Challenges of Managing Combined Funding Properties

The Challenges of Managing Combined Funding Properties
Gwen Volk
CPM, NAHP-e , FHC  ,SHCM , HCCP , FHC , RAM 
GWEN VOLK
INFOCUS, INC.
The information on the handout, on the slides, and
presented verbally in this course is intended as a guide.
Agency compliance manuals, regulatory agreements and
other pertinent documents provide further guidance and
should always be consulted. Laws and regulations are
subject to change and it is imperative that housing
providers stay current with these changes.
When
managing a combined funding property, be sure to
address conflicts in rules and procedures up front with
all parties to ensure you are in compliance with their
expectations.
©2016 GWEN VOLK INFOCUS, INC.
“Financing affordable housing and community development projects is rarely simple or straightforward, often involving numerous funding sources and multi‐tiered ownership, investment and financing structures.”
http://www.kuhlgrantlaw.com/practice-areas/affordable-housing-and-community-development
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The Challenges of Managing Combined Funding Properties
Project-Based Section 8
A Perfect Fit?
Tax Exempt Bonds
HOME
Bond
Issuer
Participating
Jurisdiction
P
J
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HUD Multifamily
HUD Community Planning and Development
HUD Public and Indian Housing
Department of Agriculture – Rural Development
Department of Treasury – IRS
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The Challenges of Managing Combined Funding Properties
Program Enacting Legislation
Project‐Based Section 8
Section 236
Housing & Community Development Act of 1974 CFR 24 Part HUD Occupancy HB Regulations Handbooks/Guides
amending United States Housing Act of 1937
880‐86 CFR 24 Part amending United States Housing Act of 1937
236
Rental Assistance Housing & Community Development Act of 1974 CFR 24 Part amending United States Housing Act of 1937
236D
Program (RAP)
CFR 24 Part Rent Supplement Housing & Urban Development Act of 1965
amending United States Housing Act of 1937
215
Section 221(d)3 National Housing Act of 1961, amending United CFR 24 Part States Housing Act of 1937
BMIR
221 4350.3 Rev 1 Ch. 4 HUD Occupancy HB 4350.3 Rev 1 Ch. 4 HUD Occupancy HB 4350.3 Rev 1 Ch. 4 HUD Occupancy HB 4350.3 Rev 1 Ch. 4 HUD Occupancy HB 4350.3 Rev 1 Ch. 4 Housing Act of 1959, amending U. S. Housing
Act of 1937
Housing & Community Development Act of 1974
and Housing Act of 1959, amending U. S.
Housing Act of 1937
Section 811 PRAC Cranston-Gonzales National Affordable Housing
Act of 1990, amending United States Housing
Act of 1937
HUD Occupancy HB 4350.3 Rev 1 Ch. 4 HUD Occupancy HB 4350.3 Rev 1 Ch. 4 Housing & Urban Development Act of 1968
Section 202 (PAC or PRAC)
Section 202/8
CFR 24 Part 891 CFR 24 Part 891E
CFR 24 Part HUD Occupancy HB 891 C 4350.3 Rev 1 Ch. 4 ©2016 GWEN VOLK INFOCUS, INC.
