HUD Update

May 13 & 14, 2015 Leading Age Gulf States/ Louisiana Assisted Living Association Candi Atkins Consultant 15777 Bolesta Rd. #37 Clearwater, FL 33760-3461 [email protected] / 727-754-4670

TABLE OF CONTENTS SECTION

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USE OF MARIJUANA IN HUD MULTI-FAMILY HOUSING

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MEDICAL MARIJUANA: COMPLIANCE ARTICLE

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HUD FORM 27061 -H RACE & ETHNICITY F ORM

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HUD HOUSING NOTICE 1 4-15 – PASSBOOK RATE CHANGE

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HUD HOUSING NOTICE 1 4-16 – WAITING LIST MANAGEMENT

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PAC RENEWAL NOTICE: MARCH 18, 2015

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HUD MEMO: EMERGENCY CALL SYSTEMS

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EMERGENCY CALL SYSTE MS EXPLANATION

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PBCA UPDATE

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ANNUAL ADJUSTMENT FA CTORS

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HUD HOUSING NOTICE 1 5-01 – EQUAL ACCESS FINAL RULE

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HUD HOUSING NOTICE 1 5-02 – REAC REQUIRED ACTIONS

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HUD HOUSING NOTICE 1 5-03 – TRANSFER OF SECTION 8 CONTRACTS

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HUD INITIATED FAIR HOUSI NG COMPLAINTS ARTICL E

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2015 FAIR HOUSING BU DGET

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ASSISTED HOUSING ALE RT: JANUARY 2015

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ASSISTED HOUSING ALE RT: FEBRUARY 2015

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ASSISTED HOUSING ALE RT: MARCH 2015

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ASSISTED HOUSING ALE RT: APRIL 2015

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ABOUT THE TRAINER Candi was a CPM (Certified Property Manager) and an ARM (Accredited Resident Manager), Designations given by the Institute of Real Estate Management (IREM) in Chicago. She has been in property management for the past 42 years in many areas: conventional apartments, federally assisted and subsidized multifamily and elderly housing, cooperatives, condominiums, and commercial properties. Currently, Candi is the president of Candi Atkins, Consultant, her own management consulting firm based in Clearwater, Florida. She is a respected instructor for the Leading Age (formerly American Association of Homes and Services for the Aging), Washington D.C. She has been a speaker annually at the AAHSA National Conventions and has addressed many State Associations of Housing and Services for the Aging. Additionally, Candi has acted as an expert witness in several of the past decade’s court cases concerning the housing industry.

Candi Atkins Candi Atkins, Consultant 15777 Bolesta Rd. #37 Clearwater, FL 33760-3461 [email protected] / 727-754-4670

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Medical Marijuana: Don’t Let Your Compliance Go Up In Smoke Watch out: Marijuana-use rules for new admissions versus tenants differ greatly Can you allow marijuana use in assisted housing if your state has legalized medicinal and/or recreational use? If you live in such a state and have been wondering the same thing, you’re not alone. And now the U.S. Department of Housing and Urban Development (HUD) has provided some answers in recently released guidance. Why Federal Status of Marijuana Trumps State Laws “We live in interesting times where HUD, among other federal agencies, is in the process of providing pot guidance,” quipped Washington, DC-based partner attorney Richard Michael Price in a Jan. 20 blog posting for the law firm Nixon Peabody LLP. “Perhaps it’s not so unusual given the state of evolving local law and legalization of marijuana.” The problem: The crux of the issue is that, despite a growing number of states and localities legalizing marijuana, federal law still lists marijuana as a prohibited substance, Price noted. “This leaves agency staff, housing providers and residents with questions about how to deal with persons who are using marijuana in ways that are consistent with state law, but arguably not consistent with federal rules,” added partner attorney Harry Kelly in a Jan. 7 Nixon Peabody blog posting. On Dec. 29, 2014, HUD released a memo containing guidance that clarifies what owners should and should not do when dealing with applicants and current residents who use marijuana, particularly in states where medical and/or recreational marijuana use is no longer outlawed. At the heart of the issue is the Controlled Substances Act (CSA), which dictates that marijuana use in any form is illegal, regardless of legalization under state law. CSA’s mandates also mean that marijuana remains an illegal controlled substance under Section 577 of the Quality Housing and Work Responsibility Act of 1998 (QHWRA). “QHWRA requires that owners/agents establish lease standards that prohibit admission based on the illegal use of controlled substances, including state-legalized marijuana,” explains Mary Ross, president of Ross Business Development in Marietta, GA. “State laws that legalize medical marijuana directly conflict with QHWRA and thus are subject to federal preemption.” How Guidance Impacts New Admissions “In the memo, HUD reiterated that despite any changes to state laws, the use of ‘medical marijuana’ is illegal under federal law,” states Syracuse, NY-based PMCS-ICAP. “Owners are required to deny admission to any household with a member who the owner determines is, at the time of application for admission, illegally using marijuana.” And this doesn’t mean that the applicant is illegally using marijuana under state law, but instead under federal law. Because federal law preempts state laws, and HUD is a federal program,

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marijuana is still federally illegal even if your state has legalized marijuana for medicinal and/or recreational use. To Evict or Not to Evict? Caveat: But HUD’s memo “makes a clear distinction between an owner’s responsibility regarding applicants for admission to assisted housing, and continued occupancy for those already living in a property,” according to the National Low Income Housing Coalition (NLIHC). Although you must deny admission to marijuana users, you have more discretion under QHWRA to evict or not evict current tenants for marijuana use. HUD’s guidance states: “Section 577 of QHWRA affords owners the discretion to evict or not evict current residents for their use of marijuana.” Meaning: “In other words, while owners are forbidden from admitting a household with a member [who] uses drugs, owners have ‘discretion to determine, on a case-by-case basis, when it is appropriate to terminate the tenancy of the household’ due to use of a controlled substance, like marijuana,” Kelly explained. Your Marijuana To-Do List In addition to denying admission for marijuana users, regardless of your state’s laws, HUD’s guidance further requires that you “not establish lease provisions or policies that affirmatively permit occupancy by any member of a household who uses marijuana. Owners must establish policies which allow the termination of tenancy of any household with a member who is illegally using marijuana or whose use interferes with the health, safety or right to peaceful enjoyment of the residents.” Although the rest of HUD’s memo is consistent with past guidance, this termination requirement for anyone who is illegally using marijuana is new, noted Colleen Bloom, associate director for housing operations at Washington, DC-based Leading Age, in a Jan. 5 analysis. Do this: You should address the use of medical and recreational marijuana in your property policies and procedures, Ross advises. “It is best to set applicants’ expectations in the resident selection plan and to establish specific guidelines in your House Rules.” Remember: Although HUD doesn’t require you to have House Rules, if you do have them and plan to edit the rules to incorporate information on marijuana use, be sure to reference the requirements for changing House Rules in HUD Handbook 4350.3 R1, C4, Paragraphs 6-9 and 6-12, Ross says. Best bet: Likewise, HUD doesn’t require you to notify applicants or residents about changes to your tenant selection plan, but notifying applicants, potential applicants and residents of such changes “is recommended,” Ross notes. Can Medicinal Marijuana Use Be a Reasonable Accommodation? But beware of adopting House Rules that prohibit the use of controlled substances, irrespective of what state or federal law says. “These rules have often been challenged by residents with disabilities who seek reasonable accommodations to allow them to use (and even grow) marijuana for medicinal purposes,” Kelly warned.

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“In the past, owners have resisted such requests on the grounds that under HUD’s rules, use of marijuana is forbidden” and a resident’s request to allow medical marijuana use is unreasonable, Kelly said. But HUD’s new guidance throws a wrench into that line of thought. “Because the new HUD guidance recognizes that owners have discretion to allow continued occupancy by persons using drugs, it may be more difficult for an owner to base a refusal to make such an accommodation on the grounds that it conflicts with federal rules,” Kelly cautioned. Resource: To read HUD’s Dec. 29 memo, “Use of Marijuana in Multifamily Assisted Properties,” go to http://portal.hud.gov/hudportal/documents/huddoc?id=useofmarijinmfassistpropty.pdf.

Quick-Reference Chart: Is Marijuana Legal In Your State? Pay attention: Some states allow medical CBD use only So far, 24 states have legalized the use of medical marijuana, decriminalized marijuana possession, or both. Mississippi, Nebraska, North Carolina and Ohio have limited decriminalization involving reduced enforcement of marijuana use or possession. Currently, 23 states still prohibit marijuana use outright. Medical Marijuana Legalized/Decriminalized Alaska Arizona California Colorado Connecticut District of Columbia Delaware Hawaii Illinois Maine Maryland Massachusetts Michigan Minnesota Montana Nevada New Hampshire New Jersey New Mexico New York Oregon Rhode Island Vermont Washington

Medical Cannabidiol (CBD) Use Only Alabama Florida Iowa Kentucky Mississippi Missouri North Carolina South Carolina Tennessee Utah Wisconsin

Non-Medical (Recreational) Marijuana Legalized/Decriminalized Alaska California Oregon Washington

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Race and Ethnic Data Reporting Form

  OMB Approval No. 2502-0204 (Exp. 06/30/2017)

U.S. Department of Housing and Urban Development Office of Housing

Name of Property

Project No.

Address of Property

Name of Owner/Managing Agent

Type of Assistance or Program Title:

Name of Head of Household

Name of Household Member

Date (mm/dd/yyyy):

Select One

Ethnic Categories*

Hispanic or Latino Not-Hispanic or Latino Select All that Apply

Racial Categories*

American Indian or Alaska Native Asian Black or African American Native Hawaiian or Other Pacific Islander White Other *Definitions of these categories may be found on the reverse side.

There is no penalty for persons who do not complete the form. _____________________________________

____________________________

Signature

Date

Public reporting burden for this collection is estimated to average 10 minutes per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required to obtain benefits and voluntary. HUD may not collect this information, and you are not required to complete this form, unless it displays a currently valid OMB control number. This information is authorized by the U.S. Housing Act of 1937 as amended, the Housing and Urban Rural Recovery Act of 1983 and Housing and Community Development Technical Amendments of 1984. This information is needed to be incompliance with OMB-mandated changes to Ethnicity and Race categories for recording the 50059 Data Requirements to HUD. Owners/agents must offer the opportunity to the head and cohead of each household to “self certify’ during the application interview or lease signing. In-place tenants must complete the format as part of their next interim or annual re-certification. This process will allow the owner/agent to collect the needed information on all members of the household. Completed documents should be stapled together for each household and placed in the household’s file. Parents or guardians are to complete the self-certification for children under the age of 18. Once system development funds are provide and the appropriate system upgrades have been implemented, owners/agents will be required to report the race and ethnicity data electronically to the TRACS (Tenant Rental Assistance Certification System). This information is considered non-sensitive and does no require any special protection.

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form HUD-27061-H (9/2003)

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Instructions for the Race and Ethnic Data Reporting (Form HUD-27061-H) A. General Instructions: This form is to be completed by individuals wishing to be served (applicants) and those that are currently served (tenants) in housing assisted by the Department of Housing and Urban Development. Owner and agents are required to offer the applicant/tenant the option to complete the form. The form is to be completed at initial application or at lease signing. In-place tenants must also be offered the opportunity to complete the form as part of the next interim or annual recertification. Once the form is completed it need not be completed again unless the head of household or household composition changes. There is no penalty for persons who do not complete the form. However, the owner or agent may place a note in the tenant file stating the applicant/tenant refused to complete the form. Parents or guardians are to complete the form for children under the age of 18. The Office of Housing has been given permission to use this form for gathering race and ethnic data in assisted housing programs. Completed documents for the entire household should be stapled together and placed in the household’s file. 1. The two ethnic categories you should choose from are defined below. You should check one of the two categories. 1. Hispanic or Latino. A person of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin, regardless of race. The term “Spanish origin” can be used in addition to “Hispanic” or “Latino.” 2. Not Hispanic or Latino. A person not of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin, regardless of race. 2. The five racial categories to choose from are defined below: You should check as many as apply to you. 1. American Indian or Alaska Native. A person having origins in any of the original peoples of North and South America (including Central America), and who maintains tribal affiliation or community attachment. 2. Asian. A person having origins in any of the original peoples of the Far East, Southeast Asia, or the Indian subcontinent including, for example, Cambodia, China, India, Japan, Korea, Malaysia, Pakistan, the Philippine Islands, Thailand, and Vietnam 3. Black or African American. A person having origins in any of the black racial groups of Africa. Terms such as “Haitian” or “Negro” can be used in addition to “Black” or “African American.” 4. Native Hawaiian or Other Pacific Islander. A person having origins in any of the original peoples of Hawaii, Guam, Samoa, or other Pacific Islands. 5. White. A person having origins in any of the original peoples of Europe, the Middle East or North Africa.

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form HUD-27061-H (9/2003)

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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER

Special Attention of:

NOTICE:

H 2014-15

Multifamily Hub Directors Multifamily Program Center Directors Rural Housing Services (RHS) Directors Supervisory Housing Project Managers Housing Project Managers Contract Administrators Multifamily Owners and Management Agents

Issued: October 31, 2014 Expires: This notice remains in effect until amended, revoked, or superseded.

Subject: Passbook Savings Rate Effective February 1, 2015 and Establishing Future Passbook Savings Rates I.

Purpose: This notice provides guidance to owners of HUD Multifamily Housing subsidized properties related to the passbook savings rate used to determine annual income from net family assets. Beginning February 1, 2015, Multifamily will annually publish the passbook savings rate to be used for all certifications to replace the previously set rate of 2% with a rate reflective of the national average.

II.

Background: Under 24 CFR §5.609(b)(3), when determining annual income for families who receive assistance in a Multifamily Housing subsidized unit, the owner includes in annual income the greater of either: (1) actual income resulting from all net family assets; or (2) a percentage of the value of such assets based upon the current passbook savings rate as determined by the U.S. Department of Housing and Urban Development (HUD) when a family has net assets in excess of $5,000. The Office of Multifamily Housing Programs had previously set the passbook savings rate at 2% because, historically, interest rates had fluctuated around that number. As interest rates have now dropped and maintained a level significantly below 2%, Multifamily Housing acknowledges the need to adjust the passbook savings rate at least annually to represent current national averages.

III.

Applicability: This notice applies to the following programs: A. Project-based Section 8 1. New Construction 2. State Agency Financed 1 8

B. C. D. E. F. G. H. I. J. IV.

3. Substantial Rehabilitation 4. Section 202/8 5. Rural Housing Services (RHS) Section 515/8 6. Loan Management Set-Aside (LMSA) 7. Property Disposition Set-Aside (PDSA) Section 101 Rent Supplement Section 202/162 Project Assistance Contract (PAC) Section 202 Project Rental Assistance Contract (PRAC) Section 202 Senior Preservation Rental Assistance Contracts (SPRAC) Section 811 PRAC Section 811 Project Rental Assistance Demonstration units under a Rental Assistance Contract (PRA) Section 236 Section 236 Rental Assistance Payments (RAP) Section 221(d)(3) Below Market Interest Rate (BMIR)

Passbook Savings Rate: This notice provides guidance regarding the passbook savings rate that will supersede information in the HUD Handbook 4350.3 Section 5-7.F. When calculating tenant income, owners should refer to the information in this notice to determine the appropriate interest rate at which to impute income from assets. A. Setting the Rate: The passbook savings rate will be based on the national average provided by the Federal Deposit Insurance Corporation. B. Publication of the Rate: The Office of Policy Development and Research publishes income limits on an annual basis to which owners must refer. Likewise, Multifamily Housing will publish the passbook savings rate, and its effective date, on a similar timeframe through a Housing program notice. Owners must begin using the new rate for all move-in, initial, annual, and interim certifications concurrent with the effective date provided. The provided effective date will allow for sufficient time to update software to include the new passbook savings rate. C. Updates to the Rate: Multifamily Housing will retain the authority to update the passbook savings rate within the calendar year. If during the year the national average differs by at least 2% from the published rate, Multifamily Housing may publish a new rate, along with its effective date, to be used in the interim.

V.

Interim Recertifications: According to Handbook 4350.3 and the model lease, tenants have the right to request an adjustment through the interim recertification process if their income changes before the next annual recertification. Because a 2 9

change in the passbook savings rate may change the reported income for individuals with more than $5000 in assets, these tenants are permitted to request an interim recertification. Owners should refer to HUD Handbook 4350.3, Section 7-10 when processing interim recertifications. VI.

Passbook Savings Rate Effective February 1, 2015 Effective February 1, 2015, the passbook savings rate to be used for all move-in, initial, annual, and interim recertifications when a family has net assets over $5,000 is .06%. This .06% rate must be used until Multifamily Housing publishes and makes effective a new passbook savings rate.

VII.

Environmental Impact

In accordance with § 50.19(c)(6) of the HUD regulations, this Notice sets forth rate determinations which do not constitute a development decision that affects the physical condition of specific project areas or building sites, and therefore is categorically excluded from the requirements of the National Environmental Policy Act and related Federal laws and authorities. VIII. Paperwork Reduction Act There are no information collection requirements in this Notice and therefore the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) does not apply. In accordance with the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number. IX.

Inquiries Questions about this notice should be directed to Catherine Brennan in the Office of Asset Management and Portfolio Oversight at 202-402-6732 or [email protected] .

__________________________________ Biniam Gebre, Acting Assistant Secretary for HousingFederal Housing Commissioner

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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER

Special Attention of:

NOTICE H 2014-16

Multifamily Regional Center Directors Multifamily Hub Directors Multifamily Program Center Directors Rural Housing Services (RHS) Directors

Issued: November 28, 2014

Expires: This notice remains in effect until amended, revoked, or superseded.

Contract Administrators Multifamily Owners and Management Agents

Subject: Waiting List Administration I.

Purpose. This notice provides guidance on the administration of waiting lists for Multifamily Housing properties, on the topics of opening the waiting list, placing applicants on the waiting list, and outreach. This notice does not mandate any new practices for Multifamily owners and agents, but rather provides additional options for owners in their waiting list administration to further ensure fair housing compliance. For additional details, owners should review federal regulations at 24 C.F.R Part 5, as well as HUD Handbook 4350.3 REV-1 Occupancy Requirements of Subsidized Multifamily Housing Programs.

II.

Background. Multifamily owners are responsible for establishing an application and selection process that treats applicants equitably and provides an effective method for determining program eligibility. While maintaining a waiting list for a property, an owner may close the waiting list for one or more unit sizes if the average wait is excessive (HUD Handbook 4350.3 4-16). When an owner agrees to accept applications again, a notice of this action must be announced in a publication likely to be read by potential applicants and in accordance with applicable affirmative fair housing marketing requirements or the HUD-approved Affirmative Fair Housing Marketing Plan. Owners must also accommodate persons with disabilities who cannot utilize the owner’s preferred application process, by providing alternative methods of application in-take (e.g. accepting mailed or online applications). In response to community concerns that individuals with disabilities may still be at a disadvantage regarding waiting list placement, the Office of Multifamily Housing (in alignment with the Office of Public and Indian Housing (PIH)), is publishing additional options for owners to administer their waiting lists.

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III.

Applicability. This notice applies to the following programs: A. Project-based Section 8 1. New Construction 2. State Agency Financed 3. Substantial Rehabilitation 4. Section 202/8 5. Rural Housing Services (RHS) Section 515/8 6. Loan Management Set-Aside (LMSA) 7. Property Disposition Set-Aside (PDSA) B. Section 101 Rent Supplement C. Section 202/162 Project Assistance Contract (PAC) D. Section 202 Project Rental Assistance Contract (PRAC) E. Section 202 Senior Preservation Rental Assistance Contracts (SPRAC) F. Section 811 PRAC G. Section 811 Project Rental Assistance Demonstration units under a Rental Assistance Contract (PRA) H. Section 236 I. Section 236 Rental Assistance Payments (RAP) J. Section 221(d)(3) Below Market Interest Rate (BMIR)

IV.

V.

Effective Date. This notice is effective upon publication and remains in effect until amended, superseded, or rescinded. Opening the Waiting List. As stated in HUD Handbook 4350.3 REV-1, paragraph 4-16.B.2, when an owner agrees to open his/her waiting list and begins to accept applications, the notice of this action must be announced in a publication likely to be read by potential applicants in the same manner (and if possible, in the same publications) as the notification that the waiting list was closed. The notifications should be extensive, and the rules for applying and the order in which applications will be processed should be stated. Advertisements should include where and when to apply. Advertising and outreach activities must be done in accordance with applicable fair housing marketing requirements or the HUD-approved Affirmative Fair Housing Marketing Plan. The notification requirements must also comply with HUD fair housing requirements, such as adopting suitable means to assure that the notice reaches eligible individuals with disabilities and those with limited English proficiency. 1 Multifamily owners must ensure that notices of and communications during all meetings are provided in a manner that is effective for persons with hearing, vision, and other communications-related disabilities

1

For additional details, please see 24 CFR § 8.6 and the Final Guidance to Federal Financial Assistance Recipients: Title VI Prohibition Against National Origin Discrimination Affecting Limited English Proficient Persons, published in the Federal Register on January 22, 2007 (72 FR 2732).

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consistent with Section 504 of the Rehabilitation Act of 1973 (24 CFR 8.6), and, as applicable, the Americans with Disabilities Act. This includes ensuring that meeting sites are accessible and auxiliary aids and services are provided as needed, e.g., materials in Braille, audio, and large type; sign language interpreters, computer-assisted real time transcription (CART) services, and assistive listening devices, etc. Consistent with our PIH counterparts, and the guidance in PIH Notice 2012-34, Multifamily Housing cautions against opening the waiting list and accepting applications for limited periods, such as a single day, which may create disorderly and unsafe application intake processes. Opening waiting lists for longer periods and making applications available ahead of time will create safer and more effective application intake processes. Additionally, having multiple venues, both physical and online, to accept the application will help promote safety and accessibility for the application process. VI.

Placing Applicants on the Waiting List. In scenarios where Multifamily Housing owners elect to open a previously closed waiting list for a set period of time, owners may consider the use of a lottery or other random choice techniques to select which applicants will be placed and to determine the order these applicants will be placed on a waiting list. Owners should consider whether this is a reasonable approach in their jurisdictions. For example, this approach would be reasonable for properties located in areas where the volume of applications is high enough that placing each eligible applicant on the waiting list would result in an unrealistic waiting period for housing. It may also be appropriate in scenarios where individuals unable to apply in person at the onset of the opening would be at a distinct disadvantage in their placement on the waiting list. If a Multifamily Housing owner uses this approach, the owner must describe it in the tenant selection plan and any public notice of a waiting list opening must clearly state that this system will be used to place applicants on the waiting list. Further, applicants should be notified that, so long as the application is submitted within the stated timeframe, the timing of the application submission will have no effect on how soon they may be offered assistance. If the lottery or other random selection procedure is not used, reasonable accommodations must be made for individuals who are unable because of disabilities to submit early in the application process. If a lottery or other random choice technique is used to place applicants on the waiting list and to determine the order in which to place applicants on the waiting list, the date and time the lottery is held should be the date recorded on the waiting list. Any preferences the applicant qualifies for must also be noted on the waiting list. Selecting tenants from the waiting list must be done in accordance with Chapter 4 of HUD Handbook 4350.3, REV-1 including paragraph 4-15.A which requires that, once unit size and preference order is determined, owners must select applications from the waiting list in chronological order to fill vacancies.

VII.

Advertising. Owners must advertise according to the property’s Affirmative Fair Housing Marketing Plan and target this advertising to groups other than the typical population of the neighborhood in which the property is located while reaching out to 3

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applicants who are least likely to apply because they are not the predominant racial or ethnic group in the neighborhood. All advertising must include the HUD-approved Equal Housing Opportunity logo, slogan, or statement. Further, all advertising depicting persons must depict members of all eligible protected classes including individuals from both majority and minority groups, including both sexes. VIII.

IX.

Paperwork Reduction Act There are no information collection requirements in this Notice and therefore the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) does not apply. In accordance with the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number. Contact Information. Inquiries about this Notice may be directed to Kate Brennan at [email protected] in the Office of Multifamily Housing.

_____________________________________________ Biniam Gebre, Acting Assistant Secretary for Housing – Federal Housing Commissioner

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Sort Out Your Confusion Regarding HUD’s Emergency Call System Policy Make sure you remove old pull cords when you replace the system If you’re like other owners/agents of elderly Multifamily properties, you’ve probably received inconsistent guidance on what types of emergency call systems you must have at your property. Here’s some much-needed clarification on the true requirements. In an Oct. 31 memo, “Office of Multifamily Housing Programs Policy on Emergency Call Systems in Elderly Properties,” the U.S. Department of Housing and Urban Development (HUD) clarifies the Multifamily policy regarding emergency call systems and explains how you can meet the functional requirements using a variety of manual, electronic, and wireless emergency alert systems. No, You Don’t Need to Have a Pull Cord System HUD does not require your property to use a specific type of call system, such as older pull cord systems, as long as the system in place meets the functional requirements described in HUD Handbook 4910.1, Section 100-2.20. Although HUD published the Handbook before many electronic systems were available in the marketplace, you should interpret the requirements as applying to electronic or wireless systems. Section 100-2.20 Emergency Call Systems states: “In projects containing 20 or more living units, each bathroom and one bed location in each living unit shall be furnished with one of the following emergency call systems: an emergency call system which registers a call (annunciator and alarm) at one or more central supervised locations, an intercommunicating telephone system connected to a switchboard which is monitored 24 hours a day, or an emergency call system which sounds an alarm (not the fire alarm) in the immediate corridor and automatically actuates a visual signal in the corridor at the living unit entrance.” Understand How to Interpret Certain Terms You should interpret terms such as “call,” “switchboard,” and “system” broadly to include both wired and wireless or electronic systems, HUD stresses. Also, a “central supervised location” or “switchboard” can be either onsite or offsite, as long as you continuously monitor the emergency calls to ensure a timely response. Remember: If you have a pull cord system installed on your property, HUD allows you to replace that system with a wireless or electronic system, as long as the new system is economical and meets the functional requirements in Handbook 4910.1, the memo says. But you must remove pull cords from each applicable unit if they are no longer in use. You Can Use Mobile Personal Devices, Too Mobile personal emergency response devices, which a tenant wears on his person, are also acceptable, according to HUD. But you must “provide ongoing assurance that the devices are operational and available for use by tenants and other household members.”

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Also, HUD requires that you have an Operation and Maintenance (O&M) Plan for mobile emergency response devices. Your O&M Plan should outline how you’ll maintain the system, ensure that it remains operational, and replace the system when necessary for the life of the project. You must give tenants written information about their devices, including what procedures they should follow regarding repairs and replacement, HUD says. You must post this information on a tenant information board or provide it to the tenants on an annual basis. Bottom Line: Follow the Functional Requirements HUD will deem acceptable emergency response systems, including mobile response devices, in elderly Multifamily properties if:   

The system registers an alarm call at a central supervised location; OR The system provides an intercommunication system that connects to a continuously monitored switchboard (24 hours per day); OR The system sounds an alarm in the immediate corridor and actuates a visual signal at the living unit entrance.

AND 

The system is available in each bathroom and one bed location in each living unit.

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PBCA Update: HUD Request for Rehearing Denied by Court by Colleen BloomPublished On: Jul 01, 2011Updated On: Sep 15, 2014

On Aug. 8, the Court of Appeals for the Federal Circuit denied the U.S. Department of Housing and Urban Development (HUD) request for a rehearing and rehearing en banc in the ongoing Performance-Based Contract Administration (PBCA) lawsuit. It is unclear how the denial will impact subsequent rebid plans of the PBCA contracts and the tasks PBCAs perform.

U.S. Court Decision Rules Against HUD On March 25, the U.S. Court of Appeals for the Federal Circuit ruled against the HUD in the lawsuit on the Performance-Based Contract Administration (PBCA) case. On May 12, HUD posted a statement indicating that HUD and the Department of Justice are reviewing options and will make a determination as to requesting a rehearing. The Department of Justice requested, and was granted a 45 day extension of time, until June 23, 2014, to file any petition for rehearing. For now, all existing PBCAs (the 42 and the 11) will remain in place. The U.S. Court of Appeals for the Federal Circuit reversed the earlier decision by the U.S. Court of Federal Claims. The Court of Appeals agreed with the Appellants that the PBCA Annual Contributions Contracts (ACCs) are procurement contracts and not cooperative agreements because the ACCs' primary purpose is to hire PBCAs to support HUD staff and provide assistance with the oversight and monitoring of Section 8 housing assistance. The Court of Appeals did not address the Appellants' argument that the NOFA's provision giving priority to in-state applications is arbitrary and capricious under the Administrative Procedure Act (APA).

Details from the PBCA Court Ruling The Court of Appeals found that the PBCA ACCs should be awarded through procurement contracts because the ACCs' primary purpose is to hire PBCAs to support HUD staff and provide assistance with the oversight and monitoring of Section 8 housing assistance. The court cites as evidence HUD's stated intentions in creating the PBCA program in 1999, as well as more recent HUD statements describing how PBCAs have helped the Department reduce improper payments and improve efficiency. The Court rejected HUD's argument that it was appropriate to use a Notice of Funding Availability and cooperative agreement for the PBCA contracts.

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The Court of Appeals decision concludes that because the ACCs are procurement contracts and because HUD did not comply with federal procurement law, the decision of the Court of Federal Claims must be reversed and remanded. The Court of Appeals does not address the Appellants' argument that the NOFA's provision giving priority to in-state applications is arbitrary and capricious under the Administrative Procedure Act (APA). Stakeholders are awaiting word from HUD on how the agency plans to respond and whether the U.S. Department of Justice plans any further action. At earlier public forums, including the LeadingAge annual conference in Dallas, HUD officials indicated that if the Court of Appeals were to rule in favor of procurement, the department would likely extend existing PBCA contracts for 18-24 months while it developed a procurement tool.

Background (past updates) U.S. Court Ruling Still Pending: HUD Extends ALL PBCA Contracts for 6 Months, Moratorium Against PBCA-Initiated MORs Continues In October 2013, despite the government shutdown going on at the time, the U.S. Court of appeals held a hearing on PBCA issue. A ruling was expected in December. At this time, however, no decision has been issued and it is unclear when one will be forthcoming. In late February, HUD extended all existing PBCA contracts and obligations (for the 42 contested states as well as the 11 uncontested ones) through June. Despite HUD's growing concern over the extended gap since the last MOR, there is no mechanism in the current 42 states contracts to reinstate them as previously articulated. Therefore, no MORs will be performed by PBCAs in the 42 contested states. A recent memo from HUD field office contract administration oversight monitors (CAOMs) to PBCA's in their area reiterated the prohibition on such a practice. Even voluntary pre-MORs should not be conducted at this time. However, MORs are still being conducted in the 11 states not being contested in court, and HUD itself can conduct an MOR at any time, in all states and territories.

Plaintiffs Cases Heard in U.S. Court of Appeals On August 27, 2013, the United States Court of Appeals granted the Plaintiff-Appellants' motion for a stay pending appeal. Thus, HUD may not execute the new ACCs until the case is resolved. And, no transition activities should occur until further notice. This means that previously announced plans regarding new awardees and contracts are suspended for now. Additional information will be provided as soon as it is available. A preliminary hearing is schedule for Oct. 10, 2013. HUD is posting updates on PBCA NOFA.

2012 NOFA Awardee Transition Activity; New Contracts Intended to Take Effect Nationwide January 2014 Now Suspended

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As previously announced, on Aug. 6, 2013, HUD posted the list of awardees from the latest Performance Based Contract Administration (PBCA) Notice of Funding Availability (NOFA). And, HUD posted revisions (dated July 30, 2013) to the original PBCA transition guidebook. The plan was that, beginning January 2014, all contracts for the new 42 state AND the existing 11-state PBCAs (which were not contested under the NOFA and will not change this time either) would follow the NOFA risk-based model of Management Occupancy Reviews. Any changes that would have occurred, including the status/timing of new 2-year contracts (initially planned to take effect starting Jan. 1, 2014) are now called into question, pending resolution of the latest appeal. For the time being, all current PBCAs (both the 42 states being contested, and the 11 non-contested) continue to be provided 3-mos contract extensions.

Management Occupancy Review Schedule Though the most recent MORs in the contested 42 states are several years old now, HUD does not plan to have new inspections conducted to establish a new baseline. Instead HUD has indicated it will keep to the “risk based” management reviews schedule, which means: 

All properties that last received “below average” or “substandard” shall be inspected annually.



