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HUD issues Guidance to Protect HUD-Assisted Tenants from LIHTC Eligibility Rules.

HUD's new guidance on how to handle conflicts between LIHTC and Section 8 eligibility rules raises more questions than it answers. The guidance was issued January 12, 2015 in a memorandum entitled "Occupancy Protections for HUD-Assisted Households in Properties with Low Income Housing Tax Credits." In the memo, HUD says, "This clarifying guidance is provided in response to reports that some owners may be attempting to terminate the tenancy of current HUD-assisted tenants (usually project-based Section 8) who do not meet LIHTC eligibility guidelines." The memo goes on to explain that the only grounds for terminating the tenancy of a HUD assisted household are those found in the applicable HUD lease (Section 8, 202, 236, etc.). HUD points out that the grounds for termination "do not include failure to meet LIHTC requirements, including LIHTC-specific income and student eligibility rules." For HUD, an existing household that becomes over-income may lose their subsidy, but they do not lose "the right to occupy the unit." HUD notes that they are aware that LIHTC owners sometimes offer incentives to get such tenants to move out. This is fine, HUD says, as long as they aren't using any project funds to do so. In addition, HUD stresses that the owner should give a written notice to the HUD-eligible tenant and inform them that are entitled to remain in the unit and that "the choice of moving with incentives is truly voluntary."

While HUD is careful to state that the rule applies to "existing" tenants, it should be noted that when LIHTC is added to a Section 8 property, all "existing tenants" have to be qualified for the LIHTC program in order for the owner to claim the housing tax credits. Further, this begs the question of what right the owner has to deny occupancy to a new applicant who does not qualify under the LIHC program - either due to income or student status. How, you might ask, could a new Section 8 tenant not qualify for the housing credit program? Simply because a pre-1981 HAP contract allows applicants up to 80% of Median Income to occupy a unit, whereas LIHTC income limits are 60% or below. This is, in fact, already stated by HUD in a document that has been on their website for some time entitled "Tips for Combining LIHTC with MF Project- Based Section 8."

While housing providers may view this as new policy, HUD's carefully worded memo makes it clear that this has been and continues to be HUD's position on the issue. In a previously issued draft of a revision to Chapter 12 Preservation in the HUD 4350.1 handbook, HUD included a section titled "Tax Credits and Subsidy Layering" in which they addressed the same issues - both with regards to initial occupancy as well as existing tenants. The draft was withdrawn for further review but we can expect that when the new handbook emerges, HUD will have much say about this dilemma.

To read the memorandum in its entirety, including some interesting statements about criminal background checks, click on the following link: http://portal.hud.gov/hudportal/documents/huddoc?id=occupprotectionshudassthsg.pdf

Gwen Volk, CPM, NAHP-e, SHCM
GWEN VOLK INFOCUS, Inc.

2015 Annual Adjustment Factors

The fiscal year 2015 Annual Adjustment Factors (AFFs) for the Section 8 Housing Assistance Payments (HAP) Program is now available. This document also contains a link to dataset tables displaying the AAFs for FY 2015.
(http://www.huduser.org/portal/datasets/aaf.html)

The AAFs are based on a formula using residential rent and utility cost changes from the most recent annual Bureau of Labor Statistics Consumer Price Index (CPI) survey. A separate Federal Register Notice will be published at a later date that will identify the inflation factors that will be used to adjust tenant-based rental assistance funding for FY 2015.

To view the AAFs for FY 2015, please click here

From NAHMA:

HUD recently issued the following notice on required actions for multifamily housing projects receiving failing scores from HUD's Real Estate Assessment Center (REAC).

HUD is required to take certain procedural steps when multifamily housing projects score 59 or less on the REAC physical inspection. This Notice provides guidance to ensure compliance with these procedural steps.

To view this notice, please click here