News

HUD Issues Notice on Electronic Signatures

On May 26, 2020, HUD issued Notice H20-4, Electronic Signature, Transmission and Storage - Guidance for Multifamily Assisted Housing Industry Partners. This Notice provides guidance to HUD multifamily assisted housing partners on electronic signatures, electronic transmission, and electronic storage of documents and forms required by HUD Multifamily Housing Programs. With the issuance of this Notice (which is effective immediately), HUD permits, but does not require, industry partners to use electronic signatures. The Notice also permits electronic transmission and storage of files. Owners and management agents (O/As) adopting the terms of the Notice must provide applicants and tenants the option to utilize wet (i.e., original) signatures and paper documents upon request. When feasible, O/As, applicants, and tenants should have the option of providing signatures and documents in wet or paper form. The Notice does not change the nature or use of required documents and all such guidance remains the same. For example, an O/A may accept a tenant s notarized statement or signed affidavit regarding the veracity of information submitted, if the information cannot be verified by another acceptable verification method. However, the document may be submitted in paper form or signed and/or transmitted to the O/A electronically. Applicability The Notice is applicable to the following HUD programs: Project-based Section 8, includingNew Construction;HFA financed;Substantial Rehabilitation;Section 202/8;Rural Housing Section 515/8;Loan Management Set-Aside (LMSA);Property Disposition Set-Aside (PDSA); andRAD projects with Project Based Rental Assistance.Other ProgramsSection 202 SPRAC;Section 202/162 PAC;Section 202 (PRAC);Section 811 PRAC;Rent Supplement;Section 236 (including RAP); andSection 221(d)(3)/(d)(5) BMIR. The guidance does not apply to the 221(d)(4) program, the HOME program, or Public & Indian Housing Programs. The Notice pertains to all HUD forms and O/A created documents relating to asset management, Section 8 contract renewal, and occupancy policies. When implementing this Notice, O/As should ensure that all applicable laws relating to electronic transactions are followed. This includes: Electronic Signatures in Global and National Commerce Act;The Uniform Electronic Transactions Act; andGovernment Paperwork Elimination Act. O/As interested in utilizing electronic signatures and transmissions should obtain a copy of this Notice and should also download and review "Use of Electronic Signatures in Federal Organization Transactions," which provides greater discussion and detail on items discussed in the HUD Notice.

Procedures for Requesting a Private Letter Ruling

A Private Letter Ruling (PLR) is a written decision by the Internal Revenue Service (IRS) that is sent in response to a taxpayer s request for guidance on unusual circumstances or complex questions about their specific tax situation. For certain transactions involving large amounts of money, the tax law may be unclear. The purpose of the private letter ruling is to remove any uncertainty and to advise the taxpayer, usually a business, regarding the tax treatment they can expect from the IRS given the circumstances specified by their ruling. A PLR may also help a taxpayer confirm whether or not a potential action will result in a tax violation. How a PLR Works A PLR is specific and applicable only to the individual taxpayer and their tax situation at the time of the request. PLRs on behalf of other taxpayers cannot be used as precedent by a person requesting a ruling regarding their own issue, and in no way binds the IRS to take a similar position when dealing with other taxpayers. However, the IRS may redact the personal content of a PLR and issue it as a Revenue Ruling, which becomes binding on all taxpayers. Even with a favorable ruling, a taxpayer has no absolute guarantee of the tax consequences, since the IRS can modify or revoke a previously issued PLR if it is later determined that the ruling was incorrect or inconsistent with the current position of the IRS. Private letter rulings are generally made public 90 days after they are provided to the taxpayer, with all identifiable information on the taxpayer redacted. How to Request a PLR Taxpayers requesting a PLR should consult the Revenue Procedure published by the IRS at the start of each calendar year, which describes guidelines and updates for the process and includes sample request letter templates and a checklist of over 50 questions that must be answered. Taxpayers planning to request a PLR should consult with an IRS employee or another tax expert for help with the process. The filing procedure is extremely technical and exact compliance is required for a successful filing. The IRS generally will not issue "comfort letters" on matters that have already been decided by tax law, regulation, court decision, revenue ruling, revenue procedure, or notice. On April 30, 2020, the IRS released an advanced version of Revenue Procedure 2020-29 which modifies the procedures outlined in Revenue Procedure 2020-1. This revised procedure temporarily allows for the submission of requests for PLRs by electronic means. One of the burdens of requesting a PLR is the cost, which has steadily risen in recent years. Fees incurred by a taxpayer can range from $150 for simple requests to $50,000 for pre-filing agreements. For a specific transaction, costs of $30,000 are not unusual - this is in addition to the professional fees the taxpayer will incur. The IRS generally completes ruling requests within 60-90 days, although the process can take significantly longer if multiple branches of the IRS need to review the ruling or if there are other extenuating circumstances. Also, current requests may take longer due to limited IRS personnel as a result of the pandemic. All PLR requests must include the following: A complete statement of facts and other information;An analysis of material facts;A statement indicating whether the issue affects any tax returns the owner already filed;A statement indicating whether a ruling on the same or a similar matter has been issued or requested, or is pending;A list of authorities that support the request;A list of authorities that appear to run contrary to the request;A statement identifying any pending legislation that would affect the request;A statement identifying information to be deleted from the copy of the PLR the IRS will make available to the public;The owner s signature or the signature of its authorize representative;A list of authorized representatives;A power of attorney and declaration of representative from each authorized representative;A statement attesting to the accuracy of the request under penalties of perjury; andThe number of copies of the request the owner is submitting. Once the request is made to the IRS, a representative of the IRS will contact the taxpayer within 21 days after the IRS receipt of the request in order to discuss procedural issues. One important note relating to the COVID-19 pandemic, according to Revenue Procedure 2020-29 (noted above), electronic submission will result in faster processing than paper submission. After this initial contact with the IRS, taxpayers should maintain contact with the Service while the ruling is pending. This can further speed up the process.