Those that most recently scored a “satisfactory” shall be visited once within the initial 2-year total ACC term.

Sites that last received “Above Average” or “Superior” shall not be reviewed during the initial 2 year term. One major exception, however, is that all Mark-to-Market Projects with PBCA Administered HAP Contracts must still be inspected annually. 

HUD has posted information regarding current/latest MOR ratings as follows: 

MOR Ratings for Projects (Excel: sorted by state, this list does include Mark-to-Market Projects: Options 1, 2, 3a and 4) as of June 4, 2012. The following States have been updated: DE, NC, NJ, PA, SC and WV.



Mark-to-Market Projects (Excel: sorted by state: Options 3b) updated June 4, 2012. The following States have been updated: DE, NC, NJ, PA, SC and WV.

Historical Timeline After the 2011 notice of funding availability (NOFA) to solicit bids for performance-based contract administrators (PBCA) contracts was completed, several PBCAs brought a lawsuit against HUD, claiming that the NOFA was not an appropriate vehicle for awarding PBCA contracts. On April 19, 2013 the U.S. Court of Federal Claims ruled in favor of HUD, upholding its authority to use the NOFA process to select PBCAs. But on May 10, 2013, another appeal was jointly filed by 9 contract administrators. And, on June 6, 2013, HUD posted the following statement to the PBCA website:

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"Unless we are prohibited from doing so by the United States Court of Appeals for the Federal Circuit, HUD intends to announce the selection of PBCAs pursuant to the NOFA on August 1, 2013." In the meantime, contract administration works continued on the same restricted (no MORs) basis under a series of 3-month contract extensions. The U.S. Court of Federal Claims in Washington, DC, heard additional oral arguments on Feb. 19 about HUD’s use of a NOFA to select PBCA and HUD’s restriction against out-of-state applicants in states where qualified in-state applicants submitted bids. The judge, Thomas Wheeler, who had previously indicated he expected to decide the case at that time, or by the end of the month, instead requested additional information from all parties and conducted a thorough review of all arguments and what the court itself described as a "morass of arcane housing assistance statutes and regulations." Although HUD has indicated in several public forums recently that it is ready to announce the successful PBCA bidders, at least 1 of the initial plaintiffs has filed an “emergency” motion for clarification and a request for a stay pending clarification or the outcome of its appeal, so the ultimate outcome is not yet clear. In the meantime, HUD continues to extend the existing PBCA contracts in 3 month increments. Depending on the end result, HUD may be forced to recompete the contracts altogether, though this is looking increasingly less likely. Here is what HUD posted on its PBCA website in the interim: Litigation had been filed in the Court of Federal Claims seeking to enjoin HUD from proceeding with the PBCA NOFA. HUD agreed not to proceed with making the awards until the Court ruled on the matter. A decision was expected to be reached by or before February 22, 2013. Although the court had originally indicated that it would provide a verbal ruling at yesterday’s hearing (February 19, 2013), due to the complexity of the program and issues involved, the court requested more time to consider the arguments. Because the current PBCA contracts have been extended through June 2013, the court stated that it would make a decision before the end of June. The court has also reserved the right to call parties back for a supplemental briefings, though it did not set a definite schedule. The cases have been consolidated under docket number: Fed Cl no. 12-852C. At recent public meetings, HUD stated that they are prepared (depending on the court ruling), to go forward with public announcement of the PBCA awards as early as September, which would mean a transition period from October to December, and formal commencement of the new 2-year only contracts starting Jan 1,2014. While LeadingAge has no particular position or preference in the resolution of this issue, we have repeatedly reached out to HUD staff to urge careful coordination of transition timing, with particular consideration of such things as: 

The need for a smooth data transition (and expected implementation of the 202D TRACS changes).



Minimized opportunity for funding gaps (given the likelihood of another continuing resolution).

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 Staffing considerations for all stakeholders given the end-of-the-year holidays. The bottom line, for now, is that owners/agents will continue sending tenant certifications and rental subsidy vouchers as they have been, until they are told to change, and management occupancy review (MOR) activity by the PBCAs remains completely suspended. Whatever may happen, HUD has expressed an urgent desire to have PBCA's resume Management Occupancy Reviews once new contracts are issued and indicated that they will be conducted according to the risk-based proposal in the NOFA, and based off the last management occupancy review (MOR) scores.

Background on Performance-Based Contract Administrators Awards Solicitation in 2012, and Earlier What began in July 2011 continues to be unresolved. The U.S. Department of Housing and Urban Development (HUD) was expected to announce 42 state PBCA notice of funding availability (NOFA) awards on Dec. 14, 2012, but due to lawsuits filed in the U.S. Court of Federal Claims by 5 plaintiffs just days prior. The plaintiffs, many of which filed protests earlier with the Government Accountability Office (GAO), were successful in getting an injunction on HUD's announcing awards under the NOFA and HUD agreed to refrain from implementing any awards, even in those states where HUD received only 1 application and were not contested in the lawsuit. These states were: 

Arizona



Idaho



Kansas



Kentucky



New Mexico



Oklahoma



Oregon

 South Carolina Background on the GAO protest regarding the NOFA On March 10, 2012, HUD posted the NOFA to restart the competition for the awarding of the outstanding 42 contracts for administration of the project-based Section 8 program. The NOFA and the new contract reflect a number of significant changes in the manner of selection and the content of expected work, now called “performance-based tasks (PBT).” Among the most significant, in-state applicants will have a distinct advantage over potential out-of-state applicants; and management reviews will no longer be required annually.

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Contrasting this NOFA with the contract offered as part of the earlier 2011 procurement process, the main changes are: 

Introduction of “risk based” management reviews (essentially a tiered process, so that properties with “above average” or “superior” scores the last time they were visited will not have to be visited every year).



Reduction in the cap on allowable administrative fees (2011 procurement bids could seek no more than a 2.5% profit margin; this NOFA caps the fee at no more than 2% - and the selection process scoring will awards more points for those willing/able to do the work for less).



A preference for applications of in-state entities such that, if there is an eligible applicant from a given state, no out-of-state applicant will be considered; but if no in-state application is made, outof-state (but still eligible) entities will be considered.

 Significant changes in the scoring methodology for review of the applications. There is also a summary of highlights and the latest Q&A document. Over the summer of 2012, a number of entities filed protests with the GAO as much because of the form of the NOFA as for the restrictions on competition (across state lines) that came along with it. Applications to be considered for the PBCA program were due June 11. You can check out the full details, including the contract, NOFA and state attorneys general opinions on prior actions. In August of 2012, the GAO issued a decision that HUD's use of a NOFA to obtain bids for contracts in 42 states was improper and recommended that HUD cancel the NOFA and solicit the contract administration services for the Project-Based Section 8 rental assistance program through a procurement instrument. Such an action would mean, effectively, a third competition for awards in the contested 42 states. Though HUD was allowed up to 60 days to advise the GAO whether it will follow the recommendation, HUD advised the GAO in October that it was "still in the process of assessing the [r]ecommendations" of the GAO decision, and on December 3, HUD informed the GAO that is "had decided to move forward with the [NOFA] awards." At that time, an orderly timeline for implementation was proposed - but ultimately not carried out.

PBCA NOFA Timeline for 2012 

Published NOFA March 9.



Application Deadline June 11 (initially April 10, changed March 15/6).



Award Announcements August 31.



PBCA Transition period September 1 - November 30.



Interim ACC’s will expire September 30.



Interim ACC’s will extend October 1 – November 30.



Effective date of new ACC’s December 1.

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PBCA Contract/Rebid Activity in 2011 The U.S. Department of Housing and Urban Development (HUD) announced July 1, 2011, its selections for the new PBCAs, who were expected to perform Section 8 contract administration duties under a new contract to take effect on Oct. 1, 2011. HUD received and reviewed a total of 130 applications for the 53 contracts under consideration nationwide: 

Most states had 2 or more applications.



10 states had no competition.

 28 states will have a change in contract administrators. In August of 2011, HUD withdrew 42 previously announced awards of new performance-based contracts and stated that HUD would re-compete them again shortly under a new NOFA. Six-month extensions were offered to current contract administrators in the interim.On Aug. 10, the HUD explained that it is withdrawing 42 previously announced awards for new PBCA contracts due to “the large number of protests” filed at the GAO on the awarding of the contracts HUD said it had plans to re-compete the contracts again shortly under a new notice of funding availability (NOFA), which it hoped to issue within 60 days. Implementation of New Contracts in 11 Jurisdictions Implementation of new contracts did move forward in the 9 uncontested states and 2 territories in 2011. These jurisdictions had only 1 applicant and had no protests were filed. The new contracts became effective Oct. 1, 2011 in: 

Iowa



Maine



Minnesota



Montana



New Hampshire



North Dakota



South Dakota



Vermont



Wyoming



Puerto Rico

 The U.S. Virgin Islands With the exception of the Virgin Islands, which did not previously have a PBCA, this involved no change in selected PBCAs.

PBCA Transition Guidebook

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As proposed back in 2011, and continuing now, should future changes occur, HUD has indicated it will stick to the planned 3-month transition period. Full details are provided in the stakeholder recommendations that were compiled into a PBCA Transition Guidebook, which includes what to expect in terms of communications from new PBCAs to owners, to residents, what steps will be taken to transition work in progress related to management reviews, subsidy payments, contract renewals and more. [NOTE: All HUD properties with Section 8 rental assistance contracts are impacted, including all Section 202 and Section 208s. HOWEVER, Section 202/PRAC and Section 811 PRAC properties are not involved in this Section 8 contract administration/rebid initiative. As has been the case with PRAC programs and other non-Section 8 issues, the HUD field offices will continue to do the daily operational oversight including budget and management reviews, subsidy payment authorization, etc.]

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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-1000

ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER

Special Attention of: All Section 232 and Section 242 Healthcare Program Participants, Multifamily Principals/Sponsors, Contract Administrators, Owners and Management Agents and HUD Approved Housing Counseling Agencies

NOTICE H 2015-01

Issued: February 6, 2015 Expires: This Notice remains in effect until amended, superseded or rescinded.

Subject:

Notice of Program Eligibility for HUD Assisted and Insured Housing Programs for All People Regardless of Sexual Orientation, Gender Identity or Marital Status as Required by HUD’s Equal Access Rule

Purpose:

The purpose of this Housing Notice (Notice) is to: Increase awareness of Office of Housing program participants and stakeholders of the requirements of the HUD Equal Access Rule for actual or perceived discrimination based on sexual orientation, gender identity, or marital status.

Introduction:

On February 3, 2012, HUD published a final rule entitled Equal Access to Housing in HUD Programs Regardless of Sexual Orientation or Gender Identity (77 FR 5662) (“Equal Access Rule or “rule”). The final rule ensures that housing across HUD programs are open to all eligible individuals regardless of actual or perceived sexual orientation, gender identity, or marital status.

Changes to HUD’s General Regulations:

The rule revises HUD’s general program requirements by adding the following provisions at 24 CFR 5.105(a)(2): (a) A determination of eligibility for housing that is assisted by HUD or subject to a mortgage insured by the Federal Housing Administration shall be made in accordance with the eligibility requirements provided for such program by HUD, and such housing shall be made available without regard to actual or perceived sexual orientation, gender identity, or marital status, and (b) No owner or administrator of HUD-assisted or HUD-insured housing, approved lender in an FHA mortgage insurance program, or any other recipient or sub-recipient of HUD funds may inquire about the sexual orientation or gender identity of an applicant for, or occupant of, HUDassisted or HUD-insured housing for purposes of determining eligibility or

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otherwise making such housing available. However, permissible inquiries into sex are permissible for temporary, emergency shelter with shared sleeping areas or bathrooms, or to determine the number of bedrooms to which a household may be entitled. The rule also revises HUD’s generally applicable definitions at 24 CFR 5.100: (a) The term “family” includes, but is not limited to the following, regardless of actual or perceived sexual orientation, gender identity, or marital status: (1) A single person, who may be an elderly person, displaced person, disabled person, near-elderly person or any other single person; or (2) A group of persons residing together and such group includes, but is not limited to: (i) A family with or without children (a child who is temporarily away from the home because of placement in foster care is considered a member of the family); (ii) An elderly family; (iii)A near-elderly family; (iv)A disabled family; (v) A displaced family; and (vi)The remaining member of a tenant family. (b) The term “gender identity” means actual or perceived gender-related characteristics. (c) The term “sexual orientation” means homosexuality, heterosexuality or bisexuality. Changes to FHA Regulations:

The rule made two changes to 24 CFR part 200-Introduction to FHA Programs and one change to 24 CFR part 203-Single Family Mortgage Insurance. (a) The rule incorporated in FHA Programs the new definition of “family” found in 24 CFR 5.100. 24 CFR 200.3 (b) The rule incorporated the nondiscrimination requirements of the Equal Access Rule in FHA programs. 24 CFR 200.30 (c) The rule incorporated the requirement that “marital status, actual or perceived sexual orientation or gender identity” not be considered when determining the adequacy of the mortgagor’s income for single-family mortgage insurance. 24 CFR 203.33

Fair Housing:

Through this notice, HUD’s Office of Housing strives to make its program participants aware of the requirements of the Equal Access Rule. The rule 2

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does not create any additional protected classes under the Fair Housing Act or any other civil rights law. Although the Fair Housing Act does not expressly include sexual orientation, gender identity and marital status as protected classes, a lesbian, gay, bisexual, or transgender person's experience with sexual orientation or gender identity housing discrimination may still be covered by the Fair Housing Act’s prohibition on discrimination based on sex. For example, courts have recognized that the Fair Housing Act’s prohibition against discrimination because of sex includes discrimination based on non-conformance with sex stereotypes. Therefore, under certain circumstances, complaints involving sexual orientation or gender identity may be investigated under the Fair Housing Act. Many states and local jurisdictions prohibit housing discrimination based on sexual orientation, gender identity and/or marital status, and HUD may refer complaints or other information concerning these protected classes to appropriate state and local fair housing enforcement agencies. Applicability:

The Office of Single Family Housing has incorporated this change into its Single Family Housing Policy Handbook, 4000.1, which will be effective June 15, 2015. Other housing program offices will provide additional guidance on how the rule specifically affects Housing insured and noninsured programs through Mortgagee Letters, Notices and/or other appropriate communications.

Paperwork Reduction Act:

This Notice does not contain information collection requirements subject to the Paperwork Reduction Act.

Questions:

If you have questions regarding this Notice, please call the FHA Resource Center at 1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech impairments may reach this number via TTY by calling the Federal Information Relay Service at 1-800-877-8339. Or you may leave a question for response by email at: [email protected] The FHA Resource Center can accept emails with attachments. To ensure proper attention to the attachment please reference it within the body of the email.

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For additional information on this Housing Notice, please visit www.hud.gov/answers. Fair Housing questions may be directed to local Office of Fair Housing and Equal Opportunity Offices. Complaints of discrimination based on gender identity may be filed by calling 1-800-669-9777 or electronically at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equ al_opp/online-complaint.

Signature: _____________________________________ Biniam Gebre Acting Assistant Secretary for Housing - Federal Housing Commissioner

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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER

Notice: H 2015-02 Special Attention of: All Multifamily Hub Directors All Multifamily Program Center Directors All Multifamily Operations Officers All Multifamily Directors of Project Management All Multifamily Field Counsel All Contract Administrators

Issued:

March 2, 2015

Expires: This notice remains in effect until amended, revoked, or superseded

Cross References: Subject: Required Actions for Multifamily Housing Projects Receiving Failing Scores from HUD’s Real Estate Assessment Center (REAC) Section 230 of the Consolidated Appropriations Act of 2014 and Section 226 of HUD’s Fiscal Year 2015 Appropriations Act require the Department to take certain steps in cases when a multifamily housing property receives a score of 59 or below on a Real Estate Assessment Center (REAC) physical inspection report. This Notice provides guidance to ensure compliance with these two sections, which are identical.1 This notice identifies where Section 230 of the Consolidated Appropriations Act, 2014 (“Section 230”) changes the current protocol. The guidance in this Notice is effective on the issue date noted above. This Notice supplements Notice H 2012-16 captioned, “Extension of Housing Notice H 2011-24: Reissuance of Revised Protocol for Placing a Flag in the Active Partners Performance System (APPS) when a Property Receives a Physical Inspection Score below 60 but Above 30.” Significant changes in process are highlighted in bold italic type.

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Section 226 of Title II of Division K of the Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 113-235, approved December 16, 2014) reiterates the direction first provided in section 230 of the Consolidated Appropriations Act, 2014 (Public Law 113-76, approved January 17, 2014) for HUD to take certain actions for multifamily projects, as described in general provision 230, and repeated in general provision 226, that have failing REAC scores. For the sake of simplicity, both this notice and the attachments thereto use “Section 230” to refer to the authority in both appropriations acts, as the language other than the dates is identical.

www.hud.gov

espanol.hud.gov

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I. Background and Applicability Section 230 directs HUD to take certain procedural steps when certain multifamily housing projects score 59 or less on the REAC physical inspection. Most of the law codifies the procedures that Housing and the Departmental Enforcement Center (DEC) already follow. A. Projects covered Section 230 applies to insured and noninsured projects with project-based assistance under section 8 of the United States Housing Act of 1937 (“Act”) or a “contract for similar project-based assistance.” The Department considers “similar project-based assistance” to include contracts for all multifamily housing projects that use the manual voucher submission and review process to submit assistance vouchers to the Department’s Tenant Rental Assistance Certification System (TRACS). In addition to properties with project-based Section 8 assistance, Section 230 and this Notice apply to properties that are subject to one of the following rental assistance contracts:  Rent Supplement Contract  RAP Contract  Section 202 Project Rental Assistance Contract  Section 811 Project Rental Assistance Contract  Section 202/162 Project Assistance Contract2  Section 811 Project Rental Assistance  Senior Preservation Rental Assistance Contract Section 230(a) states that it does not apply to units assisted under the Section 8 Project-Based Voucher Program (section 8(o)(13) of the Act) or to public housing units assisted under section 9 of the Act.

B. Triggers for action Section 230(a) requires HUD to take specific actions upon the following triggers:   

When a project “receives a REAC score of 30 or less”; When a project “receives a REAC score between 31 and 59” and the owner “fails to certify in writing that all deficiencies have been corrected”; or When a project “receives a REAC score between 31 and 59” and “receives consecutive scores of less than 60 on REAC inspections.”

HUD defines the date the project “receives a REAC score” in each of the foregoing bullets to mean the date on which HUD releases the REAC inspection report. The release date is the date the inspection is determined to be “Within Standard” and released to the owner, HUD staff, and

2

Because section 230(a) states that it applies to multifamily housing projects with a section 8 contract, Section 202/8 Housing Assistance Payments Contracts are also covered.

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HUD’s database3. This release date is also noted on the email message that HUD sends to the owner electronically. Further, the Department notes that the word “receives” appears in Section 230(a) in the present tense. With respect to the third bullet, HUD will therefore consider any inspection report that was released on or after the date of the law’s enactment (i.e., January 17, 2014) to be the first inspection in any series of inspections that will constitute “consecutive” scores. II. Impact on Current Procedures A. HUD’s initial notice to owner Section 230(b) sets out certain steps that HUD must take if one of the triggers for action is met. The statute requires the Secretary to notify the owner and provide an opportunity for response within 30 days. Currently, REAC provides the owner a letter that accompanies the inspection report notifying the owner of the results of the inspection. This REAC letter fulfills the initial owner notification requirement in Section 230(b)(1). The letter provides the owner with an opportunity to respond to the inspection report by requesting a technical review within 30 days of the release date (see 24 CFR § 200.857(d) (1)) or a “data-base adjustment” within 45 days of the release date (see 24 CFR § 200.857(e)(3))4. If, the owner does not submit an appeal or if the final score, after the appeal process, remains 59 or below, then the Department will move to take the actions described in II.B below.

B. HUD’s development of a CDE plan within 60 days of the release date Section 230(b)(1) further states: “If the violations remain, the Secretary shall develop a Compliance, Disposition and Enforcement Plan within 60 days, with a specified timetable for correcting all deficiencies.” This language requires slight changes to current practices. HUD interprets this language to mean that if the owner’s appeal to REAC for a technical review or data-base adjustment did not result in a final score above 59, then the violations remain. HUD interprets Section 230(b) to require HUD to develop a Compliance, Disposition and Enforcement Plan within 60 days from the inspection release date. However, in cases where an owner has sought a technical review or data-base adjustment, the Department will start the 60-day clock upon REAC’s release of the post appeal score, assuming the score is 59 or below and “violations remain.” In cases where the owner did not submit an appeal, the 60-day clock will start from the date the inspection was originally released.

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An inspection is determined to be “within standard” after it is reviewed for accuracy and completeness of data. HUD Engineers and Government Technical Monitors (GTMs) review each inspection uploaded into the Physical Assessment Subsystem (PASS) using the Checklist Inspection Tool and the Inspection Information Tool. 4 For instructions on how to submit a technical review or a data-base adjustment visit the REAC website at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/reac/products /pass/pass_guideandrule.

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C. Clarification that NOVs and NODs already effectively contain the Section 230 Compliance, Disposition and Enforcement (CDE) Plan The Department’s current procedure for projects that receive a physical inspection score less than 60 is to issue the owner a Notice of Violation of Regulatory Agreement (NOV) and/or Notice of Default (NOD) of HAP (or other subsidy) contract. Such notices require the owner to survey 100 percent of the project’s units and to take corrective action for all physical deficiencies5. Although currently not labeled as CDE plans, the NOVs and NODs set forth instructions to the owner on how to comply with the notice. The notices also state that if the owner does not comply, HUD will pursue appropriate enforcement and disposition of the project. As such, HUD considers existing NOVs/NODs as satisfying the requirements of what is contemplated by the phrase “Compliance, Disposition and Enforcement Plan,” as it appears in Section 230(b). Compliance, Disposition and Enforcement Plan” (CDE Plan). Going forward the Department will clearly label that portion of the NOV/NOD that sets out the CDE plan and send the owner the CDE plan within 60-days of release of a post appeal score that is 59 or below or within 60-days of release of the original score in cases where the owner does not appeal. Accordingly, on NOVs and NODs concerning poor physical condition of the project, HUD will insert the heading, “Compliance, Disposition and Enforcement Plan” in the space immediately preceding the NOVs/NODs’ instructions to the owner to:   



Conduct a survey of 100 % of the project, identifying all physical deficiencies; Correct the physical deficiencies identified at the project from the survey, including, but not limited to, those deficiencies identified in the REAC inspection; Execute a certification that the project is in compliance with HUD’s physical condition standards of 24 CFR § 5.703 and state and local codes; Submit the completed survey and certification form to the HUD Account Executive in 60 days of receipt of HUD’s notice; and Provide tenants with a “Notice of Compliance, Disposition and Enforcement Plan” for the project and provide HUD with a certification that of compliance with this directive.

Should the necessary repairs extend beyond the 60-day cure period specified in the NOV/NOD, the CDE Plan instructs the owner to submit a repair plan with the completed survey and provide a reasonable time table for when the deficiencies will be completed, stating the cost and source of funds to be used for repairs. HUD will work with the owner to determine if the owner’s request to amend the plan is acceptable and adequately protects the tenants’ interests. Any such changes to the timetable will be considered amendments to the CDE plan. A sample “Notice of Default of Housing Assistance Payments (HAP) Contract and Compliance Disposition and Enforcement (CDE) Plan” is included as Attachment A. 5

Under the current protocol the Departmental Enforcement Center (DEC) issues NOV/NODs for projects that receive scores of 30 or below and the Hub Director is responsible for issuing NOV/NODs for projects that receive scores of 31 to 59. This practice will remain the same. The only change is that these documents will now include a section called the “CDE Plan.”

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D. Providing “Notice of the CDE Plan” Section 230(b)(1) further requires HUD to “provide notice of the Plan to the owner, tenants, the local government, any mortgagees, and any contract administrator.” This statutory language adds an additional requirement to HUD’s current practices. Going forward, all NOVs/NODs containing the “Compliance, Disposition and Enforcement Plan” heading will also contain instructions to the owner to provide the project tenants with a “Notice of the Plan.” A form “Notice of a Compliance, Disposition and Enforcement Plan” is attached hereto as Attachment B. Note, however, HUD is not requiring the owners to provide tenants with a copy of NOVs/NODs containing the CDE Plan. The preparer of the NOV/NOD containing the CDE Plan (either the Multifamily Housing Account Executive (for scores from 59 to 31) or the DEC Analyst (for scores of 30 or below) will instruct the owner to deliver the “Notice of a Compliance, Disposition and Enforcement Plan” to each tenant and provide HUD with a certification that such delivery has been completed. In addition, the Notice Preparer will send a copy of Attachment B to the appropriate unit of local government, any lenders (if known to HUD) and any contract administrator for the project. The Notice Preparer must document the “Comment” section of the “Physical Inspection Detail” screen in the Integrated Real Estate Management System (iREMs) to annotate the issuance of these notices to the additional parties. E. REAC Re-inspection Requests Multifamily Account Executives and DEC Analysts should continue to process requests for re-inspection following Notice H-2011-24. Notice H-2011-24 states that if the owner of a project with a score of 31 to 59 responds to an NOV/NOD by providing HUD with a copy of the 100% survey of the project and the Project Owner’s Certification (“Project Owner’s Certification”) that the project is in compliance with HUD’s physical condition standards and state and local codes (See Attachment A), then a re-inspection is scheduled one year from the date of the last inspection. If the owner fails to respond to the NOV/NOD by submitting the Project Owner’ Certification and the 100% survey of the project’s deficiencies, then HUD strives to conduct a re-inspection as soon after the 60-day cure period mentioned in the NOV/NOD expires as possible. Projects that receive a score of 30 or below on a physical inspection will also be scheduled for a re-inspection as soon as possible after the cure period mentioned in the NOV/NOD expires regardless of whether they submit the Owner’s Certification and the 100% survey. In cases where the deficiencies noted on the last REAC inspection report and the owner’s 100% survey cannot be completed in 60-days, the NOV/NOD (CDE Plan) now instructs the owner to submit a repair plan with the 100% survey and to request an extension of time to complete the repairs. This repair plan must provide the cost and source of funds that will be used to make the repairs. If the repair plan is approved it will serve as an amendment to the CDE Plan. If the repair plan is not approved a re-inspection will be scheduled as soon as possible after the 60-day cure period expires. Should the results of a re-inspection show that the project continues to be in poor physical condition (i.e., as reflected by a score of 59 or less), then HUD moves to the next appropriate steps to enforce compliance. Such actions include considering imposition of civil

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money penalties (CMPs), abatement of the Section 8 or other rental assistance subsidy, in whole or in part, and possible assignment of an FHA loan and/or foreclosure. F. Follow-up to REAC Re-inspection Results After the DEC issues the NOVs/NODs (CDE Plans), the DEC will keep the physical referral open until the REAC re-inspection report is released. If the DEC determines that the project’s physical condition (as reflected by the re-inspection report) demonstrates that the owner has not complied with an expired CDE Plan, the DEC will alert the MFH Account Executive and will proceed to handle the matter for imposition of civil money penalties, if applicable. A subsequent REAC score of 59 or less will be deemed to violate the CDE Plan. MFH staff will follow the procedures set out in Notice H-2011-24 concerning the timing for requesting REAC re-inspections on projects that received NOVs/NODs (CDE Plans) from MFH. Multifamily Housing will be tracking all REAC inspection scores of properties that scored 59 or less and if the next REAC re-inspection score is also less than 60 (i.e., “the project receives consecutive scores of less than 60 on REAC inspections”), MFH will follow the procedures set out in Section III below. A subsequent REAC score of 59 or less will be deemed to violate the CDE Plan.

III. Failure to Comply with the Terms of a CDE Plan If the owner fails to comply with the terms of the CDE Plan, Section 230(b)(2) allows the Department to replace project management with a management agent acceptable to the Secretary and requires the Department to take one or more of the following four actions and provide notice of these actions to the owner, local government, and any PBCA/contract administrators and/ or mortgagees: 

Impose Civil Money Penalties. If the project is not already in the DEC for the physical deficiencies, MFH staff must make an elective referral to the DEC using iREMS.



Abate, including partial abatement, any Section 8 Housing Assistance Payments (HAP) or other rental assistance contract until all deficiencies have been corrected. The Multifamily Housing Account Executive must request approval from the Director, Business Relationships and Special Initiatives Division to suspend, abate or terminate the HAP contract. If the rental assistance contract is to be terminated, the Hub Director must also request approval to relocate the residents.



Encourage a transfer of the project or transfer and assignment of a HAP Contract to a new owner. The Department cannot mandate the transfer of a project and/or assignment of a HAP Contract. However, the field office can strongly encourage and owner to explore this option in lieu of an enforcement action such as abatement and relocation of the residents and/or foreclosure. Field staff may even help facilitate this process by contacting potential transferees and holding discussions with the current owner regarding a possible transfer. Any formal request for a Transfer of Physical Assets must be

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approved by HUD using the current procedures for doing so found in Chapter 13 of HUD Handbook 4350.1, Multifamily Asset Management and Project Servicing. 

Seek judicial appointment of a receiver to manage the property or seek a judicial order of specific performance to cure all project deficiencies.

Upon initiating any of the enforcement actions noted above, HUD staff will issue Attachment C, entitled “Notice of Enforcement Action” to the parties identified in Section II, D. above. This means, for example, if the DEC issues a Complaint for Civil Money Penalties to the owner, the DEC will also instruct the owner to provide a “Notice of Enforcement Action” to all tenants, with the appropriate section marked for the initiation of an administrative proceeding for civil money penalties. The DEC must also send a similar “Notice of Enforcement Action” to the local government, lender (if known) and contract administrator. Similarly, in situations where Multifamily Housing issues the owner an Abatement of the HAP Contract, the Multifamily Housing Account Executive will instruct the owner to provide a “Notice of Enforcement Action” to all tenants with the appropriate sections marked. The Multifamily Housing Account Executive must also send a “Notice of Enforcement Action” to the local government, lender (if known) and contract administrator. In addition to these Section 230 actions, the following actions will also be considered: 

In the case of an insured, HUD-Held, Section 202 Direct Loan or Capital Advance or a Section 811 Direct Loan or Capital Advance, the Hub Director may also request approval from the Director, Business Relationships and Special Initiatives Division, Office of Asset Management, to proceed with assignment and/or foreclosure of the loan or capital advance following the procedures found in the May 31, 2006 memorandum captioned, “Fiscal Year 2006 Property Disposition Program.”



The Hub Director may recommend that the Department exclude the owner from further participation in HUD programs, using a Limited Denial of Participation (LDP), a Suspension or a Debarment. (Contact the Compliance Division of the DEC for assistance in this regard.)

The Multifamily Hub should discuss with the appropriate DEC Satellite Office which course of action it intends to take. IV. Section 230 Reporting Requirements Section 230 requires the Department to report to Congress semi-annually. The report must cover any project that receives a physical inspection score of 30 or less and all properties that receive consecutive scores of 59 or below. The Business Relationships and Special Initiatives Division will create a SharePoint site to track this information. Section 230 states that the report must include, at a minimum, the enforcement actions being taken to address the poor physical condition (i.e., under a CDE plan, civil money penalties imposed, abatement and termination of HAP contract, etc.), and all actions being taken to protect the residents.

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V Findings and Certifications A. Paperwork Reduction Act The information collection requirements contained in this document are approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned control number 2502-0369. In accordance with the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number. A. Environmental Impact A Finding of No Significant Impact (FONSI) with respect to the environment has been made in accordance with HUD regulations at 24 CFR part 50.19(c), which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). If you have any questions regarding the attached guidance, please contact Brandt Witte, Housing Program Manager, Business Relationships and Special Initiatives Division, Office of Multifamily Asset Management at (202) 402-2614.

