News

VAWA Deadline Reminders

VAWA Deadline Reminders   As I noted in a prior client memo, HUD has released four Model forms for use on HUD properties to ensure compliance with requirements of the Violence Against Women Act (VAWA). These model forms are Appendix A: Notice of Occupancy Rights Under the Violence Against Women Act (HUD Form-5380); Appendix B: Model Emergency Transfer Plan (HUD Form-5381) Appendix C: Certification of Domestic Violence, Dating Violence, Sexual Assault, or Stalking and Alternate Documentation (HUD Form-5382); and Appendix D: Emergency Transfer Request Form (HUD Form-5383).   Any of these forms may be modified but must retain the same information and language. I recommend using the forms as published, without alteration, for HUD properties that are subject to the HUD final rule.   There are some important deadlines associated with the use of these forms. Notice and Certification form (HUD Form-5380 and 5382). Between now and December 15, 2017, each household must be given these forms. The forms should be provided to every household that moves in, as well as households at lease renewal or annual recertification. If there will not be an annual recertification or lease renewal between now and December 15, 2017, owners/agents should make sure that a copy of each form is given to the households. I recommend hand delivery of the forms to the residents at their apartments, and ask that they sign an acknowledgement of receipt. Beginning December 16, 2017, these two forms must be provided at move-in or when assistance is denied. I do not recommend waiting until this date to begin providing the forms to move-ins and those denied assistance. I recommend beginning this process now. Providing the forms to persons on the waiting list is not Emergency Transfer Plans must be fully implemented by June 14, 2017; so, owners/agents have four months to get these plans in place. If you are going to require tenants to provide a written request for an emergency transfer, all tenants should be given a copy of the Emergency Transfer Request Form (HUD Form-5383).   HUD is planning to update the Form HUD-91066 for multifamily programs, but until they do, owners/agents of properties under HUD s Office of Multifamily Housing should use the HUD Form-5382.

Using PHA Income Verification for Section 8 Voucher Residents on LIHTC Projects

IRS Regulation 1.42-5 states that the requirement to verify the income of a low-income resident with a Section 8 voucher at a tax credit property is satisfied "if the public housing authority provides a statement to the building s owner declaring that the tenant s income does not exceed the applicable income limit under Section 42(g)." Based on an exact reading of this language, the verification does not have to state a specific income - it only needs to state that the household income does not exceed the qualifying income limit. However, this creates potential problems when certifying the income of households, since residents are required to sign a tenant income certification stating a specific income. The IRS 8823 Guide states that a tenant income certification and supporting documentation are not sufficient unless, at a minimum, the following documents are included: Application/Income and Asset Questionnaire - a document completed by the household that the owner uses to gather information relevant to establishing all aspects of eligibility, including, but not limited to, household composition, income, income from assets, and student status. Verification of Income and Assets - All sources of income and assets must be verified to establish move-in eligibility. Each tenant file must contain an annual statement of income, household composition, and student status. Student Status (if required). Tenant Income Certification - Documents must be signed by all the adult members of a household prior to move-in and at the time of the annual recertification, and must state the anticipated annual gross income of the household. Based on #4, tenant income certifications must state a specific amount of income. If the PHA verification does not provide a specific amount, what amount should be shown on the certification? The IRS has not addressed this issue, so it is left up to the States. Most (if not all) State agencies require that income verifications, including those from PHAs, state a specific income. Theoretically, a HFA could permit the resident to self-certify income on a TIC as long as there was a PHA verification stating that the income did not exceed the maximum. However, since all income shown on a TIC must generally be verified, this type of self-certification would probably not be acceptable to most agencies. Our recommendation is that when accepting verifications from PHAs regarding the income of voucher residents, owners should request that the PHA provide the exact income that was verified for the resident. Only in cases where HFAs have specific written policies permitting an owner to accept PHA verification that income does not exceed the qualifying limits should such verification be accepted.

