HOTMA Final Rule – Impact on the HOME Program

The Department of Housing & Urban Development (HUD) has released a Final Rule implementing the Housing Opportunity Through Modernization Act of 2016 (HOTMA). This final rule was published in the Federal Register on February 14, 2023. With the exception of changes relating to Non-Public Housing Over Income families (which take effect on March 16, 2023), this final rule takes effect on January 1, 2024.

 The Housing Opportunity Through Modernization Act (HOTMA) was signed into law on July 29, 2016, amending many aspects of Multifamily Housing programs (as well as programs administered through the Offices of Public and Indian Housing and Community Planning and Development). HOTMA was intended to streamline processes and reduce burdens on housing providers. On September 17, 2019, HUD issued a proposed rule to update its regulations according to HOTMA’s statutory mandate. The final rule, published on January 9, 2023, considers public comment received on the proposed rule and provides additional guidance for implementing Sections 102, 103, and 104 of HOTMA.

Which Programs will be Affected by the Final Rule?

 The Section 8 PBRA (including RAD), Section 202/811 PRAC, 202/8, 202/162 PAC, Senior Preservation Rental Assistance Contract (SPRAC), and Section 811 Project Rental Assistance (811 PRA) programs will see changes due to HOTMA.

This is the sixth in a series of articles I am writing on the sweeping changes that will be made to HUD affordable housing programs. This article will focus on the revised rules regarding the HOME Program.

In the final rule, HUD clarifies that for the HOME Program, the definition of Live-in Aide, foster adult, foster child, full-time student, and net family assets will be the same as the meaning of these terms for the HUD multifamily housing programs.

Use of Annual Income in the HOME Program

Participating Jurisdictions (PJs) use the annual income of families to determine eligibility for: (1) occupancy of HOME-assisted rental units; (2) purchase of a homeownership unit; (3) receiving homebuyer downpayment assistance; and (4) obtaining rental assistance when there is tenant-based rental assistance (TBRA).

The HOME regulations permit a PJ to use one of two definitions for annual income for each rental project or program assisted with HOME funds: (1) adjusted gross income in IRS Form 1040; or (2) annual income as defined in the HUD multifamily housing programs. In this final rule, HUD is requiring that PJs use the HUD multifamily definition of income whenever HOME funds are layered with funds of a program that is required to use the multifamily definition.

Also, if a project has a State project-based rental subsidy, the PJ must use the subsidy provider’s income determination under the rules of the State program.

This final rule allows a PJ to accept a Federal TBRA provider’s income determinations if the family is applying for or living in a HOME-assisted rental unit and the family is being assisted by a Federal TBRA program (e.g., Housing Choice Vouchers).  Notice that the use of the PHA income determination is not required in this case — it is permitted. However, a PJ must ensure that these units comply with HOME rent limitations.

While PJs must enter into regulatory agreements with owners, developers, or sponsors of HOME-assisted rental housing, HUD is recommending that PJs also enter into agreements with PHAs, owners, or rental subsidy providers for Federal TBRA when income will be calculated in accordance with HOME rules and not the rules of the TBRA program. This may be necessary to ensure the project is able to meet the HOME rental occupancy requirements relating to fixed/floating and High/Low HOME units.

If PHAs administering HCV and owners of projects with PBRA accept annual income determinations made by administrators of other Federally assisted programs (e.g., TANF or SNAP), the PJ must also accept those income determinations.

Also, although the HOME program has no asset limitations, families that are participating in a program with asset limitations noted in the final rule may be denied assistance under that program. However, if such families are eligible based on the regulations of the HOME program, they may not be excluded from a HOME unit – even if they are denied Federal rental assistance. If the family has assistance terminated by the operator of the rental assistance program, the PJ must determine the family’s income in accordance with HOME requirements.

The final rule permits PJs to accept self-certification of assets for families with assets that do not exceed $50,000 without taking further steps to verify the accuracy of the declaration.

Hardship Exemptions When Using Adjusted Income

When PJs are required to calculate a family’s adjusted income, the PJ may grant the financial hardship exemptions allowed by the final rule for public housing and multifamily housing programs. These are the hardship exemptions that relate to the threshold to receive health and medical care expenses as well as families that apply for a continued childcare expense deduction. To use this authority, the PJ must develop policies and procedures for qualifying and granting hardship exemptions.

Source Documents No Longer Required in Year Six of the Affordability Period

Current HOME rules require that family income be fully documented at move-in and then every sixth year of the project’s affordability period. The final rule eliminates the requirement to review source documentation every sixth year of the affordability period.

Bottom Line: While not extensive, the changes made to the HOME program by the final rule are substantive and both PJs and operators of HOME-assisted rental projects should familiarize themselves with these new rules — keeping in mind that they do not go into effect until 2024.