______________________________ Biniam Gebre Acting Assistant Secretary for Housing Federal Housing Commissioner Attachments

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ATTACHMENT A SAMPLE NOTICE OF DEFAULT OF THE HOUSING ASSISTANCE PAYMENTS (HAP) CONTRACT AND COMPLIANCE, DISPOSITION AND ENFORCEMENT (CDE) PLAN [HUD office letterhead with address] [Date] CERTIFIED MAIL - RETURN RECEIPT REQUESTED [Owner’s representative name] [Owner’s name] [Owner’s address] SUBJECT:

Notice of Default of the Housing Assistance Payments (HAP) Contract and Compliance, Disposition and Enforcement Plan Project Name: [Project Name] Project Location: [Project City/Town] HAP Contract Number(s): [HAP #(s)] iREMS Number: [iREMS #]

Dear [Owner’s representative name]: This letter constitutes formal notice by the Secretary of the United States Department of Housing & Urban Development (“HUD”), that [Owner’s name], (“Owner”), owner of [Project’s

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Name] (“Project”), is in default of the HUD Housing Assistance Payments (“HAP”) Contract effective [original HAP date] with subsequent HAP Renewals, the latest HAP Basic Contract Multi-year Term Renewal with an effective date of [last renewal date]. Pursuant to paragraph [2.5(a)- verify paragraph #] of the HAP, the Owner “agrees to maintain and operate the contract units and related facilities to provide decent, safe and sanitary housing including the provisions of all the services, maintenance and utilities set forth… ”. [Additionally, pursuant to paragraph [7(b)- verify paragraph #] of the HAP Renewal, the Owner warrants that the rental units to be leased by the Owner under the Renewal Contract are in decent, safe and sanitary condition (as defined and determined in accordance with HUD regulations and procedures) and shall be maintained in such condition during the term of the Renewal Contract.] This standard is set forth in HUD regulation 24 C.F.R. § 5.703, et. al. On [date of REAC inspection] the Real Estate Assessment Center (“REAC”) inspected the Project and the Project received a score of [inspection score]. The inspection report identified serious deficiencies that demonstrate the Owner is in default of the HAP Contract [and HAP Renewal Contract]. Some of the deficiencies cited in the REAC report include, but are not limited to the following: [Summarize the REAC inspection report here. Identify major health and safety issues from the Health and Safety Summary. Summarize systemic deficiencies from the Systemic Deficiencies section of the inspection report. The following is an example from a description used in the pilot: Some of the deficiencies cited in the REAC report are Grounds – Overgrown/Penetrating Vegetation, Doors – Damaged Frames/Threshold/ Lintels/Trim, Emergency/Fire Exits – Emergency/Fire Exits Blocked/Unusable, Infestation – Insects/Roaches, Electrical Hazards – Exposed Wires/Open Panels, and Windows – Inoperable/Not Lockable. ]

Compliance, Disposition and Enforcement (CDE) Plan Accordingly, the Owner shall take the following corrective action within 60 days of the date of receipt of this Notice:    



Conduct a survey of 100 % of the Project, identifying all physical deficiencies; Correct all of the physical deficiencies identified at the Project from the survey, including, but not limited to, those deficiencies identified in the REAC inspection; Provide tenants with the enclosed “Notice of Compliance, Disposition and Enforcement Plan” for the Project. Execute the enclosed certification that the Project is in compliance with HUD’s physical condition standards of 24 CFR 5.703 and state and local codes and that the Owner has provided the tenants with the enclosed “Notice of Compliance, Disposition, and Enforcement Plan.” Submit the completed survey and certification within 60 days of receipt of HUD’s notice to: U.S. Department of Housing and Urban Development

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[HUD office address] Attention: [Name of Account Executive, Project Manager or DEC Analyst handling the matter] Unless HUD agrees otherwise in writing, the owner must correct all physical deficiencies identified in the survey of the Project within 60 days of receiving the CDE Plan. Should the necessary repairs extend beyond 60 days, the Owner must submit to HUD at the address noted above, a repair plan with the completed survey and request a reasonable extension of time to complete the repair of all deficiencies found by the survey, stating the cost and source of funds to be used for repairs. Any HUD approved extension to the 60-day deadline will be made in writing and will amend the CDE plan. HUD will work with the owner to determine if the owner’s request to amend the CDE plan is acceptable and adequately protects the tenants’ interests. HUD will re-inspect the Project to confirm that the Owner is in compliance with the HAP Contract. If the Owner fails to take the necessary corrective action, then the Section 8 assistance may be reduced, suspended, abated, or terminated under the above referenced HAP Contract, and any other remedies may be taken as provided by the parties' agreement(s) or as otherwise provided by law. For the reasons described in this Notice and Compliance, Disposition and Enforcement Plan, HUD will flag the Owner in HUD's Active Partners Performance System (APPS). This flag may adversely affect the Owner's eligibility for participation in HUD programs, under HUD's Previous Participation Certification procedure, by constituting a standard for disapproval. HUD may continue its review of any other contractual agreements between the Owner and HUD beyond the matters identified in this notice. If HUD determines that there are additional contractual violations or defaults, HUD's subsequent declaration of any such violations or defaults will not affect the requirements set out in this notice. If there are any questions concerning this Notice, please contact [HUD contact name], [HUD contact title], at [HUD contact telephone number]. Sincerely,

[Name of signatory] [Title of signatory]

Enclosures:

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NOTICE OF A COMPLIANCE, DISPOSITION AND ENFORCEMENT (CDE) PLAN FOR [PROJECT NAME, FHA Number, iREMS Number] Certification

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PROJECT OWNER’S CERTIFICATION THAT THE PHYSICAL CONDITION OF THE PROJECT IS IN COMPLIANCE WITH HUD CONTRACTS AND THE PHYSICAL CONDITION STANDARDS OF 24 C.F.R. § 5.703 [Name of project owner:] ____________________________________________ (the “project owner”), the owner of [project name:] ____________________________, [City:] __________________, [State:] ___________, Project No. ___________________ (the “project”), by and through its duly authorized representative identified below, hereby certifies that: 1. All physical deficiencies of the project identified in the HUD inspection(s) of the project performed on ___________________ and the attached project owner’s survey of the project performed on ___________________ have been corrected, and the project is in compliance with the physical condition requirements of all HUD contracts pertaining to the project and the physical condition standards of 24 C.F.R. § 5.703. The term “project” includes all units, common areas, building(s), grounds, and systems. 2. To the best of the project owner’s knowledge, the project is in compliance with all state and local codes. 3. All tenants residing at Project have received a “Notice of Compliance, Disposition and Enforcement Plan” relating to these physical deficiencies. 4. This certification is made by the project owner and is signed by a duly authorized representative of the project owner, who is so authorized by reason of his/her position as the [State fully relationship between signer of certification and project owner:] ___________________________________________________ __________________________________________________________________ _________________________________________________________________. All of the foregoing statements, as well as the date, signature and identifying information of the project owner and the signer that follows, are HEREBY CERTIFIED as true and accurate this _____ day of ___________________, 20____.

Project owner: ______________________________________________ BY:

Signature:

____________________________

Print Name:

____________________________

Title:

____________________________

WARNING: Federal statutes and regulations, including but not limited to 18 U.S.C. §§ 287, 1001, 1010 and 1012; 31 U.S.C. §§ 3729 and 3802; and 24 C.F.R Parts 24, 28 and 30, provide for criminal, civil or administrative penalties, sanctions or other regulatory actions with respect to false, fictitious, or fraudulent statements or claims presented in a matter within the jurisdiction of the U.S. Department of Housing and Urban Development.

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[Attachment B] Date: NOTICE OF A COMPLIANCE, DISPOSITION AND ENFORCEMENT (CDE) PLAN FOR [PROJECT NAME, FHA Number, iREMS Number] Pursuant to Section 230 of the Consolidated Appropriations Act, 2014 , this is a notice from the United States Department of Housing and Urban Development (HUD) that HUD has issued to the owner of [project name] (“Project”), a Compliance, Disposition and Enforcement (CDE) Plan, for the Project. The CDE Plan instructs the owner to:     

Conduct a survey 100 % of the Project, identifying all physical deficiencies; Correct the physical deficiencies at the Project, including, but not limited to, those deficiencies identified in the HUD Real Estate Assessment Center (REAC) inspection; Execute a certification that the project is in compliance with HUD’s physical condition standards of 24 CFR 5.703 and state and local codes; Submit the completed survey and certification form to the HUD project manager within 60 days of receipt of HUD’s notice; and Provide this notice to all tenants.

Unless HUD agrees otherwise in writing, the owner must correct all physical deficiencies identified in the survey of the Project within 60 days of receiving the CDE Plan. If you are aware of any owner actions contrary to these instructions, contact [EA] at [EA’s telephone number.]

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[Attachment C] Date: NOTICE OF AN ENFORCEMENT ACTION AGAINST [PROJECT NAME, FHA Number, iREMS Number] Pursuant to Section 230 of the Consolidated Appropriations Act, 2014, the United States Department of Housing and Urban Development (HUD) is providing this notice that HUD has initiated an enforcement action against the owner of [Project] for the failure to comply with HUD’s requirements for maintaining the Project in acceptable physical condition. Specifically, the notice to the owner involved: [check appropriate action]

_____

HUD’s initiation of an administrative proceeding to impose civil money penalties.

_____

HUD’s abatement, including partial abatement, of assistance payments to the owner, under the Section 8 contract, until the deficiencies are corrected.

_____

HUD’s filing of a lawsuit before a judge to appoint a receiver to operate the Project and correct the deficiencies.

_____

HUD’s filing of a lawsuit before a judge seeking an order for specific performance to the owner to correct the deficiencies.

_____

Other

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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-8000 ASSISTANT SECRETARY FOR HOUSINGFEDERAL HOUSING COMMISSIONER _____ Special Attention of All Multifamily Hub Directors All Multifamily Program Center Directors All Multifamily Operations Officers All Multifamily Directors of Project Management All Multifamily Field Counsel All Contract Administrators All Multifamily Project Owners

Notice H-2015-03 Issued: April 3, 2015 Expires: This Notice remains in effect until amended, superseded, or rescinded Cross Reference:

SUBJECT: Transferring Budget Authority of a Project-Based Section 8 Housing Assistance Payments Contract under Section 8(bb)(1) of the United States Housing Act of 1937 I.

PURPOSE This Notice supersedes Housing Notice 2014-14, ― Transferring Budget Authority of a Project-Based Section 8 Housing Assistance Payments Contract under Section 8(bb)(1) of the United States Housing Act of 1937. Readers seeking guidance on the subject of transferring budget authority of a project-based Section 8 Housing Assistance Payments Contract should instead refer to this Notice, which provides corrected information. The Office of Housing issues this correction to amend language in Housing Notice 2014-14 ("Transferring Budget Authority of a Project-Based Section 8 Housing Assistance Payments Contract under Section 8(bb)(1) of the United States Housing Act of 1937"), issued on October 9, 2014. Section VII(B)(1) of Notice H-2014-14 currently misstates the standard for eligibility of a displaced person under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (“URA”). URA implementing regulations at 49 CFR part 24 provide that a displaced person is a person that moves from real property or moves personal property from real property as a direct result of acquisition, rehabilitation or demolition for a project. The term “project” in this context refers to an activity or series of activities

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undertaken with Federal financial assistance. In discussing the standard for URA eligibility as a displaced person, Notice H-2014-14 provides that “any residents that move as a result of acquisition, rehabilitation or demolition or an activity or series of activities” may qualify. The phrase “or an activity or series of activities” is corrected to state “for an activity or series of activities,” which is the same as the phrase “for a project” in the URA regulations. This correction conforms the existing language at Section VII(B)(1) to the URA standard that Notice H-2014-14 was intended to convey. This Notice sets forth the Department’s policies and procedures for transferring all or a portion of any remaining budget authority of a project-based Section 8 Housing Assistance Payments (HAP) Contract to one or more contracts under Section 8(bb)(1) of the United States Housing Act of 1937 (the Act) where the existing HAP contract is terminated by mutual agreement. Section 8(bb)(1) of the Act shall be referred to throughout this Notice as “Section 8(bb).” II.

BACKGROUND Section 8(bb) provides the Department with a tool for preserving Section 8 budget authority. Under Section 8(bb), if a project-based Section 8 contract is terminated or expires and is not renewed, HUD is required to transfer any remaining budget authority to another contract (either a new or an existing Section 8 HAP contract) to provide assistance to eligible families, including eligible families receiving projectbased assistance at the time of contract termination, under the terms and conditions prescribed by HUD. The remaining budget authority, however, must not be required to meet any rescissions under a HUD Appropriations Act. Headquarters will notify the Field in the event there are rescission requirements in any HUD Appropriations Act that limit the use of this preservation tool. The contract administrator (either HUD or a Public Housing Agency (PHA) under an Annual Contributions Contract (ACC) with HUD) and the Owner of the project from which any budget authority on the Section 8 HAP contract is to be transferred must mutually agree to the termination of all or a portion of the existing Section 8 HAP contract and to the transfer of any remaining budget authority. The Owner of the project to which the budget authority is transferred must agree to accept the budget authority. The project from which HUD transfers budget authority may continue to exist as a multifamily housing project after the transfer, or it may cease to exist. The budget authority may be transferred to one or more projects.

III.

APPLICABILITY A. The requirements in this Notice apply to all project-based Section 8 HAP contracts on existing multifamily housing projects administered by the Office of

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Multifamily Housing Programs, whether through a Performance-Based Contract Administrator, a Traditional Contract Administrator, or by HUD. B. This Notice applies only when the contract administrator and the Owner of a project which is subject to an existing project-based Section 8 HAP Contract have mutually agreed (i) to terminate the Contract so that all of the remaining budget authority can be transferred to another multifamily housing project; or (ii) to subdivide the Contract and then terminate one or more of the resulting Contracts so that the budget authority remaining on the contract(s) that was terminated may be transferred to the Section 8 HAP contract on one or more other multifamily housing projects. The other project(s) may be owned by the same Owner as the project from which the budget authority is being transferred or by a different Owner. If the budget authority associated with the terminated contract is to be transferred to a project owned by a different Owner, the Owner must agree to accept the budget authority that is to be transferred. C. The Contract to which HUD transfers budget authority may be an existing project-based Section 8 HAP contract, in which case (i) the additional units must already be in existence and ready for occupancy at the time HUD transfers budget authority; and (ii) the Owner and contract administrator must execute an Amendment to Project-Based Section 8 Housing Assistance Payments Contract Pursuant to Section 8(bb)(1) of the US Housing Act of 1937, hereafter referred to as Amendment B, to reflect the increase in the number of assisted units made possible by the transfer of budget authority and subjecting the project to the requirements of (i) the Physical Condition Standards and Inspection Requirements of 24 CFR Part 5 Subpart G, (ii) the Physical Condition of Multifamily Properties of 24 CFR Part 200 Subpart P; and (iii) the Uniform Financial Reporting Standards of 24 CFR Part 5 Subpart H (Appendix Two-B). On the same day that the Owner executes Amendment B, the Owner and the contract administrator must agree to terminate the amended contract, and the Owner must request that it be immediately renewed under MAHRA for a 20-year term under any renewal option for which the contract is eligible. In addition, the Preservation Exhibit (Appendix Three) must be attached to the renewal contract and completed. The Preservation Exhibit provides for the automatic renewal of the contract upon expiration (i.e., at the end of the 20-year renewal term) for a whole number of years to be filled in by the Hub/PC, which must be at least the number of years remaining on the contract at the time of its termination by mutual agreement. If the project is not already subject to an existing project-based Section 8 HAP contract, the Owner must execute a new, original New Construction project-based Section 8 HAP contract (Appendix One). The budget authority cannot be transferred to the new Section 8 HAP Contract unless or until the units at Project B are existing and ready for occupancy.

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D. Section 8(bb) must only be used where the project from which budget authority will be transferred and the project(s) to which budget authority will be transferred are located in the same state. HUD may approve exceptions to this policy on a case-by-case basis. E. The remaining budget authority being transferred must be sufficient to fund the proposed number of units under the project-based Section 8 HAP contract to which budget authority is transferred. HUD has no statutory authority to increase the budget authority. F. This Notice does not apply when: 1. There is a Section 8 project-based HAP contract administered by the Office of Public and Indian Housing (i.e., a Section 8 Moderate Rehabilitation contract or a Section 8 Project-Based Voucher HAP contract) or by the Office of Community Planning and Development (i.e., a Section 8 Single-Room Occupancy Moderate Rehabilitation HAP contract). 2. An expiring project-based Section 8 HAP contract is renewed at an existing project. 3. There is no remaining budget authority on a project-based Section 8 HAP contract. HUD does not have the statutory authority to increase the budget authority to facilitate an 8(bb) transfer. 4. There is an enacted HUD Appropriations Act with rescission requirements. Headquarters will notify the Field of the rescission requirements. 5. The remaining budget authority from a terminated HAP contract has been recaptured by the Department. 6. An Owner requests transfer of debt, statutorily required low-income and very low-income use restrictions, in addition to all or a portion of a Section 8 HAP contract from one project to another. In those types of transactions, Section 214 of the Consolidated Appropriations Act, 2014, is the applicable statute, depending on whether all conditions stated in Section 214(c) can be satisfied. Section 214 is limited to qualifying transfers approved during Fiscal Years 2014 and 2015.1 7. Project A or Project B (see section IV “Definitions,” immediately below) is subject to an Interim (Full) Mark-to-Market Renewal Contract, an Interim (Lite) Mark-to-Market Renewal Contract, both of which are authorized under 1

In contrast to Section 8(bb), which authorizes the transfer of only any remaining budget authority associated with a Section 8 HAP contract that is terminated or that expires and is not renewed, Section 214 authorizes, among other things, the transfer of the project-based assistance contract itself (in whole or in part).

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section 514 of MAHRA, or a Full Mark-to-Market Renewal Contract, which is authorized under section 515 of MAHRA. These properties are still eligible for transfer or receipt of Section 8 budget authority under Section 8(bb) but will be handled on a case-by-case basis until additional guidance is released. 8. Project A has a post-conversion project based rental assistance (PBRA) contract issued as part of the Rental Assistance Demonstration (RAD). Properties that have completed conversion to PBRA under RAD may only transfer the PBRA contract under the process described in PIH Notice 201232, Section 1.6.B.7, which generally does not permit a transfer within the first 10 years following such conversion. 9. Project A has a bond financed new regulation HAP contract, refunded with a sharing of HAP savings pursuant to Section 1012 of the Stewart B. McKinney Homeless Assistance Amendments Act. IV.

DEFINITIONS A. “Contract A” is the existing project-based Section 8 HAP contract at Project A. B. “Contract A1” is one of two or more contracts resulting from the mutual agreement of the parties to subdivide Contract A into two or more contracts for the purpose of retaining a portion of the project-based assistance at Project A. Contract A1 refers to the contract that is retained with reduced budget authority and a resulting smaller number of assisted units at Project A. C. “Contract A2” is one of two or more contracts resulting from the mutual agreement of the parties to subdivide Contract A into two or more contracts for the purpose of terminating Contract A2 by mutual agreement. Immediately after the termination of Contract A2 and, if applicable, of other contracts resulting from the subdivision of Contract A other than Contract A1 (e.g., Contract A3, Contract A4, etc.), the budget authority associated with the terminated contracts will be transferred to Project B. D. “Contract B” is the project-based Section 8 HAP contract at Project B. It may be an existing project-based Section 8 contract already at the project or a new project-based Section 8 HAP contract to which Project B becomes subject as the result of the Section 8(bb) transaction. In the latter event, the new project-based Section 8 HAP contract must be a New Regulation Part 880 HAP contract (Appendix One). There may be more than one project receiving the remaining budget authority and, therefore, there may be more than one existing or new project-based HAP contract in the transaction. All project-based Section 8 HAP contracts, whether new or existing, receiving transferred budget authority will be referred to as and be subject to all the requirements for, Contract B.

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E. “HUD-Affiliated Project” is a project with any HUD affiliation, including but not limited to; a HUD Use Agreement, FHA insurance, a HUD-Held mortgage, or some other form of HUD subsidy (e.g. interest reduction payments under Section 236). F. “MAHRA” - Multifamily Assisted Housing Reform and Affordability Act of 1997. G. “Owner A” is the Owner of Project A. H. “Owner B” is the Owner of Project B. There may be more than one Project B and, if so, they may be owned by the same or different Owners. Project B may also be owned by the same Owner as Project A. I. “Project A” is the multifamily housing project from which some or all of the remaining Section 8 budget authority is transferred. Owner A will be required to adhere to all requirements for Project A, as described in Section V of this Notice. Project A will continue to exist as a HUD-affiliated project if it has a HUDinsured or HUD-held mortgage or retains a portion of the remaining budget authority in Contract A1. J. “Project B” is an existing multifamily housing project (or projects) to which some or all of the budget authority from Project A is transferred. There may be more than one project that is receiving the remaining budget authority, and they may be owned by the same or different Owners. Project B may also be owned by the same Owner as Project A. If there is more than one project, there will be a Project B, Project C, etc. All projects (whether one project or more than one) receiving this transferred budget authority will be referred to as Project B in this Notice. Project B Owners will be required to adhere to all requirements for Project B, as described in Section VI of this Notice. K. “Remaining Budget Authority” is the dollar amount remaining on a project-based Section 8 HAP contract at the time of termination by mutual agreement. The Hub/Program Center will determine whether there is any remaining budget authority and, if so, in what amount. This information is available from the Multifamily Housing Field Funding Coordinator. 1. Most project-based Section 8 HAP contracts have already been renewed under MAHRA, which requires that multi-year renewal contracts be funded on a year-to-year basis. In cases where Contract A has already undergone renewal under MAHRA, any budget authority remaining on the contract at the time of termination by mutual agreement will be limited to an amount equal to or less than the amount needed to fund Contract A for a single year. There is more likely to be budget authority remaining on Contract A, in cases where Contract A has already undergone renewal under MAHRA, in

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scenarios in which it is terminated by mutual agreement at or close to the beginning of the one-year funding cycle for a multi-year renewal contract. 2. In the rare case where Contract A is an original project-based Section 8 HAP contract (i.e., one that has not yet expired and thus has not been renewed under MAHRA), the remaining budget authority will consist of what is left from the original obligation of budget authority when the contract was executed (i.e., an estimate of the amount of money needed to fund the contract for its original, multi-year term), including any amounts added by amendment, as authorized under the heading “Project-Based Rental Assistance” in annual appropriations acts. There is more likely to be budget authority remaining on this type of Contract A in scenarios in which it is terminated by mutual agreement in the middle of its term. V.

Project A A. Request to Transfer All Remaining Budget Authority: If all of the remaining budget authority will be transferred from Project A, the following programmatic requirements must be met. Owner A must submit all applicable documentation and certify that all requirements are met in their proposal for the transfer of budget authority under Section 8(bb)(1). 1. If all of the remaining budget authority will be transferred from Project A to Project B, Owner A and the contract administrator will mutually agree to terminate Contract A and the remaining budget authority associated with Contract A will be transferred to Project B. 2. If Project A will not continue to exist as a HUD-Affiliated Project, Owner A should submit the proposed plan for the future use of the project and demonstrate that there is no longer a need for affordable rental housing at the project. This should include an explanation of why the Section 8 assistance is no longer needed at the project and how the transfer of the budget authority will have no adverse impact on the tenants affected by the transfer, including those accepting vouchers, those remaining at the property, and those relocating to Project B. B. Request to Transfer Part of the Remaining Budget Authority: If Owner A requests that some of the remaining budget authority is transferred to Project B and some of the budget authority remains at Project A, Owner A must meet the following requirements and certify as such in their proposal for the transfer of budget authority under Section 8(bb)(1). 1. An explanation as to why there is need for only a portion of the Section 8 assistance and why there will be no adverse impact on the long-term preservation of the project or the tenants affected by the transfer, including those accepting vouchers, those remaining at the property, and those relocating to Project B. This must include a revised operating budget to show 7 68

that Project A will remain financially viable after transfer of a portion of the remaining budget authority. 2. If Contract A is subdivided (e.g., into Contract A1 and Contract A2), Owner A and the contract administrator must execute the Amendment to ProjectBased Section 8 Housing Assistance Payments Contract Pursuant to Section 8(bb)(1) of the US Housing Act of 1937, hereafter referred to as Amendment A (attached as Appendix Two-A) to Contract A1. Amendment A reflects the number of assisted units at Project A resulting from the transfer of budget authority and requiring compliance with the requirements of (a) the Physical Condition Standards and Inspection Requirements of 24 CFR Part 5 Subpart G, (b) the Physical Condition of Multifamily Properties of 24 CFR Part 200 Subpart P; and (c) the Uniform Financial Reporting Standards of 24 CFR Part 5 Subpart H (Appendix Two-A). 3. On the same day Amendment A is executed, Owner A and the contract administrator must mutually agree to terminate Contract A1, and Owner A must submit a request for the immediate renewal of Contract A1 for a 20-year term, subject to appropriations, under any MAHRA renewal option for which Contract A1 is eligible. In addition, the Preservation Exhibit (Appendix Three) must be attached to the renewal contract and completed. 4. Owner A must submit a separate request for each project-based Section 8 HAP contract that is to be terminated (or subdivided and then terminated). The Hub will consider each request separately. If the proposal is part of a phased transfer of the budget authority under Contract A, the phasing plan should be included with the submitted proposal for information purposes only. HUD will only approve one request to transfer budget authority at a time. Additional requests should be submitted as the phased project moves forward. C. Requirements for All Requests to Transfer Budget Authority from Project A: Owner A must meet the below requirements. Owner A must submit all applicable documentation and certify that all requirements are met in their proposal for the transfer of budget authority under Section 8(bb)(1). 1. Owner A must be current in the submission of audited or Owner-certified Annual Financial Statements and Monthly Accounting Reports, if applicable, for the prior three-year period or for the period of time the new ownership has been in place, whichever is less. 2. If Project A is subject to a Section 236 mortgage, the Owner must have submitted Excess Income Reports for the prior seven-year period. All excess income owed to the Department, regardless of timeframe, must be paid in full prior to HUD’s approval of the project Owner’s request to transfer the budget authority.

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3. Owner A must resolve all non-compliance flags, if any, or the Owner must have a HUD-approved plan in place to resolve any flags. 4. If Project A will continue to exist as a HUD-affiliated project after transfer of the remaining budget authority and if it received any deficiencies on its last HUD physical inspection, the deficiencies must be cured or a plan must be approved by HUD that will result in cure of those deficiencies within a timeframe acceptable to HUD. 5. If Project A will continue to exist as a HUD-affiliated project after transfer of the budget authority and if it received a less than satisfactory rating in any section of its last three Management and Occupancy Reviews, corrective actions satisfactory to HUD must be completed or a plan for those corrective actions and an acceptable timeframe for their completion must be approved by HUD. 6. If Project A will continue to exist as a HUD-Affiliated Project, the transfer of budget authority must have no adverse impact on the financial and physical feasibility of the Project. To demonstrate there is no adverse impact, Owner A must certify in writing that they will make all mortgage payments (if applicable), meet all physical condition standards and management requirements, and be in compliance with all other business agreements imposed by HUD or the lender. 7. If Project A is subject to an FHA-insured mortgage, Owner A must ensure that the FHA lender submits a letter stating that it consents to the proposed transfer of budget authority. If a mortgage prepayment is planned in conjunction with the transfer of authority, HUD may waive this requirement. D. Owner A’s Proposal: In addition to the submission of all applicable documentation and written certification that the above requirements are met as applicable, Owner A’s proposal must include the following: 1. A written request asking to terminate the project-based Section 8 HAP Contract. The request will specify whether all or a portion of the remaining budget authority will be transferred2, the amount of the remaining budget authority that will remain at the project, if any; and if known, the name of the project to which the budget authority will be transferred, and whether the budget authority will be transferred to a new or existing project-based Section 8 HAP contract (the Multifamily Hub/Program Center (PC) will provide this information if Owner A does not have it). The narrative will also include a description of the proposed transaction, why it is being proposed, and how there will be no adverse impact to the existing assisted tenants as a result of the transaction. 2

Prior to submission of the proposal, the Owner of Project A will need to consult with the Hub/PC to determine the amount of the total remaining budget authority on Contract A.

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2. A description of the steps Owner A has taken to market the vacant units, if applicable, at Project A. 3. The number and configuration of the units, current rents and operating budget, as well as the proposed number and configuration of the units, rents and operating budget after transfer of the budget authority. If Project A will remain a HUD-affiliated Project, the proposed operating budget must show that Project A will remain financially viable after the transfer of the budget authority. Note: The total number of units under Contract A1 and Contract B may be greater than the number of units under Contract A prior to its termination by mutual agreement, provided there is no increase in the total amount of budget authority and that there is sufficient budget authority to cover the units. The total number of units under Contact A1 and Contract B may be less than the number of units under Contract A prior to the transfer, if all eligible tenants residing in an assisted dwelling unit at the time of the transfer are protected from displacement (e.g. with a comparable unit at Project A, a comparable unit at Project B, a tenant protection voucher, etc.). The reduced number of units supported by the budget authority at Project B should be substantially the same (within the lesser of five percent or five units) as the number of units supported by the budget authority at Project A. However, a proposed reduction of units beyond the identified threshold will be permitted in limited circumstances, if either: a. The Policy Development and Research (PD&R) Analysis (Section VIII.B.1) determines the transfer will result in a material improvement in the location of the budget authority, but the location has higher rents than the location of Project A; or b. Project B is in the same Small Area Fair Market Rent (SAFMR) area as Project A, and a reconfiguration of units is necessary due to the average vacancy rate in a given unit type being at least 25 percent for at least 24 months in accordance with Housing Notice 2011-03, Policies and Procedures for the Conversion of Efficiency Units to One-Bedroom Units 4. A Relocation Plan, if applicable, including a budget and Sources and Uses Statement, that describes relocation of the existing tenants to other units within Project A or to Project B (see Section VII.B for detailed requirements). 5. A copy of the notice advising tenants of the transfer, copies of all the tenant comments, Owner A’s evaluation of the tenant comments, a copy of the signin sheet from the tenant meeting, and a certification by the transferring Owner 10 71

that it has complied with all of the requirements of 24 CFR 245.410, 245.415, 245.416 through 245.419, as applicable, and 245.420 (see Section VII.A for detailed requirements). 6. Owner A must identify any Fair Housing litigation settlement agreements, voluntary compliance agreements, or other remedial agreements signed by the Owner and HUD. The Office of Fair Housing and Equal Opportunity (FHEO) will ensure there is no conflict between the agreements and the proposed transfer. If there is a conflict, Owner A may propose modifications to the remedial agreement as part of the transfer proposal. VI.

PROJECT B If the remaining budget authority at Project A will be transferred to more than one project, there could be more than one Project B ownership entity. If so, each ownership entity that is receiving a portion of the remaining budget authority from Contract A must meet the requirements in this Section prior to HUD’s approval of the request to transfer all or a portion of the remaining budget authority. The Hub/PC may assist in identifying Project B. Owner A may know of a project, or Owners may make direct requests to the Hub\PC. Consideration should be given to the need for assisted housing in an area, the long-term feasibility of the project after receipt of the transferred budget authority, and the Owner’s ability to meet the criteria listed below. A. Project B General Requirements: Project B must meet the below requirements. Owner B must submit all applicable documentation and certify that all requirements are met in their proposal to receive the transfer of budget authority under Section 8(bb)(1). 1. Owner B must show that receipt of the remaining budget authority, and consequently the units assisted by the budget authority, is warranted by local demands for affordable housing and will ensure the long-term preservation of the project. Documentation to support the need for Section 8 assistance will include a list of the current tenants who are eligible for Section 8 assistance and/or eligible prospective tenants who are on the waiting list, and/or a market analysis that shows there are eligible families in the area. 2. Project B must be an existing multifamily project consisting of existing dwelling units before receiving any transfer of budget authority. Projects under construction are not eligible to receive transferred budget authority. Conditional approval for transfer of budget authority to a contract at a newly constructed Project B may be provided but only with the understanding that the transfer cannot occur until construction of Project B is complete and the project is habitable (e.g. as demonstrated by a certificate of occupancy).

