Affordable Housing Connections

March 2022 Newsletter

COMPLIANCE CLARIFICATION - Help!

Question:

My organization is currently completing an occupied rehab. We have been approved for the HUD Pass Through for six (6) households which allows those households to temporarily live in alternative housing for the time of rehab on the project and to move back into their units once complete.


My question revolves around the tax credits and the households who relocate during this time. The household is eligible and qualified in their current unit. The household is moved off site, construction is completed, and the household moves back to our property and returns to their original unit. When they re-enter the unit, do they need to re-qualify the unit for initial tax credits? Or once they are initially qualified, do they remain so even if they relocate for an extended period while the rehab is completed?

Answer:

Before getting started on the answer, we would like to clearly identify the key aspects of an acquisition/rehab deal. Properties can receive tax credit funding primarily as either "New Construction" or "Acquisition Rehab." New construction is as simply as it is stated, the developer builds something from the ground up. Acquisition rehabilitation is not as straightforward. An owner may have received tax credits both on the acquisition (purchase) and rehabilitation of an existing building. To make the situation a bit more complicated, the building purchased could have existed previously as apartment housing or the building could have been used in another way such as a factory, school or even a bowling alley.


If the owner purchased a building that once was a bowling alley, for example, and it was not formerly apartments (not currently occupied,) the process of certifying household's is like new construction. The building will need a very large amount of construction completed to get the building ready for occupants. Once construction is done and the building now has units with kitchens, and bathrooms (and not alleys for gutter balls), the manager can begin marketing the property and a "lease up" to fill the new units begins.


As mentioned above, acquisition rehab credits are awarded to existing apartment buildings. Presumably this type of construction may be more like a 'face lift' for the existing units. The unit's footprint is already in place; the kitchens, bathrooms and furnaces are likely present and the construction necessary to update these spaces is not as substantial. As a result of this situation, many owners complete construction with current tenants "in place." This means the apartments are already occupied. There is no need to find new tenants by marketing and conducting a "lease up." Your tenants are already living there.

"In Place" Acquisition Rehab:

Although we just said there is no need to market and lease up your property, you do need to certify your existing tenants. The date of acquisition is a very important date. This is the date the new owner purchased the property. As a Property Owner and/or Management Agent, you need to know the date of acquisition because this is the date that will be used as the TIC effective date for all your in place tenants. You will have 120 days to fully complete an initial income certification. Tasks of an initial income certification include meeting with current tenants to go over their new application/questionnaire, sending out/collecting all income, asset and student verifications, creating the TICs and getting all required signatures. If you complete this process within 120 days of the acquisition date, you are protected with the IRS Safe Harbor.


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 (IRS 8823 Audit Guide page 4-25 and Revenue Procedure 2003-83.)


Example:

Owner purchases a building in July 2019. The Johnson's in unit 101 income qualified and a full certification package is complete. Construction begins October 2019 and is completed in July 2020. Owner will begin taking credits in 2020 however the Johnson's in unit 101, started a new job in December of 2019 and the new job puts the Johnson household over the current income limit. Because an acquisition certification was completed as of July 2019, the owner can include unit 101 in the applicable fraction used to claim credits.


Safe harbor is not a requirement but more of a safety net that has become an industry standard. Anything can happen between purchase and construction, so it is good to have this safe harbor protection!


Tenant Relocation:

It is ideal to complete construction while the tenants are "in place" however in some situations you may need tenants to relocate. Relocation can be done off site or on site. In your question, your tenants were relocated off site. Remember for tenants relocated offsite the owner must pay all moving expenses. Tenants cannot pay more than the restricted rent (good job on the HUD Pass Through Lease!) they would have been paying while on site.


A determination may be made that an existing tenant is a qualified low-income household. In which case, the owner will move the tenant and provide temporary housing while the tenant’s unit is being rehabilitated. The temporary housing may be another unit within the project or off-site. The tenant is expected to occupy the rehabilitated unit after the rehabilitation is completed. The costs attributable to moving the tenant and providing temporary housing for the tenant during the rehabilitation (e.g., legal costs, tenant moving expenses, costs for temporarily storing a tenant’s property, and temporary housing costs) are expensed as ordinary and necessary business expenses under IRC §162.

Compliance Checkup

Stay current on your compliance understanding!

QUESTION 1

1. Kevin has a court order to receive $425 per month, but his ex-wife does not pay, and he has made no effort to collect. We must count the full $425 per month as income. True or false.


(A) True


(B) False

QUESTION 2

2. Your LIHTC & HOME-assisted household has a checking account with a six-month average balance of $497 and a current balance of $1, a certificate of deposit with a market value of $10,000 with a $500 penalty to cash it in, and a savings account with a current balance of $1,701 and a six- month average balance of $1,907. What is the total cash value of the household's assets?


