Archive for the ‘Compliance Issues’ Category

SOCIAL SECURITY COLA FOR 2018

Friday, October 13th, 2017

October 13, 2017: The Social Security Administration has announced the Cost-of-Living Adjustment (COLA) for 2018.  According to www.ssa.gov:

“Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase 2.0 percent in 2018.

The 2.0 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 61 million Social Security beneficiaries in January 2018. Increased payments to more than 8 million SSI beneficiaries will begin on December 29, 2017.”

You can add the 2.0% COLA by multiplying the current award amount by 1.020.

For management staff, be sure to apply this COLA to benefits for the appropriate number of months. 

Example:

Mrs. Smith would like to move in on December 1, 2017.  Her 2017 gross Social Security monthly amount is $928.  You will calculate her Social Security income as follows:

$928 x 1.020 = $946.56 (2018 monthly amount)

$928 x 1 = $928 (December 2017)

$946.56 x 11 = $10,412.16 (January – November 2018)

$928 + $10,412.16 = $11,340.16 (12 months)

If you have already processed files for move-in for January 2018, it is recommended that you review the household income and apply the COLA to benefits issued by the Social Security Administration since it is a known anticipated change in income.

 

A Few Tidbits from Wil at Spectrum

Thursday, October 15th, 2015

Written by Wil Whalen, Spectrum Enterprises

  1. There will be no cost-of-living (COLA) increase for Social Security this year. “With consumer prices down over the past year, monthly Social Security (SS) and Supplemental Security Income (SSI) benefits for nearly 65 million Americans will not automatically increase in 2016.” – ssa.gov  This means that managers will not be required to add an increased amount of SS or SSI to TICs this year.

 

  1. It’s always a good idea to compare a tenant’s first annual recertification file to the move-in file to see what has changed. This is particularly helpful when a tenant goes over the income limit at the first annual certification.  And if there are any changes in the file that would be cited by an auditor, place a clarification or note-to-file explaining the change.  It goes along with the old auditor adage, “If one page in a file raises a question, the next page should contain the answer.” 

 

  1. Calculation Sheets are your friends. One thing that makes my job easier as an auditor is when a file contains a calculation sheet.  This page is basically a summary sheet of all the calculation tapes in your file.  However, a common thing we find is instead of an actual calculation, we see is “Total x1 = Total.” ( ie: Employment – $31,200 x 1 = $31,200). As opposed to “Employment – $15 x 40 (hours) x 52 (weeks) = $31,200”.  This doesn’t show us your work or explain where you got your numbers.  Even if there is a calculation tape further on in the file, it’s helpful to show your work here as well.

 

  1. Winter is coming! According to the National Weather Service, El Nino is in full effect and it will be the strongest El Nino of the last 50 years.  This means good news for the Northeast – where I reside – and bad news for everywhere else!  California is expected to be much more active weather-wise this winter.  They will get significant precipitation in the form of both rain and snow.  This could result in mudslides and flooding, which is bad news for areas with recent burn scars from wildfires.  There will be less lake effect snow for the Great Lakes Region and a milder winter for the Northeast.  The Southeast can expect a much stormier winter than usual. They are expecting this to have a serious impact on weather throughout the all of North America, so pay close attention to your weather forecasts and plan accordingly.

 

  1. Flexibility is important on inspection/audit day. Keep in mind that most inspectors book multiple inspections/audits in one day.  In Massachusetts we do up to four or five smaller properties in a day.  We have a lot of ground to cover each quarter.  So this means we’re often running a few minutes late and even more often a few minutes early.  So be sure you provide your inspectors with good contact phone numbers so they can keep you updated on our status.  Also, it’s a good idea to give your inspectors information as to where they should park when they arrive.  This information can often be the difference between arriving on time and being late.  If they need to park in a public lot or garage blocks from the property, knowing this in advance will allow them to factor the time to park into their travel schedule.  We always do our best to be on time, but traffic and Mother Nature often work against us.  So being flexible on inspection day will make everyone’s lives a little easier.