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3. Owner B may use the letter approving the transfer of the Section 8 budget authority as a conditional commitment to obtain financing to construct or substantially rehabilitate the project (the letter may also be used to secure financing for moderate repairs). However, no transfer of budget authority can occur until construction and/or substantial rehabilitation is complete and the project is habitable. 4. Owner B must provide documentation to assist HUD in an environmental review of the transfer in accordance with environmental regulations and requirements at 24 CFR part 50, at the time of the submission of the transfer proposal. HUD will conduct the environmental review as required by part 50 prior to approving a transfer. HUD will document compliance on Form HUD4128, “Environmental Assessment and Compliance Findings for the Related Laws.” Owner B is responsible for submitting environmental information and reports, and should use Chapter 9 of the MAP Guide and the HUD Environmental Review website (available at https://www.onecpd.info/environmental-review/) for guidance on environmental review information requirements. If Project B is currently HUD-affiliated, a new Phase I Environmental Site Assessment (ESA) in accordance with ASTM E 1527-13 (or the most recent edition), including a Vapor Encroachment Screen in accordance with ASTM E 2600-10 (or the most recent edition), is not required, unless the transfer involves: a. Significant ground disturbance (digging) or construction not contemplated in the original application or incompatible with current engineering or institutional controls; b. Site expansion or addition; c. Transfer to a site for which a Phase I ESA in accordance with ASTM E 1527-05 (or a more recent edition) has not been prepared previously; or d. Any other activities which may result in contaminant exposure pathways not contemplated in the original application or incompatible with current engineering or institutional controls. After a request has been submitted to HUD, Owner B and other participants in the proposed transfer, including Owners and contractors on Project B, may not undertake or commit funds for acquisition, rehabilitation, conversion, or construction of the receiving property until HUD has completed the environmental review and notified Owner B that the transfer to Project B is acceptable. HUD may reject transfer requests with unacceptable environmental issues, or when mitigation of an issue is infeasible.

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5. Owner B must not be subject to any of the following actions that have not been resolved to HUD’s satisfaction: 1) A charge from HUD concerning a systemic violation of the Fair Housing Act or a cause determination from a substantially equivalent state or local fair housing agency concerning a systemic violation of a substantially equivalent state or local fair housing law proscribing discrimination because of race, color, religion, sex, national origin, disability, or familial status; and 2) A Fair Housing Act lawsuit filed by the Department of Justice alleging a pattern or practice of discrimination or denial of rights to a group of persons raising an issue of general public interest pursuant to 42 U.S.C. 3614(a); or 3) A letter of finding identifying systemic noncompliance under Title VI of the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, or Section 109 of the Housing and Community Development Act of 1974. HUD will determine if actions to resolve the charge, cause determination, lawsuit, or letter of findings are sufficient to resolve the matter. Examples of actions that would normally be considered sufficient to resolve the matter include, but are not limited to, current compliance with: a. A voluntary compliance agreement (VCA) signed by all the parties; b. A HUD-approved conciliation agreement signed by all the parties; c. A conciliation agreement signed by all the parties and approved by the state governmental or local administrative agency with jurisdiction over the matter; d. A consent order or consent decree; or e. A final judicial ruling or administrative ruling or decision. 6. Project B must comply with the site and neighborhood requirements below. Owner B must submit the address of the proposed property with their proposal and HUD will determine if the site meets the following requirements: a. The site and neighborhood is suitable from the standpoint of facilitating and furthering full compliance with the applicable provisions of Title VI of the Civil Rights Act of 1964, Title VIII of the Civil Rights Act of 1968, Executive Order 11063, and HUD regulations issued pursuant thereto. b. The neighborhood must not be one that is seriously detrimental to family life or in which substandard dwellings or other undesirable conditions predominate, unless there is actively in progress a concerted program to remedy the undesirable conditions.

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c. The housing must be accessible to social, recreational, educational, commercial, and health facilities and services, and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of unassisted, standard housing of similar market rents. d. If Project B is new construction and the budget authority will be transferred once construction is complete, Project B may not be located in a racially mixed area if the project will cause a significant increase in the proportion of minority to nonminority residents in the area and may not be located in an area of minority concentration. If HUD determines that Project B will be located in an area of minority concentration, Owner B must submit supporting data (e.g., census data, evidence of local revitalization efforts, etc.) in order for HUD to determine that they meet one of the exceptions below: i. Sufficient, comparable opportunities exist for housing for minority households in the income range to be served by the proposed project, outside areas of minority concentration. Sufficient does not require that in every locality there be an equal number of assisted units within and outside of areas of minority concentration. Rather, application of this standard should produce a reasonable distribution of assisted units each year which over a period of several years will approach an appropriate balance of housing opportunities within and outside areas of minority concentration. An appropriate balance in any jurisdiction must be determined in light of local conditions affecting the range of housing choices available for very lowincome minority households and in relation to the racial mix of the locality's population. A. Units may be considered to be comparable opportunities if they have the same household type and tenure type (owner/renter), require approximately the same total tenant payment, serve the same income group, are located in the same housing market, and are in standard condition. B. Application of this sufficient, comparable opportunities standard involves assessing the overall impact of HUDassisted housing on the availability of housing choices for very low-income minority households in and outside areas of minority concentration, and must take into account the extent to which the following factors are

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present, along with any other factor relevant to housing choice: 1. A significant number of assisted housing units are available outside areas of minority concentration. 2. There is significant integration of assisted housing projects constructed or rehabilitated in the past ten years, relative to the racial mix of the eligible population. 3. There are racially integrated neighborhoods in the locality. 4. Programs are operated by the locality to assist minority households that wish to find housing outside areas of minority concentration. 5. Minority households have benefitted from local activities (e.g., acquisition and write-down of sites, tax relief programs for homeowners, acquisitions of units for use as assisted housing units) undertaken to expand choice for minority households (or families) outside of areas of minority concentration. 6. A significant proportion of minority households have been successful in finding units in nonminority areas under the Section 8 Certificate and Housing Voucher programs. 7. Comparable housing opportunities have been made available outside areas of minority concentration through other programs. ii. The project is necessary to meet overriding housing needs that cannot be met in that housing market area. Application of the overriding housing needs criterion, for example, permits approval of sites that are an integral part of an overall local strategy for the preservation or restoration of the immediate neighborhood and of sites in a neighborhood experiencing significant private investment that is demonstrably changing the economic character of the area (a “revitalizing area”). An overriding housing need, however, may not serve as the basis for determining that a site is acceptable if the only reason the need cannot otherwise be feasibly met is that discrimination on the basis of race, color, creed, sex, or national origin renders sites outside areas of minority concentration 15 76

unavailable, or if the use of this standard in recent years has had the effect of circumventing the obligation to provide housing choice. 7. Project B must meet all applicable accessibility requirements, including, but not limited to, the accessibility requirements of the Fair Housing Act, Section 504 of the Rehabilitation Act, and the Americans with Disabilities Act. Owner B must provide documentation that they have met all accessibility requirements in their proposal. 8. Owner B must receive approval through the Previous Participation process, including 2530 reviews. 9. Owner B must provide a tenant selection plan for the project and an Affirmative Fair Housing Marketing Plan that will be approved by HUD. 10. If Project B is an FHA insured project, there may be no liens on Project B other than the first mortgage that is secured by the project, unless the secondary financing on the project adheres to the following requirements: a. If the secondary financing is from a federal, state or local government agency, the subordinate loan may be secured by a promissory note and mortgage lien as is prescribed by the government funding source. Secondary financing or grants provided by public government entities or subsidiaries, when added to the first mortgage, may exceed 100 percent of the project’s Fair Market Value (FMV) or Replacement Cost. b. When secondary financing is in place, the aggregate amount of the first mortgage and the private secondary loan may not exceed 92.5 percent of the FMV of the project, unless the project has or will receive Low Income Housing Tax Credits, in which case a project-specific waiver of the total loan to value may be considered. B. Requirements if Project B is HUD-affiliated: If Project B is HUD-affiliated, Project B must meet the below requirements. Owner B must submit all applicable documentation and certify that all requirements are met in their proposal to receive the transfer of budget authority under Section 8(bb)(1). 1. If the project received a less than satisfactory rating in any section of its last three Management and Occupancy Reviews, corrective actions satisfactory to HUD must have been taken or a plan for those corrective actions and an acceptable timeframe for their completion must be approved by HUD. 2. Owner B must be current in the submission of audited or Owner-certified Annual Financial Statements and Monthly Accounting Reports, if applicable, for the prior three-year period or for the period of time the new ownership has 16 77

been in place, whichever is less, and for Section 236 projects, Excess Income Reports for the prior seven-year period and all outstanding excess income, regardless of the time period. 3. Owner B must resolve all noncompliance flags, if any. 4. Project B must have a REAC score of at least 60 or, if it does not, Owner B must submit a plan that is acceptable to HUD to correct any identified deficiencies as part of the transfer transaction and bring the REAC score to 60 or above. If Project B does not have a current REAC physical inspection score, an inspection must be conducted and the score must be 60 or above or, if the score is less than 60, the Owner must submit a plan that is acceptable to HUD to correct any identified deficiencies as part of the transfer transaction. 5. If there is an existing Section 8 HAP contract (Contract B), Owner B and the contract administrator must execute Amendment B (Appendix Two-B). 6. Owner B and the contract administrator must mutually agree to terminate the amended Contract B on the same day it is amended, and Owner B must submit a request for the immediate renewal of Contract B for a 20-year term, subject to appropriations, under any MAHRA renewal option for which Contract B is eligible. In addition, the Preservation Exhibit (Appendix Three) must be attached to the renewal contract and completed. 7. If there is no existing Section 8 HAP contract, Owner B and the contract administrator must execute a new regulation Part 880 project-based Section 8 HAP contract (Appendix One) with a one-day term. On the same day, Owner B and the contract administrator will also execute a Renewal Contract, effective at the end of the one-day term, the Renewal Contract will be renewed under any renewal option for which Project B is eligible and the budget authority transferred to a 20-year Renewal Contract under MAHRA. Please refer to the Section 8 Policy Renewal Guide for details on renewal options. For the purposes of calculating distributions, initial equity will be the initial equity used at Project A, unless Owner B contributes additional equity to Project B in conjunction with the Section 8(bb) transfer. C. Requirements if Project B is not HUD-affiliated: If Project B is not HUDaffiliated, Project B must meet the below requirements. Owner B must submit all applicable documentation and certify that all requirements are met in their proposal to receive the transfer of budget authority under Section 8(bb)(1). 1. The project must have a REAC inspection prior to the transfer and receive a score of at least 60. 2. If the project has repair needs, a repair plan that details how the physical needs of the project will be addressed and comments on the status of any 17 78

corrective action in progress, e.g., what repairs have been completed, what other corrective actions are pending, and target dates for completing these actions. 3. Owner B and the contract administrator must execute a New Regulation part 880 project-based Section 8 HAP contract (Contract B) with a one-day term (Appendix One). Pursuant to the Owner’s request, a renewal contract with a 20-year term will be executed on the same day, subject to appropriations, under any renewal option under MAHRA for which Project B is eligible. Please refer to the Section 8 Policy Renewal Guide for details on renewal options. For the purposes of calculating distributions, initial equity will be the initial equity used at Project A, unless Owner B contributes additional equity to Project B in conjunction with the Section 8(bb) transfer. HUD will use the budget authority transferred from Project A until expended to reduce the amount of appropriations needed to fund the 20-year MAHRA renewal contract. D. Owner B’s Proposal: In addition to the submission of all applicable documentation and written certification the above requirements are met as applicable, Owner B’s proposal must include the following: 1. A written notification that Owner B agrees to accept the transferred budget authority. 2. The current number and configuration of the units, current rents and operating budget; the proposed number and configuration of the units, rents, the amount of budget authority to be transferred, and operating budget after transfer of the budget authority. Note: The total number of units under Contract A1 and Contract B may be greater than the number of units under Contract A prior to its termination by mutual agreement, provided there is no increase in the total amount of budget authority and that there is sufficient budget authority to cover the units. The total number of units under Contact A1 and Contract B may be less than the number of units under Contract A prior to the transfer, if all eligible tenants residing in an assisted dwelling unit at the time of the transfer are protected from displacement (e.g. with a comparable unit at Project A, a comparable unit at Project B, a tenant protection voucher, etc.). The reduced number of units supported by the budget authority at Project B should be substantially the same (within the lesser of five percent or five units) as the number of units supported by the budget authority at Project A. However, a proposed reduction of units beyond the identified threshold will be permitted in limited circumstances, if either: 18 79

a. The Policy Development and Research (PD&R) Analysis (Section VIII.B.1) determines the transfer will result in a material improvement in the location of the budget authority, but the location has higher rents than the location of Project A; or b. Project B is in the same Small Area Fair Market Rent (SAFMR) area as Project A, and a reconfiguration of units is necessary due to the average vacancy rate in a given unit type being at least 25 percent for at least 24 months in accordance with Housing Notice 2011-03, Policies and Procedures for the Conversion of Efficiency Units to OneBedroom Units 3. To demonstrate that Project B is financially viable for the long term, written verification of the status of current or proposed financing (e.g., commitment letter); existing or proposed lender approval (FHA or other) of the proposed transaction; written approvals of the proposed transaction from any other federal, state or local agencies that have a financial or other interests in Project B; copies of all existing/proposed mortgage documents; and a title report. 4. Written narrative that Owner B has at least 5 years of successful experience owning, managing, and if applicable, renovating assisted housing. The narrative should include the following information: a. The names of the proposed development team members, if applicable; b. Documentation demonstrating, as applicable, Owner B’s recent successful experience financing, developing, rehabilitating, constructing, owning, and operating properties or projects that are similar to Project B. c. A description of the teaming partner relationships. d. A résumé for each proposed development team member, if applicable. e. If applicable, documentation demonstrating that the development team has experience with at least three transactions involving similar financing to Project B. VII.

TENANT PROCEDURES AND PROTECTIONS A. Tenant Notification: Owner A must give the tenants and legitimate tenant organization(s) of Project A written notification of the proposed transfer and provide a minimum 30-day comment period. HUD will not accept a Section 8(bb) 19 80

transfer request for any project unless Owner A has notified the tenants of the proposed transfer and has provided the tenants with an opportunity to comment on the proposed transfer. 1. The notification should include the address and phone of the local HUD office, including the specific division and/or name and phone number of a contact at the local HUD office. The notification should be provided in appropriate formats as necessary to meet the needs of all, including persons with limited English proficiency and formats for persons with vision, hearing, and other communication-related disabilities (e.g., Braille, audio, and large type, sign language interpreters, assistive listening devices, etc.). 2. The notification will include a description of the impact of the request on tenants’ rental assistance and tenant contributions and resulting tenant relocation rights and responsibilities under the Uniform Relocation Act (see section B below). In addition, the notification must inform the tenants that if the project-based rental assistance budget authority supporting the unit they currently reside in will be transferred, they may be eligible for tenant protection vouchers if they choose not to relocate (see Section C below). 3. The notice must be delivered directly to each unit in the project or mailed to each tenant and posted in at least 3 places/common areas throughout the project, including the project office. In a project greater than 4 stories, the notice may be served either by delivery to each unit or by posting. If the posting method is used, the notice must be posted in at least three conspicuous places within each building in which the affected dwelling units are located. 4. The tenants (including any legal or other representatives acting for the tenants individually or as a group) have the right to inspect and copy the materials that the Owner is required to submit to HUD for a period of 30 days from the date on which the notice is served to the tenants. Any tenant comments must be available in the project office during normal business hours for public reading and copying. 5. The tenants have the right, during this period, to submit written comments on the transfer to Owner A and the local HUD office. Tenant representatives may assist tenants in preparing these comments. 6. Owner A must hold a meeting with the tenants and legitimate tenant organizations to discuss the details of the notification and answer questions.

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7. Upon completion of the tenant comment period, Owner A must review the comments submitted by the tenants and their representatives and prepare a written evaluation of the comments. Any negative comments must be addressed. Owner A must then submit the following materials to the local HUD office at the time of submission of the request for transfer under Section 8(bb): a. A copy of Owner A’s Notification to the tenants; b. A sign-in sheet from the tenant meeting; c. Copies of all the tenant comments; d. Owner A’s evaluation of the tenant comments; and e. A certification by Owner A that it has complied with all of the requirements of 24 CFR 245.410, 245.415, 245.416 through 245.419, as applicable, and 245.420. B. Relocation: Owner A and Owner B are jointly responsible for determining which ownership entity or entities will be responsible for paying relocation expenses, including moving costs that residents incur in connection with a move to a different unit in Project A or to a unit in Project B. Under no circumstances shall the residents pay for any relocation costs incurred as a result of this transaction. 1. Any residents that move as a direct result of acquisition, rehabilitation or demolition for an activity or series of activities that includes transfer of budget authority under Section 8(bb) may become eligible for relocation assistance under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA). 2. Questions regarding URA applicability should be brought to the attention of the HUD Regional Relocation Specialist assigned to the state where the project is located. 3. A state-by-state list of Regional Relocation Specialists is available at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planni ng/library/relocation/contacts. C. Tenant Protection: If a tenant chooses not to relocate in connection with a transaction under this Notice, Tenant Protection Vouchers (TPVs) will be offered to eligible tenants at Project A, subject to available appropriations. A tenant may receive a TPV, if they meet the eligibility requirements for voucher assistance, and the unit that they currently reside in is supported by project-based rental assistance budget authority that is subject to transfer as part of the Section 8(bb)(1) transaction. Owner A will notify the tenant of their potential eligibility to 21 82

receive a TPV at the time of tenant notification (see Section A) and subsequently notify the Multifamily Hub/PC regarding how many TPVs are requested. If TPVs are needed, the Multifamily Hub/PC should work with the Public and Indian Housing (PIH) field office to follow the procedures outlined in PIH Notice 200141. D. Tenants Moving from Project A to Project B: Tenants that choose to move from Project A to Project B remain subject to their existing lease requirements and all occupancy rules under the Section 8 project-based rental assistance program (please see HUD Handbook 4350.3 for greater detail on occupancy requirements). Owner B may not seek to terminate the lease of a tenant from Project A for actions that occurred prior to the Section 8(bb)(1) transfer but the tenant will be subject to ongoing eligibility requirements for actions that occur after the transfer. Any eviction procedures currently underway at Project A will not be affected by the transfer of budget authority. VIII. Multifamily HUB/PC RESPONSIBILITIES The Multifamily Hub/PC will review and analyze the proposals from the Owners A and B and request additional information, as necessary. A. In reviewing the proposals, the Multifamily Hub/PC will: 1. Ensure that Owners A and B meet the requirements outlined in Sections V, VI, and VII. 2. Ensure that Owner A has addressed any comments received from the tenants regarding the proposed transaction. 3. Ensure that the proposal does not include any involuntary displacement of residents. 4. Ensure that the budget authority will be transferred to a project that is in the same state as Project A. If Owner A or B proposes to transfer the budget authority outside of the state, HUD must approve the transfer based on Owner A and/or Owner B’s provided justification. 5. Perform an analysis to ensure that the transfer of budget authority is budget neutral. Headquarters must approve this analysis prior to the transfer. The Department has no statutory authority to increase the budget authority to effectuate the transfer. 6. Ensure that the budget authority will be transferred to an existing project(s) with existing units. Projects under construction are not eligible to receive transferred budget authority. Approval for transfer of budget authority to a contract at a newly constructed or substantially rehabilitated 22 83

Project B may be provided, however, with the understanding that the transfer cannot occur until construction on Project B is complete and the property is habitable. 7. Ensure Owner A and Owner B have demonstrated that Project A (if the project will remain HUD-affiliated) and Project B will remain financially viable after the transfer of budget authority. 8. Review the Tenant Selection Plan, Affirmative Fair Housing Marketing Plan, and Tenant Relocation Plan (if applicable) for sufficiency. 9. Forward the following components of the proposal to FHEO for review and approval: a. The Affirmative Fair Housing Marketing Plan. b. The Tenant Selection Plan if the Owner wishes to adopt a local or residency preference (see HUD Handbook 4350.3, page 4-3). c. The address of Project B to determine compliance with Section VI.A.6.a of this Notice, and if new construction, Section VI.A.6.d of this Notice. If FHEO determines that Project B will be located in an area of minority concentration, they must notify the Multifamily Hub/Program Center staff, who will notify Owner B that they must submit supporting data (e.g., census data, evidence of local revitalization efforts, etc.) in order for FHEO to determine that Project B meets one of the exceptions outlined in Section VI.A.6.d.i or ii. d. FHEO will send a letter to the Multifamily Hub/Program Center indicating approval or disapproval of the proposed transaction within 30 business days of receipt of all pertinent information or request an extension for additional time to review the proposal. 10. Use the address submitted by Owner B to determine if the site and neighborhood of Project B meet the criteria outlined in Section VI.A.6.b and c. 11. Review the documentation submitted to indicate that Owner B is in compliance with all applicable accessibility requirements of the Fair Housing Act, Section 504 of the Rehabilitation Act, and the Americans with Disabilities Act. 12. If applicable, contact the regional relocation specialist to ensure that the Tenant Relocation Plan adheres to the requirements of the Uniform Relocation Act.

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13. Through the analysis of budget authority, ensure that the remaining budget authority is sufficient to cover the total number of units under Contract A1, if applicable, and Contract B. 14. Review the narrative detailing the capacity of the proposed owner and management agent of Project B to own, operate, manage, and if applicable, renovate affordable housing. 15. Verify Project A does not have a bond financed new regulation HAP contract, refunded with a sharing of HAP savings pursuant to Section 1012 of the Stewart B. McKinney Homeless Assistance Amendments Act. 16. Review the information submitted by Owner B to assist HUD with an environmental review of the transfer, as described at VI.A.4, above, and then conduct an environment review in accordance with the environmental regulations and requirements at 24 CFR part 50, prior to approving the transfer. Document the environmental review on Form HUD-4128, “Environmental Assessment and Compliance Findings for the Related Laws”. Guidance for completing the HUD-4128 can be found at the Multifamily Accelerated Processing (MAP) Guide, Chapter 9 and the HUD Environmental Review website (available at https://www.onecpd.info/environmental-review/). HUD may reject transfer requests with unacceptable environmental issues, or when mitigation of an issue is infeasible. B. If the Hub/PC finds that the Owners’ proposals meet the requirements of Sections V, VI, and VII of this Notice, the Hub Director shall submit a recommendation for approval with the complete package to the Policy Development and Research (PD&R) Field Economist for review and an analysis. The PD&R Field Economist will: 1. Provide an analysis for each transfer request to enable Multifamily to assess whether there is sufficient demand for affordable rental housing in the receiving market area and that the transfer does not occur in neighborhoods with highly concentrated poverty. This analysis will consist of the following: Inter-Fair Market Rent (FMR) area transfers

Intra-Fair Market Rent (FMR) area transfers

For Inter-FMR Area transfers, there can be two types: 1) Transferring to a new metropolitan area; or 2) transferring to a new non-metro county.

For Intra-FMR transfers, there can be three types: 1) Within a metro area to a new neighborhood (Small Area Fair Market Rent (SAFMR)/Zip); 2) within a metro area, in the same neighborhood (SAFMR/Zip code); and 3) within a non-

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Inter-Fair Market Rent (FMR) area transfers

Intra-Fair Market Rent (FMR) area transfers metro county.

For moves into a metropolitan area, the receiving property’s neighborhood must be in a SAFMR area with a poverty rate of less than 30 percent, unless:

New Metro Neighborhood

Within a metro area to a new neighborhood (SAFMR/Zip code), the receiving property’s neighborhood must be in a SAFMR area with a poverty rate of less than 30 percent, unless:

a. The receiving property is in a neighborhood receiving a Choice Neighborhoods Grant or is part of a significant state or local revitalization initiative that will result in new construction and substantial rehabilitation of mixed income housing; or

a. The receiving property is in a neighborhood receiving a Choice Neighborhoods Grant or is part of a significant state or local revitalization initiative that will include and result in new construction and substantial rehabilitation of mixed income housing; or

b. The receiving property is in a SAFMR area with a poverty rate between 30 and 40 percent; and either:

b. The receiving property is in a SAFMR area with a poverty rate between 30 and 40 percent; and either

1. Housing market activity within the SAFMR area would indicate that the area is revitalizing; or

1. The proposed receiving site has a higher SAFMR than the current site; or

2. The poverty rate has seen significant recent decline.

2. The proposed receiving site is considered immediately adjacent (within ½ mile) to the current site; or 3. Housing market activity within the SAFMR area would indicate that the area is revitalizing; or 4. The poverty rate has seen significant recent decline.

N/A: By definition moving the budget Old Metro authority to a new FMR area will transfer Neighborhood the budget authority to a new

Within a metro area, and in the same neighborhood (SAFMR/Zip code), the receiving property’s neighborhood must be

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Inter-Fair Market Rent (FMR) area transfers neighborhood.

Intra-Fair Market Rent (FMR) area transfers in a SAFMR area with a poverty rate of less than 30 percent, unless: a. The receiving property is in a neighborhood receiving a Choice Neighborhoods Grant or is part of a significant state or local revitalization initiative that will result in new construction and substantial rehabilitation of mixed income housing; or b. The SAFMR area is between 30 and 40 percent and at least 50 percent of the units at the receiving property are unassisted and either: 1. The proposed receiving site is considered immediately adjacent (within 1/2 mile) to the current site; or 2. Housing market activity within the SAFMR area would indicate that the area is revitalizing; or 3. The poverty rate has seen significant recent decline.

For moves to a non-metropolitan county, the receiving property must be in a county that has a poverty rate less than 30 percent, unless:

Within the same non-metro county, the receiving property must be in a county that has a poverty rate of less than 30 percent, unless:

The county poverty rate is between 30 and 40 percent, and:

The county poverty rate is between 30 and 40 percent and:

Non-Metro

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Inter-Fair Market Rent (FMR) area transfers

Intra-Fair Market Rent (FMR) area transfers

1. The housing market activity within the county would indicate that the area is revitalizing; or

1. The housing market activity within the county would indicate that the area is revitalizing; or

2. The poverty rate has seen significant recent decline; or

2. The poverty rate has seen significant recent decline; or

3. The transaction is part of a statewide portfolio preservation strategy operated by a Housing Finance Agency or is part of a significant state or local revitalization initiative that will result in new construction and substantial rehabilitation of mixed income housing.

3. The transaction is part of a statewide portfolio preservation strategy operated by a Housing Finance Agency or is part of a significant state or local revitalization initiative that will result in new construction and substantial rehabilitation of mixed income housing.

2. The PD&R field economists will write a memo detailing the analysis results to the Hub/PC that is reviewing the transfer proposal. 3. The Multifamily Hub/PC will review the memo. If PD&R has advised against the transfer, the Multifamily Hub/PC will work with the PD&R field economist to understand the reason for the rejection and communicate this reason to the Owner. C. If the Multifamily Hub/PC finds that the owners’ proposals meet the requirements of Sections V, VI, and VII of this Notice, and the PD&R field economist’s memo recommends the transfer, the Hub Director shall submit a recommendation for approval to Headquarters, Director, Office of Asset Management and Portfolio Oversight. The recommendation will include: 1. The analysis performed by the Multifamily Hub/PC to ensure that the transfer of budget authority will not result in an increase in the amount of existing budget authority. 2. The feasibility analyses described above. 3. Background information on Project A and Project B. 4. Summary information on how Project A and Project B meet the requirements of Sections V, VI, and VII.

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5. The number of units and amount of budget authority that will be included under each contract. 6. The PD&R field economist’s memo detailing their analysis. D. Headquarters’ Review and Approval 1. Upon receipt of the completed package from the Hub/PC, the responsible Headquarters office will review the package. 2. If the package meets the requirements defined in this Notice, Headquarters will prepare an approval memo to the Multifamily Hub/PC. a. The Headquarters approval memorandum will include an additional line for the signature of the Performance Based Contract Administrator’s (PBCA) authorized representative for the PBCA to consent to the termination by mutual agreement (and to the prior subdivision, if applicable) of any and all HAP contracts for which the memorandum requires termination by mutual agreement. b. Upon receipt from Headquarters, this memorandum will be sent to the PBCA by the Hub/PC. c. An authorized representative of the PBCA must sign this memorandum on the designated signature line. E. Upon receipt of approval from Headquarters, the Multifamily Hub/PC will ensure that (See Appendix Four for further clarification): 1. For Project A: a. If all of the remaining budget authority is to be transferred, Contract A is terminated before the transfer takes place. b. If a portion of the remaining budget authority will remain at Project A, Contract A is subdivided into two or more contracts (e.g., Contract A1, Contract A2, etc.) prior to termination of Contract A. The budget authority associated with Contract A1 will remain at the project and the contract will be amended using Amendment A (attached as Appendix Two-A). Contract A2 will be terminated by mutual agreement, and the budget authority associated with Contract A2 (and others, if applicable) transferred to Project B.

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c. Owner A and the contract administrator mutually agree to terminate amended Contract A1, and on the same day Owner A and the contract administrator execute a renewal of Contract A1 for a 20-year term, subject to appropriations, under any MAHRA renewal option for which Contract A1 is eligible. d. The Preservation Exhibit (Appendix Three) is attached to the 20year renewal contract and is completed. 1. For Project B: a. If there is an existing Section 8 HAP contract, Owner B and the contract administrator must execute Amendment B (attached as Appendix Two-B). b. Owner B and the contract administrator must mutually agree to terminate amended Contract B, and on the same day, Owner B and the contract administrator must execute a renewal of Contract B for a 20-year term, subject to appropriations, under any MAHRA renewal option for which Contract B is eligible. In addition, the Preservation Exhibit (Appendix Three) must be attached to the renewal contract and completed. c. If there is no existing Section 8 HAP contract at Project B, the Owner and the contract administrator execute a new regulation Part 880 project-based Section 8 HAP contract (Contract B) with a one-day term (Appendix One). On the same day, Owner B will execute a renewal contract, that will be effective at the end of the one-day term, and will be renewed under any renewal option for which Project B is eligible with the understanding that HUD will use the budget authority transferred from Project A until expended to reduce the amount of appropriations needed to fund the 20-year MAHRA Renewal Contract. d. Owner B receives approval through the Previous Participation process, including a 2530 review. e. Before the transfer takes place, Project B must have a REAC score of at least 60 or Owner B must submit a plan that is acceptable to HUD to correct any identified deficiencies as part of the transfer transaction and bring the REAC score to 60 or above. If Project B does not have a current REAC physical inspection score, an inspection must be conducted and the score must be 60 or above or the Owner must submit a plan that is acceptable to HUD to correct any identified deficiencies as part of the transfer transaction. 29 90

F. The Multifamily Hub/PC will also ensure that: 1. Contract A1 and Contract B are established as described in Appendix Five, “Steps for Establishing a New Section 8 Contract under Section 8(bb) in PAS/LOCCS/TRACS.” 2. Upon completion of the transfer, iREMS is updated to reflect the changes made to the projects, including the information from the Appendices. If you have any questions regarding this Notice, please contact your local HUD Field Office or your Desk Officer in the Office of Asset Management.

IX.

Findings and Certifications A. Information Collection

The information collection requirements contained in this document are approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control numbers 2502-0587 and 25020182. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number. B. Environmental Impact A Finding of No Significant Impact (FONSI) with respect to the environment has been made in accordance with HUD regulations at 24 CFR part 50.19(c), which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is available for public inspection between 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW, Room 10276, Washington, DC 20410–0500. Due to security measures at the HUD Headquarters building, an advance appointment to review the docket file must be scheduled by calling the Regulations Division at 202–708–3055 (this is not a toll-free number). Hearing or speech-impaired individuals may access this number through TTY by calling the toll-free Federal Relay Service at 800–877–8339.

______________________________ Biniam Gebre Assistant Secretary for Housing Federal Housing Commissioner 30 91

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Appendices Appendix One -- New Regulation Part 880 Section 8 HAP Contract – Parts I and II. If a PHA is the contract administrator for the State in which the project is located, the PHA must execute the Part 880 Section 8 HAP Contract. However, the Hub/PC must ensure that HUD has transferred budget authority to the Part 880 HAP Contract before the Owner and the Contract Administrator execute it. Forms HUD-52522a and HUD52522b. Appendix Two-A -- Amendment to Contract A1 whereby Owner A and the contract administrator agree to a reduction in the number of units covered by Contract A1 and Owner A agrees to comply with the requirements of (i) the Physical Condition Standards and Inspection Requirements of 24 CFR Part 5 Subpart G, (ii) the Physical Condition of Multifamily Properties of 24 CFR Part 200 Subpart P, and (iii) the Uniform Financial Reporting Standards of 24 CFR Part 5 Subpart H. If a PHA is the contract administrator for the State in which the project is located, the PHA must execute the Amendment. Form HUD-93185a. Appendix Two-B -- Amendment to Contract B whereby Owner B and the contract administrator agree to an increase in the number of units covered by Contract B and Owner B agrees to comply with the requirements of (i) the Physical Condition Standards and Inspection Requirements of 24 CFR Part 5 Subpart G, (ii) the Physical Condition of Multifamily Properties of 24 CFR Part 200 Subpart P, and (iii) the Uniform Financial Reporting Standards of 24 CFR Part 5 Subpart H. If a PHA is the contract administrator for the State in which the project is located, the PHA must execute the Amendment. Form HUD-93185b. Appendix Three -- Preservation Exhibit. Appendix Four -- Matrix: Requirements for Section 8 HAP Contracts Appendix Five -- Steps for Establishing a New Section 8 Contract under Section 8(bb) in PAS/LOCCS/TRACS.