(A) $11,698


(B) $14,083


(C) $14,000


(D) $13,917

QUESTION 3

3. The Johnson family applied for housing at ABC Property. When determining eligibility, the following is written on the application for housing; $50 groceries delivered weekly from their grandmother Maxine, $200 that is deposited monthly into their checking account and an automatic deposit from the Social Security Administration that is $602 gross per month (includes COLA). The correct annual income is:


(A) $10,224


(B) $9,624


(C) $600.00


(D) $2,400

QUESTION 4

4. Chuck is a roofer. He works from April through September. He does not work in rain or windstorms. His employer can provide information showing the total number of regular and overtime hours Chuck worked during the past three years. To calculate Chuck’s anticipated income, you would:


(A) Not accept this form of verification, you need to determine the current snapshot and expected hours Chuck will work


(B) Use the average number of regular hours over the past three years times his current regular pay rate, and the average overtime hours times his current overtime rate


(C) Multiple the current rate of pay X 40 hours per week at 52 weeks per year


(D) When calculating income, you don’t include sporadic income

QUESTION 5

5. Jennifer’s social security payment of $250 per month is being reduced by $25 per month for a period of six months to make up for a prior overpayment. How would you calculate the annual income?


(A) $250 X 12 = $3,000 per year


(B) $250 - $25 = $225 X 12 = $2,700 per year


(C) $225 X 6 = $1,350. $250 X 6 = $1,500. $1,350 + $1,500 = $2,850 per year


(D) $25 X 12 = $300.00 per year

Answers to Compliance Checkup

Question 1 Answer (A - True)


Question 2 Answer (A)


Question 3 Answer (B)


Question 4 Answer (B)


Question 5 Answer (C)

A Place to Share our Stories

Written by Sarah Thornton

Congratulations Irene Ruiz-Briseno!

Irene is the first to receive the Sherrill Oman Scholar and awarded a stipend to pursue her education in the affordable housing or leadership world, however she pleases.

Who was Sherrill Oman?

Sherrill (or Sherry) Oman was a long-time board member of AHC’s counsel from Frederickson & Byron, PA. She was a visionary who led AHC's Board into creating the ELC. Her passion was in real estate practice on serving local housing authorities and developers of affordable housing. Sherry’s son, David Oman, was able to present the award to Irene as well as celebrate in Irene’s academic accomplishment.


So, what is Irene’s plan with the award?


There are many directions Irene can take but she is still figuring out what she wants to do. One thing she knows for sure is she wants to expand her knowledge of tax credits. As she said, “all hands-on deck” are needed in the housing industry in the past, the future, and especially now.


Where does 5 years later look for Irene?


Being treated like a seasoned developer. Growing up, Irene’s mother would drive around pointing out projects she helped to develop. Irene wants to help those who have a desire to create housing come to life. Dedicated attention to all clients so she can live vicariously through them. If the clients are successful, it’s a reflection on her.



A big thank you goes out to Lyn Burton and Barbara Dacy for giving Irene this opportunity so she can learn more, to help more. Leadership is about setting examples and creating new leaders. Irene is going to give that “I helped developed that building” tour all over one day to the future generations to come.

Where does 5 years later look for Irene?

Being treated like a seasoned developer. Growing up, Irene’s mother would drive around pointing out projects she helped to develop. Irene wants to help those who have a desire to create housing come to life. Dedicated attention to all clients so she can vicariously live through them. If the clients are successful, it’s a reflection on her.


A big thank you goes out to Lyn Burton and Barbara Dacy for giving Irene this opportunity so she can learn more, to help more. Leadership is about setting examples and creating new leaders. Irene is going to give that “I helped developed that building” tour all over one day to the future generations to come.

Barbara Dacy, you will be missed on the AHC Board!

Being on the Board of AHC gave Barbara a deeper understanding of what being on a board is really about. A lot of credit goes to the staff that does the work for the board but it is the board’s job to ask the big questions and constantly think of the bigger picture. After 17 years of evolution, growth, and hard work, Barbara Dacy is stepping down from AHC’s Board. Back in 2004, when Lyn asked Barbara to be a part of the AHC Board to help with strategic initiatives, she never thought she would accomplish what she has today.


What is she most proud of?


One thing that always kept Barbara engaged was the need to involve an educational process to create bigger connections. Thus, the Leadership Certificate Course was born in 2021 after many years of the course being in the making. Barbara was happy to see it finally come to life. Although she is stepping down from the board, she will still be teaching the course with the same amount of dedication she had for it when it was just an idea.


What kept her driven?


The passion and excitement that came along with the job. While on the board and still today, she continues to love her day job as an executive director of housing for Otter Tail County Housing and Redevelopment Authority. Her role is to get the agency going and established. Although it was hard for her to let go of her day job, that is all she wanted for the AHC Board. The talk to become constant action.


What does she look forward to?


Mainly spending time at her cabin whether it be boating on the lake, gardening, or mowing. Curling up with a good book or working hard in her garage too. Barbara will continue to work at her day job and teach alongside Lyn but does have plans to officially retire at the end of 2023. Although she did mention, “I have the right to change my mind” since she has a strong desire to constantly keep fighting for the bigger picture at hand.