Webinar on Fair Housing and COVID-19

A. J. Johnson will be conducting a webinar on June 2, 2020 on Complying with Fair Housing Law in the Age of COVID-19. The Webinar will be held at 10:00 AM Eastern Time. This one hour webinar will provide property managers with guidelines and recommendations for handling COVID-19 fair housing issues. A brief overview of fair housing requirements will be followed by a discussion of how COVID-19 fears may lead to fair housing violations relating to ethnic minorities and the disabled. The relationship between the pandemic and reasonable accommodation requests will be covered, as well as the particular attention that must be paid to potential sexual harassment. Finally, the importance of consistent treatment of applicants and residents will be discussed. Those interested in participating in the Webinar may register on the A. J. Johnson Consulting Services website (www.ajjcs.net) under "Training."

COVID-19 Takes Disproportionate Toll on Affordable Housing Residents

A new survey by the Federal Reserve (FED) shows that 39% of former workers in households earning $40,000 or less lost work during the current pandemic, and many of these households do not have the resources to make it through to a return to work. Operators of affordable housing (HUD/LIHTC) will know immediately that this is the very income group affordable housing programs are designed to serve, and the vast majority of our residents will fall into this income category. The FED survey was released on May 14 and clearly shows that lower income households entered the COVID-19 shutdown in precarious economic positions that have only worsened since March. At the beginning of the nationwide lockdown, many Americans had limited savings, despite gains from a record-long economic expansion that was of limited benefit to many in the lower-income categories. According to the survey, at the end of 2019, 30% of adults said they could not cover three months worth of expenses with savings or borrowing if a job loss were to occur. 20% of people working in February reported losing a job or being furloughed in March or the beginning of April, and most of that job loss was highly concentrated among low earners. In fact, 39% of former workers living in a household earning $40,000 or less lost work, compared with 13% in those making more than $100,000. The U.S. economy began slowing in March as state and local governments instituted stay-at-home orders in an attempt to slow the spread of the virus. This has almost certainly caused the steepest growth decline in the United States since World War II. Consumer spending has tanked as stores and restaurants closed, and mass layoffs are now a feature of daily lives. Nearly 3 million people filed for unemployment benefits during the week of May 4, resulting in a two month total of more than 36 million. Congress has provided more than $2 trillion in relief spending, expanded unemployment insurance, and provided forgivable loans to small businesses as a way of protecting jobs. However, it is becoming apparent that these efforts will not be enough to stem the damage and there is no discernable timeframe for fully re-opening the economy. About 53% of people with jobs worked from home at the end of March, but this is a highly educated group. More than 60% of workers with a bachelor s degree worked completely from home, versus 20% of those with a high school degree or less. Among those who have lost hours or jobs due to the pandemic, 48% were "finding it difficult to get by" or "just getting by," according to the survey. Only 64% of those with reduced employment felt that they would be able to pay their bills in April, compared with 85% of those without a work disruption. Then there are those who took pay cuts - about 23% of all adults, and 70% of those who had lost their jobs or had hours reduced said their income was lower in March than in February. About 90% of workers who lost jobs expect to return to work for the same employer according to the survey, but most do not have a return date. About 5% had already returned to work, and 8% did not expect to go back to the same employer. Additional help from Congress is almost certainly going to be required but it will be a much harder climb than the earlier packages. The Phase IV CARES relief package is already running into trouble in the Senate and passage of the House bill is unlikely. In the meantime, affordable housing operators must be prepared for a reduction in rent collections and if the crisis continues through the summer, without additional help from the federal government, cash flow for some properties may become an issue. This may be especially true for Low-Income Housing Tax Credit developments, which may not have the mortgage forbearance of some HUD-assisted properties. Now is the time to examine planned expenditures for the upcoming year, and unless necessary for legal reasons or to maintain the property is a sound physical condition, consider deferral of such expenditures.