 

  1. Happy Halloween.

HUD Tenant Demographic data and Spectrum’s End of Year Data Collection Software

Friday, September 18th, 2015

Written by Paul Perpich, Spectrum Enterprises

The 2014 Spectrum End of Year data collection cycle has been completed and the tenant demographic data has been submitted to HUD. The 2014 cycle marked the end of significant updates HUD has made over the past two years to the tenant demographic and income data that was collected as a result of the congressional mandate embodied in the 2008 Housing and Economic Recovery Act (HERA). For the most part the recent major updates that you saw in our End of Year (EOY) software, primarily version 5.0.0 and later, have been stabilized and you shouldn’t see any changes to the dataset for awhile.

In 2014 HUD published their first final report on the tenant demographic and income data that has been submitted to date and included only the 2012 collected data. The initial report on 2013 data was published earlier this summer. It became apparent early in the process that the effort required of HFAs, property owners and managers as well as management software system vendors to ramp up their systems and personnel to collect tenant demographic data that was previously not collected for tax credit compliance was significant. Consequently, HUD decided that the 2009 to 2011 data submitted was not suitable for publication.

One aspect of the data collection process that has been problematic for HUD and is something we’ll be continuing to focus on is the submission of incorrect Building Identification Numbers (BIN). For this past 2014 cycle we added information in the Building form in our software that provided information about the correct format for the BIN as well as a tool to check the format of the BIN that had been entered. While we provided this guidance we did not require that the BIN be correct and the file could be submitted to us with the incorrect BIN. Moving forward we’ll be stiffening the requirement to submit correct BINs.

For the 2015 collection cycle we will still allow incorrectly formatted BINs to be submitted to us but we will be providing a report of those properties that have submitted incorrect BINs to the state HFAs. That report will also include statistics on the completeness of the rest of the HUD required data that was submitted. Our expectation is that by the 2016 collection cycle report files with incorrect BINs will not be allowed to be submitted to us.

Importing data using XML

The ability to import data directly from property management software systems into the Spectrum EOY software has been steadily increasing since the introduction of the State Housing Finance Agency Low Income Housing Tax Credit Data Transfer Standard in 2006. The development of the standard has been sponsored by the National Affordable Housing Management Association (NAHMA) and is commonly referred to as the NAHMA LIHTC XML Data Transfer Standard.

Spectrum included the ability to import data using the XML standard in 2009 with version 3.1.1 of our software. After a slow start use of the XML standard has increased significantly over time with the greatest increase occurring during the past two years. Spectrum has been working closely with the standards group since inception of the standard and has taken a leadership role in working with the HUD and the standards group to ensure that the standard includes all of the data elements is HUD requesting as part of their Low-Income Housing Tax Credit (LIHTC) Tenant Demographic and Income Data Collection program.

Using the XML import process to move event data from a management software system to the EOY software is a quick and relatively easy process that once correctly setup eliminates the need to manually enter tenant demographic and income data into the EOY software. An entire year’s worth of data can be processed and moved in just a few minutes. The XML standard is supported by Yardi, Real Page and Boston Post (now MRI) as well as other vendors. If you’re not using the XML process and would like to learn more about it please contact me at [email protected] or 517-277-0120.

Here’s a breakdown by Spectrum monitored states of the use of the XML import process:

State

 Properties

Use XML

%

CA

2944

2151

73%

CT

234

111

47%

HI

84

29

35%

MA

651

433

67%

MD

375

285

76%

WV

242

142

59%

VI

24

9

38%

Totals:

4554

3160

69%

Important Reminders

Before submitting your EOY file to Spectrum please be sure to remember the following:

  1. Make sure the BIN numbers are correct (e.g. MA-12-00001) and match what’s on the 8609.
  2. Make sure the Placed in Service Date (PISD) is accurate (building form).
  3. Make sure the BIN address is complete and matches what’s on IRS form 8609 (building form).
  4. If you’re using XML to import data from your management system be sure to verify all the data that is not included in the XML import file such as the following:

– Management agent, owner and general partner data especially contact information

– All the property information, building and unit counts as well as the set aside information located in Property form.

  1. Missing TIC information to avoid 8823s
  2. Keep in mind that HUD is now requiring Live in Caretakers be reported on the TIC even though they aren’t included in the number of occupants count for the unit.
  3. Also keep in mind that all household members need to be entered not just the head of household.

