Through Section 8(bb): HUD Notice 2014-14 HUD Notice 2015-03 - - PowerPoint PPT Presentation

Transferring Subsidy Through Section 8(bb): HUD Notice 2014-14 HUD Notice 2015-03

Presented by Laura Simpson September 24, 2015

Agenda

I. Need for the HUD Notice II. General Overview of the Transfer Process III. Transferor Owner Requirements

• IV. Transferee Owner Requirements

V. Proposal Requirements

• VI. Types of Transfers
• A. To Existing HUD-Affiliated Project
• B. To Existing non-HUD-Affiliated Project
• C. To New Construction
• VII. Tenant Protections During Transfer
• VIII. HUD Review
• A. Field Office Review
• B. Headquarters Review
• IX. Questions

8bb??

Current Section 8 Project 8bb Helps Prevent This

8bb??

Current Section 8 Project (Project A) New Construction Existing Building that is HUD Affiliated Existing Building that is not HUD Affiliated

8bb

Need for the HUD Notice

• Section 8(bb) of the United States Housing Act of 1937 – 42 U.S.C. §

1437f(z)(2)(bb)(1)

• “If an assistance contract under this section, other than a contract for

tenant-based assistance, is terminated or is not renewed, or if the contract expires, the Secretary shall, in order to provide continued assistance to eligible families, including eligible families receiving the benefit of the project-based assistance at the time of the termination, transfer any budget authority remaining in the contract to another contract. The transfer shall be under such terms as the Secretary may prescribe.”

• HUD Notice H-2014-14: Issued October 9, 2014
• HUD Notice H-2015-03: Issued April 3, 2015
• Prior to the Notice the standards for transferring the budget authority were

vague, leaving owners unsure of how to effectively transfer remaining budget authority

• Preservation of project-based Section 8 housing was undermined

What Can 8bb Do For Me?

• Significant amounts of project-based Section 8

are being underutilized due to vacancy rates

• County assistance for Low income households
• Scarce resources spread too thin
• Focused assistance is needed
• Senior Housing vs. workforce housing
• How to identify and equalize pockets of scarcity

and abundance

8(bb) is Different than Section 214

• Section 214 deals only when an owner transfers their current use restrictions or

HUD-related loans to a new project

• Section 214 applies to HAP Contracts, HUD-held and HUD-insured debt,

and affordability use restrictions

• Section 8(bb) applies to a project-based Section 8 HAP contract
• Section 214 is only an option for an obsolete project; one that is physically
• bsolete or financially nonviable
• Section 8(bb) is available to a larger number of properties

General Overview of the Transfer Process

• Agreement between the Owners of Property A (current Section 8 contract)

and Property B

• Property B may be existing or new construction and may be either already

HUD-affiliated or not currently HUD-affiliated

• Both Owners must meet minimum requirements
• Requirements will take longer to meet for new construction and non HUD-

affiliated construction

• Tenants must be notified and protected
• Those who want to remain in the current property can
• Those who want to stay with the project-based Section 8 in the new

property must be moved, with no cost to the tenant

• Proposal between Owner A and Owner B is submitted to HUD Field Office
• HUD Field Office reviews including review by FHEO and Field Economist
• HUD Field Office submits to Headquarters
• Transfer is Executed

Is 8(bb) Applicable?

(pg 1-3)

Is Owner A Eligible?

(pg 8) Yes

Stop Process

Owner A’s Proposal Meet Requirements

(pg 9) Yes No

Transfer All or Part

(pg 7) Yes No

Transfer Part

(pg 7)

Transfer All

(pg 7)

Project B Requirements

(pg 11)

HUD Affiliated

(pg 16)

not HUD Affiliated

(pg 16)

Tenant Protections

(pg 19)

Hub Review PD&R Field Economist HQ Approval

Yes No No

Execute New Contracts

No

New Const.

Yes

Minimum Requirements

• Current Project must have a current Section 8 HAP Contract
• Current Project Owner and the Contract Administrator (HUD or PHA) have

mutually agreed to either:

• Terminate the contract and transfer the entire budget authority or
• Subdivide the contract, then terminate and transfer a portion of the budget

authority

• Both projects must be located in the same state
• Not subject to certain exclusions (refer to pages 1-4 of the Notice)
• Remaining budget authority must be sufficient to fund the proposed number of

units

• Number of units supported should be substantially the same (lesser of 5 %
• r 5 units)

Is 8(bb) Applicable?