Program HOME
Enacting Legislation
Regulations Title II of the National Affordable 24 CFR Part
Housing Act of 1990, amending 92
US Housing Act of 1937
CDBG
Housing & Community
Development Act of 1974
amending US Housing Act of
1937
CFR 24 Part
570
Handbooks/Guides
Compliance in HOME Rental
Projects: A Guide for Property
Owners (2009)
HOME Final Rule 07/2013
https://www.hudexchange.inf
o/home/home-laws-andregulations/
https://www.hudexchange.inf
o/resources/documents/Basic
ally-CDBG-Chapter-4Housing.pdf
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HUD Office of Public and Indian Housing
Program Enacting Legislation
Regulations Handbooks/Guides
Public Housing The United States Housing Act of 1937
24CFR Chapter 9 Public& Indian Housing PIH HB 7465.1 REV 2, 3 August 1987 / Public Housing Occupancy Guidebook, June 2003
Housing Choice Vouchers
Housing & Community Development Act of 1974 amending 1937 Housing Act 24 CFR Part 982 Section 8 Tenant Based Assistance
PIH HB 7420.10G April 2001: Housing Choice Voucher Program Guidebook
PIH‐2012‐32, REV‐2 issued June 15, 2015 – revised RAD Notice (235 pages)
Quick Reference Guides to Multifamily Housing (PBRA) and Projects Converting to Project‐
Based Voucher (PBV) Assistance
RAD‐Rental Public Law 112‐55 11/18/11 Assistance Demo (established RAD) ‐ Public Law 113‐
76 1/17/14 (extended RAD’s second component)
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The Challenges of Managing Combined Funding Properties
Program Enacting Legislation
Regulations Section 515 Section 515 of the Housing Act of 1949 7 CFR, Parts Direct Loans
1940‐1949
Section 521 Section 521 of the Housing Act of 7 CFR, Parts Rental Assistance 1949
1940‐1949
Handbooks/Guides
RD Occupancy Handbook 2‐3560, 2/24/05.[Chapter 6]
RD Occupancy Handbook 2‐3560, 2/24/05. [Chapter 7]
US Department of Treasury - IRS
Program Enacting Legislation
Regulations Handbooks/Guides
Low Income Housing The Tax Reform Act of 1986 (temporary). IRS Code Credits 4% & 9%
Made a permanent part of the IRS Code Section 42
(Section 42) by the Omnibus Budget Reconciliation Act of 1993.
Tax‐Exempt Bonds
Pre‐HERA
Post‐HERA
Guide for Completing Form 8823 Low Income Housing Agencies Report of Noncompliance. State Agency Manual or FAQ’s
Mortgage Subsidy Bond Tax Act of 1980 IRS Code Property‐specific Land Use set‐asides for low income units Section 142(d)
Restriction Agreement
2008 Housing & Economic Recovery Act 142(d) amended and Issuer Handbook (if any)
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State
Link to Compliance Guidance
Indiana
http://www.in.gov/myihcda/files/2015_RHTC http://www.in.gov/myihcda/2490.htm
_Compliance_Manual.pdf
http://www.ihda.org/property‐managers/
Same link
Illinois
Ohio
Link to Forms
http://www.ohiohome.org/compliance/polici
es.aspx
Michigan http://www.michigan.gov/mshda/0,4641,7‐
141‐5555_8002_26576_26578‐254003‐‐
,00.html
Minnesota http://mnhousing.gov/wcs/Satellite?c=Page&
cid=1358905290806&pagename=External%2
FPage%2FEXTStandardLayout
Wisconsin https://www.wheda.com/WorkArea/Downloa
dAsset.aspx?id=1015
http://www.ohiohome.org/compliance/for
ms.aspx
http://www.michigan.gov/mshda/0,4641,7
‐141‐5555_8002_26576_26589‐80581‐‐
,00.html
Same link
https://www.wheda.com/Forms/LIHTC/
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The Challenges of Managing Combined Funding Properties
• Established July 2010
• To better align the operation
of Federal rental policy for
properties with multiple
Federal funding sources
http://archives.huduser.org/aff_rental/home.html
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Participating Agencies
• White House Domestic Policy
Council
• National Economic Council
• Office of Management and Budget
• U. S. Department of HUD [MultiFamily, PIH, CPD & OGC]
• U. S. Department of Agriculture –
RHS/RD
• U. S. Department of the Treasury –
IRS
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Alignment Initiatives
• Physical Inspections
• Income Reporting and Definitions
• Financial Reporting
• Common Energy Efficiency Requirements
• Appraisal Primer
• Market Study Standards
• Subsidy Layering Review
• Capital Needs Assessment
• Improve Data Sharing on Owner Defaults
• Fair Housing Compliance Enforcement
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The Challenges of Managing Combined Funding Properties
http://archives.huduser.org/aff_rental/fed_admin_proposals.html
Physical Inspections
Issue: A property that has multiple federal funding sources may be
subject to multiple physical inspections using multiple standards.
