HUD in a New Administration

1
HUD in a NewAdministration

• Monica Hilton Sussman, Esq.
• Nixon Peabody LLP
• 401 9th Street, NW
• Washington, DC 20004
• [phone]

2
2010 HUD APPROPRIATIONS

• House Bill (HR 3288) Senate Bill
• Section 8 Project Based 8.4 billion 8.1
  billion
• Section 8 Tenant Based 18.2 billion 18.1
  billion
• CDBG 4.166 billion 3.99 billion
• HOPE VI 250 million -
• Public Housing Capital Fund 2.5 billion 2.5
  billion
• Public Housing Operating Fund 4.8
  billion 4.75 billion
• Veterans Vouchers 75 million 75 million
• Elderly 202 1 billion 785 million
• HOME 1.99 billion 1.825 billion
• CHOICE Neighborhoods 250 million
• Sustainable Communities 150 million 150
  million

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ARRA HOUSING-RELATED APPROPRIATIONS

• PUBLIC HOUSING CAPITAL FUND 4 BILLION
• GREEN ASSISTED HOUSING 250 MILLION
• SECTION 8 PROJECT BASED (12 mo. funding) 2
  BILLION
• CDBG 1 BILLION
• NEIGHBORHOOD STABILIZATION 2 BILLION
• HOME (TCAP) 2,250 BILLION
• EMBERGENCY SHELTER GRANTS 1,500 BILLION
• NATIVE AMERICAN BLOCK GRANTS 510 MILLION
• LEAD HAZARD GRANTS 100 MILLION
• WEATHERIZATION GRANTS 5 BILLION
• ENERGY CONSERVATION GRANTS 6,300 BILLION
• CDFI 100 MILLION
• RURAL HOUSING 200 MILLION
• FEMA 100 MILLION
• INDIAN PROGRAMS 40 MILLION
• VETERANS 150 MILLION
• TRANSITIONAL FOR WOMEN 50 MILLION
• MILITARY 969.6 MILLION

4
Energy Efficiency Conservation Grants (DOE)

• 3.2 billion 2.8 by formula 400 million
  competitive
• States (28) local government (68) tribes (2)
• To assist in reduction of fuel emissions, and
  total energy use, improve energy efficiency in
  transportation, buildings, grants for retrofits,
  transportation, conservation, building codes and
  inspection services, building energy audits.

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Weatherization (DOE)

• 5 Billion by formula
• To install energy efficient improvements in homes
  of low income families - 200 of poverty level
• To states and tribes
• Costs allowed increased to 6,500
• Further assistance for homes partially
  weatherized 1974-1994

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Section 8 Renewal Update

• Option 2 OCAF or Budget based
• Use current debt service
• No limitation on return
• For profit owner
• REAC Score
• 20 year contact or modify existing contract term
  to 20 years
• ARRA provided for 2 billion for 12 month
  funding triggers reporting requirements

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2009 Omnibus Appropriations Bill

• Other Provisions
• Transfer of subsidy and project-based assistance
• Maintaining Project-based Section 8 in foreclosed
  properties and rents adjusted any method
• Preservation of 202s made easier, eliminates
  savings requirement, allows for enhanced vouchers
• Allow HUD to negotiate note sales to state and
  local governments and taking into account use
  agreements and needs for established sales of
  notes

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PRESERVATION LEGISLATION

• March 2008 House draft of a preservation bill
  designed to prevent the loss of affordable
  housing dwelling units was circulated to
  stakeholders for comments. Many of this bills
  provisions relate to on-going issues that have
  been a source of frustration for preserving
  existing affordable housing. HUD working with
  House staff on issues it will address
  administratively.
• June 2008 Chairman Barney Frank holds hearing.
• June 2009 DAS Carol Galante holds series of
  meetings on preservation policy. Revised Draft
  circulated HUD Secretary Donovan testifies on
  proposed bill.
• July 2009 Stakeholders provide testimony on
  bill.
• September 2009 Industry Groups meet with
  Chairman Frank to discuss controversial issues
  agrees to drop Federal Right to Purchase staff
  revising bill expect introduction January 2010.

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PRESERVATION LEGISLATION(continued)

• Key Issues
• Conversion of Rental Assistance Payment and Rent
  Supplement contracts to project-based Section 8
  contracts 34,000 units nationwide.
• Inclusion of new debt service in budget-based
  rent increases.
• Expansion of enhanced vouchers.