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HUD-Initiated Fair Housing Complaints Have Doubled Most disability-related complaints involved failure to make reasonable accommodations If you’ve had any doubts whatsoever that the U.S. Department of Housing and Urban Development (HUD) is seriously cracking down on fair housing violations, its annual report to Congress will change your mind. On Nov. 7, HUD released its report on the state of fair housing for fiscal years (FYs) 2012 and 2013. In addition to detailing HUD’s many recent efforts to combat housing discrimination, the report also offers up some surprising statistics. During FY 2010 and FY 2011, there were only 18 HUD Secretary-initiated complaints, compared with 36 filed by HUD in FY 2012 and FY 2013. “Secretary-initiated complaints are filed by the HUD Secretary and typically involve a broader systemic issue rather than a particular instance of discrimination,” explains the National Low Income Housing Coalition (NLIHC). HUD alone worked on 3,577 housing discrimination complaints during FY 2012-2013 and charged, settled or referred to the U.S. Department of Justice (DOJ) approximately 40 percent of those cases. Pitfall: Compared with the FY 2010-2011 period, disability-related discrimination complaints in FY 2012-2013 increased considerably, while discrimination complaints based on race declined. Of the 4,429 disability-related complaints in FY 2013, most (57 percent) involved an owner’s/agent’s failure to make a reasonable accommodation. Disability complaints also accounted for the biggest share of total discrimination complaints in FY 2013 (53 percent), while race-based discrimination complaints totaled 28 percent of the total complaints. Familial status accounted for 14 percent, national origin accounted for 12 percent, sex for 12 percent, retaliation for 11 percent, religion for 3 percent, and color for 2 percent. To access “Fiscal Year 2012-2013 Annual Report on the State of Fair Housing in America,” go to http://portal.hud.gov/hudportal/documents/huddoc?id=2012-13annreport.pdf.

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FAIR HOUSING AND EQUAL OPPORTUNITY FAIR HOUSING PROGRAMS 2015 Summary Statement and Initiatives (Dollars in Thousands) FAIR HOUSING PROGRAMS

Enacted/ Request

2013 Appropriation ................

$70,847

2014 Appropriation/Request ........

66,000

2015 Request ......................

71,000b

Program Improvements/Offsets ......

+5,000

Supplemental/ Rescission

Carryover $9,769a/

Total Resources

Obligations

Outlays

-$3,706

$76,910

$58,619

$73,484

18,264

...

84,264

83,000

71,000

1,264

...

72,264

71,000

72,000

-17,000

...

-12,000

-12,000

+1,000

a/ Includes $85 thousand of collections from the National Fair Housing Training Academy and $328 thousand of actual recaptures. b/ This number includes an estimated Transformation Initiative (TI) transfer that may be up to 0.5 percent or $15 million, whichever is less, of Budget Authority.

1. What is this request? For fiscal year 2015, the Department requests $71 million for Fair Housing programs, a $5 million increase from the fiscal year 2014 enacted amount. This request includes $45.6 million for the Fair Housing Initiatives Program (FHIP); $23.3 million for the Fair Housing Assistance Program (FHAP); $1.8 million for the National Fair Housing Training Academy (NFHTA); and $300 thousand for the Limited English Proficiency Initiative (LEPI). The fiscal year 2015 request for FHIP provides an increase of $5.5 million from fiscal year 2014. This will support testing to respond to the results of HUD’s recent Housing Discrimination studies (HDS). Due to fewer agencies in the FHAP, the Department decreased the request for FHAP by $500 thousand, excluding the NFHTA, from fiscal year 2014. The request for the NFHTA is level with the fiscal year 2014 enacted amount, but breaks it out into a separate program. Lastly, the LEPI is level with the 2014 enacted amount. The implementation of the Affirmatively Furthering Fair Housing (AFFH) rule requires that FHEO provide technical assistance, review, and report on the fair housing assessments of every entitlement jurisdiction and Public Housing Authority funded by FHEO. This staff will be responsible for a range of activities, including providing direct technical assistance to CPD grant recipients; reviewing, commenting on Assessment of Fair Housing submitted by Community Planning and Development recipients and PHAs and Consolidated Plans from PHAs. This staff will also prepare guidance and conduct trainings on the new rule. This initiative will serve over 1,200 state and local jurisdictions that receive Community Development Block Grant funds and an additional 300 estimated PHAs.

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Fair Housing Programs In fiscal year 2015, HUD’s fair housing programs will accomplish the following to support the Department's strategic goal of Building Inclusive and Sustainable Communities Free from Discrimination: 

Investigate at least 8,000 administrative complaints of housing or lending discrimination through FHAP, approximately the same number as in fiscal year 2014 and another 21,000 independent FHIP investigations into allegations of rental, sales, lending, or insurance discrimination, up 1,000 from approximately 20,000 estimated in fiscal year 2014.



Conduct testing to detect housing discrimination based on race, national origin, disability, religion, familial status, color, or sex. This includes testing for rental discrimination, lending discrimination, and refusals to make reasonable accommodations, as well as inspections for design and construction violations.



Conduct national, regional and local housing discrimination tests to follow up on the Department’s studies of housing discrimination. HUD is investing $26 million to support housing discrimination studies over a three year period, including $9 million for the Housing Discrimination Study released in June 2013, “Housing Discrimination Against Racial and Ethnic Minorities,” available at http://www.huduser.org/Publications/pdf/HUD-514_HDS2012.pdf



Educate more than one million people about their right to housing and lending free from discrimination and what to do if their rights are violated.



Develop a national media campaign to support national education messages about fair housing rights and the obligation to affirmatively further fair housing in the rental market that will reach an estimated 100,000,000 viewers.

Staffing and Key Functions Affirmatively Furthering Fair Housing activities involve remote and on-site monitoring of HUD funded recipients and conducting associated compliance reviews. This AFFH function entails developing policies and procedures for ensuring implementation of, and compliance with, Title VI of the 1964 Civil Rights Act, Section 504 of the 1973 Rehabilitation Act, Title II of the Americans with Disabilities Act, and the Age Discrimination Act, and the Architectural Barriers Act. On July 19, 2013, the Department published the proposed rule on “Affirmatively Furthering Fair Housing.” The proposed rule refines existing requirements so the individuals, organizations, and state and local governments implementing HUD programs better understand their requirements under the Fair Housing Act and have the tools they need to Affirmatively Further Fair Housing, ensuring that every American has the opportunity to live in the community of their choice without facing discrimination. Under the

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Fair Housing Programs proposed new rule, HUD will provide program participants with a more clearly articulated definition of what it means to affirmatively further fair housing; and; nationally uniform data and a geospatial tool; The Department expects to issue a final rule in 2014. The FHEO Salaries and Expenses (S&E) request in this program justification for fiscal year 2015 is $7.8 million, of which $7.7 million is for Personnel Services (PS) and $149 thousand is for Non-Personnel Services (NPS). The request is for 59.6 FTE’s for activities associated with the FHAP and the FHIP. This compares to $8.1 million for S&E and 63.1 FTEs for FHIP and FHAP enacted for fiscal year 2014. Please see the justification “Salaries and Expenses – FHEO” for further details. 2. What is this program? HUD’s fair housing programs each play a crucial and unique role in the Department’s work to support fair housing enforcement and education and to strengthen the efforts of states, communities, and public housing authorities to prevent discrimination and affirmatively further fair housing. Though Title VIII of the Civil Rights Act of 1968 outlawed housing discrimination more than 45 years ago, housing discrimination of all types continues in communities throughout the nation. The National Fair Housing Alliance, a national consortium of more than 220 private, non-profit fair housing organizations, state and local civil rights agencies, and individuals, estimates that more than 4.0 million people every year are victims of discrimination.1 The FHIP, the FHAP, and the NFHTA address housing discrimination and its long term consequences and are the only funded programs in the federal government dedicated to assisting individuals to get justice for housing discrimination. Along with the work of HUD's Office of Fair Housing and Equal Opportunity, these programs work in concert to redress injuries to victims, prevent housing discrimination and eliminate segregation. The FHAP provides much needed support to approximately 90 state and local government civil rights agencies to investigate housing discrimination within their jurisdictions. In recent years, several small, local FHAP agencies that process fewer than five complaints per year have closed or lost their FHAP status due to state and local budget issues and/or not meeting HUD performance standards. In all of these circumstances, there was a larger state FHAP agency that covered the local jurisdiction. Accordingly, future complaints that would have been processed by the closed agency have been absorbed by the state FHAP agency. The FHAP is critical to assisting individuals and families who believe they are victims of discrimination. These agencies investigate more than three-fourths of the formal housing discrimination complaints filed each year. The FHIP supports excellent fair housing education and enforcement by private non-profit groups in more than 120 communities. These groups provide advice, technical assistance, testing, and investigations that complement the work of HUD and FHAP agencies.

1

National Fair Housing Alliance, 2013 Fair Housing Trends Report; Modernizing the Fair Housing Act for the 21st Century, 2013.,

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Fair Housing Programs FHIP agencies also conduct education and outreach activities that help inform people of their rights under the Fair Housing Act, as well as educate the housing industry about compliance with the Fair Housing Act. The NFHTA further enhances fair housing work in the country. Through its one-of a-kind fair housing training tailored to fair housing investigators, administrators, and testers, the NFHTA provides advanced courses as well as a 5-week certification program for fair housing investigators. Finally, LEPI ensures that individuals are aware of their housing rights and able to assert them, regardless of the language they may speak. Fair Housing Initiatives Program Increase/Decrease 2015 From 2014 Request $31,600,000 +$2,325,000

2013 Enacted $24,765,000

2014 Enacted $29,275,000

Education and Outreach Initiative

4,571,000

6,250,000

8,000,000

+1,750,000

Fair Housing Organization Initiative

9,940,000

3,575,000

5,000,000

+1,425,000

FIRST

1,000,000

1,000,000

1,000,000

…

40,276,000

40,100,000

45,600,000

+5,500,000

Fair Housing Initiatives Program Private Enforcement Initiative

Total

The Fair Housing Initiatives Program (FHIP) was created under Section 564 of the Housing and Community Development Act of 1987 to establish and support a network of experienced fair housing enforcement organizations throughout the nation to foster compliance with the Fair Housing Act and state and local fair housing laws. This is the only grant program within the federal government whose primary purpose is to support private efforts to prevent and address housing discrimination. The mission of FHIP is to eradicate discrimination in all forms from the housing market. This is accomplished through the interplay of three major components: Private Enforcement Initiative (PEI), Education and Outreach Initiatives (EOI); and Fair Housing Organizations Initiatives (FHOI). PEI supports high quality, effective investigations, and testing by private fair housing organizations in more than 120 communities. While HUD, states, and local agencies handle official administrative complaints of housing discrimination, FHIP grantees investigate individual allegations in a way that is different and complementary to this work. They provide on-the-spot assistance without the lengthy administrative and legal requirements of a formal legal complaint. When necessary, fair housing enforcement organizations do not hesitate to file court cases on behalf of victims of discrimination, often advancing the fair housing law for the nation.

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Fair Housing Programs Using PEI funds, FHIP agencies often lead the nation in pursuing cutting edge fair housing cases. For example, in fiscal year 2013, HUD signed a $39 million settlement with Wells Fargo Bank, resolving allegations that the bank failed to market and maintain real estate owned (REO) properties that it owned, serviced, or held in trust after foreclosure in Black and Hispanic neighborhoods, compared to those in White neighborhoods. The initial complaint was brought to HUD by the National Fair Housing Alliance (NFHA), a FHIP grantee, and other fair housing groups after they did their own independent investigation. Under the settlement, Wells Fargo will invest a total of $39 million in grants to non-profit organizations and municipal entities to support home ownership, neighborhood stabilization, property rehabilitation, and housing development in 45 communities across the country. Wells Fargo will also develop new best practices and conduct trainings related to REO properties. PEI also supports testing to detect and deter housing discrimination as well as to prove allegations of discrimination. FHIP grantees conduct almost all of the fair housing testing in the country and engage in enforcement activities. For example, a series of tests conducted by the Fair Housing Center of Metropolitan Detroit (FHC), a FHIP grantee, resulted in a $100,000 settlement of a discrimination case against the owner of a 330-unit apartment complex in Detroit, MI for discrimination against families with children and African Americans. Approximately $3.5 million of PEI funds will be used to conduct national and regional testing to follow up on the findings of the Department’s recent studies into housing discrimination based on race, national origin, disability, and familial status. A second major initiative, FHOI, supports the establishment of new fair housing organizations in underserved areas. Without this funding, communities such as Indianapolis, Indiana; Dallas, Texas; and Columbia, South Carolina would have no local private fair housing presence. FHOI also enhances the capacity of existing organizations by supporting enforcement organizations to use an expert architect or economist or supporting fair housing education organizations to add enforcement staff. Through EOI, FHIP grantees conduct education campaigns on the rights, responsibilities, remedies, and resources available under the Fair Housing Act. Each year the Department awards local and regional grants that fund more than 32,000 local education and outreach efforts, working with people in their own communities to provide information, referrals, education and training on fair housing rights. These organizations also train lenders, housing providers, real estate agents, and others on how to comply with the Fair Housing Act. In addition, the Department awards a national fair housing education and outreach grant to disseminate a broad national fair housing message. As a separate education program, Fair Housing Accessibility FIRST is a superb mechanism to ensure compliance with the Fair Housing Act. It educates builders, designers, architects, and planners on the Fair Housing Act's accessibility requirements for multifamily housing.

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Fair Housing Programs Fair Housing Assistance Program

Fair Housing Assistance Program

2013 Enacted

Complaint Processing

$12,449,000

$19,800,000

$19,500,000

$-300,000

3,524,000

2,480,000

2,480,000

…

Capacity Building

120,000

120,000

120,000

…

Training

986,000

1,200,000

1,200,000

…

…

200,000

…

-200,000

…

….

[1,800,000]

$-1,800,000

Total 26,579,000 25,600,000 23,300,000 *Funding for NFHTA is requested in fiscal year 2015 as a separate line item. See page 8 for details.

-2,300,000

Administrative Costs

Biennial Policy Conference

2014 Enacted

Partnership Funding

8,000,000

……

NFHTA

1,500,000

1,800,000

2015 Request

Increase/Decrease from 2014

The FHAP authorized under 42 U.S.C. 3601, et. seq., provides consistent and dependable funding through partnerships with state and local civil rights enforcement agencies to combat housing discrimination. FHAP jurisdictions provide rights, remedies, and procedures that are substantially equivalent to the Fair Housing Act. By providing these services locally, FHAP agencies reduce the cost of investigating complaints of discrimination and serve as a vital community resource for housing discrimination and civil rights issues. The presence of a FHAP agency in a community increases the likelihood that a victim of discrimination will file a complaint. The FHAP provides support to 90 state and local government civil rights agencies for an average cost of less than $250,000 per agency for pursuing housing discrimination within their jurisdictions. FHAP is critical to assisting individuals and families who believe they have been victims of discrimination. These agencies investigate the majority (80 percent) of the administrative fair housing complaints filed in the country. They plan the investigations, interview parties and witnesses, gather and analyze evidence, facilitate resolution, and render determinations. Further, these agencies ensure compliance with settlement agreements and, where necessary, litigate complaints to address violations. FHAP agencies also conduct education on fair housing and fair lending at events throughout their communities. These agencies often serve as the principal civil rights enforcers in their communities and assist jurisdictions' efforts to affirmatively further fair housing.

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Fair Housing Programs National Fair Housing Training Academy (NFHTA) National Fair Housing Training Academy National Fair Housing Training Academy Total

2013 Enacted* [$1,500,000] [$1,500,000]

2014 Enacted *

2015 Request

Increase/Decrease from 2014

[$1,800,000]

$1,800,000

$+1,800,000

[$1,800,000]

1,800,000

$1,800,000

*Funding was provided under FHAP The Budget request for the National Fair Housing Training Academy (NFHTA) will allow the Department to provide additional courses to a broader housing audience, offer courses in a wider range of locations, support cross-training, and develop an effective national training strategy that ensures that those who work in fair housing nationally have access to a consistent, reliable training resource. Established in 2004, NFHTA provides fair housing and civil rights training to federal, state, and local agencies, educators, attorneys, industry representatives, FHEO staff, and other housing industry professionals. This training conveys information needed to comply with fair housing laws and eliminate housing discrimination. With a faculty composed of some of the foremost experts in fair housing litigation, training, and research, NFHTA brings hands-on experiences to the classroom. The Academy provides investigators with a 5-week certification program which covers such topics as Fair Housing Law and Ethics; Critical Thinking and Investigation; Interviewing Techniques, Standards for Testing Cases and Negotiation Skills for Investigators. Additionally, the NFHTA offers advanced courses in predatory lending, accessibility, executive leadership, and conciliation. This investment into the future of fair housing and the capacity of fair housing professionals will allow the FHIP and FHAP programs to operate more efficiently and produce cases with larger impacts in coming years. NFHTA offers these various courses on a fee basis established by course and per participant. The tuition fees paid by students who attended the academy are deposited to the HUD Accounting Center in Fort Worth on a monthly basis and are reinvested in the Academy’s operations. The fees will be used for curriculum development. New classroom and online courses will be developed for new audiences, including community organizations, state and entitlement jurisdictions, attorneys, housing counseling agencies and other stakeholders. Strategic marketing of the NFHTA and the ability to provide new and up-to-date courses, especially on-line to new targeted audiences, will generate revenue over a period of time to help sustain the NFHTA.

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Fair Housing Programs A 2009 assessment of NFHTA by the Center for Organizational Excellence found that progressive completion of the NFHTA curriculum "positively impact[s] the job performance of FHAP investigators in a way that benefits the organization, primarily in timeliness and quality of case completion." It also found that taking additional NFHTA courses beyond the core curriculum had a continuing positive effect on the timeliness of investigations. The support provided through the Training Academy allows these organizations to spend the recourses they already have to provide better investigations and work smarter and more effectively. Limited English Proficiency Initiative (LEPI)

Limited English Proficiency Initiative

2013 Enacted

2014 Enacted

2015 Request

Increase/Decrease from 2014

Limited English Proficiency Initiative

$284,208

$300,000

$300,000

$-0-

284,208

300,000

300,000

$-0-

Total

LEPI is vital to ensuring that individuals who are not proficient in English are aware of their rights, able to understand the terms of leases and other housing-related documents, and able to receive important announcements that affect the health or safety of their households. In addition, the initiative educates HUD-assisted housing providers on their responsibilities under federal law and HUD regulations to ensure that their housing programs and activities are fully accessible to all, regardless of national origin or English proficiency. Finally, this initiative saves HUD staff time, as it helps HUD more efficiently communicate with, and thereby serve, the needs of people who are not fluent in English. Since Congress initiated the LEPI program in fiscal year 2008 and provided funding in fiscal years 2008 through 2014, the Department has used this funding to translate vital HUD documents such as model leases; fair housing complaint forms; statements of residents’ rights and responsibilities; information on how to become a first-time homeowner and how to avoid loan fraud and foreclosure; and fair housing information for disaster housing providers and survivors. This request will fund not only translation of HUD documents and printing but oral interpretation services at HUD events; oral interpretation for LEP persons seeking to access HUD services by telephone; acquisition of technology that conducts simultaneous oral translation; marketing of HUD’s language access services to the populations that need them; and public education on the availability of and the right to obtain information regarding HUD-funded services in multiple languages. Without translated documents and oral interpretation services persons with limited English proficiency would not be able to access the Department's programs in the same way as an English speaking person(s).

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Fair Housing Programs Who do we serve? Discrimination occurs in different types of housing and in many different types of housing transactions. The FHIP program was created to assist people from various demographic and socio-economic backgrounds and to provide independent support for investigations and enforcement by federal, state and local enforcement agencies. The National Fair Housing Alliance, a consortium of fair housing organizations, many of which are supported by FHIP funds, recently released a report, Fair Housing in a Changing Nation, which stated that in 2012, 19.2 percent of complaints investigated by private fair housing organizations alleged race discrimination; 44.3 percent alleged discrimination against a person with a disability; 5.4 percent alleged discrimination against people because of their national origin; and 16.6 percent alleged discrimination against a family because of children. Similarly, in 2012, 30.5 percent of complaints investigated by state and local enforcement agencies alleged racial discrimination; 48.1 percent alleged discrimination against a person with a disability; 12.4 percent alleged discrimination against people because of their national origin; and 14.5 percent alleged discrimination against a family because of children. 3. Why is this program necessary and what will we get for the funds? The Department's Housing Discrimination Against Racial and Ethnic Minorities (HDS) 2 study in 2012 found that real estate agents and rental housing providers recommend and show fewer available homes and apartments to minority families, thereby increasing their costs and restricting their housing options. The HDS found that there were no “worst performing areas”, meaning discrimination was pretty consistent across the nation and supports the notion that housing discrimination is a national, not a regional, phenomenon. The Executive Summary for this study can be viewed at http://www.huduser.org/portal/Publications/pdf/HUD-514 HDS 2012 execsumm.pdf. Details from the study of ethnic discrimination are below: African American  African American renters who contact agents about recently advertised housing units learn about 11 percent fewer available units and are shown roughly 4 percent fewer units.  African American homebuyers who contact agents about recently advertised homes for sale learn about 17 percent fewer available homes and are shown about 18 percent fewer homes.

2

Housing Discrimination Against Racial and Ethnic Minorities, (2012) at page 13, available at http://www.huduser.org/Publications/pdf/HUD514_HDS2012_execsumm.pdf

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Fair Housing Programs Asian American  Asian American renters who contact agents about recently advertised housing units learn about 10 percent fewer available units and are shown nearly 7 percent fewer units.  Asian American homebuyers who contact agents about recently advertised homes for sale learn about 15 percent fewer available homes and are shown nearly 19 percent fewer homes. Hispanic  Hispanic renters who contact agents about recently advertised housing units learn about 12 percent fewer available units and are shown roughly 7 percent fewer units. 

The difference in treatment for Hispanic homebuyers is not statistically significant.

It is notable that the 2012 Housing Discrimination Study recommended follow up testing so that enforcement strategies do not rely primarily on individual complaints of suspected discrimination. It recommended that HUD encourage the local fair housing organizations it funds to conduct more proactive testing.3 This proposal responds to that recommendation. Discrimination has a costly impact on its victims. HUD’s recent HDS found that “although the most blatant forms of housing discrimination (refusing to meet with a minority homeseeker or provide information about any available units) have declined since the first national paired-testing study in 1977, the forms of discrimination that persist (providing information about fewer units) raise the costs of housing search for minorities and restrict their housing options.” The study found that discrimination increases the duration of the search, constrains the housing choices of homeseekers and can result in higher costs for individual applicants. Housing is critical to many aspects of a person's life. Therefore, housing discrimination can have a compounding effect on its victims, devastating their social and financial limits. The exclusion of African Americans and other minorities from neighborhoods that offer high quality schools and access to jobs and quality services has perpetuated racial inequalities in the United States. A study on the effect of housing segregation on Latino employment found that in cities with greater segregation, employment rates were lower for Latino men, and as these cities became more segregated over a 20-year period, employment rates of Latino men decreased even further.4 A study of the effect of housing segregation of African Americans in cities found strong consistent evidence that as segregation increases, African Americans "have lower high school graduation rates, are more likely to be neither in school nor working, earn less income, and are more likely to be single mothers.” Findings include that 20- 24-year old African Americans in more segregated cities have a 5.5 percentage point lower high school graduation rate than 20- 24-year old African Americans in less segregated cities, and segregation increases the percentage of 20-24 year old African Americans who are neither in school nor 3 4

Id. Dickerson vonLockette and Jacqueline Johnson, “Latino Employment and Residential Segregation in Metropolitan Labor Markets, “Du Bois Review, 7(1), 2010.

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Fair Housing Programs working by 6.2 percentage points.5 Racial segregation has also been identified as having a negative effect on communities’ economic growth as well as on individual skill sets. 6 America cannot reach its fullest potential compared to the rest of the world if segregation and discrimination prevent people from accessing good schools and good jobs. Despite the persistence of discrimination, federally funded fair housing enforcement and education have complimented and reinforced social changes, and thereby have moved the needle significantly in several key aspects. There are four complementary mechanisms by which Congressional appropriations for FHAP, FHIP, and the Fair Housing Training Academy reduce housing discrimination: 1. 2. 3. 4.

Detection and remedy of discrimination; Deterrence of willful violators through increased severity, immediacy, or probability of penalties; Education of ignorant violators about their legal responsibilities; and Education of potential victims both to assert their civil rights and to seek remedies.

Funding for FHAP agencies and FHIP organizations both contribute substantially to the first two mechanisms, detection and deterrence. The Fair Housing Training Academy enhances the first two factors by increasing the capacity of local partners to improve the timeliness, consistency, and probability of detection and conciliation. Speedy and successful investigations, especially when publicized,7 strengthen the deterrence of willful violations. FHIP education and outreach efforts primarily operate through the latter two mechanisms, educating landlords/agents, as well as those seeking housing. In a secondary effect that may not be obvious, factors that increase deterrence also can serve the fourth mechanism and increase the probability of victims seeking assistance. HUD’s fair housing awareness survey showed that 80 percent of respondents who had a plausible basis for a discrimination claim nevertheless took no action about the incident. These victims frequently reported that they remained silent because they thought it wasn’t worth it or that no good would result. Greater certainty of success would dramatically reduce the silent victimization. According to the authors, “Two-thirds of those who expect that filing a complaint would bring about a good outcome say they would be very likely to file one if they were discriminated against, compared to less than onefourth of those who do not anticipate good results.”8

5

Cutler, David M. and Edward Glasser, "Are Ghettos Good or Bad?" The Quarterly Journal of Economics, August 1997. Li Huiping, Campbell, Harrison, Fernandez, Steven, “Residential Segregation, Spatial Mismatch and Economic Growth across US Metropolitan Areas,” (2013) available at http://usj.sagepub.com/content/50/13/2642 7 Myers, Samuel L., Jr. “Final Report: The Deterrent Effects of Media Accounts and HUD Enforcement on Racial Disparities in Loan Denial Rates.” 2007. http://www.hhh.umn.edu/centers/wilkins/pdf/HUD_finalreport_march2009.pdf. 8 HUD, “Do We Know More Now? Trends in Public Knowledge, Support and Use of Fair Housing Law.” 2006. 6

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Fair Housing Programs 4. How do we know this program works? FHIP and FHAP are necessary to overcome housing discrimination in this country. As discussed above, fair housing enforcement operates through several direct and indirect mechanisms to reduce discrimination. The long-term results are seen both in reduced discrimination in HDS studies and in controlled econometric studies. HDS 2012 found continued evidence of discrimination against Black and Asian homeseekers, although reduced from prior studies. Ross and Galster studied variation of enforcement activity between metropolitan areas, and concluded that “higher amounts of state and local enforcement activity supported by HUD through its FHIP and FHAP programs (especially the amount of dollars awarded by the courts) were consistently associated with greater declines in discrimination against black apartment-seekers and home-seekers.” 9 In 1977, HUD’s first national study of discrimination against African Americans detected high levels of blatant rental and sales discrimination in both rental and sales markets. In 1989 HUD conducted another HDS measuring discrimination against Hispanics as well as blacks. This study again found high levels of discriminatory treatment in both rental and sales markets nationwide. However HUD’s HDS2000, found that while still significant, levels of discrimination against African American and Hispanic buyers and African American renters decreased since 1990, unfortunately discrimination against Hispanic renters remained constant. HDS 2000 also looked at discrimination against Asian Americans. HUD’s study Housing Discrimination Against Racial and Ethnic Minorities 2012 assessed discrimination against well-qualified African American, Hispanic, and Asian American renters. Due to changes in housing markets, sampling methods, and testing protocols, results from HUD’s four decennial paired-testing studies cannot be precisely compared. But they do provide a qualitative picture of trends in the adverse treatment of minority homeseekers. In particular, it shows that blatant “door slamming” discrimination when an African American or Hispanic renter is told that an advertised unit is unavailable declined significantly in 1989 and has continued to decline since then. HUD’s study of the Fair Housing Initiatives Program (FHIP) from its inception in 1987 through 2006 analyzed the types of grants awarded through the program, the outcomes of cases investigated by recipients, and any difference in outcomes of cases referred by FHIPs with those referred by others. The study found that FHIP organizations fulfill an important role by reducing the number of inquiries that HUD and FHAP agencies receive. Of those cases where FHIP organizations conduct preliminary investigations, 43 percent are determined not to have cause and an additional 27 percent are resolved by the FHIP without a referral, 15 percent are referred to HUD or a FHAP. The remaining 15 percent are litigated or resolved in another venue. Of the FHIP generated inquiries which are referred to HUD, 90 percent of them become complaints and are investigated, compared with only 38 percent of inquiries brought directly to HUD by a complainant. This is because of the weeding out of cases discussed in 9

Ross, Stephen L., and George C. Galster. “Fair Housing Enforcement and Changes in Discrimination between 1989 and 2000: An Exploratory Study.” University of Connecticut Working Paper 2005-16, 2005.

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Fair Housing Programs the paragraph above. Additionally, the study estimates that the work of FHIP organizations likely reduced HUD's inquiry workload by nearly one-fourth. 10 The study also found that FHIP organizations provide useful investigative and testing evidence to support a complaint. When a FHIP organization is involved with a case, the Department consistently reached a cause finding more quickly than it did in cases without FHIP support. This is because FHIP organizations do a significant amount of the investigative work, including testing, to make a determination for cause easier for HUD and FHAP investigators than a case brought independently by a complainant to HUD or a FHAP. FHIP organizations are also the primary source of all testing evidence used to support complaints. FHIP organizations are involved in only 10 percent of the total cases that HUD and the FHAPs investigate, but represent 85 percent of the cases with testing evidence. Finally, the study determined that FHIP organizations play an important role in bringing forth more complex complaints. FHIP organizations are involved (either as a representative or complainant) in 42 percent of the design and construction complaints, 62 percent of familial status complaints, and 55 percent of pattern and practice cases referred to the Department of Justice. These numbers are especially striking considering that FHIPs are only involved in 10 percent of the total cases investigated by HUD and the FHAPs. The findings of this study clearly show that our FHIP partners are fundamental to HUD’s ability to aggressively combat discrimination.11 FHIP organizations also play a critical role in promoting public awareness to inform people of their rights under the Fair Housing Act. The FHIP study found that the most common education and outreach activities conducted by FHIP organizations include the distribution of education and outreach materials and fair housing training for landlords, apartment managers, and real estate agents.12 HUD studies on public awareness have found that the majority of the public is knowledgeable about most aspects of the Fair Housing Act, and that between 2001 and 2005 there was a significant increase in overall support of fair housing laws.13 For example, support improved by 9 percentage points for opposing restricting home sales based on race, and 8 percentage points for opposing real estate agents limiting client home searches based on neighborhood racial composition. In some areas, such as discrimination in the amount paid for a downpayment, approximately 85% of the public disapproved of the discriminatory treatment. Public disapproval of racial discrimination in real estate sales rose by 9 percentage points between 2000 and 2005, for example, from 79 percent to 88 percent. In order to prevent waste fraud and abuse in the FHIP, the Department conducts multiple reviews throughout the life of the grant. Firstly, prior to awarding funding, the Department assembles a panel of fair housing experts to review grant applications and select the best organizations for funding. Secondly, during the grant application process, each grantee informs the Department of specific 10 11 12 13

HUD, “Study of the Fair Housing Initiatives Program,” 2011. Ibid. Ibid. HUD, “Do We Know More Now?: Trends in Public Knowledge, Support and Use of Fair Housing Law.” 2006.