Notice H 2016-18, Automating Capital Needs Assessments

HUD published Notice H 2016-18 on December 30, 2016, "Implementation of the CNA e Tool: Automating Capital Needs Assessments (CNA), and Related Policy Changes." The Notice introduces new Capital Needs Assessment tools, and consolidates and aligns due diligence methods for CNAs. These tools are optional at this time, but will become mandatory in the future. Background In 2010, the Domestic Policy Counsel convened the Rental Policy Working Group (RPWG) that included the Departments of Treasury, Agriculture, and HUD to align their policies and practices applicable to multifamily housing projects. RPWG recommendations were published in 2011 and included a proposal to create a standard, automated, electronic template and process for CNAs for use by various agencies and programs, and available for use by all multifamily industry participants. The CNA e Tool and training and technical assistance resources for users are released in conjunction with this Notice and will continue to be developed by HUD. The Tool and associated components can be found at the CNA e Tool home page: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/can Implementation of the Tool for HUD Programs The Notice describes: The implementation schedule for optional use, then mandatory use, of the CNA e Tool; Which HUD programs will use the Tool; System user access credentials and methods; and Training and self-help resources, technical assistance and help desk resources that are available to users. Calendar for Implementation All program participants and their CNA providers are encouraged to begin using the CNA e Tool for preparation of CNAs submitted to HUD beginning on January 15, 2017. All CNAs submitted to HUD on or after July 1, 2017, must be submitted through the CNA e Tool in order to be an acceptable CNA. Applicability to HUD Programs This Notice does not apply to any Public Housing Authority (PHA) except those for the RAD program. On or after July 1, 2017, CNAs are required to be submitted using the CNA e Tool for the following programs: Refinance/Acquisition Section 223(a)(7) & 223(f); Substantial Rehab less than gut rehab Sections 220, 221, & 231; New Construction or Substantial Rehabilitation (gut rehab) Sections 220, 221, 231; Supplemental Loans Section 241(a); Mark to Market Restructuring; RAD - Rental Assistance Demonstration without insured mortgage financing; Ten-year update CNAs for assets with insured mortgages; Partial payment of claims or Loan Modifications; and Section 202-811 with PRAC assistance, but not an insured mortgage transaction. Owners with projects falling in these categories should obtain a copy of the Notice and begin the process of understanding and using the CNA e Tool.

Costs and Burdens Relating to VAWA

The cost of implementing the VAWA 2013 requirements can be significant. The HUD final rule provides guidance on who will bear the cost of implementation. One issue is who bears the cost if a property is damaged due to a VAWA-related incident. The final rule lacks clarity and simply states that the means for recuperating costs for damages will vary depending on the HUD-covered program. HUD also states that while implementation of these new rules will increase costs to housing providers, there will be no increase in funding to offset the additional expenses. Basically, the law creates an "unfunded mandate" on covered housing providers. At least one section of the final rule is clear with regard to the cost of emergency transfers. While covered housing providers are "encouraged" to pay for or assist with the cost of emergency transfers, there is no requirement that they do so.   Issue: Can a tenant or applicant terminate a lease for VAWA related reasons? The answer is yes - the VAWA lease term/addendum must provide that the tenant may terminate the lease without penalty if a determination is made that the tenant has met the conditions for an emergency transfer.   Issue: What are the rights of Limited English Proficient (LEP) victims under VAWA? Executive Order 13166 directs all federal agencies to ensure that programs receiving federal assistance provide meaningful access to LEP persons. Covered housing providers are required to follow the Executive Order, but are not required to go beyond that order. Required steps may include providing oral interpretation services, hiring bilingual staff, and providing notices of LEP services.   Issue: To what extent to VAWA protections to mixed status immigrant families? There are no special protections for mixed status immigrant families.   Issue: Are lease violations unrelated to domestic violence affected by VAWA? No - housing providers may evict or terminate assistance to a victim of domestic violence for a lease violation not related to domestic violence. There must be a connection between the alleged violation and domestic violence to trigger VAWA protections.   Issue: Confidentiality Requirements are not outlined in detail by HUD. Will more guidance be given? Issues that HUD has not addressed with regard to confidentiality include: How to maintain an auditable trail while also protecting the privacy of details of a tenant s status; Whether VAWA documentation should be retained separately from the tenant file; and How actions such as transfers should be documented.   HUD has indicated that they will take steps to ensure that housing providers understand their obligations with respect to maintaining confidentiality. We do know at this point that no confidential information may be placed in a shared data-base without a request or consent in writing by the individual. There is no specific exception for disclosure to law enforcement or government agencies. Where disclosure of the fact that someone is the victim of a VAWA crime is necessary to secure VAWA protections, the individual requesting the protections may consent to the disclosure.   Issue: In the case of Housing Choice Vouchers, do the confidentiality provisions apply to the PHA or the property owner? The answer is - both. Neither the PHA administering the voucher nor the owner of the property using the voucher may violate the confidentiality provisions of VAWA.   Issue: Where must VAWA-related documents be kept? The final rule does not require housing providers to maintain VAWA-related documents in a particular location. Housing providers should determine the best strategy for maintaining confidentiality in accordance with VAWA 2013.   Issue: Will program specific regulations include VAWA confidentiality provisions? No - such a prohibition could limit a PHA from providing other landlords and owners with relevant and necessary information about a tenancy that is unrelated to a VAWA crime.   Issue: Are tenants in HOME-assisted units covered by VAWA? For project-based HOME assistance, the assistance may be in the form of operating assistance, development assistance, and mortgage interest rate subsidy. VAWA requirements apply to "all HOME tenant-based rental assistance and rental housing assisted with HOME funds." Rental housing assisted with HOME funds is rental housing that has been newly constructed, acquired, or rehabilitated with HOME funds. When HOME assistance is provided "solely for development assistance," VAWA applies. Since an entire project is assisted by the HOME funds, the language of the law indicates that all units are subject to VAWA requirements - not just the HOME units.   Issue: Are HOME funded projects begun prior to the effective date of the final VAWA rule subject to the rule? No - compliance with the regulations set forth in the final rule is required for any tenant-based rental assistance or rental housing project for which the date of the HOME funding commitment is on or after the effective date of the final rule, which is December 16, 2016. However, basic statutory core protections of VAWA were effective upon enactment of VAWA 2013. The law was enacted on March 7, 2013. The core protection of VAWA prohibits denial or termination of assistance or eviction on the basis of domestic violence, dating violence, sexual assault, or stalking.