Acquisition Rehab – The Missing Manual

Friday, August 7th, 2015

Written by Erik Whitton, Spectrum Enterprises

PURPOSE

Spectrum staff is often asked to provide guidance to individuals with questions about acquisition rehab LIHTC deals.  This article will attempt to answer some of the fundamental questions that arise when a housing professional is responsible for an acquisition/rehab deal for the first time.  The article will also address ‘resyndication’ scenarios where an existing LIHTC project receives a subsequent allocation (after the initial 15 year compliance period ends).  

INTRODUCTION

Before getting started on this article I will say that most problems arise due to a lack of planning or communication between all parties.  The issues we see most frequently do not necessarily result in noncompliance reported by the HFA to the IRS, instead we see a lot of issues where the property has not met the terms of the partnership agreement with the investor.  It is critical that all parties communicate in the early stages to clearly identify the key aspects of acquisition/rehab deals.  Primarily these are:

  • Date of acquisition;
  • When will construction begin and end?
  • Will tenants need to relocate due to construction?
  • First credit year;
  • Minimum set aside;
  • How many units were pledged to the HFA as LIHTC units;
  • The credit delivery timeframe promised to the investor;
  • How the ‘project’ will be defined to the IRS on the 8609 forms (for multiple building properties);
  • For an existing property, how many current tenants will be able to qualify vs. how many cannot qualify due to income/student status

ACQUISITION REHAB EXPLAINED

Properties may receive Tax Credit funding primarily as either new construction or acquisition rehab. New construction is pretty straightforward (the developer is building something from the ground up).  Acquisition rehab is more complicated.  An owner can receive tax credits both on the acquisition (purchase) and rehabilitation of an existing building.  The building could have existed previously as apartment housing or it could have been something else entirely such as a school or a factory and is now being repurposed for affordable housing.   

If the building was not formerly apartments (is not currently occupied) the process of certifying tenants is similar to new construction.  You are typically looking at a substantial amount of construction work needed to get the building ready for occupancy.  Once all construction is completed the manager begins marketing and lease up as if it was new construction.

However many acquisition rehab credits are awarded to existing apartment buildings.  Since these presumably already have things such as kitchens, bathrooms, and furnaces no major construction is needed.  As a result, we see many situations we call “in place” rehabs.  This means the apartments are already occupied.  There is no need to market the property and lease it up as a brand new project.  Your tenants are already living there.  

IN-PLACE ACQUISITION REHAB

This is where a lot of confusion exists.  Although you don’t need to market the building and fill all the units, you do need to certify your existing tenants.  A key date is the date of acquisition.  This is the date the new owner purchased the property.  Many people get confused here believing the same owner is in place.  However, in most cases a new partnership is formed that purchases the building.  While it may be the same names and faces – there is usually a new ownership entity that is created to purchase the property.  A manager needs to know the date of acquisition.

This is the date that will be used as the TIC effective date for all of your in place tenants.  You have a period of 120 days to fully complete their income certification. This includes meeting with them to get an application or questionnaire filled out; sending out and receiving all income and asset verifications; filling out the TIC form and getting all required paperwork and signatures.  As long as you can complete this process within 120 days of the acquisition date, you are protected with the IRS Safe Harbor.  (*The following section has additional details about the Safe Harbor)

Some useful tips include notifying all tenants about the need to be income certified.  Make sure to tell them about the improvements they will experience as a result of the construction work.  Make sure to also inform them of the possible noise, dust, and workers that will be at the site.  In order to start the process of mass certifying all tenants you might plan a pizza party or BBQ and invite all tenants.  Make sure to provide additional staff from other sites managed by your company.  This is a good way to start getting questionnaire forms completed and the paperwork started.  

Do not worry about the fact that your TIC forms will show an effective date that precedes the income/asset verifications, affidavit forms, and TIC signatures.  This will not be noted as a problem by a compliance auditor.  There is no need to back date anything in this process.  

IRS SAFE HARBOR

The IRS created this safe harbor to allow owners to use existing tenants as tax credit qualifying households in an event where the household was income eligible when the owner purchased the building but then went over the income limit during the rehab construction period before credits were initiated.   See IRS 8823 Audit Guide page 4-25 and Revenue Procedure 2003-82

Example:  Owner purchases a building in March 2015.  The Jones tenant in unit A01 is income qualified and a full certification package is completed.  Construction begins in March 2015 and is completed in March 2016.  Owner will begin taking credits in 2016 however Jones started a new job in December 2015 with enough income that he is over the limit.  Because an acquisition certification was completed the owner can include unit A01 in the applicable fraction used to claim credits.  However, if the owner waited until 2016 to certify the tenant the unit would not be credit qualified.  