Joe Biden Releases Housing Plan

Former Vice President and presumed Democratic Presidential candidate Joe Biden has released a comprehensive housing plan - much of which deals with affordable rental housing, including the Low-Income Housing Tax Credit program. Following are the major elements of the 81-page plan that relate to affordable housing. A Homeowner & Renter Bill of Rights - this part of the plan would prevent mortgage brokers from leading borrowers into loans they cannot afford; prohibit the advancing of foreclosures when a homeowner is in the process of receiving a loan modification; and prohibit landlords from refusing to accept Housing Choice Vouchers.Tenant eviction protections, including support for the Legal Assistance to Prevent Evictions Act of 2020, which will help tenants facing eviction access legal assistance.Encourage the elimination of local and state housing regulations that perpetuate discrimination by seeking legislation requiring any state receiving Community Development Block Grant (CDBG) or Surface Transportation Block Grants to develop inclusionary zoning practices.Expand the Community Reinvestment Act (CRA) to apply to mortgage and insurance companies as well as banks and to close loopholes that allow banks to avoid lending and investing in all the communities they serve.Re-implement the Affirmatively Furthering Fair Housing Rule requiring communities to proactively examine housing patterns and identify and address policies that have a discriminatory effect.Create an advanceable and refundable tax credit of up to $15,000 to assist families with down payments to purchase their first home.Provide Section 8 vouchers to every eligible family by fully funding the Section 8 program.Enact a Renter s Tax Credit to reduce the cost of rent and utilities to 30% of income for low-income individuals and families who make too much to qualify for Section 8 but still cannot afford decent housing.Establish a $100 billion Affordable Housing Fund to construct and upgrade affordable housing. This fund would be available to states and communities that are willing to implement new zoning laws that encourage more affordable housing. This Fund, along with the potential withholding of CDBG and transportation dollars, represents the "carrot and stick" approach that is most likely to work with cities that have heretofore been uninterested in affordable housing.Expand the HOME program and the Capital Magnet Fund with an additional $5 billion annually.Increase funding for the Housing Trust Fund (HTF) by $20 billion.Increase credits for the LIIHTC program by $10 billion. This blueprint will certainly provide the framework for any Biden housing plan should he be elected President in November, so it is worth paying attention to. Clearly, some of the goals outlined in the plan would be beneficial to the affordable housing industry.

HUD Issues Guidance on COVID-19 and HOME Projects

On May 1, 2020, the Department of Housing & Urban Development (HUD) issued updated guidance relative to application of the CARES Act to projects with HOME funding. Section 4024 of the CARES Act imposes a temporary moratorium on evictions. The temporary eviction moratorium applies to covered dwelling units assisted by the HOME program. Primary components of the guidance include: The CARES Act eviction moratorium applies to HOME-assisted projects as well as dwelling units occupied by recipients of HOME tenant-based rental assistance (TBRA).Rental projects that received HOME assistance that are currently within the period of affordability (POA) specified in the HOME written agreement - including those projects with a POA longer than that required by the HOME regulation - are covered.Rental projects that have a HOME loan within its term of repayment and secured on the property as a first or subordinate lien, regardless of whether the project is in its POA, are covered.Homeownership projects containing rental units that received HOME assistance that are currently within the POA are covered, as are homeownership projects with rental units that have a HOME loan within the terms of repayment and secured by a first or subordinate lien.All residential rental units in or on properties (i.e., multifamily and multi-unit single family) that have a HOME loan secured on the property - regardless of whether the project is in its POA - are covered.E.g., a 100 unit apartment community has ten HOME-Assisted Units; all 100 units must comply with the CARES Act requirements.For a period of 120-days, beginning on March 27, 2020 and continuing through July 24, 2020, an owner cannot:Make, or cause to be made, any filing with the court of jurisdiction to initiate an eviction (e.g., an unlawful detainer, complaint) for nonpayment of rent or other fees or charges; orCharge fees, penalties or other charges to the tenant related to the nonpayment of rent.If an owner did not provide the tenant with an eviction notice, including but not limited to a notice to vacate, quit, or terminate tenancy, for nonpayment of rent or other fees or charges prior to March 27, 2020, the owner may not issue such notice until after the 120-day period.Fees, penalties, or charges relating to nonpayment of rent may not be charged during the 120-day period.Monthly rent, fees, and other charges (except fees and charges relating to the nonpayment of rent during the 120-day moratorium) may accrue during the 120-day period and be charged to the tenant after the CARES Act 120-day moratorium ends on July 24, 2020. In other words, the residents will still own rent for this period of timeThe CARES Act moratorium does not apply to evictions based on violations of permitted lease terms other than nonpayment of rent or other fees, penalties, and charges. Owners and managers of properties with HOME assistance should ensure compliance with these requirements going forward and make sure that all site staff of HOME-assisted properties are also familiar with the requirements.