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Fair Housing Programs measurable outcomes it will achieve during the course of the grant, and if it receives an award, it reports to the Department quarterly on its progress on these goals. In addition, every year for every grant, the Department conducts a monitoring review of the grantee. This includes reviewing cases, financial records, and testing methodology. If the grantee has failed to comply with proper procedures and grant requirements, the Department initially provides technical assistance to correct the error, but if a problem persists, FHEO will withdraw the grant and the organization's funding. Finally, at the conclusion of the grant the Department conducts a performance assessment of the grantee. This assessment looks at the project management, project outcomes, financial management, and the timeliness of performance. The score given on this final assessment helps determine eligibility for future FHIP grants. Any grantee with poor performance cannot receive funding from the FHIP until the regional office attests that the grantee has resolved its problems. The Department oversees FHAP agencies to ensure that complainants receive a high-quality investigation, that skilled investigators are handling the case, and that the agency's administration and interpretation of the law furthers civil rights in the community. HUD ensures high-quality investigations by reviewing every complaint investigated by FHAP agencies for timeliness and quality. Based on that review, the program reimburses FHAP agencies up to $2,600 per complaint, based on the timeliness and quality of the investigation. Finally, the program ensures that agencies properly document all cases and enforce laws in a way that is substantially equivalent to the Fair Housing Act. HUD conducts on-site performance assessments of FHAP agencies at least once every 2 years. During the performance assessments, HUD determines whether the FHAP agency engages in effective, timely, comprehensive, and thorough fair housing complaint investigation, conciliation, and enforcement activities. These multiple checks on FHAP agencies prevent waste fraud and abuse in the FHAP. As a result of these efforts, FHAP agencies complete their cases efficiently, continually meeting their annual targets for timely processing. In fiscal year 2012, 53 percent of new cases received by FHAP agencies were closed within 100 days and 93 percent of cases opened the previous year closed by the subsequent year. Those that remained open did so because of the complexity of the evidence or the legal arguments or because of adjudication. Throughout these efforts, FHAP agencies consistently obtain positive results for complainants by reaching a determination of reasonable cause to believe that discrimination has occurred in 8 percent of their cases and conciliating another 32 percent of their investigations. In recent years, FHEO has implemented program changes to enhance the quality of FHAP investigations. These changes allow program dollars to go further because better investigations will receive a higher reimbursement. In addition, the Department increased the incentive for quality conciliation agreements with significant monetary and public interest relief. This expands the effect of conciliation agreements negotiated by FHAP agencies because the meaningful public interest relief included assists more people and the significant monetary compensation to victims deters others from engaging in discrimination.

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Fair Housing Programs The NFHTA contributes substantially to the performance of FHAP investigators. A 2009 assessment of NFHTA by the Center for Organizational Excellence found that progressive completion of the NFHTA curriculum "positively impact[s] the job performance of FHAP investigators in a way that benefits the organization, primarily in timeliness and quality of case completion." The assessment also found that taking additional NFHTA course beyond the core curriculum had a continuing positive effect on the timeliness of investigations. By establishing NFHTA as an independent organization, we will be able to have the same positive effect on the operation and skill of FHIP grantees. To better assess the effect of these programs, the Department is conducting additional national housing discrimination studies of discrimination against families with children, and persons with physical disabilities, persons with mental disabilities and source of income. As in the past, the data from this testing will allow researchers to analyze the effectiveness of various fair housing enforcement measures and will be used by the Department for targeting education and enforcement initiatives and recommending potential legislative or regulatory reforms. Plans to Improve this Program Via IT Investment The HUD Enforcement Management System (HEMS) within the Regulatory, Legislative, and Enforcement segment of HUD’s IT Fund supports the program activities in this budget. HEMS provides the automated support for FHEO’s investigative and program compliance work. Through the implementation of the consolidated HEMS, the time required to create case documents for the FHEO complaint process should be reduced. More details on the systems that support FHEO can be found in the Information Technology Fund justification.

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Fair Housing Programs FAIR HOUSING AND EQUAL OPPORTUNITY FAIR HOUSING PROGRAMS Summary of Resources by Program (Dollars in Thousands)

Budget Activity Fair Housing Initiatives Program .. Fair Housing Assistance

2013 Budget Authority

2012 Carryover Into 2013

2013 Total Resources

2013 Obligations

2014 Budget Authority/ Request

2013 Carryover Into 2014

2014 Total Resources

2015 Request

$40,277

$849

$41,126

$39,175

$40,100

$1,950

$42,050

$45,600

Program .............. Fair Housing Limited English Proficiency

26,580

8,535

35,115

19,159

25,600

16,030

41,630

23,300

Program .............. National Fair Housing Training Academy .....

284

300

584

285

300

284

584

300

...

85

85

...

...

...

...

1,800

Transformation Initiative (transfer) Total ...............

...

...

...

...

...

...

...

[355]

67,141

9,769

76,910

58,619

66,000

18,264

84,264

71,000

NOTES: The carryover into fisal year 2013 includes recaptures of $328 thousand.

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Fair Housing Programs FAIR HOUSING AND EQUAL OPPORTUNITY FAIR HOUSING PROGRAMS Appropriations Language The fiscal year 2015 Budget includes proposed changes in the appropriation language listed and explained below. New language is italicized and underlined, and language proposed for deletion is bracketed. For contracts, grants, and other assistance, not otherwise provided for, as authorized by title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Amendments Act of 1988, and section 561 of the Housing and Community Development Act of 1987, as amended, [$66,000,000] $71,000,000, to remain available until September 30, [2015]2016, of which [$40,100,000] $45,600,000 shall be to carry out activities pursuant to such section 561: Provided, That notwithstanding 31 U.S.C. 3302, the Secretary may assess and collect fees to cover the costs of the Fair Housing Training Academy, and may use such funds to provide such training: Provided further, That no funds made available under this heading shall be used to lobby the executive or legislative branches of the Federal Government in connection with a specific contract, grant or loan: Provided further, That of the funds made available under this heading, $300,000 shall be available to the Secretary of Housing and Urban Development for the creation and promotion of translated materials and other programs that support the assistance of persons with limited English proficiency in utilizing the services provided by the Department of Housing and Urban Development. (Department of Housing and Urban Development Appropriations Act, 2014.)

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An Eli Real Estate Publication

Volume 11, Number 1

In This Issue... n Employ 4 Strategies To Better Manage Your Waiting List  The way you manage your waiting list can have a huge impact on your fair housing compliance — and your waiting list administration practices aren’t going unnoticed when it comes to fair housing enforcement. The good news is, you now have some helpful tips to stay out of trouble.......................................................................... 3 n PHAs: When You Can Safely Deny A Tenant’s ‘Port Out’ Request  When a tenant requests to “port out” of a unit, know your rights as a public housing authority (PHA) to effectively defend your decision to deny the request. This case details how a PHA and the U.S. Department of Housing and Urban Development (HUD) effectively defended a port-out request denial...................................... 4 n Sort Out Your Confusion Regarding HUD’s Emergency Call System Policy  If you’re like other owners/agents of elderly Multifamily properties, you’ve probably received inconsistent guidance on what types of emergency call systems you must have at your property. Here’s some much-needed clarification on your true obligations. ............................................................... 5 n Need To Transfer A Section 8 HAP Contract? Here’s How  If you have a seriously run-down property or cannot continue with your Section 8 contract, now you have specific guidance and instructions on how to transfer your contract’s budget authority elsewhere................................. 6 n Get A Clearer Definition Of Homeless Youth  If you’ve had questions about how homeless youth qualify for the U.S. Department of Housing and Urban Development’s (HUD) homeless assistance programs, you’re not alone. And now HUD has provided some additional guidance.................................................................... 7 n Watch Out: HUD-Initiated Fair Housing Complaints Have Doubled  If you’ve had any doubts whatsoever that the U.S. Department of Housing and Urban Development (HUD) is seriously cracking down on fair housing violations, its annual report to Congress will change your mind........... 7

January 2015

Income Calculation

How The New Passbook Savings Rate Will Impact Your Income Calculations Use extreme caution when manually setting rates in your site software The U.S. Department of Housing and Urban Development (HUD) has finally adjusted the passbook savings rate used for certifications with HUD Form 50059. Although this is good news for your tenants, the transition to the new rate could get a little bumpy for you and other owners/agents. On Oct. 31, HUD posted a new Notice H 2014-15 “Passbook Savings Rate Effective February 1, 2015 and Establishing Future Passbook Savings Rates.” The new passbook savings rate should more accurately reflect current interest rates earned on assets, according to an Oct. 31 analysis by Colleen Bloom, associate director for housing operations at Washington, DC-based Leading Age. “Many years ago, the Office of Multifamily Housing Programs had set the passbook savings rate at 2 percent because, historically, interest rates fluctuated around that number.” But interest rates have now dropped to a level significantly below the 2-percent mark, Bloom points out. And HUD will update this rate annually going forward, acknowledging that Multifamily Housing will need to adjust the rate at least annually to represent current national averages.

Which HUD Programs are Involved According to Mary Ross, president of Ross Business Development in Marietta, GA, this change applies to: continued on next page 112



Assisted Housing Alert™

continued from cover page

•

Project-Based Section 8 New Construction

•

Project-Based Section 8 State Agency Financed

•

Project-Based Section 8 Substantial Rehabilitation

•

Section 202/8

•

Rural Housing Services (RHS) Section 515/8

• Project-Based Section 8 Loan Management SetAside (LMSA) • Project-Based Section 8 Property Disposition SetAside (PDSA) •

Section 101 Rent Supplement

•

Section 202/162 Project Assistance Contract (PAC)

• Section 202 Project Rental Assistance Contract (PRAC) • Section 202 Senior Preservation Rental Assistance Contracts (SPRAC) •

Section 811 PRAC

• Section 811 Project Rental Assistance Demonstration units under a Rental Assistance Contract (PRA) •

Section 236

•

Section 236 Rental Assistance Payments (RAP)

•

Section 221(d)(3) Below Market Interest Rate (BMIR)

How the New Rate Will Work Old way: “Currently, when calculating income from assets — when the cash value of assets exceeds $5,000.00 — HUD requires owners/agents to use the greater of ‘actual income from assets’ or 2 percent,” Ross says. New way: Beginning on Feb. 1, 2015, when the cash value of assets exceeds $5,000, the new “income from asset” calculation will equal the greater of “actual income from assets” or 0.06 percent, Ross explains. This means that you should use the new 0.06-percent passbook rate for all certifications effective Feb. 1, 2015 or later. You should use the new 0.06-percent passbook savings rate for all move-in, initial, annual and interim recertifications. If you already completed a certification that will be effective on or after Feb. 1, 2015, you will need to correct the certification using the 0.06 percent rate, instructed the Multifamily Housing Rental Housing Integrity Improvement Project (RHIIP) in a Nov. 14 listserv posting.

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Also, the HUD model lease and HUD Handbook 4350.3 REV-1 allow tenants to request an interim recertification if their income changes before the next recertification, RHIIP says. “Because a reduction in the passbook savings rate could reduce household income, tenants are permitted to request an interim recertification using the new 0.06-percent rate beginning Feb. 1, 2015.” You should refer to HUD Handbook 4350.3, Chapter 7 for additional instructions on interim certifications, Ross advises. And all your residents can take advantage of the reduced passbook savings rate on or after Feb. 1.

Option: Set Your Rate Manually Most site software allows you to set the passbook rate. But don’t modify the passbook rate in your software until you know how doing so will impact certifications before Feb. 1. Further, some software will allow you to enter a new passbook rate with an effective date. If your software has this function, you could use the 2-percent passbook rate for certifications effective before Feb. 1 and the new 0.06percent passbook rate for certifications on or after Feb. 1, Ross suggests. Warning: If your software does not allow you to set an effective date for the new passbook rate, leave the rate at 2 percent, Ross recommends. This ensures that all certifications effective before Feb. 1 are calculated correctly.

Think About 3 Remaining Software Questions But there are still several unanswered questions regarding how and when updates to compliance software will occur. “In reality, managers will be working on future certifications at the same time they are working on historical certifications,” according to Syracuse, NYbased PMCS-ICAP. In these situations, the unanswered questions are: • Will the software be able to pick from and utilize multiple passbook savings rates based on the effective date of the certification you’re creating? • Will it allow users to reference a softwaregenerated log of passbook savings rates with associated effective dates? • Will it force users to continuously update their setup screen to display the correct rate they need incorporated on the certification(s) they’re working on?

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Tread Carefully When Making Rate Changes “HUD did not make this change effective immediately in order to allow software vendors to incorporate this change,” Ross notes. Still, you must be very careful in how you handle the changing passbook rate in your software. If you do modify the passbook rate in your software, be very careful with your data entry, Ross stresses.



“Double-check your entry before you ‘save’ so you get the results you expect. You may want to test the change as well.” Resource: The new HUD Notice H 2014-15 is accessible at http://portal.hud.gov/hudportal/documents/ huddoc?id=14-15hsgn.pdf. n

Multifamily

Employ 4 Strategies To Better Manage Your Waiting List How to handle lottery or other random choice selection processes The way you manage your waiting list can have a huge impact on your fair housing compliance — and your waiting list administration practices aren’t going unnoticed when it comes to fair housing enforcement. The good news is, you now have some helpful tips to stay out of trouble. On Nov. 28, the U.S. Department of Housing and Urban Development (HUD) issued Notice H-2014-16: “Waiting List Administration.” Although the Notice does not mandate any new practices or procedures, it does provide multifamily housing property owners/agents with guidance and additional options for waiting list administration. Here are some tips on how you can ensure your fair housing compliance by improving your waiting list management:

1. Open Waiting Lists for Longer Time Periods In the Notice, HUD cautions owners/agents against opening the waiting list and accepting applications for limited time periods, such as a single day. This could “create disorderly and unsafe application intake processes,” HUD warns. Better: But if you open waiting lists for longer time periods and make applications available ahead of time, you will create a safer and more effective application intake process, HUD advises.

2. Allow Online And Offline Applications You may want to consider offering multiple venues for application submission, as well as accepting both online and physical application submissions, suggests Mary Ross, president of Ross Business Development in Marietta, GA.

Providing multiple physical and online venues to accept applications “will help promote safety and accessibility for the application process,” HUD says.

3. Carefully Weigh Lotteries’ Pros & Cons If you’re opening a previously closed waiting list, you can use a lottery or other random-choice technique to select which applicants to place, as well as to determine the order in which you’ll place these applicants on the waiting list. But HUD cautions that you should consider whether this is a reasonable approach in your jurisdiction. When to use: A lottery or random choice approach is reasonable if your property is located in an area where the volume of applications is high enough that placing every eligible applicant on the waiting list would result in an unrealistic waiting period for housing, HUD points out. This approach may also be appropriate when you have individuals who are unable to apply in person at the onset of the opening and would suffer a distinct disadvantage in their placement on the waiting list. Remember: If you use a lottery or random-choice approach, you must describe it in the tenant selection plan, HUD stresses. “Any public notice of a waiting list opening must clearly state that this system will be used to place applicants on the waiting list.” You should also notify applicants that, as long as they submit their application within the stated timeframe, the timing of the application submission will have no bearing on how soon they may receive an offer of assistance. HUD also reminds that once you determine unit size and preference order, you must select applications from the waiting list in chronological order to fill vacancies.

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4. Accommodate Applicants with Disabilities HUD published this Notice in response to community concerns that people with disabilities may be at a disadvantage regarding waiting list placement, Ross notes. Tip: If you don’t use a lottery or random-selection procedure when reopening a previously closed waiting

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list, you must make other reasonable accommodations for individuals who are unable to submit early in the application process due to disabilities, HUD instructs. Link: To read the entire Notice, go to http://portal.hud. gov/hudportal/documents/huddoc?id=14-16hsgn.pdf. n

Court Takeaway

PHAs: When You Can Safely Deny A Tenant’s ‘Port Out’ Request HUD can’t force you to provide an informal hearing in this situation When a tenant requests to “port out” of a unit, know your rights as a public housing authority (PHA) to effectively defend your decision to deny the request. This case details how a PHA and the U.S. Department of Housing and Urban Development (HUD) effectively defended a port-out request denial.

Why Landlord Dispute Doesn’t Justify Port-Out Request Background: Plaintiffs Iva Robbins and her adult son, Ivan Robbins, receive a Housing Choice Voucher (HCV) under the Section 8 program. They used the voucher to rent an apartment unit in Alexandria, VA. After a dispute with the landlord over utilities, Iva requested that her local PHA, the Alexandria Redevelopment and Housing Authority (ARHA), “port out” her and her son to another unit in Fairfax, VA. The ARHA denied her request because she was not in good standing with her current landlord in Alexandria due to her failure to pay rent, utilities, and late fees. After Iva submitted additional “port out” and hearing requests, the ARHA again denied the requests. Iva then contacted HUD regarding the PHA’s alleged noncompliance with Section 8 program requirements, but found no relief. In a letter, HUD recommended that Iva resolve her utility dispute by working with her landlord and the ARHA. HUD also warned Iva that her failure to pay for electric service could result in termination of her benefits, and clarified that the ARHA was not required under regulations to afford Iva a hearing on the denial of her port out requests.

Iva then filed a lawsuit with the U.S. District Court for the District of Columbia.

Tenant Must Meet 3 Elements to Prove Standing In her complaint and request for a preliminary injunction, Iva asked the court to remedy her “living condition of homelessness,” and argued that HUD is responsible for her “adverse living condition” because she participates in its Section 8 program and it failed to require the ARHA to provide her with a hearing and vouchers to port out of Alexandria. HUD filed a motion to dismiss for lack of subject matter jurisdiction and failure to state a claim, arguing that HUD is not the appropriate party to bring these claims against. Analysis: To establish standing, a party must meet the following three requirements: 1. That she has “suffered an injury in fact;” 2. That the injury is “fairly traceable to the challenged action of the defendant;” and 3. That it is “likely, as opposed to speculative, that the injury will be redressed by a favorable decision” by the  ourt. Even assuming that Iva suffered an injury-in-fact through her living conditions, she has failed to prove causation and redressability, the court decided. These elements of standing are closely linked in this case because a federal court can act to redress only injury that it can trace to the defendant’s action — not injury that results from the independent action of some third party not before the court.

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You Don’t Need to Grant a Port-Out Denial Hearing “The Housing Assistance contract was between the resident, the landlord, and the local housing authority,” explained Washington, DC-based partner attorney Richard Michael Price in a Nov. 26 blog posting for the law firm Nixon Peabody LLP. And as for causation, the court found that Iva’s complaint did not state a specific link tying any action or inaction by HUD to her “condition of homelessness.” “The court also discussed that HUD could not force the local housing authority to provide the requested voucher to port out,” Price says. Nor could HUD even force the ARHA to provide Iva with an informal hearing on the matter.

There is no regulation mandating a hearing for a PHA’s denial of a port out request in the first place, the court pointed out. HUD also cannot require the ARHA to provide Iva with housing vouchers in a new PHA’s jurisdiction after denying the port out request. The local PHA “is responsible for determining if a port out request should be granted or if an individual participant’s housing assistance should be terminated,” the court wrote. Outcome: The court granted HUD’s motion to dismiss and denied Iva’s motion for preliminary injunction on the basis of standing, not subject matter jurisdiction. Robbins v. HUD, 2014 U.S. Dist. Lexis 151606 (Dist. of Columbia, Oct. 27, 2014). n

Compliance

Sort Out Your Confusion Regarding HUD’s Emergency Call System Policy Make sure you remove old pull cords when you replace the system If you’re like other owners/agents of elderly Multifamily properties, you’ve probably received inconsistent guidance on what types of emergency call systems you must have at your property. Here’s some much-needed clarification on your true obligations. In an Oct. 31 memo, “Office of Multifamily Housing Programs Policy on Emergency Call Systems in Elderly Properties,” the U.S. Department of Housing and Urban Development (HUD) clarifies the Multifamily policy regarding emergency call systems and explains how you can meet the functional requirements using a variety of manual, electronic, and wireless emergency alert systems. Some answers:

No, You Don’t Need to Have a Pull Cord System HUD does not require your property to use a specific type of call system, such as older pull cord systems, as long as the system in place meets the functional requirements described in HUD Handbook 4910.1, Section 100-2.20. Although HUD published the Handbook before many electronic systems were available in the marketplace, you should interpret the requirements as applying to electronic or wireless systems. Section 100-2.20 Emergency Call Systems states:

“In projects containing 20 or more living units, each bathroom and one bed location in each living unit shall be furnished with one of the following emergency call systems: an emergency call system which registers a call (annunciator and alarm) at one or more central supervised locations, an intercommunicating telephone system connected to a switchboard which is monitored 24 hours a day, or an

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emergency call system which sounds an alarm (not the fire alarm) in the immediate corridor and automatically actuates a visual signal in the corridor at the living unit entrance.”

Understand How to Interpret Certain Terms You should interpret terms such as “call,” “switchboard,” and “system” broadly to include both wired and wireless or electronic systems, HUD stresses. Also, a “central supervised location” or “switchboard” can be either onsite or offsite, as long as you continuously monitor the emergency calls to ensure a timely response. Remember: If you have a pull cord system installed on your property, HUD allows you to replace that system with a wireless or electronic system, as long as the new system is economical and meets the functional requirements in Handbook 4910.1, the memo says. But you must remove pull cords from each applicable unit if they are no longer in use.

You Can Use Mobile Personal Devices, Too Mobile personal emergency response devices, which a tenant wears on his person, are also acceptable, according to HUD. But you must “provide ongoing assurance that the devices are operational and available for use by tenants and other household members.” Also, HUD requires that you have an Operation and Maintenance (O&M) Plan for mobile emergency response devices. Your O&M Plan should outline how you’ll maintain the system, ensure that it remains operational, and replace the system when necessary for the life of the project.

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You must give tenants written information about their devices, including what procedures they should follow regarding repairs and replacement, HUD says. You must post this information on a tenant information board or provide it to the tenants on an annual basis.

Bottom Line: Follow the Functional Requirements HUD will deem acceptable emergency response systems, including mobile response devices, in elderly Multifamily properties if: • The system registers an alarm call at a central supervised location; OR • The system provides an intercommunication system that connects to a continuously monitored switchboard (24 hours per day); OR • The system sounds an alarm in the immediate corridor and actuates a visual signal at the living unit entrance. AND • The system is available in each bathroom and one bed location in each living unit. Resources: If you have questions regarding emergency call systems, HUD is directing inquiries to Brendan B. McTaggart at (202) 402-2047 or brendan.b.mctaggart@ hud.gov. You can access the Oct. 31 memo at http://portal. hud.gov/hudportal/documents/huddoc?id=Emergency_ Call_System_Memo.pdf. n

Industry Notes

Need To Transfer A Section 8 HAP Contract? Here’s How Transfer process goes a long way in preserving affordable housing, experts say If you have a seriously run-down property or cannot continue with your Section 8 contract, now you have specific guidance and instructions on how to transfer your contract’s budget authority elsewhere. On Oct. 9, the U.S. Department of Housing and Urban Development (HUD) released Notice H-2014-14, “Transferring Budget Authority of a Project-Based Section 8 Housing Assistance Payments Contract under Section 8(bb)(1) of the United States Housing Act of 1937.”

The Notice explains HUD’s policies and procedures for transferring all or a portion of any remaining budget authority of a project-based Section 8 Housing Assistance Payments (HAP) contract to one or more Section 8(bb)(1) contracts where the existing HAP contract is terminated by mutual agreement. “Remaining budget authority” is the dollar amount remaining on a HAP contract at the time of termination by mutual agreement. The Hub/Program Center will determine this amount.

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Significance: “This long-awaited detailed explanation of this tool for preserving and transferring Section 8 contracts is a piece of the preservation puzzle,” noted Colleen Bloom, associate director for housing operations at Washington, DC-based Leading Age, in an Oct. 12 analysis. This allows owners who find themselves with properties that are perhaps beyond repair, or for other reasons not suitable for continued Section 8 subsidy assistance, to transfer all or part of the Section 8 contract to another more suitable property. Eligibility: The Notice applies to all project-based Section 8 HAP contracts on existing multifamily housing projects, according to HUD. But the Notice applies only when the contract administrator and the owner mutually agree to either terminate or subdivide the HAP contract so that the remaining budget authority can transfer to another multifamily housing project.



The owner of the “receiving” project may be the same as the owner transferring the HAP contract, or the receiving project owner may be a different owner, Bloom says. If the receiving project has a different owner, then the other owner must also agree to accept the transferred Section 8 HAP budget authority. To receive the new budget authority, the receiving project must also be existing construction and ready for occupancy, Bloom notes. The budget authority can be divided into more than one receiving project, but the transferring and receiving projects must be in the same state, unless HUD approves an exception on a case-by-case basis. For more information on the transfer process, eligibility and requirements, go to http://portal.hud.gov/ hudportal/documents/huddoc?id=14-14hsgn.pdf. n

Get A Clearer Definition Of Homeless Youth Understand the four categories of homelessness If you’ve had questions about how homeless youth qualify for the U.S. Department of Housing and Urban Development’s (HUD) homeless assistance programs, you’re not alone. And now HUD has provided some additional guidance. HUD has released a three-page document that provides an overview of its definition of homelessness and how that definition relates to eligibility for emergency shelter and other resources, reports the National Low Income Housing Coalition (NLIHC). Specifically, the document contains four HUD categories of homelessness: 1. Literal homelessness;

3. Fleeing domestic violence; and 4. Homelessness defined under non-HUD statutes. Technically, youth fall under only the fourth category, but the paper specifies that youth are likely to be eligible under the other categories, NLIHC states. The paper also includes five hypothetical scenarios to explain how youth might qualify under the four categories. Resource: To access the paper, “Children and Youth and HUD’s Homeless Definition,” go to www. hudexchange.info/resources/documents/HUDs-HomelessDefinition-as-it-Relates-to-Children-and-Youth.pdf. n

2. Imminent risk of homelessness;

Watch Out: HUD-Initiated Fair Housing Complaints Have Doubled Most disability-related complaints involved failure to make reasonable accommodations If you’ve had any doubts whatsoever that the U.S. Department of Housing and Urban Development (HUD) is seriously cracking down on fair housing violations, its annual report to Congress will change your mind.

On Nov. 7, HUD released its report on the state of fair housing for fiscal years (FYs) 2012 and 2013. In addition to detailing HUD’s many recent efforts to combat housing discrimination, the report also offers up some surprising statistics.

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During FY 2010 and FY 2011, there were only 18 HUD Secretaryinitiated complaints, compared with 36 filed by HUD in FY 2012 and FY 2013. “Secretary-initiated complaints are filed by the HUD Secretary and typically involve a broader systemic issue rather than a particular instance of discrimination,” explains the National Low Income Housing Coalition (NLIHC). HUD alone worked on 3,577 housing discrimination complaints during FY 2012-2013 and charged, settled, or referred to the U.S. Department of Justice (DOJ) approximately 40 percent of those cases. Pitfall: Compared with the FY 2010-2011 period, disability-related discrimination complaints in FY 2012-2013 increased considerably, while discrimination complaints based on race declined. Of the 4,429 disability-related complaints in FY 2013, most (57 percent) involved an owner’s/agent’s failure to make a reasonable accommodation. Disability complaints also accounted for the biggest share of total discrimination complaints in FY 2013 (53 percent), while race-based discrimination complaints totaled 28 percent of the total complaints. Familial status accounted for 14 percent, national origin accounted for 12 percent, sex for 12 percent, retaliation for 11 percent, religion for 3 percent, and color for 2 percent. To access “Fiscal Year 2012-2013 Annual Report on the State of Fair Housing in America,” go to http://portal.hud.gov/hudportal/documents/ huddoc?id=2012-13annreport.pdf. n

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We Welcome Your Comments and Suggestions! Sarah Terry Editor Kimberly Gilbert Managing Editor [email protected] Candi Atkins Consulting Editor [email protected]

Images used throughout this newsletter are provided by PhotoSpin. Some images are modified for educational purposes.

Subscriptions: (800) 223-8720 Fax: (800) 508-2592 Email: [email protected] This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

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An Eli Real Estate Publication

Volume 11, Number 2

February 2015

In This Issue...

Fair Housing

n How Lawsuits Against HUD Could Jeopardize Disparate Impact Liability  Just because the U.S. Department of Housing and Urban Development (HUD) finalized new disparate impact regulations under the Fair Housing Act (FHA) doesn’t mean that these regulations will survive serious dissent in the courts. And one recent court decision staunchly rebukes the disparate impact regulation as outofbounds...................................11 n Stay Up-To-Date On Key Housing Legislation  With so many housing-related bills circulating, it’s easy to lose track of the proposed and passed legislation that most impacts your properties. Check out the table of legislation below to keep current on the most important bills traveling their way through Congress, according to the National Low Income Housing Coalition (NLIHC)............................. 12 n Don’t Worry About Grievance Procedures When Tenant Self-Terminates Lease  When you move a tenant temporarily while completing repairs on a unit, that tenant cannot expect to stay in the temporary unit if the voucher isn’t transferrable. Here’s what to do if you get into a sticky situation. ....................................................13 n When You’ll See 2015 Income Limits — Don’t Hold Your Breath  You will need to wait until February 2015 before you’ll find out the fiscal year (FY) 2015 income limits from the U.S. Department of Housing and Urban Development (HUD)........................................................ 14 n Check Out New 3-Year & 5-Year Census Bureau Data  For the first time, you can access block group level data via the Census Bureau’s American FactFinder. This should help you to more easily collect the housing and demographics data you need............................................. 14 n Take Action To Preserve Your Buildings’ Affordability  If you are a Section 236 or Section 202 property owner with an active mortgage, the U.S. Department of Housing and Urban Development (HUD) is offering some new ways for you to preserve your property’s affordability....................................................................... 15 and more...

Learn 4 Important Fair Housing Don’ts From These Cases Hint: These ‘gatekeeping’ practices will get you into hot water with the feds Watch out: The U.S. Department of Housing and Urban Development (HUD) continues to crack down on violations of the Fair Housing Act (FHA). From rooting out delayed reasonable accommodation decisions to evictions for pregnancy, fair housing enforcement is getting stronger and stricter. Here are the latest cases and what you can learn from them:

1. Don’t Deny Disability-Related Accommodations—It Could Cost You $40K A married couple will receive $42,290 in compensation from Chapel Creek Residential Association, Inc. (CCRA) of Birmingham, AL as part of a Conciliation Agreement with HUD. The couple filed a complaint alleging that CCRA unreasonably delayed and/or constructively denied their request for disability-related modifications due to the husband’s use of a wheelchair, according to a Nov. 3 HUD press release. In addition to the compensation payout, the Conciliation Agreement also requires CCRA to develop reasonable accommodation/modification policies and procedures that are consistent with the FHA. Lesson Learned:Don’t drag your feet when responding to a reasonable accommodation request, or you’ll end up paying a far higher price than the accommodation would ultimately cost you.HUD is keeping a close eye on disability-related reasonable accommodation requests and how properties handle them. continued on next page 120

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continued from cover page

2. Don’t Use Residents’ Health Against Them HUD also reached a Conciliation Agreement with Huntington Management, which operates five independent living properties known as Oakmont Senior Communities in southeastern Michigan. The Conciliation Agreement arose from a former employee’s allegations that she was fired because she raised fair housing concerns about Huntington’s policy of monitoring applicants’ and residents’ health, according to a Nov. 3 HUD announcement. The former employee filed her complaint with the Fair Housing Center of Metropolitan Detroit (FHCMD), which sent fair housing “testers” to Oakmont. The testers discovered that Huntington regularly collected applicants’ and current residents’ medical data.Moreover, Huntington refused to allow residents who had to leave their units for hospital stays to return to housing if deemed not “independent” enough, HUD says. As part of the Conciliation Agreement, Huntington must pay the former employee $35,000 in compensation and alter its policies so that it no longer requires residents returning from hospital stays to undergo a “gatekeeping review” or provide medical information, HUD reports. Lesson Learned:You cannot employ policies and procedures that effectively end up being gatekeeping practices to deny residents’ return to housing due to their medical status. And keep in mind that when an employee raises a valid complaint, you need to address the problem properly and immediately. Terminating the employee to silence the matter will only get you into more trouble.

3. Don’t Treat Emotional Support Animals Like Pets On Nov. 12, HUD announced that it has ordered Castillo Condominium Association in San Juan, PR to pay out a total of $36,000 for violating the FHA. Castillo allegedly refused to allow a resident with disabilities to keep his emotional support animal. The resident filed a complaint alleging that the Castillo denied his request to keep an emotional support animal in his unit, despite documentation from his healthcare provider identifying his disability and need for the animal, HUD says. Castillo allowed pets when the resident initially moved in and then later adopted a “no-pets” policy. A HUD Administrative Law Judge decided that Castillo should pay only $3,000 in emotional distress

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damages and a $2,000 civil penalty. But HUD then issued an order to override this decision and ordered Castillo to pay out $20,000 in damages plus a $16,000 civil penalty. Lesson Learned: “Assistance animals are not pets,” HUD Assistant Secretary for Fair Housing and Equal Opportunity Gustavo Velasquez said in a Nov. 12 statement. “Persons with disabilities often depend on them in order to carry out life’s daily functions. This order reaffirms HUD’s commitment to taking appropriate action when federal fair housing law has been violated.”