This safe harbor is not a requirement of the program, instead it is common sense and has largely become an industry standard.  In other words, why wouldn’t you certify your existing tenants at time of acquisition in order to lock them in as income qualified tenants in case they later go over the limit?  Some rehabs take a long period of time between the owner purchasing the property and the start of the credit flow.  Anything can happen during this period so it is good to have this safe harbor protection.

Here are a few additional thoughts on the safe harbor:

  1. The safe harbor protects income only.  The household must remain student eligible throughout their tenancy to be considered LIHTC qualified.
  2. Owner must keep the unit rent restricted to receive the safe harbor protection.
  3. Manager does not need wait until the date of acquisition to begin certifying tenants.  If the manager has access to the files before the acquisition date they can begin the process 120 days prior to closing.  In a situation where there is no management change and the acquisition date is well communicated (not delayed) you have a period of 240 days to certify all existing tenants.  Even at a large community this is plenty of time to complete the process provided you have adequate staffing, communication, and planning.
  4. In a situation where the acquisition occurred prior to September 3 and the following year is the 1st credit year you will need to “test” the income of all tenants between September 3 and December 31.  This test is for the purposes of the available unit rule.  There is no need to completely re-certify all tenants; instead you simply need to contact them to find out if their income has changed.  Be sure to note your files.  See IRS 8823 Audit Guide pages 4-25 and 4-26.

WHAT INCOME AND RENT LIMITS DO I USE?

Use the income limits in effect on the date of acquisition for all TICs that you complete within the 120 day window surrounding the date of acquisition.  For any TICs completed after 120 days use the income limits that correspond to the TIC effective date (the TIC effective date will match the date all paperwork and signatures were finalized).  

Your acquisition date might fall in the 45 day grace period after new income limits are announced (but before they become mandatory).  In these cases you are free to choose the higher of the 2 available limits.  See IRS LIHC Newsletter # 48

In most cases you will use the rent limits that correspond to the income limits (same year).  However, it is possible that higher rent limits can be used.  The gross rent floor rule allows the owner to charge rents based on the limits in effect at the time the owner received the initial allocation of credit from the state agency.  You could have a scenario where the credit allocation was August 2012 and the acquisition date was March 2013.  If the 2012 limits were higher than 2013 you can charge rents based on 2012 limits.  See IRS 8823 Audit Guide page 11-3

WHAT IF AN EXISTING TENANT DOES NOT QUALIFY?

You may find that you have existing tenants that have too much income to qualify, or they might be ineligible full time students.  Hopefully the owner was aware of this ahead of time and did not structure the property as 100% LIHTC (check the tax credit application and the partnership agreement to see what commitments were made to the state agency and the investor).  In that case you would simply treat the household as market rate (i.e. no credits would be claimed).  However, owners often believe all of their tenants will qualify so they structure the property as 100% affordable.  In that case you could negotiate an incentive with the tenant to voluntarily leave the apartment so you can re-rent to a qualified household.  It is very important to note that you may not simply evict or not renew leases without good cause.  For a detailed explanation of the ‘good cause’ requirement see IRS 8823 guide chapter 26.    Make sure the household chooses to leave in a voluntary manner and be aware that some households may simply choose not to leave despite your best efforts.  In those cases the unit is treated as an over-income non-qualified unit.    

Tip: talk to over income tenants about home ownership.  Work with them to provide tools needed to qualify for a mortgage and choose a realtor.  See if your state housing agency provides programs for prospective first time home buyers and set this up at your site.  Offer ineligible tenants moving services from local companies, truck rentals, packing boxes, etc.  Offer them other apartments in communities you manage they might qualify for.  Offer cash in exchange to leaving the site.  DO NOT work with them to manipulate their income in order to qualify!  

Tip: Make sure paperwork is clear in notifying tenants of their right to remain in the unit.

Please refer to HUD Memo: “Occupancy Protections for HUD Assisted Households in Properties with Low Income Housing Tax Credits”

WHAT IF I CAN’T GET EVERYONE CERTIFIED WITHIN 120 DAYS?

