Interim Final Rule on Streamlining Administrative Regulations Under the FAST Act Effective

On March 8, 2016, HUD published a final rule streamlining regulatory requirements pertaining to certain elements of various multifamily housing programs including, but not limited to, the Housing Choice Voucher (HCV) and Public Housing (PH). The goal was to reduce the administrative burden on PHAs and owners/managers. The easements included changes pertaining to annual income reviews in the HCV, PH, and Section 8 Project-Based Rental Assistance (PBRA) programs for households with fixed income sources.

On December 4, 2015, which was prior to the issuance of this final rule, President Obama signed the Fixing America’s Surface Transportation Act (FAST Act) into law. The FAST Act was primarily a transportation law but also contained a section (Section 78001) that amended the United States Housing Act of 1937. This section brought about the streamlining of income recertifications and was specifically for households where fixed income sources made up at least 90% of its income. Specifically the law allowed PHAs and owners/managers of HCV, PH and PBRA properties to conduct full income recertification for households with 90% or more of their income from fixed-income every 3 years instead of annually. In the off years, a previously determined or verified COLA or interest rate adjustment specific to each source of fixed income is applied.

On December 12, 2017, HUD published an interim final rule amending the regulatory language to implement the FAST Act and to align the current regulatory flexibilities with those provided in the FAST Act. In addition, HUD is issuing this rule to expand some of the flexibilities to some of its other multifamily housing programs while seeking public feedback on the expansion. The specific programs affected by this expansion are:

  1. Section 8 Project-Based Rental Assistance (PBRA), including projects undergoing mark-to market debt restructuring under the Multifamily Assisted Housing Reform and Affordability Housing Act,
  2. Section 202 of the Housing Act of 1959, and the
  3. Section 811 of the Cranston-Gonzalez National Affordable Housing Act.

This interim final rule also modifies the earlier streamlining regulations so that the procedures for households meeting the 90% fixed-income threshold of the FAST Act are as similar as possible to those for households who have some fixed income sources but not enough to meet the 90% threshold.

This interim final rule is effective March 12, 2018. Below is a summary of the specific provisions and expansions included in this interim final rule.

Streamlined Certification of Fixed Income

During Years 2 and 3 after a full income recertification, PHAs and owners/managers in the HCV, PH, and PBRA programs may determine a household’s fixed income by applying the applicable verified COLA or interest rate to each fixed income source. This interim rule adds a specific provision for households that do not meet the 90% fixed-income threshold and now indicates, in the cases of households:

  • That meet or exceed the 90% fixed income requirement: The PHA or owner/manager has the choice to also adjust the non-fixed income source.
  • With at least one source of fixed income, but whom don’t meet the 90% fixed-income threshold: PHAs and owners/managers must verify and adjust non-fixed sources annually.

The interim rule continues to require a full recertification every 3 years and that households certify that all the information they submit for income verification, including the sources of income, is accurate.

Utility Reimbursements

The current PBRA regulations state owners/managers must reimburse tenants if the utility allowance exceeds the total tenant payment, but does not specify the frequency of these reimbursements causing many to process small monthly checks and expend postage to mail them causing an administrative and, possibly, a financial burden. This interim final rule explicitly states:

  • Owners/Managers can make quarterly reimbursements if the reimbursement amount is $45/quarter or less.
  • In the event a household vacates prior to its next quarterly reimbursement, a prorated reimbursement is required.
  • Owners/Managers taking advantage of this option must have a policy in place to assist tenants for whom the quarterly reimbursements pose a financial hardship.

The regulations do not contain the requirements around utility reimbursements for the Section 202 and Section 811 programs instead leave such requirements in the assistance contracts. HUD indicates it is not including regulatory text to implement these new flexibilities in this interim final rule, but rather would be open to amending the assistance contracts of any owners looking to take advantage of the flexibilities.

Declaration of Assets Under $5,000

This interim rule amends the regulations for households with net assets equal to or less than $5,000 specifically stating an owner/manager may accept a household’s declaration that it has assets at or below this requirement without annually taking additional steps to verify the accuracy of the declaration. This is allowable during the off years (Years 2 and 3) after a full income certification as third-party verification of all household assets will be required every 3 years.

This interim rule also allows owners/managers in the Section 202 and Section 811 programs to require tenants to provide the same certification of assets allowed in the HCV, PH, and PBRA programs.

Applicability to HCV and PH Programs

The utility allowance reimbursement and asset certification provisions provided in the March 8, 2016 final rule only applied to the HCV and PH programs. In an effort to align across HUD programs, this interim rule expands the same policies to the other multifamily housing programs, however, they are also looking for comments on this provision and understand this may lead them to reconsider these policies.

Justification for Interim Rulemaking

In general, HUD seeks out public comments before making a final rule effective, however, it also provides for exceptions from that requirement when the good cause requirement is satisfied and states it is satisfied when the prior public procedure is “impracticable, unnecessary, or contrary to the public interest”.

In this case, HUD finds good cause exists to publish prior to gathering public comment on the basis that the streamlining changes made to utility reimbursement and declaration of assets in this interim rule were included in HUD’s proposed rule which was published on January 6, 2015. Although these provisions were not for the other multifamily housing programs, those providing comments to the proposed rule requested HUD consider extending its applicability to these programs.

Although HUD made this rule effective March 12, 2018, it delayed it for a period of 90 days (the interim rule was published on December 12, 2017) allowing participants in HUD’s multifamily housing programs and other interested parties to submit comment during the first 30-day period. HUD will take any comments received into consideration and determine whether any further changes are needed before implementing the streamlining changes for the multifamily housing programs.

Applicability to the Housing Credit Program

As per IRS Notice 88-80, Housing Credit income determinations are to be made in a manner consistent with the Section 8 program which means, technically, these flexibilities should apply. However, it is important to remember, State Monitoring Agencies are allowed to be more restrictive than the Federal rules so they are not obligated to implement them into their state compliance requirements. Before applying these flexibilities to your Housing Credit properties, be sure to discuss them with your State Agency as well as your investor. Also understand that your Agency and/or investor may not be familiar with the final or this interim final rule and may need to be informed. This interim final rule (publication date December 12, 2017 with a March 12, 2018 effective date) is contained in the December 12, 2017 Federal Register (82 FR No. 27, pages 58335-58341). To obtain a copy, simply CLICK HERE.

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