Eminent Domain Takings of Properties with HUD interest

1. 1 Eminent Domain Takings of Properties with HUD interest  Kathy Szybist Special Applications Center U.S. Dept. HUD Welcome. My background and knowledge: PIH, so I�m going to approach the presentation from the Public Housing perspective (e.g. when a state is taking PH property for a road/highway), but also touch on other HUD areas� Welcome. My background and knowledge: PIH, so I�m going to approach the presentation from the Public Housing perspective (e.g. when a state is taking PH property for a road/highway), but also touch on other HUD areas�

2. 2 HUD & DOT Partnership HUD & DOT: Announce Interagency Partnership Task Force to Promote Sustainable Communities (3/19/09) Goal of Partnership: Coordinate efforts, investments, and strategies to assist families in gaining better access to affordable housing, more transportation options, and lower transportation costs Great to be here and discussing coordination efforts with you all. Mutual interests. The Overlaps between our programs and services are extensive and as evidence by this new federal partnership.Great to be here and discussing coordination efforts with you all. Mutual interests. The Overlaps between our programs and services are extensive and as evidence by this new federal partnership.

3. 3 What is the Special Applications Center (SAC)? Based in Chicago �Back Office� operation in support of the Office of Public Housing�s field offices A part of the Office of Public Housing investments (OPHI) HOPE VI Mixed Finance Capital Fund MTW (Moving to Work) SAC My background and knowledge: PIH, so I�m going to approach the presentation from the Public Housing perspective (e.g. when a state is taking PH property for a road/highway), but also touch on other HUD areas� I work for SAC Office of PIH of HUD Work for the field. Do that which the field does not do often enough to get good at. SAC is part of OPHI, an HQ office headed up by a DAS, Dominique Blom.My background and knowledge: PIH, so I�m going to approach the presentation from the Public Housing perspective (e.g. when a state is taking PH property for a road/highway), but also touch on other HUD areas� I work for SAC Office of PIH of HUD Work for the field. Do that which the field does not do often enough to get good at. SAC is part of OPHI, an HQ office headed up by a DAS, Dominique Blom.

4. 4 What Does SAC Do? Eminent Domain (Public Housing) Section 18 (Demolition/Disposition) De Minimis Demolition (5 units or 5%) Conversion Required Voluntary Homeownership Section 32 Section 5(h) The revised section 18 rule became effective Nov 06. 24 CFR 970 The section numbers refer to the Housing Act of 1937 The calculator rule was effective April 20, 2006. The Department can now accept applications. See the SAC website for details. Section 5(h) applies to only those HA�s with previously approved plans. We can only approve administrative changes for 5(h), we cannot add units to a previously approved plan. New homeownership plans need to to conform to section 32The revised section 18 rule became effective Nov 06. 24 CFR 970 The section numbers refer to the Housing Act of 1937 The calculator rule was effective April 20, 2006. The Department can now accept applications. See the SAC website for details. Section 5(h) applies to only those HA�s with previously approved plans. We can only approve administrative changes for 5(h), we cannot add units to a previously approved plan. New homeownership plans need to to conform to section 32

5. 5 HUD�s Requirements for Eminent Domain Takings Depends on HUD�s Property Interest HUD�s Property Interest depends on HUD Program Source of Funding 1st question you must ask: (1) does HUD have an interest in the property you are proposing to take AND if YES, (2) what is that property interest? 1st question you must ask: (1) does HUD have an interest in the property you are proposing to take

6. 6 HUD Property Interests (may trigger HUD role in e.d. taking) Public Housing: YES HOME-Funds: NO But possible grant repayment CDBG-Funds: NO FHA-Insured Single Family: NO FHA-Insured Multi-Family: Depends No: if No Use Agreement Yes: if Use Agreement HUD 202 & 811 Housing: YES Supportive-Housing Program (SHP): Yes