Some States and Localities Increase the Minimum Wage for 2017

Managers of affordable housing properties spend a good deal of their time verifying and calculating income. All managers are aware that most workers must be paid a minimum wage (some workers are exempt from the requirement). While the federal minimum wage is $7.25 per hour, many states and localities have higher minimums. 19 states and 21 local jurisdictions raised those minimums as of January 1, and some increases are dramatic. For example, Arizona raised its minimum wage from $8.05 to $10 per hour. Maine went from $7.50 to $9.00 and both Washington State and Massachusetts raised the minimum to $11 and hour. Six states plus D.C now have minimum wages in excess of $10 per hour. Some localities have set the bar even higher. Several California cities have minimum wages of $12 or more and Seattle requires some employers to pay $15 per hour. As we enter the new year, managers of affordable housing should make sure they know what the minimum wage is for their state and locality and apply this to all working applicants who are not exempt from minimum wage laws.

IRS Notice 2016-77 - QAP Preferences Relative to Community Revitilization Plans

On December 27, 2016, the IRS issued Notice 2016-77. This Notice relates to the issue of satisfying the required Qualified Allocation Plan (QAP) preference relating to Community Revitalization Plans.   Background Section 42 (m) of the Internal Revenue Code (the "Code") requires that every Low-Income Housing Tax Credit (LIHTC) allocation be made pursuant to a QAP. The code specifies certain preferences and selection criteria that each QAP must contain. Three preferences are required, and one of these is that the QAP must give "preference in allocating housing credit dollar amounts among selected projects to projects which are located in qualified census tracts and the development of which contributes to a concerted community revitalization plan " (emphasis added). Qualified Census Tracts (QCTs) are HUD-designated areas with either a high percentage of households below a certain income level or with a poverty rate above a certain level.   The IRS Position The IRS has determined that in some cases, HFAs have given preference to projects in QCTs without regard to whether the projects contribute to a concerted community revitalization plan (CRP). In some cases, if an LIHTC project benefitted a particular neighborhood, HFAs treated the project itself as a CRP. There is a reason that a preference is granted only to projects that contribute to a concerted community revitalization project. The project itself cannot be a CRP. The notice states that the position of Treasury and the IRS is that unless there is a plan with more elements than the project itself no later than the allocation date, the preference fails to apply, indicating that if the allocation would not have occurred without the preference, the allocation itself may be invalid. The IRS is requesting comments regarding guidance that should be issued relating to the preference. Comments are due to the IRS no later than February 10, 2017. Comments may be emailed to Notice.comments@irscounsel.treas.gov. When emailing comments, include "Notice 2016-77" in the subject line.

2017 Increase in Pay for Active Duty Military

The National Defense Authorization Act of 2017 has been signed into law by President Obama and effective January 1, 2017, all active duty and active reservists will receive an increase of 2.1% in base pay. This increase will appear in the January 2017 Leave & Earning Statements (LES), but managers of affordable housing properties verifying pay with LESs from prior to January should apply the increase when projecting annual income. When adding the increase to the base pay, the new amount should be rounded to the nearest dollar.

