As you probably know by now if you are operating properties that utilize HOME funds, HUD has released the 2013 HOME rent limits. You may also be aware that due to calculation errors by HUD in earlier years, dating back as far as 2009, HUD now has to decrease the HOME rents in many areas. In order to offset the pain of these decreases, HUD is “phasing” in the reductions so that all required rent reductions will be in place by 2015.
Background
The maximum HOME rent limits are established in the National Affordable Housing Act of 1990 (NAHA), as amended. HUD’s Economic and Market Analysis Division calculates the HOME rents each year using Fair Market Rents and Section 8 Income Limits.
In 2009, due to HERA, HUD had to eliminate its policy of holding Section 8 income limits harmless from reduction. This is because HERA provided for a separate determination of tax credit and tax exempt bond income limits, so there was no longer any reason for HUD to hold the Section 8 income limits harmless. However, HUD made the decision at that time to hold the income limits harmless in the calculation of annual HOME rent limits to avoid a negative affect on the operations of HOME properties. In short, HUD had no authority to do this since the method for establishing the HOME rent is Statutory – and not subject to HUD discretion. As a result, there have been no reductions in HOME rents since 2009. This error does not affect areas where rent limits have increased.
Effect on Properties
In order to minimize the impact in 2013, HUD is limiting the decrease in 2013 rents from the published 2012 rent limits to 33 percent of the total difference between the two rents. If 33 percent of the difference is $10 or less, HUD will permit the 2013 HOME rent limit to decrease by the entire amount. This process will continue in 2014 and 2015 so that all HOME rents will comply with the requirements of the law by 2015. Certain areas will be significantly impacted by these reductions, but it is important that all owners subject to HOME rent limits understand that HOME rents are not held-harmless from reduction, unlike rents for the Low-Income Housing Tax Credit Program.
If you have questions on how this procedure may affect your property, you should contact the Agency that oversees the HOME funds for your property. You should also feel free to contact me with any questions.