7. 7 Public Housing (PH) Funded by US Housing Act of 1937 PHA holds property �in trust� for �benefit of HUD� Evidence of HUD�s property interest DOT: recorded against property DOT includes use restriction (low-income housing) (ACC) Supremacy Clause PHA may not agree to voluntary taking w/o HUD Consent NO condemnation lawsuit w/o joining HUD as party PHA usually owns PH, but may be owned by private party if mixed-finance transaction (24 CFR 941 Subpart F) PHA owns land in Fee Simple but for benefit of HUD DOT says PHA must operate property as low-income housing (according to Annual Contributions Contract (ACC) which is contract between HUD and PHA (or Mixed-Finance ACC if another entity owns housing) If property is seized by a 3rd party and HUD did not consent, HUD is authorized to take possession of the propertyPHA usually owns PH, but may be owned by private party if mixed-finance transaction (24 CFR 941 Subpart F) PHA owns land in Fee Simple but for benefit of HUD DOT says PHA must operate property as low-income housing (according to Annual Contributions Contract (ACC) which is contract between HUD and PHA (or Mixed-Finance ACC if another entity owns housing) If property is seized by a 3rd party and HUD did not consent, HUD is authorized to take possession of the property

8. 8 Public Housing (cont.) If a government or quasi-government entity takes PH property, HUD expects all residential dwelling units to be replaced, one-for-one PHA must be made �whole� for property value and units If the HA and the taking agency can agree on a deal that includes the replacement of any units taken, the department will go along with the concept without going to court if certain steps are followed. This does not apply to an HA exercising its power of eminent domainIf the HA and the taking agency can agree on a deal that includes the replacement of any units taken, the department will go along with the concept without going to court if certain steps are followed. This does not apply to an HA exercising its power of eminent domain

9. 9 Factors Determining HUD Consent (PH) Agreement between the taking body and the PHA PHA Board support Authority of the taking body Compensation for dwelling buildings Other Laws Compensation for vacant land & non-dwelling buildings Agreement - The previous version of this notice talked about a �Friendly Taking�. That is what this still involves. The taking body may always exercise its authority, provided it includes HUD in the action. Board Support � HUD will usually get a Board Resolution indicating support. The contract with the Department is with the legal entity called the HA, which is represented by the board Authority � In order to meet the exception for disposition of Section 18 of the Housing Act of 1937 the taking agency needs to take the first step. We usually expect getting a letter from the taking agency to the HA saying they have the authority under State law to take, and describing what they intend to do. Dwelling Building Compensation - The Department expects the HA to be made whole. The HA is in the housing business, and the Department expects the HA to be in the housing business to the same extent it was prior to the taking action. The taking agency may provide funds or units to carry this out. The discussion in the two paragraphs under, (e) Other Laws, belongs with this section. Will correct it when we reissue. Other Laws � For example: the development in question may be part of a VCA settlement. The Department will not allow the taking to proceed until such time a new VCA has been crafted and signed off by all parties. Vacant land & building compensation � Same as for dwelling units, the HA needs to be made wholeAgreement - The previous version of this notice talked about a �Friendly Taking�. That is what this still involves. The taking body may always exercise its authority, provided it includes HUD in the action. Board Support � HUD will usually get a Board Resolution indicating support. The contract with the Department is with the legal entity called the HA, which is represented by the board Authority � In order to meet the exception for disposition of Section 18 of the Housing Act of 1937 the taking agency needs to take the first step. We usually expect getting a letter from the taking agency to the HA saying they have the authority under State law to take, and describing what they intend to do. Dwelling Building Compensation - The Department expects the HA to be made whole. The HA is in the housing business, and the Department expects the HA to be in the housing business to the same extent it was prior to the taking action. The taking agency may provide funds or units to carry this out. The discussion in the two paragraphs under, (e) Other Laws, belongs with this section. Will correct it when we reissue. Other Laws � For example: the development in question may be part of a VCA settlement. The Department will not allow the taking to proceed until such time a new VCA has been crafted and signed off by all parties. Vacant land & building compensation � Same as for dwelling units, the HA needs to be made whole