IRS Revenue Ruling 2016-29 - Regarding Qualified Allocation Plan Provisions Relating to Local Approval of LIHTC Allocations

This recently issued Revenue Ruling addresses the issue of whether or not Section 42 of the Internal Revenue Code requires or even encourages Housing Finance Agencies (HFAs) to reject proposals for low-income housing tax credit (LIHTC) developments if the locality where the project will be located does not specifically support the project. While not referenced in the ruling, this guidance is a direct response to criticisms of HFAs (and the lack of IRS oversight of HFAs) in a recent Government Accountability Office (GAO) study of the LIHTC program. The ruling uses an unidentified state as an example. It should be noted that the GAO report found that 12 HFAs (Alaska, Arkansas, Chicago, Georgia, Illinois, Kansas, Montana, Nevada, New Mexico, North Dakota, Oklahoma, and South Dakota) make approval of LIHTC applications contingent on letters of support from local officials, and another ten agencies (Guam, Indiana, Kentucky, Massachusetts, Ohio, Texas, Virginia, Washington, DC, West Virginia, and Wisconsin) award points for such local support. The QAP of the particular state used as an example contains provisions that strongly favor applications for LIHTC projects that receive direct local government support. For example, under the point system that the HFA uses in judging among projects, points are granted to projects that - Show measurable community support for the project, such as written statements from neighborhood organizations in the area of the proposed project; Receive a commitment of development funding by the locality; and Receive written support for the project, as evidenced by a written statement from the state legislator elected from the district in which the project is proposed to be developed. The HFA takes the position that Section 42 requires that allocations be made only to projects that receive the approval of the locality where the proposed project is to be located. If such approval is not forthcoming, the HFA will reject the application. This basically gives communities a "local veto" over proposed LIHTC projects. In this particular state, local approval is much more likely for projects in areas with a higher percentage of minority residents. This results in fewer economic opportunities for minorities in higher-opportunity, non-minority communities. In effect, it allows communities to perpetuate segregation by race. This practice as resulted in the allocation of tax credits in predominately lower-income or minority areas, resulting in the continuation of residential racial and economic segregation. Section 42(m)(1)(A)(ii) does prohibit an allocation of credits to a building unless the allocating agency "notifies the Chief Executive Officer (or the equivalent) of the local jurisdiction within which the building is located of such project and provides such individual a reasonable opportunity to comment on the project." Analysis The IRS ruling (which based on any reasonable reading of the law is correct) is that the HFA is misinterpreting the code provision. The HFA interpretation of the law is inconsistent with both the language of Section 42 and federal fair housing policy. The Language in the Code The code requires that each local jurisdiction be given a "reasonable opportunity" to comment on any proposal to allocate tax credits within the jurisdiction. It does not require the jurisdiction s "approval." The clear meaning of "reasonable opportunity to comment," according to the IRS ruling, is that the jurisdiction has the right to comment, or even object, to the proposal, but they do not have the right of final approval. The HFA must use its own judgment in the approval or denial of a project, and local officials should not be given veto authority. Federal Fair Housing Requirements As significant as the HFA s misreading of Section 42 is, the most serious failure of the HFA policy is that it perpetuates racial segregation in clear violation of federal fair housing law. The only way the HFA reading of the code could be correct is if Congressional intent, when creating the LIHTC program, was to reverse or circumvent federal fair housing policy. There is no legislative history on which the HFA could have reached this conclusion. There is nothing in either the language of Section 42 or its legislative history indicating that Congress intended to change the original intent of the Fair Housing Act, which was "to provide, within Constitutional limitations, for fair housing throughout the United States." The Ruling "When state housing credit agencies allocate housing credit dollar amounts, Section 42 (m) (1)(A)(ii) does not require or encourage these agencies to reject all proposals that do not obtain the approval of the locality where the project developer proposes to place the project. That is, it neither requires nor encourages housing credit agencies to honor local vetoes." Whether or not the IRS would have issued this ruling without the recent GAO report is unknown. What is clear is that the ruling is on point relative to both the wording and intent of the code. There is no question that it is the intent of some local governing authorities to prevent integration of certain communities. This ruling will make it more difficult for HFAs to be complicit in such local attempts. Owners and developers operating in states where QAPs give any degree of veto authority to local government over the awarding of federal tax credits should remind the HFA of this ruling.