Barbara is extremely grateful for her experience of being a part of AHC’s board. She feels honored to be a part of the evolution into making a stronger and better organization. Many of her coworkers started as professional colleagues that turned into friendships, she is forever thankful for. AHC taught her the value and importance of what it means to have just one role in this industry.

COVID-19 Response Supplies Available Through Health Resources & Services Administration (HRSA)

Medicare-certified rural health clinics and health centers supported by the U.S. Department of Health and Human Services/Health Resources & Services Administration (HRSA) can now order COVID-19 point-of-care testing supplies and N95 masks from the HRSA Health Center COVID-19 N95 Mask Program.


Multifamily owner/agents can now submit new orders for point-of-care testing supplies and N95 masks to their federally qualified health centers/community health center partners by 11:59 p.m. their local time on Monday, March 7. The program is intended to ensure that high-quality masks are made available to the nation's underserved communities and those disproportionately affected by COVID-19. Masks should be distributed to patients, staff, and any members of the community who request them.


HRSA encourages health centers to consider their ordering numbers as they work closely with their community partners to leverage HRSA's various COVID-19 response programs and distribute essential supplies to such populations as residents of HUD-assisted housing.


For additional information, please see the following announcements regarding these partnerships from the White House, HRSA and the Administration for Community Living (ACL), and HUD.

New Flyer Published – REAC Inspections During the Pandemic

The Office of Housing and the Federal Housing Administration reports in response to inquiries Multifamily Housing has received regarding the COVID-19 pandemic and REAC inspections, please see this flyer that outlines the rights and obligations of residents, owners, and agents when a REAC inspection is scheduled at your property.

Residents have the right to decline to have their unit inspected as part of a REAC inspection if they are not comfortable with the REAC inspector entering their home. In this case, an alternative unit will be selected for inspection.

If owners or management agents have concerns about proceeding with a REAC inspection due to COVID-19, please reach out to the REAC Technical Assistance Center (TAC) at 888-245-4860 or via email at REAC_TAC@hud.gov to report the conditions at your property.

HUD Supplied REAC Inspection FAQ

HUD has published this REAC Q&A in response to large volume of questions regarding inspections and the COVID-19 pandemic. Here you can find clarification on some Frequently Asked Questions.

Housing Notice 2015-04 FAQs Published to HUDCLIPS

On February 10, 2022, the Office of Multifamily Housing posted to HUDCLIPS updated responses to frequently asked questions (FAQs) regarding Housing Notice H-2015-04, Methodology for Completing a Multifamily Housing Utility Analysis. The FAQs were originally distributed to stakeholders via the Rental Housing Integrity Improvement Project (RHIIP) listserv in July 2015 and were redistributed with updated responses in August 2016.

The updated FAQs are now located on HUDCLIPS under Housing Notice H-2015-04: https://www.hud.gov/sites/dfiles/OCHCO/documents/UA_FAQs_February_2022.pdf.

Voting Rights and Access for Residents at HUD-Assisted Properties

On February 9th, Multifamily Housing News has reported the Office of Multifamily Housing Programs is making multifamily owners/agents of HUD-assisted properties aware that residents have the right to access voter registration activities and to participate in the electoral process.


Under the National Voter Registration Act of 1993, Congress has found that the right of citizens to vote is a fundamental right and that it is the duty of the Federal, State, and local governments to promote the exercise of that right.

HUD is asking owners to share voter & election resources with residents

HUD is asking owners to share voter and election resources with residents, including encouraging residents to visit vote.gov. This website provides helpful information, including how to register to vote, voter registration deadlines, and specific information about state and local elections.

Many rules about voting are set by states, so owners should check with their counsel to ensure that all activities are compliant with local and state law.

Permissible activities at Multifamily-assisted properties include:


  • Permitting the use of community space on an incidental basis to hold meetings, candidate forums, or voter registration, provided that all parties and organizations have access to the facility on an equal basis and are assessed equal rent or use charges.
  • Collaborating with local election administrators to permit the use of space for voter drop boxes and voting sites, including for early voting.

Owners/agents may not use Section 8, PRAC, or project funds to finance the use of facilities or equipment for partisan political purposes or partisan political activities that favor one candidate, party or political position over another. Any voter registration activities undertaken should not be partisan. Impermissible activities include any act that would:


  1. Suggest that benefits are in any way tied to a participant’s voting activity, or
  2. Give the appearance that the processes of voter registration or voting are not voluntary processes.


You are reminded that federal laws, including Section 504 of the Rehabilitation Act of 1973 (Section 504) and Titles II and III of the Americans with Disabilities Act of 1990 (ADA), require that the voting process, including voter registration, site selection, and casting ballots be accessible for individuals with disabilities. For example, any community space used for voting access must be accessible. See https://www.ada.gov/ada_voting/ada_voting_ta.htm for additional information.

Affordable Housing Connections

Our Mission


We deliver monitoring and consulting services to governmental organizations, property owners and managers; and education to individuals who aspire to leadership in the affordable housing industry. Our aim is to protect the investment of private equity and tax dollars and to ensure continued quality affordable rental housing.