10. 10 Factors Determining HUD Consent (PH) (cont.) Compensation for Severance Damages Appraisal Resident consultation Relocation Environmental Site & Neighborhood Standards Severance Damages � A partial taking can have a profound effect on the property remaining, especially if the taking is for a highway. Depending on how the environmental works out, might end up having to take and demo more units. Might have to do sound barriers. Appraisal - The value of the property proposed for taking needs to be determined by an appraisal. For a swap, we need two appraisals. If the piece proposed for taking is so small that its value is less than the cost of getting the appraisal, the Department is open to suggestions. Resident Consultation � The Department considers the residents to be our customers. The HA�s are our business partners in the servicing of our mutual customer, the residents. The residents need to be consulted, and the consultation documented. Relocation � The taking agency is expected to pay for and do the relocation. URA applies either way. The taking agency�s funding source will require it or HUD will require it for lack of better guidance. Environmental � HUD staff will perform the environmental under 24 CFR Part 50 for the taking and the proposed use of the site. The result of the environmental may have an impact on the calculation for severance damages. Site & Neighborhood Standards � Would have a direct impact on the taking agency if it were proving hard units in exchange for the HA units it was taking. An indirect impact if the taking agency were providing the funds for the replacement units to the HA. The HA has to be able to find the sites to build the replacement units. Sites meeting the Department�s requirements for situating public housing may drive the cost of the unit past the compensation amount received.Severance Damages � A partial taking can have a profound effect on the property remaining, especially if the taking is for a highway. Depending on how the environmental works out, might end up having to take and demo more units. Might have to do sound barriers. Appraisal - The value of the property proposed for taking needs to be determined by an appraisal. For a swap, we need two appraisals. If the piece proposed for taking is so small that its value is less than the cost of getting the appraisal, the Department is open to suggestions. Resident Consultation � The Department considers the residents to be our customers. The HA�s are our business partners in the servicing of our mutual customer, the residents. The residents need to be consulted, and the consultation documented. Relocation � The taking agency is expected to pay for and do the relocation. URA applies either way. The taking agency�s funding source will require it or HUD will require it for lack of better guidance. Environmental � HUD staff will perform the environmental under 24 CFR Part 50 for the taking and the proposed use of the site. The result of the environmental may have an impact on the calculation for severance damages. Site & Neighborhood Standards � Would have a direct impact on the taking agency if it were proving hard units in exchange for the HA units it was taking. An indirect impact if the taking agency were providing the funds for the replacement units to the HA. The HA has to be able to find the sites to build the replacement units. Sites meeting the Department�s requirements for situating public housing may drive the cost of the unit past the compensation amount received.

11. 11 Obtaining HUD Consent:Application Submission (PH) If PHA agrees to terms of taking, it must request HUD approval HUD�s Special Applications Center (SAC): authority to approve takings Application must be made by PHA through the Public and Indian Housing Information Center (PIC), Inventory Removals Module An exception will be made for developments with no units at this time. Later this year, a PIC enhancement will be rolled out, negating the need for the exception. This applies to all work the SAC does SAC cannot help with providing PIC rights to HA staff, this is an HA IT issue, or possibly the local PIC Coach can help. There is a naming convention that needs to be followed to successfully make attachments which is on the SAC site :filenames are no longer than 25 characters (including file type ending, e.g., �.doc�), and as long as filenames conform to Windows Explorer file naming rules: filenames with spaces must be enclosed in quotation marks. Example: Filename as shown in MS Word: PIC FAQ Ideas.doc Filename to attach to PIC application: �PIC FAQ Ideas.doc"  A revised PIC instruction manual is in the works to pick up feedback from the Ha�s and Field. An exception will be made for developments with no units at this time. Later this year, a PIC enhancement will be rolled out, negating the need for the exception. This applies to all work the SAC does SAC cannot help with providing PIC rights to HA staff, this is an HA IT issue, or possibly the local PIC Coach can help. There is a naming convention that needs to be followed to successfully make attachments which is on the SAC site :filenames are no longer than 25 characters (including file type ending, e.g., �.doc�), and as long as filenames conform to Windows Explorer file naming rules: filenames with spaces must be enclosed in quotation marks. Example: Filename as shown in MS Word: PIC FAQ Ideas.doc Filename to attach to PIC application: �PIC FAQ Ideas.doc" A revised PIC instruction manual is in the works to pick up feedback from the Ha�s and Field.

