Affordable Housing Connections
March 2020 Newsletter
"Audit Season" is Coming!
For properties scheduled for 2020 inspections, the confusion about the new notice periods thus providing you with shorten preparation time can lead to unpreparedness or worse yet, non-compliance! Below is a shortened outline of AHC monitoring procedures to ensure you and your team walk out of work the day of your inspection wearing nothing but smiles.
The Site Visit
1. SITE VISIT NOTICE PERIOD:
AHC notifies owner/management via email regarding the upcoming site visit, this notification is called the BLD (Bright Line Date) Notice and sets the date, time and expected during of the site visit.
NEW – The Section 42 Final Rule shortens the notice for LIHTC site visits from a maximum of 30 days to a maximum of 15 days with no advance notice of units selected for UPCS inspections. The Section 42 Final Rule also allows the units being inspected to be decoupled from the files being reviewed. This means that a unit being physically inspected does not have to be the unit of the tenant file being reviewed. Because of this, AHC will provide a list of the units selected for tenant file review only in the site visit notice. When the AHC Inspector arrives at the property, the AHC Inspector will discuss vacant units with the owner/manager and incorporate at least one vacant unit (per BIN) into a random selection of LIHTC units for the UPCS inspection.
2. SITE VISIT FREQUENCY:
• Tax Credit Site Visits:
For LIHTC, site visits must be conducted at least once every three years during the compliance period. Once a project has completed its compliance period, the project enters something called the Extended Use Period, or EUP. During EUP (generally a project’s 16th to 30th year), site visits are conducted at least once every five years.
*Credit Period - is usually 10 years following the date the building was placed in
service. It is the time period in which the owners of the project receive tax credits, which they can then apply to their respective income tax liabilities.
*Compliance Period - is the duration of the credit period plus 5 years. The compliance period is 15 years beginning with the first year of the tax credit period (placed in service year or subsequent year if deferral was elected).
• HOME Site Visits:
HOME site visit frequency depends on the number of units and amount of project funding and is either annual, every two or every three years during the Period of Affordability (POA). HOME projects with funding committed on or after August 23, 2013 are subject to site visits once every three years, like the LIHTC program.
*Period of Affordability - The Period of Affordability (POA) is the length of time a project must be restricted by HOME program requirements. Several factors may determine this restriction period including the amount of HOME loan money committed to the project, the activity type and any additional restriction by the Participating Jurisdiction (PJ).
The Physical Inspection
In order to be treated as a Low-Income Housing Credit (LIHC) unit, the unit must be suitable for occupancy. We know this much is true, but what goes into a project being deemed decent, safe, sanitary and in good repair?
State agencies must use the local health, safety and building codes or the Uniform Physical
Condition Standards (UPCS) when conducting physical inspections of LIHC properties. If a state agency chooses to use the UPCS, then HUD’s Dictionary of Deficiency Definitions to determine the severity of the violation must be used.
The IRS adopted the Dictionary of Deficiency (Defect) Definitions to provide objective standards that can be applied consistently by all the state agencies. The UPCS include five major categories:
The UPCS major categories/Inspectable areas:
The site, including components such as fencing and retaining walls, the grounds, parking lots and its lighting, project signs and play areas; building exteriors, including fire escapes, foundations, and roofs; building systems such as domestic water, electrical system and elevators, HVAC, fire protection and sanitary systems; dwelling units, including electrical systems and outlets, call-for-aid (if applicable), hot water heaters, functional bathrooms and kitchens, lighting, smoke detectors, stairs, walls, patio/porch/balcony and windows. The dwelling must include at least one battery-operated or hard-wired in working condition smoke detector on each level of the unit; common areas, such as garages, utility rooms, laundry rooms and trash collection areas.
HUD’s Dictionary of Deficiency Definitions also includes descriptions to gauge the extent of
the noncompliance with the UPCS. The types of defects include (1) minor/infrequent, (2) Moderate/more frequent, and (3) severe/pervasive.
Deficiencies that are identified as posing a threat to the health and safety of a resident, but may not be directly associated with a particular category, are categorized separately as Health and Safety Deficiencies, which can apply across all five inspectable areas. All areas and components of the housing must be free of health and safety hazards. These areas include, but are not limited to, air quality, electrical hazards, elevators, emergency/fire exits, flammable materials, garbage and debris, handrail hazards, infestation and lead based paint.