For a variety of reasons you may not be able to get everyone certified within 120 days.  There’s no need to panic here or worry about lost credits or noncompliance.  This simply means you no longer have the protection offered with the safe harbor.  Instead of using the acquisition date as your TIC effective date, you should instead use the date that you fully completed the file after obtaining all verifications and signatures.  The balance of credits not claimed in year 1 can be claimed in year 11.

Be sure to check your partnership agreement to see the credit delivery committed to the investor.  A downward adjuster is possible depending on how aggressively this was structured.  

TENANT RELOCATION

In some cases a rehab may be completed without the tenant leaving their unit.  In other situations however you may need tenants to relocate.  The relocation may be done off site or on site.  Refer to the following possible scenarios:

OFFSITE RELOCATION

For tenants relocated offsite the owner must pay all moving expenses.  Tenants cannot pay more than than the restricted rent they would be paying while on site.  The IRS has provided informal guidance that offsite relocation may not last more than 6 months (check with your HFA if you are relocating tenants off site).

ONSITE RELOCATION

It is more common to see tenants relocated to units at the same property.  This can either be a temporary relocation where the tenant will return to their original unit or a permanent relocation where the tenant will stay in the new unit.

ONSITE TEMPORARY RELOCATION

If the tenant will temporarily move out of their apartment to another unit in the same project while their unit is rehabbed the manager does not need to complete any additional certification paperwork.  

Example: The Smith household in unit 101 is temporarily moved to unit 105 while contractors replace the carpeting, windows, and kitchen cabinets.  This work is completed within 2 weeks and the household then moves back into unit 101.  

ONSITE PERMANENT RELOCATION

If a tenant is going to permanently relocate to a different unit in the same project their TIC and lease status move with them.  Owners will usually do a ‘rolling rehab’ where a portion of units are empty upon acquisition.  For example – a building might have tenants in all first floor units but the units in the 2nd floor are empty when the building is purchased.  Construction crews will rehab the 2nd floor units first.  After this work is done the 1st floor tenants are transferred to 2nd floor units and then the construction crews begin work on the 1st floor units.  

Example: an owner purchases a building on May 1, 2014 and certifies the Jones household in unit 1-1 (an un-rehabbed first floor unit).  During June, July, and August  the owner completes all rehab work for the “empty” 2nd floor units and the Jones household moves into unit 2-1 on September 1.  There is no need to conduct a full income certification for Jones at this time.  However, a new TIC form should be printed and marked “Other – Unit Transfer” to note the move.  

In this example unit 1-1 is qualified for the months of May/June/July/August.  Starting in September the unit becomes “empty – never qualified” because it swaps status with 2-1.  After construction is completed and an eligible tenant moves into 1-1 it becomes qualified again.  

Unit 2-1 is “empty – never qualified” for each month until September.  Starting in September the unit becomes qualified with the Jones household living there.  

With all tenant relocation during rehab it is critical to keep a record showing the status of each unit during each month.  You need to record who resides in the unit each month; whether they are a qualified household (income/student status/rent); and whether the unit is suitable for occupancy.  Keep track of qualified vacant units as well.  Keep track of all tenant relocations from one unit to another.   This is required in order to compute the first year applicable fraction which determines the credit amount.  For an in depth explanation of this and to see an example of a chart you may use please see IRS 8823 Audit Guide pages 4-28 through 4-30.  We often see poor record keeping in this regard.  

On a final note regarding tenant relocation the management team must be aware of the special rules used by the IRS to define a “project.”  This only occurs where a property has multiple buildings so if you just have a single building you can ignore this.  With a multiple building site the owner makes an election on their IRS 8609 forms whether to treat all buildings as a single project; or to treat each building as a separate standalone project; or something in between.  For instance, you could have a 10 building project purchased in 2013 where buildings 1-4 are rehabbed by the end of the year.  The owner could designate these as “Project A” while choosing to treat buildings 5-10 as “Project B” due to being rehabbed the following year.  In this situation a tenant may not simply “transfer” from a unit in Project A to another unit in a Project B building.  Instead, the manager must treat this as a move out and a new move in.  The household must be fully certified when moving into the new unit.  The units would not swap status and the income cert would not follow the household where they transfer to a building in a different “project.”  For more explanation of this refer to IRS LIHC Newsletters #15; #26; #27; #29; and #39.

