire extinguishing device but they are easy to remove and have expiration dates. Management companies that conduct regular inspections of units (quarterly is recommended) can check the expiration dates and replace the devices as needed. Since the expiration dates are known, this type of equipment is easy to budget for. Property Security There are a number of ways to impact insurance premiums by improving property security, but care should be taken because advertising the presence of security can have a negative impact on marketing and occupancy. Two common security measures are electronic surveillance and security guards. 24/7 electronic surveillance can be a good deterrent to crime and is preferable to security guards, which are a visible reminder that the property may be dangerous. The best onsite security measure is lighting, and insurance underwriters may well inspect a property s lighting plan when assessing risk. Ultimately, risk mitigation and the resulting reduction in insurance premiums is an ongoing process. A comprehensive incident reporting system with a root cause analysis is a must. Every casualty event, no matter how minor, must be reported and followed up on. Part of that follow-up should be the implementation of a plan that will prevent the recurrence of the event in the future. When combined with an ongoing inspection program to catch problems before they occur, this process will reduce casualty events to the lowest possible level and provide the greatest opportunity for reducing the cost of insurance premiums.

HUD Proposes Restoring Discriminatory Effects Rule

On June 25, 2021, HUD announced that it will issue a proposed rule titled Restoring HUD s Discriminatory Effects Standard. The publication proposes to rescind HUD s 2020 disparate impact rule and restore the 2013 discriminatory effects rule. HUD believes that the 2013 rule is more consistent with case law and better implements the Fair Housing Act s broad remedial purpose of eliminating unnecessary discriminatory practices from the housing market. The discriminatory effects (also known as disparate impact) doctrine is a tool for addressing policies that cause systemic inequality in housing. It has long been used to challenge policies that unnecessarily exclude people from housing opportunities, including zoning requirements, lending, and property insurance policies, and criminal records policies. HUD believes that having a discriminatory effects standard is necessary to meet the goal of a housing market that is free from both intentional discrimination and policies and practices that have unjustified discriminatory effects. HUD s 2013 disparate impact rule codified long-standing caselaw for adjudication of Fair Housing Act cases under the discriminatory effects doctrine, for cases filed administratively with HUD, and for federal court actions brought by private plaintiffs. Under the 2013 rule, the disparate impact framework was fairly straightforward: a policy that had a discriminatory effect on a protected class was unlawful if it did not serve a substantial, legitimate, nondiscriminatory interest or if a less discriminatory alternative could also serve that interest. The 2020 rule complicated that analysis by placing more burdensome requirements on complaining parties, new proof requirements, and new defenses, all of which made it harder to establish that a policy violates the Fair Housing Act. HUD now proposes to return to the 2013 rule s more direct analysis. The public will have 60 days to comment on the proposed rule. HUD will review the comments, develop responses, and publish a final rule. HUD has provided no timeframe regarding when a final rule can be expected.