12. 12 Guidance and Forms (PH) Eminent Domain HUD PIH Notice 2009-01 Application Form: HUD 52860 & HUD 52860 - F www.hud.gov/sac SAC Management: Ainars.rodins@hud.gov (312) 913-8706 Tamara.gray@hud.gov (312) 913-8306 The Eminent Domain notice was rewritten in 2008 and notice was reissued in 2009 with slight modifications. A taking agency may always take HA property, but HUD needs to be made a party to the suit. The notice just explains how this can all be accomplished without court action. The Eminent Domain notice was rewritten in 2008 and notice was reissued in 2009 with slight modifications. A taking agency may always take HA property, but HUD needs to be made a party to the suit. The notice just explains how this can all be accomplished without court action.

13. 13 HOME-Funded Property Authorized by Title II-Cranston-Gonzalez National Affordable Housing Act Grant Funds to States/localities Often used in partnership with nonprofits to fund construction, acquisition, and rehab of afford housing HUD: NO direct property interest BUT, units have use restrictions and funds must be repaid if not u PHOME: authorized Title II of the Cranston-Gonzalez National Affordable Housing Act 24 CFR Part 92 provides grants to States and localities often used in partnership with local nonprofit groups-to fund a wide range of activities that build, buy, and/or rehabilitate affordable housing for rent or homeownership HOME-funded housing units must remain affordable in the long term (20 years for new construction of rental housing; 5-15 years for construction of homeownership housing and housing rehabilitation, depending on the amount of HOME subsidy) If affordability period is not maintained (for any reason, State/locality is responsible for repaying the HOME funds to HUD. HUD has no property interest in HOME-funded property Up to owner of HUD-funded property to negotiate any taking and agree upon compensation HUD would have no say in the matter HUD has no direct input into the eminent domain process BUT State/locality would obviously be concerned with this requirement if a taking entity proposed an eminent domain taking of a HOME-funded property and would probably try to get as much money out of the eminent domain process as possible to replace the units or repay the HOME funds to HUD Possible Relocation (URA) implications: under URA an acquisition is considered to be involuntary when an agency acquired property under threat or use of eminent domain Contac the local HUD CPD Rep regarding any proposed taking Up to owner of HUD-funded property to negotiate any taking and agree upon compensation HUD would have no say in the matter � HUD: NO direct property interest BUT, units have use restrictions and funds must be repaid if not u PHOME: authorized Title II of the Cranston-Gonzalez National Affordable Housing Act 24 CFR Part 92 provides grants to States and localities often used in partnership with local nonprofit groups-to fund a wide range of activities that build, buy, and/or rehabilitate affordable housing for rent or homeownership HOME-funded housing units must remain affordable in the long term (20 years for new construction of rental housing; 5-15 years for construction of homeownership housing and housing rehabilitation, depending on the amount of HOME subsidy) If affordability period is not maintained (for any reason, State/locality is responsible for repaying the HOME funds to HUD. HUD has no property interest in HOME-funded property Up to owner of HUD-funded property to negotiate any taking and agree upon compensation HUD would have no say in the matter HUD has no direct input into the eminent domain process BUT State/locality would obviously be concerned with this requirement if a taking entity proposed an eminent domain taking of a HOME-funded property and would probably try to get as much money out of the eminent domain process as possible to replace the units or repay the HOME funds to HUD Possible Relocation (URA) implications: under URA an acquisition is considered to be involuntary when an agency acquired property under threat or use of eminent domain Contac the local HUD CPD Rep regarding any proposed taking Up to owner of HUD-funded property to negotiate any taking and agree upon compensation HUD would have no say in the matter �

