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Working with HUD

Working with HUD. Randall Kelly, Esq. Nixon Peabody LLP Washington, DC. The HUD World. Rental Subsidy Assistance project-based portable FHA Insurance Federal Loans & Grants Cost of Doing Business with HUD. Rental Subsidy Assistance. Project-Based Section 8 HAP Contracts

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Working with HUD

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  1. Working with HUD Randall Kelly, Esq. Nixon Peabody LLP Washington, DC

  2. The HUD World • Rental Subsidy Assistance • project-based • portable • FHA Insurance • Federal Loans & Grants • Cost of Doing Business with HUD

  3. Rental Subsidy Assistance Project-Based Section 8 HAP Contracts The defining feature of the project-based assistance program is that the Section 8 assistance is provided to housing projects and not to households.

  4. Rental Subsidy Assistance (cont’d) Project-Based Section 8 HAP Contracts As long as an eligible household resides in a Section 8 unit in the project, the owner will receive Section 8 assistance for that unit. When the household moves from the unit, the household no longer receives the Section 8 assistance. If the owner rents the unit to a new eligible household, then the owner will continue to receive Section 8 assistance for the unit.

  5. SPECIFIC BREEDS OF PROJECT-BASED SECTION 8 1. The New Construction, Substantial Rehabilitation and State Agency Programs 2. The Loan Management Set-Aside (“LMSA”) 3. Multifamily Assisted Housing Reform Act of 1997 (“MAHRA”)

  6. FEDERAL BUDGET TREATMENT OFSECTION 8 CONTRACTS 1. Under the original Section 8 project-based assistance program, Congress appropriated the full amount of the funds needed for the entire contract term in the first year of the contract. 2. Technical changes in federal appropriation rules since 1990 generally disallow this type of forward funding. All Section 8 contracts now are funded one year at a time. 3. While this change in policy introduces “annual appropriations risk”, Congress never has failed to provide full funding for all Section 8 project-based assistance.

  7. Rental Subsidy Assistance Housing Choice Vouchers 1. Tenant-Based Certificate Program 2. Section 8 Certificate Program 3. Section 8 Voucher Program

  8. Rental Subsidy Assistance Housing Choice Vouchers Merging Programs

  9. Rental Subsidy Assistance Housing Choice Vouchers Project-Based Vouchers

  10. Project-Based Vouchers • PBVs are a subcomponent of the Section 8 tenant-based assistance program. • PHAs may use up to 20% of their Section 8 tenant-based ACC budget authority. • PBV program is the only component of Section 8 currently available to fund new Section 8 project-based contracts. • No more than 25% of the units in a building can have PBVs, except for developments for the elderly, persons with disabilities.

  11. Project-Based Vouchers Term • Contract term of up to fifteen years.

  12. COMMON FEATURES OF ALL SECTION 8 PROGRAMS

  13. COMMON FEATURES • ELIGIBLE TENANTS - Households must earn less than 80% of AMI in order to be eligible for Section 8 assistance. However, income targeting requirements limit most participants to very low-income (less than 50% of AMI). • TENANT PAYMENTS - Households pay 30% of adjusted income as the tenant payment. • SECTION 8 RENTS v. SECTION 42 RENTS - The Section 8 rents generally mayexceed the maximum rents allowed under Section 42.

  14. OTHER FEDERAL RENTAL SUBSIDIES RENTAL ASSISTANCE PAYMENTS and RENT SUPPLEMENT

  15. STATE & LOCAL RENTAL SUBSIDIES Local Rent Supplement Programs and Housing Production Trust Funds

  16. CURRENT FHA LOAN PROGRAMS SECTION 236

  17. FEDERAL LOANS & GRANTS

  18. HOME Program HOME Program Eligible Activities Include: • Acquisition of housing (including assistance to homebuyers). • New construction, reconstruction, mod and sub rehab. • Site improvements and certain predevelopment costs

  19. Forms of HOME Assistance • Grants • Interest or non-interest bearing loans or advances • HERA ended the necessity for below-market rate interest loans coupled with a 9% LIHTC deal. Result is that new construction and substantial rehabilitation expenditures will qualify for the 9% credit even if the project receives a below market federal loan, i.e., a loan from federally appropriated funds with an interest rate below the AFR.

  20. Eligible Costs for HOME Assistance • Actual hard construction costs to meet NC/SR standards of the jurisdiction. • Site improvements, utility connection costs, on-site roads, sewer and water lines. • Construction or rehabilitation of community facilities. • Acquisition costs, including refinancing of existing debt. • Soft costs such as architectural and engineering costs, settlement costs, relocation, etc.

  21. HOME PROGRAMOther Applicable Federal Requirements • Fair Housing and Equal Opportunity requirements. • Affirmative fair housing marketing procedures for projects containing 5 or more units. • Environmental reviews. • Davis Bacon wage rates if assistance is being provided for 12 or more units – and once triggered it applies to whole project.

  22. HOME PROGRAM AND THE 2009 ECONOMIC RECOVERY ACT • $2,25 Billion in funding so that the HOME program can assist LIHTC projects. • Disbursed based upon the 2008 HOME funding formula. • Housing agencies to disburse competitively pursuant to their QAPs. • Funds must be spent quickly.

  23. CDBG • Administered by cities with populations of more than 50,000, referred to as Entitlement Cities. • Administered by a city’s department of housing and community development. • In a population of fewer than 50,000, typically administered by a state agency. • CDBG is not a housing assistance program.

  24. Eligible CDBG Activities • Loans to developers rehabilitating housing for low-and moderate-income families. • Funding acquisition of land to be used for housing as well as certain infrastructure. • Loans and grants to nonprofit organizations to acquire affordable rental housing.

  25. CDBG and HERA • Title III of HERA addressed the redevelopment of abandoned and foreclosed homes. • Title III provides $3,920,000,000 in funding CDBG. • Each State or Unit must expend the Appropriated Funds within 18 months of receipt.

  26. CDBG AND THE 2009 ECONOMIC RECOVERY ACT Additional $1 Billion

  27. A Pound of Flesh - What’s in it for HUD?

  28. REAC Inspections for HQS • Score determines how frequently you will be visited. • Low scores end up in the Enforcement Center. • Failing scores cause your 2530 to be flagged. • Score determines how frequently you will be visited.

  29. 2530 Previous Participation Clearance • HUD’s Vetting Process – does HUD want to do business with you based you your prior experience with HUD? • Paper or electronic – industry threw a fit b/c electronic filing was so horrible. Working better now. • File early and often.

  30. Audited Financial Statements • Electronic filing. • Opportunity for HUD to flag your 2530.

  31. Other Compliance Concepts • HQS • Section 504 – to the extent that you are making an element accessible, then you have to make that element accessible in about 5% of the units. • Excess Income Reports – for 236 properties. • Fair Housing • 9807 Prepayment Approval

  32. Randall Kelly, Esq. Nixon Peabody LLP Suite 900401 9th Street, N.W.Washington, DC20004-2128 (202) 585-8760 rkelly@nixonpeabody.com

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