NCSHA’s HFA Institute Reflections – HOME Proposed Rule

Written by Lois Churchill, Spectrum Enterprises

NCSHA held its annual HFA Institute last week in Washington DC. I was able to attend both the HOME and the LIHTC modules this year.

The major topic during the HOME module was the publication on December 16, 2011 of the HOME Proposed Rule. The comments period runs through February 14, 2012 so be sure to read and send comments before that date!

The Proposed Rule makes lots of changes most of which affect the Participating Jurisdictions (PJs) only so I won’t go into those here. What will affect properties directly (if the rule is approved as is currently written) include:

  • Time limit to initially qualify a new HOME unit. The rule states that if a HOME rental unit is not leased to an initial income eligible tenant within a specified time the PJ must submit information about the current marketing plan and possibly a plan for more aggressive marketing. The timeframe being discussed is between 3 and 6 months. The PJ will have to repay HOME funds invested in a rental unit that isn’t initially leased within 18 months.
  • Monitoring fees will no longer be prohibited. The rule will allow PJs to charge reasonable annual monitoring fees to owners of HOME rental projects to which HOME funds are committed on or after the effective date of the final rule. Existing properties will not be subject to monitoring fees as the rule is currently written.
  • Physical inspections – the rule will require the PJ to inspect each HOME project at completion and during the affordability period. The frequency will change. The project will have to be inspected upon completion, at 12 months after completion, and at least once every three years thereafter. Also, the minimum standard will be UPCS if the rule passes, not HQS, except for TBRA. State or local code, if more stringent, will be the standard. The sample of units inspected may also change. For projects with one to four HOME units all buildings containing a HOME assisted tenant and 100 percent of the HOME units would be inspected. For projects with more than four HOME units at least 20 percent of the HOME units in each building but not less than four.
  • HOME units in the project and one in each building would be inspected. Please note there are substantial changes developers need to be aware of regarding new construction and rehabilitation standards for HOME assisted projects/units.
  • Students – please send comments about this one! HUD is proposing to use the same restrictions on student eligibility that they use for the Section 8 program. Specifically the proposed rule reads “An individual does not qualify as a low-income family if the individual is enrolled as a student at an institution of higher education, as defined under section 102 of the Higher Education Act of 1965; is under 24 years of age; is not a veteran of the United states military/ is unmarried; does not have a dependent child; and is not otherwise individually low-income or does not have parents who qualify as low-income.” This rule was adopted for Section 8 to stop otherwise dependent and/or ineligible students from receiving subsidy. There is no subsidy in a HOME assisted unit. It’s unclear why HUD wants to adopt this definition for HOME. It’s clear that student housing isn’t allowable or if it isn’t let’s make that clear. Because the majority of HOME rental units are in developments that are also subject to LIHTC rules, why not adopt the LIHTC student definitions for HOME eligibility as well? Read this section (in the definition of low-income families) and send comments.
  • Income definitions – the definition of income using the Census long form will be eliminated. The definition based on the IRS definition of adjusted gross income will be revised to require that federal government cost-of-living allowances that are not include in adjusted gross income be added to the adjusted gross income of applicants for HOME assistance for the purpose of determining income eligibility. This would affect federal civilian employees or federal court employees who are stationed in Alaska, Hawaii, or outside the US. Also, for those using the chapter 5 definitions of income the proposed rule would required at least 3 months of earning documentation (e.g., wage statements, interest statements, unemployment compensation). The 3 month minimum earnings examination would codify already recommended practice.

Electronic comments on the HOME Proposed Rule may be submitted through the Federal eRulemaking Portal as http://www.regulations.gov. Electronic submission of comments is strongly encouraged over paper submission. However those may be sent to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500.

The Federal Register is Volume 76, No 242, Friday, December 116, 2011, pages 78344 through 78382.

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