Lead Agency: USDA-RD
Programs Involved: USDA-RD, HUD MF, HOME, HUD PIH
Proposed Alignment: Federally-assisted multifamily housing owners
are subject to multiple physical inspections as a result of utilizing
more than one federal funding stream for property acquisition, repair
or rehabilitation, or rental income subsidy, when programs are
combined on a property. State-level teams are testing solutions to
eliminate duplicative physical inspections at each multifamily property
financed with multiple federal funding sources. State, local and federal
housing agencies will come to agreement on the use of common
inspection criteria, a statistically valid sample size, and an established
inspection frequency.
Participating States: MI, MN, OH, OR, WA, WI
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https://www.huduser.gov/portal/phy-inspection/home.html
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As of 2015, thirty-one (31) states were participating in the pilot program for:
1. Alignment of inspection standards: a. Use of the Uniform Physical Condition Standards (UPCS) for the LIHTC, HOME, Rural Development, Public Housing, project‐based Section 8, Section 202 and Section 811 and FHA‐insured Multifamily programs; or b. Use of the UPCS or local code, whichever is more stringent for all properties that have units supported by HOME funds. The Housing Choice Voucher Program (HCV) uses Housing Quality Standards which differ from UPCS and local code; 2. Use of statistically valid sample size from all assisted units in building; 3. Established inspection frequency of not less than every three years.
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The Challenges of Managing Combined Funding Properties
The Thirty-One States
California, Colorado, Delaware, Georgia, Illinois, Indiana, Kansas,
Kentucky, Louisiana, Massachusetts, Michigan, Minnesota,
Missouri, Nevada, New Jersey, New Mexico, New York, North
Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South
Carolina, Tennessee, Texas, Utah, Virginia, Vermont,
Washington, Wisconsin, and West Virginia.
As listed on the HUD website
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Established in 2011, seven (7) states including MI, OH, WI, NV, PA,
NC, SC participated in the pilot program where State-level teams
tested different strategies for standardizing, and aligning Subsidy
Layering Review requirements across agencies.
On September 26, 2014, HUD issued Notice 2014-0081 entitled
Administrative Guidelines; Subsidy Layering Reviews for Section 8
Project-Based Voucher Housing Assistance Payments Contracts
and Mixed-Finance Development.
HUD intends to publish a guidebook that will allow all agencies
that wish to enter into such an agreement to do so.
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HUD has exempted all HUD properties that have RD financing
from HUD audit requirements.
Notice H2013-23 allows owners of HUD assisted projects that
receive less than $500,000 in federal financial assistance to
submit unaudited, owner-certified, financial statements
February 14, 2014 new version of FASS-MF so these owners
can submit owner-certified financials electronically.
RD has been working on a handbook update to eliminate the
AUP* requirement and use the $500,000 threshold for audits.
*AUP means “agreed upon procedures” which is the “light audit” required of RD projects with between 16 and 24 units.