14. 14 HOME-Funded Property (Cont) HUD: No direct property interest Owner negotiates eminent domain taking Units: long-term affordable use restrictions If Units not used as required, MUST REPAY HUD Owner & State/locality would want as much $ as possible to repay HUD or replace units Relocation/URA Implications HUD has no direct input into the eminent domain process HOME-funded housing units must remain affordable in the long term (20 years for new construction of rental housing; 5-15 years for construction of homeownership housing and housing rehabilitation, depending on the amount of HOME subsidy) Up to owner of HUD-funded property to negotiate any taking and agree upon compensation BUT State/locality would obviously be concerned with this requirement if a taking entity proposed an eminent domain taking of a HOME-funded property and would probably try to get as much money out of the eminent domain process as possible to replace the units or repay the HOME funds to HUD Possible Relocation (URA) implications: under URA an acquisition is considered to be involuntary when an agency acquired property under threat or use of eminent domain Contact the local HUD CPD Rep regarding any proposed taking 24 CFR Part 92 HUD has no direct input into the eminent domain process HOME-funded housing units must remain affordable in the long term (20 years for new construction of rental housing; 5-15 years for construction of homeownership housing and housing rehabilitation, depending on the amount of HOME subsidy) Up to owner of HUD-funded property to negotiate any taking and agree upon compensation BUT State/locality would obviously be concerned with this requirement if a taking entity proposed an eminent domain taking of a HOME-funded property and would probably try to get as much money out of the eminent domain process as possible to replace the units or repay the HOME funds to HUD Possible Relocation (URA) implications: under URA an acquisition is considered to be involuntary when an agency acquired property under threat or use of eminent domain Contact the local HUD CPD Rep regarding any proposed taking 24 CFR Part 92

15. 15 CDBG-Funded Property Authorized by Title 1 of Housing and Community Development Act of 1974 Grant Funds to States/localities Funds may be used broadly for community & economic development activities HUD: No direct property interest Owner negotiates eminent domain taking Relocation/URA Implications HUD has no direct input into the eminent domain process Grantees develop their own programs and funding priorities. However, grantees must give maximum feasible priority to activities which benefit low- and moderate-income persons. A grantee may also carry out activities which aid in the prevention or elimination of slums or blight. Additionally, grantees may fund activities when the grantee certifies that the activities meet other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community where other financial resources are not available to meet such needs. CDBG funds may not be used for activities which do not meet these broad national objectives. Contact the local HUD CPD Rep regarding any proposed taking HUD has no direct input into the eminent domain process Grantees develop their own programs and funding priorities. However, grantees must give maximum feasible priority to activities which benefit low- and moderate-income persons. A grantee may also carry out activities which aid in the prevention or elimination of slums or blight. Additionally, grantees may fund activities when the grantee certifies that the activities meet other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community where other financial resources are not available to meet such needs. CDBG funds may not be used for activities which do not meet these broad national objectives. Contact the local HUD CPD Rep regarding any proposed taking

