Working with HUD

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Working with HUD

• Randall Kelly, Esq.
• Nixon Peabody LLP
• Washington, DC

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The HUD World

• Rental Subsidy Assistance
• project-based
• portable
• FHA Insurance
• Federal Loans Grants
• Cost of Doing Business with HUD

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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.

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Rental Subsidy Assistance (contd)

• 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.

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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)

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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.

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Rental Subsidy Assistance

• Housing Choice Vouchers
• 1. Tenant-Based Certificate Program
• 2. Section 8 Certificate Program
• 3. Section 8 Voucher Program

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• Rental Subsidy Assistance
• Housing Choice Vouchers
• Merging Programs

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• Rental Subsidy Assistance
• Housing Choice Vouchers
• Project-Based Vouchers

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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.

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Project-Based Vouchers

• Term
• Contract term of up to fifteen years.

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• COMMON FEATURES OF ALL SECTION 8 PROGRAMS

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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 may exceed the maximum rents
  allowed under Section 42.

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• OTHER FEDERAL RENTAL SUBSIDIES
• RENTAL ASSISTANCE PAYMENTS
• and
• RENT SUPPLEMENT

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• STATE LOCAL RENTAL SUBSIDIES
• Local Rent Supplement Programs
• and
• Housing Production Trust Funds

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• CURRENT FHA LOAN PROGRAMS
• SECTION 236

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• FEDERAL LOANS GRANTS

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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

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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.

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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.

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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.

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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.

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CDBG

• Administered by cities with populations of more
  than 50,000, referred to as Entitlement Cities.
• Administered by a citys 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.

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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.

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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.

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CDBG AND THE 2009 ECONOMIC RECOVERY ACT

• Additional 1 Billion

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• A Pound of Flesh -
• Whats in it for HUD?

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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.

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2530 Previous Participation Clearance

• HUDs 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.

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

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• 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

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• Randall Kelly, Esq.
• Nixon Peabody LLP
• Suite 900401 9th Street, N.W.Washington,
  DC20004-2128 
• [phone]
• rkelly_at_nixonpeabody.com