4. Don’t Forget: Pregnancy is Never Grounds for Eviction The Salvation Army must pay out $48,000 to four women as part of Conciliation Agreement with HUD and set aside $24,000 to hire a part-time housing case manager to settle allegations that the international charity wrongfully evicted the women because they became pregnant, according to a Nov. 12 HUD announcement. The four women were residents of the Salvation Army’s Turning Point Center transitional housing center in Washington, DC. HUD filed a Secretary-initiated complaint against the Salvation Army following an investigation that revealed Turning Point’s residency rules unlawfully discriminated against residents based on gender and familial status. The Salvation Army accepted pregnant women and women with children, but it evicted women who became pregnant while residents, HUD claims. Turning Point’s policy stated that “there are to be no additions to a resident’s family while she is enrolled in the Turning Point program. Pregnancy, regardless of outcome, will be ground for dismissal from the program.” As part of the Conciliation Agreement, the Salvation Army must pay out $12,000 to each of the four women and $24,000 to hire a part-time case manager who will assist women with moving to housing after completing the center’s two-year program, HUD states. Turning Point must also revise its residency policies to allow women who become pregnant after entering the program to complete their stay. Lesson Learned: Transitional housing is not exempt from FHA requirements — and you cannot evict residents for becoming pregnant under any circumstances. “Transitional housing centers are essential to helping individuals move from homelessness into stable housing situations,” Velasquez said in the Nov. 12 announcement. “But it is both wrong and illegal to evict women because they become pregnant.” n

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11

Disparate Impact

How Lawsuits Against HUD Could Jeopardize Disparate Impact Liability A surprising district court decision could influencethe upcoming Supreme Court ruling Just because the U.S. Department of Housing and Urban Development (HUD) finalized new disparate impact regulations under the Fair Housing Act (FHA) doesn’t mean that these regulations will survive serious dissent in the courts. And one recent court decision staunchly rebukes the disparate impact regulation as outofbounds.

Why Disparate Impact Poses Many Pitfalls Background: Effective March 2013, HUD passed a final rule on the “discriminatory effects standard” under the FHA, commonly known as the Disparate Impact Rule. (See “You Now Have Disparate Impact Liability — Without Intent To Discriminate,” AHA Vol. 9, No. 4, page 27.) The rule allows a person or entity to be held liable for discrimination under the FHA without actual intent to discriminate. To prove disparate impact, “all that is necessary is statistical evidence that a policy or practice had a harsher effect — a ‘disparate impact’ — on a class protected by the FHA,” explained Washington, DC-based partner attorney Harry J. Kelly in a Nov. 4 blog posting for Nixon Peabody LLP. “Disparate impact liability, reflected in HUD’s regulation, poses severe threats to the housing industry, because virtually any rule or policy adopted by a housing provider could have some disparate impact on some class of persons protected by the FHA,” Kelly warned.

Pay Attention to These Lawsuits And shortly after HUD finalized the disparate impact rule, several insurance trade associations sued HUD, claiming that the regulation would dramatically impair their ability to assess premiums based on risk, Kelly noted. In a recently decided case involving the American Insurance Association and the National Association of Mutual Insurance Companies, the plaintiffs argued that HUD’s rule violated the Administrative Procedures Act by expanding the FHA’s scope to recognize not only intentional discrimination but also disparate impact, according to a Nov. 6 National Council of State Housing Agencies (NCSHA) analysis.

And somewhat surprisingly, U.S. District Court for the District of Columbia’s Judge Richard Leon issued a forceful opinion siding with the plaintiffs. Applying recent Supreme Court precedents, Judge Leon determined that the FHA’s language did not recognize claims for non-intentional discrimination, Kelly stated. Judge Leon “pointed to other federal anti-discrimination laws that contain language focusing on the effects of discriminatory conduct — language that does not appear in the FHA.” And absent such language, Judge Leon held that HUD had exceeded its authority in creating liability that Congress did not intend.

How Lower Court Opinion Might Affect Supreme Court’s Decision Judge Leon’s stunning ruling could sway the upcoming Supreme Court decision in another big disparate-impact case: Texas Department of Housing and Community Affairs (TDHCA) v. Inclusive Communities Project. (See “Heads Up: Supreme Court May Finally Answer ‘Disparate Impact’ Questions,” AHA Vol. 10, No. 12, page 91.) In this case, the highest court must decide whether TDHCA violated the FHA by disproportionately awarding housing credits to developers building properties in areas with high minority concentrations, NCSHA explained. In his opinion, Judge Leon wrote: “The Supreme Court is now perfectly positioned … to finally address this issue in the not-to-distant future.” Bottom line: “Housing stakeholders should pay careful attention to the outcome of cases like American Ins. Assn., because a decision that ultimately affirms or rejects disparate impact liability will dramatically affect the scope of prohibited actions under the FHA,” Kelly stressed. Later this term, the Supreme Court should have the last word on whether the FHA does in fact recognize disparate impact liability under the law. What’s more: “Judge Leon’s ruling is likely to make HUD’s soon-to-be finalized rule on Affirmatively Furthering Fair Housing (AFFH) even more central to its fair housing activities,” the NCSHA said. You can read Judge Leon’s opinion statement at www.ncsha.org/system/ files/resources/AIA+Order.pdf. n

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Toolkit

Stay Up-To-Date On Key Housing Legislation Why appropriations act’s budget allocation for HUD might be barely enough With so many housing-related bills circulating, it’s easy to lose track of the proposed and passed legislation that most impacts your properties. Check out the table of legislation below to keep current on the most important bills traveling their way through Congress, according to the National Low Income Housing Coalition (NLIHC). n Name Consolidated and Further Continuing Appropriations Act of 2015

Status

HUD Programs Function Affected The Act provides HUD with a Passed House and All programs $45 billion budget for 2015. The Senate; signed by approved budget supports the President Barak continuation of key priorities like Obama. the Choice Neighborhoods Initiative and expanding the HUD-Veterans Affairs Supportive Housing (HUDVASH) to include veterans living on Native American tribal lands.

On Dec. 3, 2014, the bill passed in the House of Representatives by a vote of 378 to 46. The bill will now go to the Senate. Native American On Dec. 2, the House passed the Housing bill by voice vote. Assistance The bill will now go and Selfto the Senate. Determination Act (NAHASDA) (H.R. 4329)

Low Income Housing Tax Credit (LIHTC) program

The bill would provide the minimum 9-percent credit to LIHTC projects allocated tax credits before Jan. 1, 2015, but not necessarily placed in service.

Indian Housing Block Grant (IHBG) Title VI Loan Guarantee Title VIII Housing Assistance for Native Hawaiians

The bill would reauthorize the NAHASDA through the end of FY 2018. NAHASDA authorizes the main Native American housing programs including the block grant.

On Dec. 1, House Representatives Earl Perlmutter (D-OR) and Steve Stivers (R-OH) introduced the bill. The House referred the bill to the Committee on Financial Services.

Public housing authorities (PHAs)

The bill would reduce the frequency of income recertifications for public housing and voucher-assisted households from annually to every three years for households with income at least 90-percent fixed income. HUD would redefine “fixed income,” which has included Social Security or Supplemental Security Income (SSI), in various versions of rental assistance reform legislation.

Tax Increase Prevention Act of 2014 (H.R. 5771)

Tenant Income Verification Relief Act of 2014 (H.R. 5776)

Housing Choice Voucher program (HCV)

Impact The budget allocation allows HUD to support the individuals and organizations it currently serves, but limits its ability to help some new families reach middle class or become homeowners. The budget also does not include the $301 million increase in homeless assistance grants that HUD requested for fiscal year (FY) 2015, nor does it include funding for the pilot program Homeowners Armed with Knowledge (HAWK). The bill effectively extends the 9percent minimum rate that expired in 2013, and without this extension LIHTC projects would receive a floating rate based on a formula that uses the federal cost of borrowing to establish the credit rate. Although the bill would not increase NAHASDA’s authorized appropriation level of $650 million per year, it would make several reforms. One reform is that the bill would now include reauthorization of the Native Hawaiian Housing Block Grant and the Native Hawaiian Loan Guarantee, both of which have expired. The bill would essentially amend The Housing Act of 1937. The bill aims to reduce administrative burdens on both families and housing providers by decreasing the frequency of tenant income reviews for tenants whose incomes do not increase beyond a common inflation-based adjustment factor.

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Court Takeaway

Don’t Worry About Grievance Procedures When Tenant Self-Terminates Lease Here’s how to successfully defend this type of constructive eviction claim When you move a tenant temporarily while completing repairs on a unit, that tenant cannot expect to stay in the temporary unit if the voucher isn’t transferrable. Here’s what to do if you get into a sticky situation. Background:Plaintiff Bobby Tucker obtained a Housing Choice Voucher from the Seattle Housing Authority (SHA) for a project-based Section 8 unit. Tucker signed a one-year rental agreement for such a unit at the SHA-operated Lam Bow Apartments. Before moving in, Tucker inspected the unit. He noted that the carpets needed replacing and that the unit’s overall condition was “fair.” Three days after move-in, a section of the unit’s kitchen ceiling collapsed, damaging the kitchen and carpeting.

What to Do When Tenant Argues with Repairs SHA temporarily moved Tucker to the Longfellow Creek Apartments, a separate SHA-operated complex where the units are not project-based. Within 10 days, SHA made the necessary repairs to the Lam Bow unit. The property manager, Shurvon Wright, inspected the unit and deemed it “rent-ready.” But when Tucker inspected the Lam Bow unit, he claimed that the ceiling repair wasn’t completed, the kitchen had debris and dirty water in it, and the kitchen smelled like mold. Tucker informed Wright that he didn’t want to return to the Lam Bow unit and instead wanted to remain at the Longfellow Creek apartment. In response, Wright sent Tucker a letter informing him that the Lam Bow unit had been repaired and cleaned, and that the unit was ready for occupancy. Wright also informed Tucker that he could terminate his lease, but that his subsidized rent was tied to the Lam Bow Apartments. SHA then sent Tucker a letter informing him that the Longfellow Creek unit he was occupying did not accept “mobile” housing vouchers and that his Lam Bow voucher would not transfer to the Longfellow Creek unit. SHA presented Tucker with his choices: lease the Longfellow Creek unit for a monthly rent of $750, present a valid voucher for the unit, or move out.

Tucker returned his keys to the Lam Bow unit and continued to occupy the Longfellow Creek unit.He did not sign a lease or pay any portion of the rent for that unit.

Self-Termination of Lease Can Be This Simple SHA evicted Tucker from the Longfellow Creek unit and rented the Lam Bow unit to another tenant. Tucker filed a lawsuit for wrongful eviction against SHA in the U.S. District Court for the Western District of Washington. Tucker didn’t dispute that his initial relocation to the Longfellow Creek unit was for temporary purposes only. But he contended that his refusal to return to the Lam Bow unit was because he didn’t want to expose himself or his daughter to mold—despite SHA’s inspections showing no mold present. SHA filed motions for summary judgment, arguing that Tucker failed to raise an issue of fact to support his constructive eviction claim and that he was never entitled to occupy his Section 8 housing rental because he was not qualified for a two-bedroom unit. Analysis:Tucker’s constructive eviction claim alleged that SHA breached its obligations under the lease, as well as the implied warranty of habitability and covenant of quiet

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enjoyment. But the court found that Tucker failed to provide sufficient evidence that, after SHA informed him the unit was habitable, he returned to inspect the unit and the repairs were incomplete and/or the unit was mold-infested and unsanitary. Further, Tucker’s complaint concedes that he notified SHA that the unit remained unsanitary and mold-infested “despite the repair of the ceiling collapse.” So Tucker essentially admitted that SHA had in fact completed the ceiling repairs.

When Grievance Procedures Don’t Really Matter In Tucker’s amended complaint, he argued that SHA violated his constitutional due process and federal statutory rights under the U.S. Housing Act of 1937, HUD regulations, and SHA’s Administrative Plan by: 1. Denying his right to grievance procedures to address his complaints about mold and other unsanitary conditions in his leased Section 8-assisted unit; and 2. Denying his right to grievance procedures prior to SHA’s termination of his Section 8 housing assistance.

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SHA countered that it did not violate Tucker’s rights because he voluntarily relinquished his assisted tenancy and, as a result, he was not entitled to these protections and procedures. The court agreed. “The implementing regulations regarding assisted housing contemplate that if a participating family prematurely terminates its assisted lease before the end of one year, the family relinquishes the opportunity for continued assistance,” the court wrote. “The regulations also provide that the lease terminates if the tenant terminates the lease.” Moreover, Tucker made no argument that he was entitled to any grievance procedures even if the court had found that he terminated his assisted lease. Instead, his claims relied entirely on his contention that he did not selfterminate his tenancy. Nevertheless, the court determined that he voluntarily relinquished his tenancy. Outcome:The court granted SHA’s summary judgment motions (Tucker v. Seattle Housing Authority, et. al., 2014 U.S. Dist. Lexis 175658 (West. Dist. of WA, Dec. 19, 2014)). n

Industry Notes

When You’ll See 2015 Income Limits — Don’t Hold Your Breath HUD won’t release income limits until HHS releases poverty guidelines You will need to wait until February 2015 before you’ll find out the fiscal year (FY) 2015 income limits from the U.S. Department of Housing and Urban Development (HUD). In early December 2014, HUD announced that it would not yet release its 2015 income limits due to the 2014 Consolidated Appropriations Act’s change in the definition of “extremely low income” (ELI) household, which was calculated as 30 percent of the area median income (AMI), reported Washington, DC-based partner

attorney Tatiana Gutierrez Abendschein in a Dec. 5 Nixon Peabody LLP blog posting. As of July 1, 2014, an ELI household is calculated as the greater of the Department of Health and Human Services’ (HHS) poverty guidelines or 30 percent of the AMI. (See “Implement New ELI Limits Now Or Face Compliance Snags,” AHA Vol. 10, No. 9, page 65.) HUD has delayed the release of the FY 2015 income limits because HHS has not yet released the 2015 poverty guidelines. n

Check Out New 3-Year & 5-Year Census Bureau Data Enjoy a new edition of Census Explorer interactive maps, too Good news: For the first time, you can access block group level data via the Census Bureau’s American FactFinder. This should help you to more easily collect the housing and demographics data you need.

On Dec. 4, the Census Bureau released five yearestimates from the 2009-2013 American Community Survey (ACS). The ACS five-year estimates are available down to the census tract and block group level, according

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to the National Low Income Housing Coalition (NLIHC). The ACS is a survey of more than 3.5 million households that includes social, demographic, housing, and economic characteristics. Additionally, the Census Bureau released the ACS 20112013 three-year Public Use Microdata Sample (PUMS) files, which contain records on a subsample of housing units and information from the ACS questionnaire, NLIHC said. In the past, you could access block group level data only via the Census Bureau’s file transfer protocol

15

(FTP) site, but now you can access this data through the American FactFinder. Also, the Census Bureau is including in this data release a new edition of Census Explorer interactive maps. Links: You can access the ACS at www.census.gov/ acs/www. You can access data on the American FactFinder at http://factfinder2.census.gov, and the Census Explorer interactive maps are at www.census.gov.censusexplorer. n

Take Action To Preserve Your Buildings’ Affordability Join this mailing list and email HUD for affordability options If you are a Section 236 or Section 202 property owner with an active mortgage, the U.S. Department of Housing and Urban Development (HUD) is offering some new ways for you to preserve your property’s affordability. HUD has started a targeted outreach to owners of Section 236 insured loan HUD 202 direct loan Rent Supplement Contract and Section 8 flexible subsidy contract/Rental Assistance Payment Contract properties, according to a Dec. 11 announcement by Colleen Bloom, associate director for housing operations of Washington, DC-based Leading Age. HUD is encouraging these owners to sign up for the new HUD Multifamily Housing Preservation

Mailing List by visiting https://www.hudexchange.info/ mailinglist/. The mailing list will provide information on new educational materials and new pages on the HUD exchange, Bloom said. You can also send emails to specially created HUD mailboxes to explore specific options for your property, Bloom noted. Include your property’s name, address, mortgage maturity date, and primary contact information in your email to [email protected] (for Section 202financed properties) or [email protected] (for Section 236 properties). n

Try These Ideas To Improve Your LIHTC Property’s Funding Why use of HCVs is actually making LIHTC units less affordable for ELI households Although the Low Income Housing Tax Credit (LIHTC) program serves extremely low income (ELI) households, LIHTC propertiesmostly do not do so without using Housing Choice Vouchers (HCVs). So says a new report from the National Low Income Housing Coalition (NLIHC). The report includes five case studies highlighting properties that utilize innovative strategies to achieve deep affordability. The NLIHC report also obtained unit-level data on a random sample of 104 LIHTC properties in Maine, Virginia, Florida, Ohio, and Oregon. In the sample, ELI households occupied 36 percent of units, very low income occupied 35 percent of units, low income occupied

26 percent, and households with incomes above 80 percent of the area median income (AMI) occupied 3 percent. Of the LIHTC households that the NLIHC sampled, about one-third received rental assistance — 69 percent of ELI households and 22 percent of very low income households. Approximately 90 percent of the households receiving rental assistance were getting an HCV, while about 8 percent received assistance from an undefined source and 2 percent received U.S. Department of Agriculture (USDA) rental assistance. Problems:Although most of the sampled ELI households in LIHTC housing received rental assistance, only 17 percent of those without rent assistance could

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afford their homes, the NLIHC says. Approximately 57 percent of ELI households without rent assistance had severe cost burdens, meaning they’re paying more than half of their household income toward rent for their LIHTC units, and 26 percent had a moderate cost burden (paying 31 to 50 percent of income). Because owners of LIHTC properties can collect rents up to and sometimes above the 60-percent AMI rent level from HCV holders, payment standards are higher than that rent level, the NLIHC warns. “A key finding is that it appears that HCVs are a significant revenue source for LIHTC properties and allow owners to fill the higher-cost LIHTC units in places where they are competing with market rate units.” Possible solutions: The NLIHC makes the following recommendations: • Add a third income targeting option to the federal LIHTC statute that would require at least 40 percent of the units in a project be occupied by residents with incomes averaging no more than 60 percent of the AMI. Also, properties that use this proposed third option would receive a 30-percent basis boost. • Maintain a mix of units affordable to households at different income levels, so that the rents paid by higher-income households supplement the overall project operating expenses. • Layer multiple funding sources, as well as use non-traditional resources, such as private donations, to fill funding gaps. • Reduce or eliminate mortgage debt and cultivate strong local partnerships with municipal and/or state governments. Resource: To read the NLIHC’s report “Aligning Federal Low Income Housing Programs with Housing Need,” go to http://nlihc.org/library/research/alignment. n

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An Eli Real Estate Publication

Volume 11, Number 3

In This Issue... n Quick-Reference Chart: Is Marijuana Legal In Your State?  So far, 23 states and the District of Columbia have legalized the use of medical marijuana, decriminalized marijuana possession, or both. Mississippi, Nebraska, North Carolina, and Ohio have limited decriminalization involving reduced enforcement of marijuana use or possession. Currently, 23 states still prohibit marijuana use outright. ...................................................................19 n When You Can (And Cannot) Evict Tenants Who Are No Longer Eligible  If you’re terminating tenants who do not meet the Low Income Housing Tax Credit (LIHTC) eligibility guidelines, you’re making a big mistake. Here’s what you need to know about tenancy termination when your property participates in both the U.S. Department of Housing and Urban Development (HUD) Multifamily program and the LIHTC program................. 20 n Pay Attention: Disparate Impact Finally Gets Its Day In Supreme Court  The United States’ highest court is now one step closer to weighing in on the principle of “disparate impact.” Will disparate impact disappear, or is the principle here to stay?................................................. 21 n Good News: You’re Getting An Extension On TRACS 202D Deadline  You have a 30-day extension on the TRACS 202C to 202D conversion deadline, according to a Jan. 16 announcement by the U.S. Department of Housing and Urban Development (HUD) — and you can thank the myriad of properties that haven’t yet converted. But problems abound, and the TRACS system has been five nights behind in processing voucher requests................... 22 n Understand These New Functionalities Added To Multifamily EIV  Among the changes in the update to the Enterprise Income Verification (EIV) system in the latest version release, you will enjoy a fix to a bug in the Identity Verification Report............................................................ 23 n You Could Enjoy A Reprieve On MORs  If your property consistently scores high on management and occupancy reviews (MORs), the U.S. Department of Housing and Urban Development (HUD) wants to give you a deserved break.................................................................23

March 2015

HUD

Medical Marijuana: Don’t Let Your Compliance Go Up In Smoke Watch out: Marijuana-use rules for new admissions versus tenants differ greatly Can you allow marijuana use in assisted housing if your state has legalized medicinal and/or recreational use? If you live in such a state, you’re likely confused. Thankfully, the U.S. Department of Housing and Urban Development (HUD) has provided some answers in recently released guidance.

Why Federal Status of Marijuana Trumps State Laws “We live in interesting times where HUD, among other federal agencies, is in the process of providing pot guidance,” quipped Washington, DC-based partner attorney Richard Michael Price in a Jan. 20 blog posting for the law firm Nixon Peabody LLP. “Perhaps it’s not so unusual given the state of evolving local law and legalization of marijuana.” The problem: The crux of the issue is that, despite a growing number of states and localities legalizing marijuana, federal law still lists marijuana as a prohibited substance, Price noted. “This leaves agency staff, housing providers and residents with questions about how to deal with persons who are using marijuana in ways that are consistent with state law, but arguably not consistent with federal rules,” added partner attorney Harry Kelly in a Jan. 7 Nixon Peabody blog posting. continued on next page 128

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continued from cover page

On Dec. 29, 2014, HUD released a memo containing guidance that clarifies what owners should and should not do when dealing with applicants and current residents who use marijuana, particularly in states where medical and/or recreational marijuana use is no longer outlawed. At the heart of the issue is the Controlled Substances Act (CSA), which dictates that marijuana use in any form is illegal, regardless of legalization under state law. CSA’s mandates also mean that marijuana remains an illegal controlled substance under Section 577 of the Quality Housing and Work Responsibility Act of 1998 (QHWRA). “QHWRA requires that owners/agents establish lease standards that prohibit admission based on the illegal use of controlled substances, including state-legalized marijuana,” explains Mary Ross, president of Ross Business Development in Marietta, GA. “State laws that legalize medical marijuana directly conflict with QHWRA and thus are subject to federal preemption.”

How Guidance Impacts New Admissions “In the memo, HUD reiterated that despite any changes to state laws, the use of ‘medical marijuana’ is illegal under federal law,” states Syracuse, NY-based PMCS-ICAP. “Owners are required to deny admission to any household with a member who the owner determines is, at the time of application for admission, illegally using marijuana.” And this doesn’t mean that the applicant is illegally using marijuana under state law, but instead under federal law. Because federal law preempts state laws, and HUD is a federal program, marijuana is still federally illegal even if your state has legalized marijuana for medicinal and/or recreational use.

To Evict, Or Not To Evict? Caveat: But HUD’s memo “makes a clear distinction between an owner’s responsibility regarding applicants for admission to assisted housing, and continued occupancy for those already living in a property,” according to the National Low Income Housing Coalition (NLIHC). Although you must deny admission to marijuana users, you have more discretion under QHWRA to evict—or not evict—current tenants for marijuana use. HUD’s guidance states: “Section 577 of QHWRA affords owners the discretion to evict or not evict current residents for their use of marijuana.” Meaning: “In other words, while owners are forbidden from admitting a household with a member [who] uses

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drugs, owners have ‘discretion to determine, on a case-bycase basis, when it is appropriate to terminate the tenancy of the household’ due to use of a controlled substance, like marijuana,” Kelly explained.

Your Marijuana To-Do List In addition to denying admission for marijuana users, regardless of your state’s laws, HUD’s guidance further requires that you “not establish lease provisions or policies that affirmatively permit occupancy by any member of a household who uses marijuana. Owners must establish policies which allow the termination of tenancy of any household with a member who is illegally using marijuana or whose use interferes with the health, safety or right to peaceful enjoyment of the residents.” Although the rest of HUD’s memo is consistent with past guidance, this termination requirement for anyone who is illegally using marijuana is new, noted Colleen Bloom, associate director for housing operations at Washington, DC-based Leading Age, in a Jan. 5 analysis. Do this: You should address the use of medical and recreational marijuana in your property policies and procedures, Ross advises. “It is best to set applicants’ expectations in the resident selection plan and to establish specific guidelines in your House Rules.” You should explicitly state in your tenant selection plan, House Rules, and other related policies and procedures that marijuana use is prohibited under federal law for applicants. Also specify your desired discretion for marijuana use, along with your state’s laws, for current residents. Remember: Although HUD doesn’t require you to have House Rules, if you do have them and plan to edit the rules to incorporate information on marijuana use, be sure to reference the requirements for changing House Rules in HUD Handbook 4350.3 R1, C4, Paragraphs 6-9 and 6-12, Ross says. Best bet: Likewise, HUD doesn’t require you to notify applicants or residents about changes to your tenant selection plan, but notifying applicants, potential applicants and residents of such changes “is recommended,” Ross notes.

Can Medicinal Marijuana Use Be a Reasonable Accommodation? But beware of adopting House Rules that prohibit the use of controlled substances, irrespective of what state or federal law says. “These rules have often been challenged by residents with disabilities who seek reasonable

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accommodations to allow them to use (and even grow) marijuana for medicinal purposes,” Kelly warned. Potential pitfall: “In the past, owners have resisted such requests on the grounds that under HUD’s rules, use of marijuana is forbidden” and a resident’s request to allow medical marijuana use is unreasonable, Kelly said. But HUD’s new guidance throws a wrench into that line of thought. “Because the new HUD guidance recognizes that owners have discretion to allow continued occupancy

by persons using drugs, it may be more difficult for an owner to base a refusal to make such an accommodation on the grounds that it conflicts with federal rules,” Kelly cautioned. Resource: To read HUD’s Dec. 29 memo, “Use of Marijuana in Multifamily Assisted Properties,” go to http:// portal.hud.gov/hudportal/documents/huddoc?id=useofmarij inmfassistpropty.pdf. n

Quick-Reference Chart: Is Marijuana Legal In Your State? Pay attention: Some states allow medical CBD use only So far, 23 states and the District of Columbia have legalized the use of medical marijuana, decriminalized marijuana possession, or both. Mississippi, Nebraska, North Carolina, and Ohio have limited decriminalization involving reduced enforcement of marijuana use or possession. Currently, 23 states still prohibit marijuana use outright. Medical Marijuana Legalized/ Decriminalized Alaska Arizona California Colorado Connecticut District of Columbia Delaware Hawaii Illinois Maine Maryland Massachusetts Michigan Minnesota Montana Nevada New Hampshire New Jersey New Mexico New York Oregon Rhode Island Vermont Washington

Medical Cannabidiol (CBD) Use Only Alabama Florida Iowa Kentucky Mississippi Missouri North Carolina South Carolina Tennessee Utah Wisconsin

Non-Medical (Recreational) Marijuana Legalized/Decriminalized Alaska Colorado Oregon Washington

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LIHTC

When You Can (And Cannot) Evict Tenants Who Are No Longer Eligible Do this first if you decide to offer tenants incentives for voluntarily moving elsewhere If you’re terminating tenants who do not meet the Low Income Housing Tax Credit (LIHTC) eligibility guidelines, you’re making a big mistake. Here’s what you need to know about tenancy termination when your property participates in both the U.S. Department of Housing and Urban Development (HUD) Multifamily program and the LIHTC program. In a Jan. 12 memorandum, HUD’s Office of Multifamily Housing Programs provided guidance to Multifamily staff regarding protecting tenants living in buildings participating in Multifamily programs, such as Project-Based Section 8, as well as the LIHTC program. Reports to HUD on owners wrongfully attempting to terminate tenancy of HUD-assisted tenants sparked the memo, according to the National Low Income Housing Coalition (NLIHC). The situation: With an aging HUD-subsidized housing inventory, more owners are receiving tax credits to fund substantial rehabilitation and repairs for their properties, explains Syracuse, NY-based PMCS-ICAP. “Following rehabilitation, these owners are tasked with ensuring the HUD-assisted households moving back into the new units are also tax credit eligible.” But in some cases, these households may have income in excess of the LIHTC eligibility levels.

We Want to Hear From You Tell us what you think about Assisted Housing Alert. • What do you like? • What topics would you like to see us cover? • What can we improve on? We’d love to hear from you. Please email Kimberly Gilbert at [email protected] Thank you in advance for your input!

Don’t Make These Eviction Mistakes Pitfall: “Advocates have observed that HUD-assisted tenants have been threatened with displacement by owners who obtain LIHTC equity and then seek to remove tenants, citing the lower LIHTC income eligibility threshold,” NLIHC says. “Some tenants were also threatened with displacement when an owner attempted to rescreen them under LIHTC.” Mistake: If HUD-assisted tenants don’t meet the LIHTC eligibility guidelines, for example because they have income greater than the LIHTC program threshold, you cannot terminate their tenancy on these grounds alone. “Terminating tenancy may only occur in very limited circumstances, as prescribed in regulations and the lease agreement, which do not include failure to meet LIHTC-specific income rules or student eligibility rules,” NLIHC states. “Eviction of HUD-assisted households is limited to those reasons permitted by HUD and state and local law, and detailed in the lease agreement,” PMCS-ICAP agrees. Of course, you have the right to terminate tenancy due to criminal activity, but that criminal activity must have occurred during the term of the lease or you must be able to document that the applicant fraudulently failed to disclose past criminal activity during the application process.

Handle Eligibility Problems This Way “If an assisted household becomes over-income in a HUD program, its rent assistance ends, but it may continue to live in the unit paying market rent,” NLIHC stresses. Alternative: You can offer incentives to over-income households to encourage them to move voluntarily, PMCSICAP notes. But you cannot use Section 8 or FHA project funds to pay out these incentives. First, you should inform tenants in writing that they have the option of remaining in occupancy as HUD-assisted tenants under the terms of their lease, to ensure that the choice of moving with incentives is truly voluntary, HUD states. To read the HUD memo, “Occupancy Protections for HUD-Assisted Households in Properties with Low-Income Housing Tax Credits,” go to http://portal.hud.gov/hudportal/ documents/huddoc?id=occupprotectionshudassthsg.pdf. n

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Court Takeaway

Pay Attention: Disparate Impact Finally Gets Its Day In Supreme Court Some justices appear to be staunchly defending the FHA The United States’ highest court is now one step closer to weighing in on the principle of “disparate impact.” Will disparate impact disappear, or is the principle here to stay? On Jan. 21, the U.S. Supreme Court heard oral arguments in the landmark disparate impact case, Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. (Docket No. 131371). The Supreme Court was poised to tackle the disparate impact issue in two prior cases, but in both cases the parties reached settlement agreements prior to oral arguments. This case is the first of its kind to make it to the highest court.

How Disparate Impact Made its Way to Supreme Court Background: In terms of fair housing, disparate impact means that housing policies and practices that have a discriminatory effect on minorities are illegal, regardless of whether there is an actual intent to discriminate. All 11 federal appeals courts have ruled that the Fair Housing Act (FHA) covers disparate impact claims, according to The Leadership Conference on Civil and Human Rights. And in 2013, the U.S. Department of Housing and Urban Development (HUD) issued a regulation that explicitly covered the disparate impact principle (see Assisted Housing Alert Vol. 9, No. 4, page 27, “You Now Have Disparate Impact Liability — Without Intent To Discriminate.”) HUD is steadfastly standing by its 2013 disparate impact rulemaking, which the agency defended at length in a detailed amicus brief submitted to the Supreme Court on the case. In the case now before the Supreme Court, The Inclusive Communities Project (ICP) sued the Texas Department of Housing and Community Development (TDHCD), claiming that TDHCD located most Low Income Housing Tax Credit (LIHTC) properties in predominantly “black” communities in Texas, which

caused a disparate impact on these tenants. ICP won its case in the lower courts, and TDHCD has appealed the case all the way to the highest court.