It is important to note that at the time of rehab, the owner has not completed the election on the 8609 (line 8b) that will define the project.  Management should confer with the owner to determine what elections will be made prior to moving tenants between buildings.

RESYNDICATION

The term “Resyndication” is used to describe an existing LIHTC project that receives a subsequent allocation of credits.  This can only happen after the property completes the initial 15 year compliance period.  In other words, the owner cannot receive an allocation of credit in year 2008 and again in 2014.  

RESYNDICATION INCOME AND RENT LIMITS

Once a property receives a 2nd allocation of tax credits it is critical to examine the income and rent limits being used.  Often a site has been operating under the first allocation using HERA or HOLD HARMLESS income and rent limits from previous years.  These limits could have been established in a given area a few years ago where area limits then began to drop.  Upon receiving a subsequent allocation of credit the property may no longer receive the HOLD HARMLESS protection and must use income limits that correspond to the new placed in service date.  In some cases the tenant rents being charged will need to be lowered.  And, the income limit for admitting new tenants will be lower as well.  Finally, the subsequent allocation can still use the gross rent floor as established when the 2nd round of credits are initially allocated to the new owner (if higher than new placed in service amounts).

WHAT IF A HOUSEHOLD IS OVER THE INCOME LIMIT?

With resyndication there is a concept known as “Income Grandfathering.”  A project might include some units occupied by over income households as of the 2nd credit allocation.  As long as the household was previously income qualified when they first occupied a unit (during the initial LIHTC compliance period) they may be used as a qualified household for the new round of credits.   Please refer to the discussion on page 4-26 of the IRS 8823 Audit Guide for more explanation of this topic.

It is critical that the initial move in file is intact and well documented.  Some states allow annual recertification files be used if an initial move in file cannot be used (note: the recert must include full 3rd party income verification).

Although previously income qualified households are protected, there is no such protection offered to full time student households or to units charged a gross rent that exceeds the applicable limitation.  

ARE FULL INCOME CERTIFICATIONS NEEDED?

Due to the concept of income grandfathering, a site is not required to complete full income certifications of previously income qualified households to coincide with the new acquisition date.  This is true regardless of whether each household is currently within the income limit or above it.  Instead of completing full income certification packages, the site may rely on the original move in files under the former credit allocation.  In some cases these files can be several years old.  Spectrum would urge all owners, managers, and investors to conduct a full review of those files to ensure all paperwork is intact and free of errors/omissions.   If resources are available, we would prefer to see all households fully certified to coincide with the new allocation of tax credits.  The protection offered to previously income qualified households should only be used where needed – with current households that are over the income limit.

Before making a decision *not* to certify existing tenants be sure to speak with your state agency and tax credit investor as they might require this.  

RESYNDICATION STUDENT STATUS

After the 15 year compliance period ends, some states allow properties to rent units to full time student households.  Upon receiving a subsequent allocation of credits the LIHTC units may not be occupied by non qualified full time student households.  Documentation is needed to demonstrate compliance with the full time student rules in conjunction with the new round of tax credits.  

RESYNDICATION RENT COMPLIANCE

Some properties must lower the rent charged to existing households upon receiving a subsequent allocation of credits.  It is critical to maintain and provide clear documentation showing when the rent was lowered.  If the site is choosing to complete full income certifications this can be recorded on the new TIC form.  However, some sites choose not to complete new TIC forms so we have to examine documents such as ledgers to see compliance with this.  

TIP: if you are planning to resyndicate your property and rents will need to be lowered, we suggest examining ways to use the rehab funds to increase energy efficiency at the site.  You may be able to offset the rent reduction by lowering the overall cost of utilities paid by the tenants.  

Resources:

IRS 8823 Audit Guide 4-25

IRS Newsletters

Safe Harbor Revenue Procedure 2003-82

HUD Memo “Occupancy Protections for HUD Assisted Households in Properties with Low Income Housing Tax Credits”

HOME Final Rule – does it apply to your property?

Thursday, July 9th, 2015

Written by Lois Churchill, Spectrum Enterprises

You own or manage a property with HOME funding. The new Final Rule came out in August of 2013. Do the requirements in that rule apply to your property? At first glance most folks thought it only applied to new projects to which HOME funds were committed on or after 8/23/13 – we now know this to not be entirely true.