Supreme Court Refuses to Overturn Idaho Case Giving Homeless the Right to Sleep in Public Places

The U.S. Supreme Court denied a petition by Boise, ID to review Martin v. Boise, December 16, 2019, leaving in place earlier rulings by the 9th Circuit that homeless persons cannot be punished for sleeping outside when there are no adequate alternatives. This decision leaves in place the April 2019 9th Circuit ruling which covers nine western states and sets national precedence. The covered states are Alaska, Washington, Montana, Idaho, Oregon, California, Nevada, Hawaii and Arizona. The original case was filed in 2009 by the National Law Center on Homelessness & Poverty, seeking to prevent homeless people from being punished for sleeping on the streets when they have no other option. The goal of the suit was to force localities to offer affordable housing as the primary solution to homelessness. Boise had a "Camping & Disorderly Conduct Ordinance" against homeless persons. In 2018, the 9th Circuit found that "as long as there is no option of sleeping indoors, the government cannot criminalize indigent, homeless people for sleeping outdoors on public property, on the false premise that they had a choice in the matter." The High Court refusal to consider the case affirms that within the 9th Circuit, "the 8th Amendment precludes the enforcement of a statute prohibiting sleeping outside against homeless individuals with no access to alternative shelter." This ruling does not prohibit cities from addressing street encampments; it just means they have to do it in constructive ways that reduce harm and actually assists in ending homelessness. Putting homeless people in jail simply takes up jail space that could be used for dangerous criminals and imposing fines they cannot pay further inhibits their ability to afford housing. Early in the case, the Department of Justice recognized that "criminalizing public sleeping in cities with insufficient housing and support for homeless individuals does not improve public safety outcomes or reduce the factors that contribute to homelessness." The victory in this case is not that it allows homeless people to sleep in public areas; the victory is that it will force communities to address homelessness proactively through development of adequate affordable housing, while providing safe and appropriate emergency shelter in the meantime.

HUD Issues Issues Waivers for Public & Indian Housing Programs, Including Section 8 Project-Based Vouchers During COVID-19 Emergency