Watch for 3 Major Issues Analysis: According to a Jan. 22 analysis by the law firm Buckley Sandler LLP, the nine Supreme Court justices focused on three major issues: 1. Whether the phrase “make unavailable” in the FHA provides a textual basis for disparate impact (e.g., the law makes it unlawful to “… make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.”); 2. Whether three provisions within the 1988 amendments to the FHA demonstrate congressional acknowledgement that the FHA permits disparate impact claims; and 3. Whether the justices should defer to HUD’s disparate impact rule.

Why Proceedings Hint Decision Could Swing Either Way During oral arguments, Justice Antonin Scalia seemed to agree with the Supreme Court’s four liberal justices that the FHA can ban housing or lending practices without any proof of intent to discriminate. Justice Scalia said that the Supreme Court must read the FHA as a coherent law, including the original 1968 law and the 1988 amendments, The Leadership Conference reported. Scalia told Texas Solicitor General Scott Keller, “I find it hard to read those two [laws] together in any other way than there is such a thing as disparate impact.” But later in the oral arguments, Justice Scalia said that “racial disparity is not racial discrimination.” The justices also discussed how the disparate impact tests have “been applied for many years,” explains the National Low Income Housing Coalition (NLIHC). So you have to analyze that policy or practice to justify it and “show that

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Assisted Housing Alert™

there are no alternative policies or practices that do not have a disparate effect.” Justice Stephen Breyer appeared to be inclined to simply uphold the FHA, stating: “So, why should this Court suddenly come in and reverse an important law which seems to have worked out in a way that is helpful to many people, has not produced disaster…?” Outcome: Clearly, the disparate impact issue is still largely undecided among some of the Supreme Court justices. The Supreme Court is scheduled to issue a ruling on this case by the end of June.

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Resources: A transcript of the oral arguments before the Supreme Court is available at www.supremecourt.gov/ oral_arguments/argument_transcripts/13-1371_g4ek.pdf. To read HUD’s amicus brief, go to http://portal.hud.gov/ hudportal/documents/huddoc?id=131371bsacUnitedStates. pdf. To read HUD’s 2013 final rule on disparate impact, go to http://portal.hud.gov/hudportal/documents/huddoc?id =discriminatoryeffectrule.pdf. n

TRACS

Good News: You’re Getting An Extension On TRACS 202D Deadline But beware of continuing processing delays for voucher requests You have a 30-day extension on the TRACS 202C to 202D conversion deadline, according to a Jan. 16 announcement by the U.S. Department of Housing and Urban Development (HUD) — and you can thank the myriad of properties that haven’t yet converted. But problems abound, and the TRACS system has been five nights behind in processing voucher requests.

Why the Conversion Deadline Extension? As of Jan. 15, only about 60 percent of properties submitting tenant certifications and vouchers to TRACS had made the conversion to the TRACS 202D release, according to a Jan. 16 analysis by Colleen Bloom, associate director for housing operations at Washington, DC-based Leading Age. What could muck up the works is the remaining 40 percent of properties attempting the conversion in a short timeframe. Therefore, HUD is extending the conversion deadline until Feb. 27, which is the last day you can submit vouchers and certifications in the TRACS 202C format, says Mary Ross, president of Ross Business Development in Marietta, GA. And the HUD Office of Multifamily Housing is issuing this one-time 30-day extension “because the new data for repayment agreements, veterans, homeless, DUNS Numbers, etc. contained in the TRACS 202D release is needed for reporting purposes,” Bloom noted.

According to the Multifamily Housing Rental Housing Integrity Improvement Project (RHIIP), the updated TRACS 202D release implementation schedule is as follows: • TRACS 202D Release Conversion Start Date: Aug. 1, 2014 • TRACS 202C Release Conversion End Date: Feb. 27, 2015 • TRACS 202C Release Transactions will be rejected: March 2, 2015

Heads Up: You Could Experience Voucher Delays Meanwhile, HUD’s TRACS system is experiencing processing delays for voucher requests throughout the month of January, according to Syracuse, NY-based PMCS-ICAP. The problem involves voucher files formatted in TRACS 202D, which are significantly larger in size because the number of rows in the file has increased. “While the TRACS Team is aware of the delays and is working to address the problem, the system appears to be an estimated five nights behind in processing,” PMCSICAP noted. Mistake: In the interim, do not re-transmit vouchers that you already submitted because this will only increase the backlog volume, HUD instructs. TRACS will still process vouchers in the queue using the “first in-first

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out” logic. But you may still experience minor delays in voucher payments scheduled for February. What to do: If you are unsure of the status of your voucher submission, PMCS-ICAP instructs you to log on to TRACS via Secure Systems, and do the following: Click on Voucher/Tenant Queries, click on Voucher Query, select your Contract Number/Project Number, and hit ‘Submit.’” “Vouchers successfully processed will

23

appear on the list with an assigned Voucher ID,” PMCSICAP says. Links: The release notice updating the TRACS 202D implementation schedule is available at http://portal.hud. gov/hudportal/documents/huddoc?id=tracs_202d_relea_ schedule.pdf. You can read the full notification on the processing delays from TRACS at http://portal.hud.gov/ hudportal/documents/huddoc?id=tracsmaint.pdf. n

Industry Notes

Understand These New Functionalities Added To Multifamily EIV HUD grants new access to certain users for these reports Among the changes in the update to the Enterprise Income Verification (EIV) system in the latest version release, you will enjoy a fix to a bug in the Identity Verification Report. After implementing the release on Dec. 19, 2014 and running the summarization on Dec. 21, the U.S. Department of Housing and Urban Development (HUD) has announced the successful implementation of the EIV 9.8 system release with full functionality, according to the Multifamily Housing Rental Housing Integrity Improvement Project (RHIIP). Here are the new functionalities that the 9.8 release added to the Multifamily EIV system:

• EIV — HQs Management Reports o No HSC or HSU Role Assigned: Report provided duplicative data in Certified Contracts/Projects Report and thus was removed. • EIV — Verification Reports o New Hires Report: Additional EIV report access has been granted to users with HFC user roles o Income Discrepancy Report: Additional EIV report access has been granted to users with OIG, HFC, HSC, and HSU user roles. o Identity Verification Report: Results for percentage of household members who have failed on the statistics screen have been corrected to show results instead of a zero percent. n

You Could Enjoy A Reprieve On MORs Also, HUD wants to reduce the timeframe to receive vacancy payments If your property consistently scores high on management and occupancy reviews (MORs), the U.S. Department of Housing and Urban Development (HUD) wants to give you a deserved break. HUD published two new proposed rules in the Jan. 14 Federal Register, both of which solicit public comments due by March 16. One proposed rule deals with MORs, while the other concerns vacancy payments. The MOR proposed rule would reduce the number of required MORs for Project-Based Section 8 properties by

allowing your annual MOR rating to dictate the frequency of MORs, explains Syracuse, NY-based PMCS-ICAP. To determine MOR frequency, HUD would utilize its new risk-based asset management model. Reason: “Because MORs disrupt inspected project operations and consume HUD staff time, HUD proposes to require MOR schedules based on both a project’s previous MOR rating and HUD’s risk-based asset management model, which classifies properties as

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‘troubled,’ ‘potentially troubled,’ or ‘not troubled,’” explains the National Low Income Housing Coalition (NLIHC). HUD would use the proposed MOR schedule (with 15 combinations of previous MOR and risk classifications) to determine whether the next MOR will take place within 12, 24, or 36 months, NLIHC says. In the other proposed rule, HUD would reduce the maximum time period for Project-Based Section 8 owners to receive vacancy payments from 60 days to 30 days. “Currently, owners are entitled to vacancy payments in the amount of 80 percent of the contract rent for a period of no more than 60 days after a vacant unit is ready for occupancy, provided the owner has marketed the unit,” PMCS-ICAP says. HUD has decided that the 60-day period for vacancy payments is too long and may encourage owners to allow units to remain vacant longer. If finalized, this proposed rule would affect future renewal contracts under the Multifamily Assisted Housing Reform and Affordability Act (MAHRA), but it would not preempt existing contracts, PMCS-ICAP notes. Silver lining: Under the proposed rule, you can still apply for debt-service vacancy payments if vacancy persists beyond the 30-day period, NLIHC points out. Debt-service vacancy payments are equal to the principle and interest payments needed to amortize the portion of the debt service attributable to the vacant unit, for up to 12 additional months.

We Welcome Your Comments and Suggestions! Sarah Terry Editor Kimberly Gilbert Managing Editor [email protected] Candi Atkins Consulting Editor [email protected]

Images used throughout this newsletter are provided by PhotoSpin. Some images are modified for educational purposes.

Links: To read the full text of the MOR proposed rule, go to www.federalregister.gov/articles/2015/01/14/2015-00353/section-8-housingassistance-programs-proposed-management-and-occupancy-review-schedule. For the full text of the vacancy payment proposed rule, visit www.federalregister. gov/articles/2015/01/14/2015-00357/streamlining-management-and-occupancyreviews-for-section-8-housing-assistance-programs-and-amending. n

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An Eli Real Estate Publication

Volume 11, Number 4

In This Issue... n Begin Using The Updated Race And Ethnic Data Reporting Form Now  The U.S. Department of Housing and Urban Development (HUD) has released an updated version of the Race and Ethnic Data Reporting Form with a new expiration date of June 30, 2017. Start using the updated form immediately with all new applicant members and households.................................................. 26 n Know How Equal Access Impacts Your Regulatory Mandates  Although the Equal Access Rule has existed for nearly three years, many housing providers aren’t complying with the regulation. Here’s a refresher on the key regulatory revisions that the Rule spurred ....................... 27 n Why Private Landlords Aren’t Liable For This Reasonable Accommodation Claim  If a Section 8 tenant tries to go after a private landlord for denying a reasonable accommodation based on the public housing authority’s (PHA’s) decisions, the tenant won’t likely be successful. Here’s one case that illustrates how a court will view a decision to deny a reasonable accommodation under the Fair Housing Act (FHA)............................................. 29 n Get Your Property ‘Camera-Ready’ For REAC Inspectors  Heads up: Real Estate Assessment Center (REAC) inspectors are using new software capabilities to record your Level 3 severe deficiencies with photographs...................................................................... 30 n Don’t Evict Domestic Violence Victims For ‘Disorderly Action’  If your local government enacts an ordinance that requires you to evict tenants who are victims of domestic violence for “disorderly action,” beware that this requirement violates the Fair Housing Act (FHA).......31 n Heed Updated Rent Annual Adjustment Factors For FY 2015  Heads up: The contract rents for units in your Section 8 housing assistance payment (HAP) programs and project-based certificate program have changed as of Feb. 9........................................................31

April 2015

Fair Housing

Are You Complying With HUD’s Equal Access Rule? Look for these problems in your eligibilityrelated forms If you’re asking prospective tenants about their sexual orientation or gender identity, you’re making a big mistake that could get you into hot water with the U.S. Department of Housing and Urban Development (HUD). And with the recent release of two new Notices, HUD is making its intentions clear that it is cracking down on this type of potential discrimination. On Feb. 6, HUD issued Notice H 2015-01, which reiterates the prohibition on actual or perceived discrimination based on sexual orientation, gender identity, or marital status. Then on Feb. 20, HUD issued Notice CPD-15-02, “Appropriate Placement for Transgender Persons in SingleSex Emergency Shelters or Other Facilities.” Both Notices deal with the requirements contained in HUD’s 2012 regulation, “Equal Access to Housing in HUD Programs Regardless of Sexual Orientation or Gender Identity.”

Understand the Equal Access Rule Basics There are many areas that the Fair Housing Act (FHA) does not directly address, including sexual orientation and gender identity, according to a Feb. 23 analysis by Washington, DC-based partner attorney Harry Kelly for the law firm Nixon Peabody LLP. That’s why HUD issued the 2012 regulation, dubbed the “Equal Access Rule,” to attempt to address this gap. The Equal Access Rule administratively extends protections based on sexual orientation and gender identity. continued on next page 136

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Among other things, the Rule “stated that (a) eligibility decisions for HUD-insured and –assisted housing should be made without regard to sexual orientation, gender identity or marital status, and (b) owners of HUD-insured or –assisted housing may not inquire about the sexual orientation or gender identity of prospective” residents, Kelly explains. And the guidance HUD issued on Feb. 23 “builds on those concepts.” HUD’s view is that these protections do not constitute new “protected classes” under the FHA, but rather reflect judicial interpretations of the FHA’s current prohibition of discrimination based on sex, Kelly says. Although the FHA “does not expressly include sexual orientation, gender identity and marital status as protected classes, a lesbian, gay, bisexual or transgender person’s experience with sexual orientation or gender identity housing discrimination may still be covered by the [FHA’s] prohibition on discrimination based on sex,” explains Mary Ross, president of Ross Business Development in Marietta, GA.

Don’t Ask About Gender Identity Basically, HUD’s guidance says that you cannot ask about gender identity for eligibility purposes, Ross states. But keep in mind that there may be other reasons to ask about gender identity or marital status — for instance, “you may be required to disclose gender for a tax credit Tenant Income Certification (TIC).” Pay attention: In Notice CPD-15-02, which provides additional guidance regarding placement of transgender persons in single-sex shelters, HUD “urges shelter providers to place a client in a shelter based on the gender with which the client identifies, taking health and safety concerns into consideration,” Kelly notes.

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Review Your Forms Another crucial step: To comply with the Equal Access Rule, ensure that your forms aren’t impermissibly asking for certain information about applicants. “Owners/agents may want to review forms to determine if inquiries about gender, sexual orientation or marital status are required,” Ross says. “Since these criteria are not considered when determining eligibility, owners/ agents may want to remove such inquiries,” or at the very least, consider making responses optional if appropriate. Caveat: Beware that you cannot edit the forms under Office of Management and Budget (OMB) approval posted on the HUDClips website without HUD approval, Ross cautions. The TRACS forms (HUD Form 50059 and 50059A) include fields asking you to identify the sex of household members. But with the release of TRACS version 202D, the responses to these fields are optional and may be left blank. And review any forms your organization has created, such as the Application, Live-in Aide Questionnaire and Interim Certification Questionnaire, which may ask household members to disclose gender or marital status, Ross suggests. You may also want to modify certain sample forms provided by HUD, including the Citizenship Declaration (HH 4350.3 R1, C4, Exhibit 3-5), the Family Summary (Exhibit 3-4), and the Owner Summary (Exhibit 3-7), Ross adds. Because these are not OMB forms, you can modify them. Resources: To read Notice H 2015-01, go to http:// portal.hud.gov/hudportal/documents/huddoc?id=15-01hsgn. pdf. To access Notice CPD-15-02, visit http://portal.hud. gov/hudportal/documents/huddoc?id=15-02cpdn.pdf.  n

Toolkit

Begin Using The Updated Race And Ethnic Data Reporting Form Now Why you should include this form as an attachment to the application The U.S. Department of Housing and Urban Development (HUD) has released an updated version of the Race and Ethnic Data Reporting Form with a new expiration date of June 30, 2017. Start using the updated form immediately with all new applicant members and households.

Technically, the previous version of this form expired on March 31, 2014. Strategy: You should truly consider including this form as an attachment to the application, which applicants continued on page 28

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Know How Equal Access Impacts Your Regulatory Mandates Review important revisions to definitions of family, gender identity, and sexual orientation Although the Equal Access Rule has existed for nearly three years, many housing providers aren’t complying with the regulation. Here’s a refresher on the key regulatory revisions that the Rule spurred:

Recognize HUD’s ‘Without Regard to’ Requirements Notice H 2015-01 reminds you of the Equal Access Rule’s revisions to the U.S. Department of Housing and Urban Development’s (HUD) general program requirements, which essentially added the following provisions at 24 CFR 5.105(a)(2): (a) A determination of eligibility for housing that is assisted by HUD or subject to a mortgage insured by the Federal Housing Administration shall be made in accordance with the eligibility requirements provided for such program by HUD, and such housing shall be made available without regard to actual or perceived sexual orientation, gender identity, or marital status, and (b) No owner or administrator of HUD-assisted or HUD-insured housing, approved lender in an FHA mortgage insurance program, or any other recipient or sub-recipient of HUD funds may inquire about the sexual orientation or gender identity of an applicant for, or occupant of, HUD-assisted or HUD-insured housing for purposes of determining eligibility or otherwise making such housing available. However, permissible inquiries into sex are permissible for temporary, emergency shelter with shared sleeping areas or bathrooms, or to determine the number of bedrooms to which a household may be entitled.

Key Definition Changes to ‘Family,’ ‘Gender Identity’ & ‘Sexual Orientation’ The Rule also revised HUD’s definitions at 24 CFR 5.100 as follows:

(a) The term “family” includes, but is not limited to the following, regardless of actual or perceived sexual orientation, gender identity, or marital status: (1) A single person, who may be an elderly person, displaced person, disabled person, near-elderly person or any other single person; or (2) A group of persons residing together and such group includes, but is not limited to: (i) A family with or without children (a child who is temporarily away from the home because of placement in foster care is considered a member of the family); (ii) An elderly family; (iii) A near-elderly family; (iv) A disabled family; (v) A displaced family; and (vi) The remaining member of a tenant family. (b) The term “gender identity” means actual or perceived gender-related characteristics. (c) The term “sexual orientation” means homosexuality, heterosexuality or bisexuality.

Heed Nondiscriminatory Mortgage Rules The Equal Access Rule also made three changes to 24 CFR part 200 (Introduction to FHA Programs) and part 203 (Single Family Mortgage Insurance). In 24 CFR 200.3, the Rule incorporated the new definition of “family” found in 24 CFR 5.100, as well as the nondiscrimination requirements found in the Rule. In 24 CFR 203.33, the Rule incorporated the requirement that “marital status, actual or perceived sexual orientation or gender identity” not be considered when determining the adequacy of the mortgagor’s income for single-family mortgage insurance. Resource: To read the Equal Access Rule, go to www.gpo.gov/fdsys/pkg/FR-2012-02-03/html/20122343.htm. n

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continued from page 26

information from your applicants, without documenting the statistics on the waiting list.” Prepare yourself: Beware that another revised version of the form is currently under HUD review, “so you may see additional changes in the future,” says Mary Ross, president of Ross Business Development in Marietta, GA. Also, keep in mind that “you are not required to include the expiration date if the form is generated using TRACS or site software,” as illustrated in HUD’s Forms Matrix. n

would complete and return along with the application, urges Syracuse, NY-based PMCS-ICAP. Why? “The newly expanded Affirmative Fair Housing Marketing Plan (HUD Form 935.2A) now requires owners to report the race and ethnic demographic breakdown of applicants on the waiting list via Worksheet 1,” PMCS-ICAP says. “By including this form with the application, you can efficiently gather this demographic Race and Ethnic Data Reporting Form

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U.S. Department of Housing and Urban Development 2IILFHRI+RXVLQJ

Name of Property

Project No.

20%$SSURYDO1R ([S06/30/2017 

Address of Property

Name of Owner/Managing Agent

Type of Assistance or Program Title:

  Name of Head of Household

Name of Household Member



DatePPGG\\\\ :

Select One

Ethnic Categories*

Hispanic or Latino Not-Hispanic or Latino Select All that Apply

Racial Categories*

American Indian or Alaska Native Asian Black or African American Native Hawaiian or Other Pacific Islander White Other *Definitions of these categories may be found on the reverse side.

There is no penalty for persons who do not complete the form.  _____________________________________

____________________________

Signature

Date

 Public reporting burden for this collection is estimated to average 10 minutes per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. This information is required to obtain benefits and voluntary. HUD may not collect this information, and you are not required to complete this form, unless it displays a currently valid OMB control number. This information is authorized by the U.S. Housing Act of 1937 as amended, the Housing and Urban Rural Recovery Act of 1983 and Housing and Community Development Technical Amendments of 1984. This information is needed to be incompliance with OMB-mandated changes to Ethnicity and Race categories for recording the 50059 Data Requirements to HUD. Owners/agents must offer the opportunity to the head and cohead of each household to “self certify’ during the application interview or lease signing. In-place tenants must complete the format as part of their next interim or annual re-certification. This process will allow the owner/agent to collect the needed information on all members of the household. Completed documents should be stapled together for each household and placed in the household’s file. Parents or guardians are to complete the self-certification for children under the age of 18. Once system development funds are provide and the appropriate system upgrades have been implemented, owners/agents will be required to report the race and ethnicity data electronically to the TRACS (Tenant Rental Assistance Certification System). This information is considered non-sensitive and does no require any special protection.



1

IRUP+8'+ 

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29

Court Takeaway

Why Private Landlords Aren’t Liable For This Reasonable Accommodation Claim Know what a tenant must prove to win a disparate treatment claim If a Section 8 tenant tries to go after a private landlord for denying a reasonable accommodation based on the public housing authority’s (PHA’s) decisions, the tenant won’t likely be successful. Here’s one case that illustrates how a court will view a decision to deny a reasonable accommodation under the Fair Housing Act (FHA).

Does Your PHA Have an ‘Over-Housing’ Policy? Background: Since 1983, Priscilla Batista leased the same three-bedroom apartment at the housing cooperative Cooperativa de Vivienda Jardines de San Ignacio (the Cooperativa) in San Juan, PR. Although her two children lived with her previously, they moved out in 1997 and 2003. Batista received Section 8 rental assistance through the Puerto Rico Housing Finance Authority (PRHFA). During a management review of housing assistance recipients in October 2007, the PRHFA [missing word here?] Batista’s three-bedroom unit was “over-housed” for Section 8 purposes, meaning that Batista’s unit was larger than what she qualified for under Section 8. The Cooperativa sent Batista a letter informing her that, under Section 8, she must either transfer to a smaller unit and continue to receive Section 8 assistance, or remain in her three-bedroom unit and pay the fair market rent without assistance. The Cooperativa sent additional letters, several of which informed Batista of a two-bedroom unit that became available, but she didn’t respond. Eventually, Batista submitted a request to the Cooperativa for a reasonable accommodation under the FHA, stating that her disability requires her to have a bedroom, as well as a separate room for physical therapy and a third room for reading and crafts. Batista claimed that moving to a smaller unit would compromise her health, and that the suggested two-bedroom unit was noisier than her current unit and moving there would aggravate her hypersensitivity to sounds.

When a Tenant Must Provide Medical Documentation The Cooperativa sought guidance on the reasonable accommodation request from the PRHFA and the U.S. Department of Housing and Urban Development (HUD). In a letter, the PRHFA stated that the Cooperativa “should offer a smaller unit to the member and require paying the market rent if [Batista] refuses to transfer to another unit.” The PRHFA also wrote that when a tenant such as Batista requests a reasonable accommodation for medical conditions, the cooperative must determine the applicant’s eligibility on a case-by-case basis. The Cooperativa then performed an independent “noise pollution test” on the suggested two-bedroom apartment. The noise-level test showed that the two-bedroom unit was not unsuitably loud. The Cooperativa did not analyze Batista’s medical condition itself; instead it relied on the findings HUD had compiled on Batista’s reasonable accommodation request. The Cooperativa then denied Batista’s request. Batista nevertheless remained in the three-bedroom unit, even after she stopped receiving Section 8 assistance. She filed an administrative complaint with HUD on April 12, 2010, alleging that the Cooperativa violated the FHA by failing to provide her requested reasonable accommodation and retaliated against her because she’d recently prevailed in a separate HUD proceeding against the cooperative. HUD sided with the Cooperativa on both of Batista’s claims, deciding that Batista failed to submit medical documentation stating that a three-bedroom unit, as opposed to a two-bedroom unit, was necessary to accommodate her disability. Batista then filed a lawsuit in federal district court, alleging the reasonable accommodation and retaliation claims, and additionally a claim of disparate treatment under the FHA. The district court also sided with the Cooperativa, granting summary judgment to the defendants on the reasonable accommodation and disparate treatment claims. The district court concluded that it lacked jurisdiction to rule on the retaliation claim. Batista then appealed the

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district court’s decision to the U.S. Court of Appeals for the First Circuit.

Don’t Take Blame for PHA’s Decision Analysis: The Cooperativa conceded that Batista qualifies as handicapped under the FHA. But the district court decided that there was not a triable issue of fact as to whether the Cooperativa had failed to provide a “reasonable and necessary” accommodation. The appeals court agreed, stating that while the FHA “obliges private landlords to adjust their policies to make reasonable accommodations for their tenants who otherwise receive Section 8 subsidies, the [PRHFA], not the Cooperativa, is the entity responsible for administering Section 8 benefits.” And the PRHFA, not the Cooperativa, established the “over-housing” policy that led to the revocation of Batista’s Section 8 assistance. But Batista never challenged the PRHFA’s determination that, under its over-housing policy, she does not qualify for the subsidy for the three-bedroom unit. Instead of filing a lawsuit against the PRHFA, Batista sued the Cooperativa. “And the Cooperativa is not responsible for the Section 8 subsidy determination,” the appeals court wrote. “Nor has the Cooperativa said it would decline to make the current apartment available to Batista if she were deemed eligible for a Section 8 subsidy to pay the market rent.” “As a result, Batista must — but has not — explained why a private landlord, like the Cooperativa, acts unlawfully in refusing to provide the subsidy itself,” the appeals court reasoned. “Indeed, not even Batista argues her requested accommodation would be a ‘reasonable’ one

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under the [FHA] if the subsidy she previously received were not reinstated.”

No Evidence? Disparate Treatment Claim Dead in the Water In her disparate treatment claim, Batista alleged that the Cooperativa instituted multiple claims against her, barred her from voting in resident-member assemblies, attempted to prevent visitors from entering the premises to see her, threatened to evict her from her unit, and more. According to the appeals court, to prove her disparate treatment claim, Batista must produce either: a. Direct evidence of discriminatory intent; or b. Indirect evidence creating an inference of discriminatory intent. Batista argued that the Cooperativa’s “true intent was to eliminate Section 8 beneficiaries from the housing cooperative,” rather than the Cooperativa’s actions being motivated by Batista’s status as a disabled person protected by the FHA, the appeals court noted. Also, Batista submitted no evidence “to suggest that an impermissible, disability-based discriminatory purpose motivated the Cooperativa’s actions,” the appeals court said. Outcome: The appeals court affirmed the district court’s decision to grant the defendants summary judgment on the reasonable accommodation and disparate treatment claims. The appeals court reversed and remanded Batista’s retaliation claim to the district court. Batista v. Cooperativa de Vivienda Jardines de San Ignacio, et al., 2015 U.S. App. Lexis 489 (1st Circuit, Jan. 13, 2015). n

Industry Notes

Get Your Property ‘Camera-Ready’ For REAC Inspectors Learn how to access photos that the REAC inspector takes of your property Heads up: Real Estate Assessment Center (REAC) inspectors are using new software capabilities to record your Level 3 severe deficiencies with photographs. The U.S. Department of Housing and Urban Development (HUD) has upgraded its software to allow for these photographic capabilities, according to Chichester, NH-headquartered US Housing Consultants. The ability to photograph came about as part of the latest version of the Uniform Physical Condition Standards (UPCS) 4.0 inspection software.

REAC began testing the photographic capabilities for inspections starting back in August 2014 (see “Camera Shy? Get Ready For Close-Ups Of Your REAC Deficiencies,” AHA Vol. 10, No. 10, page 76). Although HUD planned to officially begin using the new software for all inspections in October 2014, REAC inspectors have just recently begun routinely photographing Level 3 deficiencies. Look ahead: “We would expect that capability will eventually be extended to all noted deficiencies,” not just Level 3 deficiencies, said Washington, DC-based partner

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attorney Richard Michael Price in a Feb. 3 blog posting for the law firm Nixon Peabody LLP. “This should create more accuracy in the inspections, and also provide real time evidence of when a ‘severe’ defect is really rather minor (think some of those soil erosion issues that were really grass bald patches),” Price notes. “Photos can still be taken in or out of context

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as well, so pursuing appeals where it is reasonable is still important.” Important: And the REAC inspectors aren’t the only ones with access to the photographs — owners and managers can view the snapshots, too. To view the photos, you need to log into the Physical Assessment Subsystem (PASS) in the online Secure Systems, Price explains. n

Don’t Evict Domestic Violence Victims For ‘Disorderly Action’ HUD is cracking down on local ordinances that conflict with the FHA If your local government enacts an ordinance that requires you to evict tenants who are victims of domestic violence for “disorderly action,” beware that this requirement violates the Fair Housing Act (FHA). A U.S. Department of Housing and Urban Development (HUD) complaint alleged that the city of Berlin, NH enacted an ordinance requiring landlords to evict tenants cited by police three or more times for “disorderly action.” If landlords didn’t comply with the ordinance, they would face fines and/or loss of their rental license. The ordinance made no exception for victims of domestic violence, who are overwhelmingly women needing police assistance, HUD said in a Feb. 19 press release. HUD charges that the city of Berlin’s ordinance violates the FHA. “Federally funded housing providers also must comply with the Violence Against Women Act (VAWA) and HUD regulations that provide protection for victims of domestic violence,” the release states. As a result of the complaint, the municipality entered into a Conciliation Agreement with HUD. Under the

Agreement, the city must amend its ordinance to include a statement saying that the “ordinance is not intended to be used against victims of reported incidents of domestic violence.” The city of Berlin must also modify its definition of “disorderly action” to specify that the term will not include the actions of victims of reported domestic violence incidents. Additionally, the city must post the Conciliation Agreement on its website, host an activity to raise awareness of domestic violence, and provide fair housing training to the mayor, city council members, city manager, police chief, and all other city employees who interact with abuse or crime victims. Resources: To read the Conciliation Agreement, go to http://portal.hud.gov/hudportal/documents/ huddoc?id=TownBerlin.pdf. For more information on HUD’s regulations regarding domestic violence victims, visit http://portal.hud.gov/hudportal/documents/ huddoc?id=11-domestic-violence-memo.pdf. n

Heed Updated Rent Annual Adjustment Factors For FY 2015 Find out where you can see the revised AAFs Heads up: The contract rents for units in your Section 8 housing assistance payment (HAP) programs and projectbased certificate program have changed as of Feb. 9. The U.S. Department of Housing and Urban Development (HUD) published a notice in the Feb. 9 Federal Register on the revised contract rent Annual Adjustment Factors (AAFs) for fiscal year (FY) 2015. HUD uses the AAFs to adjust the contract rents on the anniversary date of the assistance contract for certain multifamily projects, according to a Feb. 11 listserv from

the Multifamily Housing Rental Housing Integrity Improvement Project (RHIIP). HUD bases the AAFs on a formula using residential rent and utility cost changes from the most recent annual Bureau of Labor Statistics Consumer Price Index (CPI) survey. HUD applies the AAFs at HAP contract anniversaries for those calendar months commencing after the effective date of the Federal Register notice (Feb. 9, 2015). There are three categories of Section 8 programs that use the AAFs:

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• Category 1: New Construction, Substantial Rehabilitation, and Moderate Rehabilitation programs; • Category 2: Loan Management (LM) and Property Disposition (PD) programs; and • Category 3: Project-Based Certificate (PBC) program. Each Section 8 program category uses the AAFs differently. HUD does not use AAFs for renewal rents (expect for the PBC program), budget-based rents, the tenant-based certificate program, and the voucher program. HUD has divided the AAFs into two tables, each of which contain two columns. The first column adjusts the contract rent for rental units where the highest-cost utility is included in the contract rent (where the owner pays for the highest-cost utility). The second column is for where the highest-cost utility is not included in the contract rent (where the tenant pays for the highest-cost utility). What to do: Take the following steps to select the applicable AAF: 1. Determine whether Table 1 or Table 2 is applicable. 2. In Table 1 or Table 2, locate the AAF for the geographic area where the contract unit is located. 3. Determine whether the highest-cost utility is or is not included in the contract rent for the unit. 4. Select the AAF from the column “Highest Cost Utility Included” if the highest-cost utility is included in the contract rent. 5. Select the AAF from the column “Highest Cost Utility Excluded” if the highest-cost utility is not included in the contract rent. Also, HUD will publish a separate notice at a later date to identify the inflation factors that it will use to adjust tenant-based rental assistance funding for FY 2015. HUD has updated the HUDUSER website to include the revised AAFs, which you can find at www.huduser.org/portal/datasets/aaf.html. The Feb. 9 Federal Register notice is available at www.gpo.gov/fdsys/pkg/FR-2015-02-09/pdf/2015-02622.pdf. n

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One key to successful leadership is continuous personal change. Personal change is a reflection of our inner growth and empowerment. ~ Robert E. Quinn It is not the strongest or the most intelligent who will survive but those who can best manage change. ~ Charles Darwin The universe is change; our life is what our thoughts make it. ~ Marcus Aurelius Antoninus

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