In January 2015 HUD provided an Applicability of Requirements chart to help determine what rules apply to what properties. There are three categories:

Category #1 are requirements to clarify or codify existing requirements. Those requirements are applicable to all HOME projects regardless of when funds were committed. Included in category #1 are types of housing that are excluded from the definition of housing and student qualifications.

Category #1 requirements specific to rental housing include items such as requirements of at least a one year lease (or less, if mutually agreed upon), fact that HOME rents include both rent and actual utilities or rent and the utility allowance; that PJs may designate more than the required minimum HOME units as Low-HOME units; that supportive services cannot be mandatory for tenants of HOME-assisted units (except supportive services provided in transitional housing), and tenant selection procedures.

Category #2 are new project requirements, applicable to all new projects to which HOME funds were committed on or after the effective date of the applicable requirement (typically 8/23/13). Items such as completion deadlines, property standards, conflict of interest regarding who may not live in a HOME unit, and initial PJ inspections for new properties are included in Category #2 requirements. Also shown in Category #2 but not yet effective is changeover to UPCS standards for physical inspections.

Category #2 requirements specific to rental housing include ability of a PJ to charge monitoring fees, requirement for capital needs assessments for rental projects with 26+ total units (not yet in effect), requirements for initial occupancy of vacant units, requirement that HOME agreements stipulate whether HOME units are fixed or floating, on-site inspection requirements. There are several requirements in this section of the New Rule that were to be effective 1/24/15 but have been further delayed.

Category #3 are new program requirements that are applicable to all HOME projects as of their effective dates (typically 8/23/13) regardless of when funds were committed.

Calculating For Additional Set Asides

Thursday, June 18th, 2015

Written by Jennifer Borland, Spectrum Enterprises

Many properties have included in the extended low income housing commitment set asides in addition to 40/60 or 20/50.  Most often Spectrum sees properties that include units set aside at 40%, 30%, 20%.  How are the income limits for these set asides calculated?

Given the 50% limits, determining additional set aside limits isn’t very hard:

40% = 50% x 0.8

30% = 50% x 0.6

20% = 50% x 0.4

Using limits for a property placed in service prior to 2009 in Portland, Maine:

            1 person           2 person           3 person          

50%     $27,300           $31,200           $35,100                      

            x     0.8            x     0.8            x     0.8

40%     $21,840           $24,960           $28,080

 

            1 person           2 person           3 person          

50%     $27,300           $31,200           $35,100                      

            x     0.6            x     0.6            x     0.6

30%     $16,380           $18,720           $21,060

 

            1 person           2 person           3 person          

50%     $27,300           $31,200           $35,100                      

            x     0.4            x     0.4            x     0.4

20%     $10,920           $12,480           $14,040

Spectrum recommends having your housing credit agency approve limits before implementing.

2015 HOME Limits

Monday, May 11th, 2015

HUD published the 2015 HOME income and rent limits on Friday. The go into effect on June 1, 2015.

Things to remember about HOME income and rent limits:

  1. There is no 45 day transition. You must begin using the new limits on the effective date;
  2. HOME limits are not “held harmless” like LIHTC limits. If HOME income limits go down, you must use the lower limits for both income and rent.

You can find the HOME limits either by following the link on our web site or directly at https://www.hudexchange.info/home/.

Elderly Housing

Thursday, May 7th, 2015

Written by Edward Clark, Spectrum Enterprises

The term “Elderly Housing” gets thrown around a lot. Too much in fact, because often we hear a property described as “Elderly Housing” when it doesn’t actually meet the requirements to be called that.

“We have an Elderly Preference” – Don’t we all? They pay the rent on time, their apartments are usually very tidy and at least half the time they smell a little like my grandmother.  There is no “Elderly Preference” in housing. You may target the elderly in your marketing by placing advertisements in the AARP newsletter or passing out flyers at the local bingo parlor but don’t let your staff tell people your property has an “Elderly Preference”. That could be seen as discouraging eligible households from applying.