16. 16 FHA-Insured Property(single and multi-family) HUD: No direct property interest (generally) Owner negotiates eminent domain taking UNLESS Use restrictions (HUD-imposed, often statutory) Use Agreement: recorded against property HUD: property interest Owner/taking body should contact HUD (MFH) prior to agreeing to terms of taking FHA-insured property may include not only multi-family dwelling, but also nursing homes and hospitals A Regulatory Agreement is required with all multi-family loans on FHA-insured property, but most likely not give HUD an independent property interest and/or trigger HUD review with an e.d. taking (since reg agreement is tied to the mortgage) Use Agreement on property triggers HQ review HUD CLAIMS use agreement gives HUD a property interest (may be contested in court) For instance, Use Agreement (20 years) may appear with �Mark-to-Market� restructuring: MAHRA�(Multi-Family Housing Reform Act of 1987) or Project-based Section 8 (HAP Agreement) WHY does HUD impose use restrictions? To ensure properties remain as affordable housing after putting a lot of money into it and they are often required by statute If comes across one in an eminent domain taking, owner/taking body should contact HUD HQ or local HUD office What HUD will require in order to release its property interest-determined case-by-case basis One instance, an intra-agency taking/transfer was used when property subject to a HUD use agreement was taken for a highway/road (e.g. like in Oklahoma). FHA-insured property may include not only multi-family dwelling, but also nursing homes and hospitals A Regulatory Agreement is required with all multi-family loans on FHA-insured property, but most likely not give HUD an independent property interest and/or trigger HUD review with an e.d. taking (since reg agreement is tied to the mortgage) Use Agreement on property triggers HQ review HUD CLAIMS use agreement gives HUD a property interest (may be contested in court) For instance, Use Agreement (20 years) may appear with �Mark-to-Market� restructuring: MAHRA�(Multi-Family Housing Reform Act of 1987) or Project-based Section 8 (HAP Agreement) WHY does HUD impose use restrictions? To ensure properties remain as affordable housing after putting a lot of money into it and they are often required by statute If comes across one in an eminent domain taking, owner/taking body should contact HUD HQ or local HUD office What HUD will require in order to release its property interest-determined case-by-case basis One instance, an intra-agency taking/transfer was used when property subject to a HUD use agreement was taken for a highway/road (e.g. like in Oklahoma).

17. 17 Section 202 & 811 Housing Section 202 (Housing for low-income Elderly) Section 811 (Housing for low-income Disabled) Authorized by National Affordable Housing Act of 1990 Capital Advance /Grant funds to nonprofits Use restrictions (housing for elderly/disabled) Use Agreements: recorded against property HUD: property interest Owner/taking body should contact HUD (MFH) Nonprofit owns land in Fee Simple Under use agreement, nonprofit must operate property as housing for disabled/elderly (40 years) HUD interest not as strong as with PH (under DOT), but still has an interest Owner/taking body should contact HUD prior to agreeing to taking (1)to obtain HUD consent prior to consenting to the taking; or alternatively, (2) if the owner is not consenting, the will need to join HUD as a party to the condemnation lawsuit Nonprofit owns land in Fee Simple Under use agreement, nonprofit must operate property as housing for disabled/elderly (40 years) HUD interest not as strong as with PH (under DOT), but still has an interest Owner/taking body should contact HUD prior to agreeing to taking (1)to obtain HUD consent prior to consenting to the taking; or alternatively, (2) if the owner is not consenting, the will need to join HUD as a party to the condemnation lawsuit

18. 18 Supportive Housing Program (SHP) Authorized by McKinney-Vento Homeless Assistance Act of 1987 Assists homeless persons Grant funds to governments & nonprofits Use Restrictions possible (e.g. acquisition) Use Agreements: recorded against property HUD: property interest Owner/taking body should contact HUD (CPD) Nonprofit/government owns property HUD requires Declaration of Lien and Restrictive Covenant if grant funds provided for new construction, acquisition, sub rehab Owner must operate property as supportive housing for 20 years If property is seized by a 3rd party and HUD did not consent, HUD is authorized to take possession of the property HUD = CPDNonprofit/government owns property HUD requires Declaration of Lien and Restrictive Covenant if grant funds provided for new construction, acquisition, sub rehab Owner must operate property as supportive housing for 20 years If property is seized by a 3rd party and HUD did not consent, HUD is authorized to take possession of the property HUD = CPD

19. 19 HUD Resources Public Housing Property Special Applications Center (SAC) of PIH http://www.hud.gov/sac HOME, CDBG, or SHP Property Office of Community, Planning & Dev (CPD) http://www.hud/gov/cpd FHA-Insured or 202/811 Property Office of Multi-Family Housing (MFH) http://www.hud.gov/offices/hsg