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The Challenges of Managing Combined Funding Properties
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IRS publishes Amendments to Low Income Housing Credit
Compliance Monitoring Regulations - FR Vol. 81 No. 37
February 25, 2016
IRS issues Revenue Procedure 2016-15
◦ reduces minimum number of units for which the state agency must
perform physical inspections and low-income certification reviews
◦ permits state agency to perform inspections on different units than
those for which file reviews are performed
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Both initiatives may make it easier for LIHC owners to work with
HUD on properties subject to HUD REAC Inspections (if state
agency adopts the IRS modifications – these are permissions, not
requirements)
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Variations in Program-Specific
Requirements:
◦ Eligibility requirements
◦ Documentation Requirements
◦ Unit Requirements
Variations in Monitoring:
◦ Physical Inspections
◦ Management Reviews
◦ Reporting Non-Compliance
Variations in Other Requirements
◦ AFHMP
◦ VAWA
Variations in Procedures
• Verification
• Calculation
• Certification
• Leases
• Utility Allowances
• Terminations
• Record retention
• Terminations
• Record retention
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Eligibility requirements
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Definition of Income
Income Limits
Income eligibility –initially and at recertification
Income Targeting
Student eligibility
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Social Security Numbers
Birth Certificates
Citizenship
Criminal Background Screening
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Unit as sole/primary residence
Under-Utilization
Manager’s unit
Transfers
Documentation Requirements
Unit Requirements
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The Challenges of Managing Combined Funding Properties
Verification
◦ Income
◦ Assets
Calculation
◦ Income
◦ Rents
◦ Security Deposits
Certifications
◦ Notice Requirements
◦ Types and Timing
◦ Effective Dates
◦ Adding Household Members
◦ Acquisition Rehab Issues
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(More) Variations in
Procedures
Leases
◦ Forms
◦ Modifications
◦ Addenda/Attachments
◦ Beginning Term
Utility Allowances
Termination
◦ Tenancy
◦ Assistance
Record Retention
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Variations in Monitoring
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Management reviews
Physical Inspections
Reporting non-compliance
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The Challenges of Managing Combined Funding Properties
Variations in Other Requirements
AFHMP vs AFFH
• FHEO requires AFHMP of most HUD projects
• FHEO requires AFFH of PHA’s and of states and
localities using HOME/CDBG funds
VAWA
• 2013 reauthorization applies to LIHC, HUD, RD but . . .
• Each agency devises its own rules and forms
HUD Fair Housing rules applicable only to deep subsidy
projects:
• Section 504 access for persons with disabilities
• Meaningful access for persons with limited English
proficiency
• Equal access for LGBT
• Equal access to restrooms re: gender identity
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HUD announced on 1/12/15 that an LIHC property cannot terminate a
Section 8 tenant for becoming over-income for LIHC or for not
meeting another LIHC requirement (full-time student household, for
example) because the HUD lease does not include this as a grounds
for termination.
Owners may offer full-time student households incentives to move
out so as long as the incentives are not paid from Section 8 or FHA
project funds.
Owners should inform tenants in writing that they have the option of
remaining as HUD-assisted tenants and that the choice of moving
with incentives is truly voluntary.
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HUD’s “Tips for Combining LIHTC with . . . Section 8”
http://portal.hud.gov/hudportal/HUD?src=/states/shared/working/r10/mf/sect8tips
Excerpts:
Tenants who qualify for Section 8 80% income limits on pre-universe
properties, cannot be denied housing due to an LIHC restriction of
50% or 60%.
 Owners cannot exclude students who would otherwise qualify for
Section 8 without having “a HUD-approved waiver.”
 Owners may want to choose other than 100% LIHC deals in order to
avoid conflicts.
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The Challenges of Managing Combined Funding Properties
• Every program’s rules rule for their program.
• Conflicts among eligibility rules can result in a
household who qualifies for one program but not
another not being able to move-in or being limited
as to which units are available to them.
• Conflicts among procedures can result in different
incomes for the same household – one for each
program.
• Some conflicts will mean that an owner may have to
sacrifice financial benefits or even risk noncompliance if a solution cannot be found.
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• Name the programs funding the property and/or its residents
• Review the regulations, regulatory documents, agency
handbooks and manuals for each program.
• Identify potential conflicts – especially those that can be
resolved within the existing regulations
• Talk about these issues with compliance staff of the agencies
involved and seek common ground where not in violation of
program rules.
• Establish property procedures that take into account every
program
• Hire staff with multiple program experience and train them in
your procedures
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The Challenges of Managing Combined Funding Properties
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Include all the Players on the Team from Day One
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Developer
Owner
Syndicator
Management Agent
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Compliance Manager
Property Manager/Assistant Manager
Leasing Staff
Regional Manager
Director of Operations
And last but not least . . .
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Assume nothing
Question everything
 Listen well
 Take Action
 Repeat . . .
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Multiple Program Knowledge and Experience
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The Challenges of Managing Combined Funding Properties
Gwen Volk,
CPM, NAHP-e , FHC  ,SHCM , HCCP , FHC , RAM 
INFOCUS, INC.
(903) 938-2605
[email protected]
GWEN VOLK
©2016 GWEN VOLK INFOCUS, INC. 13