Elderly housing is unique in that it is the only type of rental housing that can actually discriminate on the basis of familial status. Even that doesn’t mean you can deny people with children however. You need to understand the different types of elderly housing and what makes them different from each other. Here is a quick and easy to follow primmer:

1) Any housing that is recognized by the Secretary of HUD as “Elderly Housing”. At least the head or co-head must be handicapped OR disabled OR 62 years old or older. I put handicapped/disabled ahead of 62 or older because people sometimes assume a 25 year old in a wheelchair doesn’t belong in “Elderly Housing”. They do. It’s the law. Children are allowed as members of the household too.

2) 62 and older housing. This one is easy. Every resident must be 62 or older. No kids, no 25 year olds in wheelchairs. Today, if you weren’t alive the year the Korean War ended, you cannot move into this type of housing.

3) 55 and older housing. This provides the biggest pool of potential tenants, and the biggest potential to make a mistake. 80% of the units must be occupied by a head or co-head that is 55 or older. The remaining units can be occupied by anybody. Families with kids, people with disabilities, ugly people. They can all live here. That doesn’t mean you should rent up 20% of your units to people under 55 though. Instead, you need to track the make-up of your community to make sure you never fall below the 80% threshold. If an 86 year old man moves in with his 30 year old second wife (it could happen) and he dies while doing push-ups trying to impress her (will probably happen), the household no longer counts as a 55 and older household. So they moved in as part of your 80% but suddenly became a part of your 20% instead. Once the property drops below 80% the property is no longer elderly housing and is open to everyone regardless of age. 55 and older housing must also provide at least one service or amenity that benefits people of advancing age. Yoga classes, trips to the grocery store, a fitness room can all qualify.

I hope this helps. Now where did I leave my keys??

REMINDER – Check for Updated Compliance Forms

Friday, April 24th, 2015

Written by Erik Whitton, Spectrum Enterprises

A recent trend we are noting as we review tenant files is that many sites are using outdated forms.  Most state agencies provide forms such as Tenant Income Certifications (TIC), Income Verifications, and Affidavit forms.  While many of these forms are suggested; others are mandatory.  From time to time these forms are modified to reflect new rules or policies.  For example, the imputed asset rate changed in February 2015 which means most state agencies have updated their TIC forms to reflect the new rate. Other forms may have changed as well.  

Please make sure that properties in your portfolio are using the current version of all forms provided by your state agency.  Most state agencies maintain a website with all compliance materials such as forms, income/rent limits, and compliance manuals.  It is therefore very easy to compare the forms you are using with the current versions provided by the state agency.  Usually the forms have a date on the bottom of the form to indicate when they were  last updated.  

I would additionally suggest:

  • Reviewing any recent changes to your state compliance manual
  • Compare the income and rent limits in use at your sites with the figures provided by your state agency
  • See if the state is providing any compliance training seminars that you should participate in
  • See if you can subscribe to an email notification service to receive these types of updates

Please see our forms package here.

Spring Inspection & Clean Up!

Thursday, April 9th, 2015

Written by Cathy Turner, Spectrum Enterprises

It sure has been a difficult time to do property inspections in the east coast this winter.  So glad that Spring has finally arrived!  A special thanks goes out to the managers and maintenance personnel that braved the cold temperatures with me this winter. 

It is clear that due to the grueling winter conditions and stress on property budgets, managers had to focus all efforts on safety and snow/ice removal.  General site inspections and routine maintenance had to take a backseat.   Now that the weather is improving and temperatures are raising it is time to get back out on your properties.  It is time to take note of storm damage and make a plan for repairs.  Obviously, the big repair items such as roof damage are already in the works.  However, I am willing to bet that once you get out and walk the grounds and building areas, you will find many other projects needing attention sooner rather than later.     

Here are some of the items that I have noticed in my recent travels.

  • Look for tripping hazard on walkways and grounds. 
  • Repair potholes.
  • Pick up trash left under the melting snow.  Especially, broken glass. 
  • Check playgrounds.  Look for damaged equipment and sharp edges.
  • Look for fallen or hanging cable and telephone wires.
  • Look for damaged trees and vegetation. 
  • Walk all of the halls and look for water damage.  I have found many damaged ceilings in closets.
  • Check handicap parking spaces.  Be sure signage is not damaged or missing.
  • Repair fence damage. 
  • Look for damaged or missing window screens.
  • Storm doors can take a beating in the winter wind.  Be sure all doors properly close and latch.  Repair screens as needed.

If you want more ideas and suggestions for your properties spring clean up check out this blog by Laine Nadeau.


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