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PRESERVATION LEGISLATION(continued)

• Provision for ELIHPA and LIHPRHA properties to
  utilize any rent adjustment process allowed under
  MAHRA (typically LIHPRHA is eligible only for
  OCAF adjustments and ELIHPA is eligible only for
  AAF or a budget-based rent increase).
• Allowance for owners to receive project-based
  vouchers in lieu of enhanced vouchers.
• Prohibition of HUDs practice of limiting sales
  proceeds to non-profit owners/sellers.

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PRESERVATION LEGISLATION(continued)

• Incorporation of proposed changes to the Mark
  to-Market program allows below market properties
  to go through Mark to-Market even though rents
  are below market, Non Profit transfer window
  expanded to 5 years from M2M closing or years
  from enactment of bill.
• Mark-to-Market properties would also be eligible
  for MAHRA rent increases.

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Controversial Provisions

• Federal Right of Purchase of any affordable
  housing property including LIHTC
• Limitation of Federal preemption
• Tenant withholding rents in properties with low
  REAC scores
• Making tenants 3rd party beneficiaries to Section
  8 contracts

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FHA Mortgage Insurance and LIHTC

• Elimination of the subsidy layering process for
  projects with FHA insurance
• Exempt FHA projects with LIHTCs from HUD cost
  certification, if at the time of firm commitment
  the loan-to-cost ratio is below 80
• HUD issued a memo in July addressing the need for
  escrowing LIHTC equity The law eliminates the
  requirement for escrow and/or letter of credit
  altogether.

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FHA Mortgage Insurance and LIHTC(continued)

• Exempts FHA-insured projects if tax credit agency
  is doing inspections (presumably from REACS).
  As to other compliance monitoring, if HUD
  determines the HFA monitoring is sufficient to
  ensure compliance with HUDs requirements, then
  it too need not be performed (for MORS ?)
• Pilot for streamlined reviews for FHA loans where
  LIHTCS are being used (instructions to be issued
  within 180 days of enactment)

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Project Based Vouchers (PBV)

• Increases the term of a PBV contract from 10 to
  15 years and allows public housing agencies
  (PHAs) to commit to unlimited renewals
• The PBV per-building limitation (no more than 25
  of the units unless it is elderly or there are
  family self-sufficiency services provided) is now
  calculated on a project-wide basis
• PBVs are permitted for elevator and coop
  buildings

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Project Based Vouchers (PBV)(continued)

• Subsidy layering is not required for existing
  building or if the HFA has conducted SLR
• Environmental review is not required before PHA
  enters into a HAP for existing buildings, unless
  otherwise required by law or regulation

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Project Based Vouchers (PBV)(continued)

• Rent floor is established
• Rents for units in LIHTC projects need not go
  through rent reasonableness test if the PBV rent
  does not exceed the LIHTC unit rents, but also is
  not in excess of the PHA payment standard for the
  unit size
• The law codifies HUD policy that for determining
  rent reasonableness voucher rents are to be
  compared with the private, unassisted market, up
  to the greater of the tax credit rents for
  comparable units or the housing authority
  established payment standard. (Seems not to
  apply to PBVs)

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HUD Policies

• Defer Flex Subsidy Payoff
• January 9, 2008 John Garvin Memo addresses
  policies and procedures for the review of
  requests to defer repayment of flexible subsidy
  loans.
• HUD will not defer repayment of HELP loans,
  which were provided with flexible subsidy
  assistance in cases of earthquake damage.
• Significant justification for deferral will be to
  bring in new ownership with new capital to
  reposition and preserve the property, and to
  address non-compliance issues.

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HUD Policies(continued)

• Unit Reduction
• Convert Studios to 1s (not 2s)
• Rents equal combined 2 studios or the 1 BR rents
• HAP rents not to exceed LIHTC rents
• Agree to renew HAP
• IRPs reduce IRP prorate by of units (not taking
  into account BR size)
• Not limited to elderly
• No 1 for 1 replacement
• Notice so can be waived?

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Proposed Regs - October 2009

• Reduce equity requirement for LIHTC as well as
  Historic Tax Credit and New Market Tax Credit
• FHA - the pass through lease policy now a
  mortgagee letter
• Rumors at HUD regarding new policy which is to
  take into account post rehab rents for Section 8
  mark up to market
• New issue is whether owners can use tax credit
  exchange monies for calculating equity