On April 10, 2020 the HUD Office of Public & Indian Housing (PIH) issued waivers to provide administrative relief and ensuring continued program operations during the COVID-19 pandemic. These waivers can be reviewed in their entirety in Notice PIH-2020-05. These waivers are directed to public housing authorities (PHAs), Indian tribes and tribally designated housing entities, and apply to public housing, Section 8 Housing Choice Vouchers (HCV), Section 8 Project-Based Voucher, and Indian Housing Programs. PHAs and Indian tribes may implement any or all of these waivers, immediately or at any point during the applicability period. HUD has also waived certain requirements relating to notice and approval of Administrative Plan and ACOP amendments, which will allow PHAs to adopt these new waivers more quickly. HUD is providing both short term waivers (focused on providing essential flexibilities when normal operations are severely disrupted) and long-term waivers, which allow PHAs to defer important but less critical functions in order to focus on the most vital responsibilities until transitioning back to normal operations. The short term waivers generally end on July 30, 2020 and the long-term waivers expire on December 31, 2020. HQS Waivers >PHAs may enter into a Housing Assistance Payment (HAP) contract for tenant-based or PBV units, turn over units to a new family, add new units to a PBV HAP contract, or substitute units on a PBV HAP contract without conducting a Housing Quality Standards (HQS) inspection through July 31, 2020. >In lieu of the HQS inspection, the PHA may accept a certification from the project owner that the owner "has no reasonable basis to have knowledge that life threatening conditions exist" in the units in question. >Units must be inspected by October 31, 2020. >These same alternate requirements apply to PHAs choosing to utilize the alternative inspection flexibility that had previously been provided under the Housing Opportunity Through Modernization Act of 2016 (HOTMA), which allows the PHA to recognize alternative inspection regimes such as REAC. In lieu of a PHA inspection within 15 days, the PHA may accept an owner s certification of no knowledge of life threatening conditions to delay inspections until no later than October 31, 2020. >If an HQS inspection has been conducted but the PHA uses the Non-Life Threatening Deficiencies (NLT) flexibility that had previously been provided under HOTMA, project owners have up to 60 days, instead of 30, to make NLT repairs. >For units already under a HAP contract, PHAs may delay the required biennial HQS inspections until no later than October 31, 2020. >If a tenant notifies a PHA that their unit does not comply with HQS, through July 31, 2020, the PHA may notify the project owner in lieu of conducting an HQS inspection. For life threatening deficiencies, the owner must either correct the deficiency or provide evidence that the deficiency does not exist within 24 hours. For NLT deficiencies, the project owner must either correct the deficiency or provide evidence that the deficiency does not exist within 30 days of the PHA notification. >HUD is waiving the HQS requirement that a leased unit have at least one bedroom or sleeping room for every two people in order to accommodate residents who may need to add household members as a result of the COVID-19 emergency. Recertifications for Income & Family Composition (Public Housing & HCV/Section 8  >PHAs may delay annual re-examinations of family income and composition until December 31, 2020. >If a PHA wants to proceed with re-certifications, through July 31, 2020, PHAs may rely on family self-certification and forego reliance on third-party income verifications, such as the EIV system. HUD will even permit self-certifications over the phone if the PHA staff creates a contemporary written record. >Interim certifications may be used to adjust a family s portion of the rent if the family has lost income. Again, PHAs may rely on family self-certifications and need not rely on EIV or other third party verification through July 31, 2020. In addition, PHAs may wish to review and adjust their interim re-examination policies, such as when increases in family income must be reported or how to determine the effective date of the interim certification. >Mandatory EIV monitoring is waived through July 31, 2020. However, families will be responsible if significant discrepancies from their self-certification are later discovered. >If a PHAs payment standard increases, PHAs do not have to wait until the regular family re-examination for a unit to increase the HAP subsidy. Additional Waivers Applicable to PIH and HCV/Section 8 Programs >Section 8 Administrative Plans and public housing Admissions and Continued Occupancy Policies (ACOP) may be temporarily amended without board of directors approval until July 15, 2020. >PHA Annual Plan/5-Year Plan submission dated extended - PHAs with June 30 and September 30 fiscal year ends now have until October 18, 2020, to submit their annual or 5-year plans. PHAs with December 31 fiscal year ends have until January 16, 2021. In addition, plan amendments, except for amendments required for RAD, Section 8, and Section 22 repositioning efforts, can be adopted without an open public meeting of the PHAs board of directors. >HUD is still requiring PHAs to notify tenants of policy changes, but 30-day advanced notice is no longer required. >PHAs have been given broad latitude to extend a family s initial voucher, execute HAP contracts up to 120 days after the start of a family s lease, allow vacancies for more than 180 days, and retain units on a HAP contract even if the unit does not generate subsidy for more than 180 days. >COVID-19 qualifies as "good cause," through December 31, 2020, to extend a family s participation in the Family Self-Sufficiency (FSS) Program for up to two years. >Public notice for PHAs opening or closing waitlists can be provided by leaving an outgoing voice message on its answering system and website, if the messages are accessible for hearing, visual, and other communication-related disabilities. >Capital Fund obligation end dates and expenditure end dates are extended by one year. PHAs may exceed Total Development Cost (TDC) and Housing Construction Cost (HCC) limits by 25% and may seek HUD approval to exceed TDC and HCC by up to 50%. Deadlines for closeout forms are extended by six months. >PHAs may use force account labor (workers employed directly by the agency), rather than contracted labor, for modernization activities. >Energy audits are suspended and PHAs need not review utility allowances until December 31, 2020. >HUD is temporarily suspending the Public Housing Assessment System (PHAS) and the Section 8 Management Assessment Program (SEMAP) for PHAs with a fiscal year end on or before December 31, 2020. >Financial statement submission deadlines have been extended. >PHAs now have 90, rather than 60, days to submit form HUD-50058 for transactions impacted by these waivers. HUD will provide future guidance regarding reporting work-arounds in the PIH Information Center (PIC) system. The CARES act also provides supplemental funding for the Public Housing and HCV programs and additional flexibility to move monies between Operating and Capital Funds. HUD will publish additional guidance regarding these aspects of the CARES Act in the future.