(pg 1-3)

Stop Process

Tenant Protections

(pg 19) Yes No

• Owner must give tenants and legitimate written notification of the proposed

transfer period and provide a minimum 30-day comment period

• must include point of contact at local HUD office
• must be in appropriate formats as necessary to meet needs of all tenants
• Must include description of the impact on tenant’s rental assistance, tenant

contributions and resulting relocation rights and responsibilities under the Uniform Relocation Act

• Must inform tenants they may be eligible for tenant protection

vouchers if they chose not to relocate

• Must be delivered or mailed to each unit in the project AND posted in at

least three areas/common places, including the project office

• Tenants must notified they have a right to submit written comments on the

transfer to the transferring owner and the local HUD office

• Comments must be available in the project office during normal

business hours for reading and copying

Tenant Protections

• Tenants must be able to inspect a copy of the materials that the Owner is

required to submit to HUD for a period of 30 days from the date on which the notice was served

• The transferring owner must hold a meeting with the tenants and legitimate

tenant organizations to discuss the details of the notification and answer questions

• Must have a sign-in sheet that is submitted to HUD
• After 30-day comment period, the transferring owner must review the

comments submitted by tenants and their representatives and prepare a written evaluation of the comments

• Written evaluation must address all negative comments
• Certification of compliance with 24 C.F.R § 245.410, 415, and 416-20

Tenant Protections

Relocation Plan

• The transferring owner and receiving owner must determine who will be

responsible for paying relocation expenses, including moving costs that the tenants incur with a move.

• To both a different unit in the existing building or to the receiving project
• Tenants cannot pay for any relocations costs incurred as a result of an

8(bb) transfer

• When residents move, they may be eligible for relocation assistance under

the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 Vouchers

• If a tenant choses not to relocate, Tenant Protection Vouchers will be offered,

subject to available appropriations

• Must notify the local HUD office regarding how many Tenant Protection

Vouchers are requested

• No tenant may be involuntarily displaced because of 8(bb)

Tenant Protections

Is 8(bb) Applicable?

(pg 1-3)

Is Owner A Eligible?

(pg 8) Yes

Stop Process

Owner A’s Proposal Meet Requirements

(pg 9) Yes No

Transfer All or Part

(pg 7) Yes No

Transfer Part

(pg 7)

Transfer All

(pg 7)

Tenant Protections

(pg 19) Yes No No

Transferor Requirements

• Cannot combine transfer of multiple HAP Contracts into one transfer proposal
• Submit a separate request for each project-base Section 8 HAP Contract
• Current in submission of Annual Financial Statements and Monthly Accounting

Reports for the prior 3 years or for the period of time the new ownership has been in place, whichever is less

• If the Current Project is subject to a 236 mortgage, the Owner has submitted

Excess Income Reports for the prior 7 years, and all excess income regardless

• f timeframe, must be paid in full prior to HUD’s approval of the transfer
• All non-compliance flags, if any, have been resolved or there is a HUD-

approved plan in place to resolve the flags

Transferor Requirements

If Project A will continue to be a HUD-affiliated project after the transfer:

• all physical inspection deficiencies must be corrected or there must be a

HUD-approved plan to cure those deficiencies

• if the Project received a less than satisfactory in any section of its last

three Management and Occupancy Reviews (MORs) corrective actions satisfactory to HUD must have been complete or a plan for those corrective actions must be HUD-approved

• the transfer of budget authority cannot have an adverse impact on the

financial and physical feasibility of the Project

• If Project A is subject to an FHA-insured mortgage, the FHA lender must submit

a letter stating that it consents to the proposed transfer of budget authority

Transferor Requirements

Proposal Requirements

• Budget Authority
• Must specify whether all or part of the remaining budget authority will be

transferred

• Amount of budget authority that will remain, if any
• Specifically identify the project that the budget authority will be transferred

to

• Whether the budget will be transferred to a new or existing Section 8 HAP

contract

• Narrative of the transaction, including a description of the proposed

transaction including why it is being proposed and how there will be no adverse impact to the existing assisted tenants as a result of the transaction

• Description of the steps taken by the transferor to market the vacant units
• Number and configuration of units, current rents, and operating budget before

and after the transaction

Transferor Requirements

Proposal Requirements (cont.)

• Tenant Protection Compliance
• Relocation Plan – must include a budget and a Sources and Uses

Statement that describes relocation of the existing tenants to other units within the transferring project or to the receiving project

• Notice to tenants, copies of all tenant comments, owner’s evaluation of

comments, copy of the sign-in sheet, certification of compliance

• Identify any Fair Housing litigation settlement agreements, voluntary

compliance agreements, or other remedial agreements signed by the transferring owner and HUD. Identify whether All or Part of the Remaining Subsidy will Transferred

Transferor Requirements – Transfer All

Transferring Owner and Contract Administrator have mutually agreed to terminate the Section 8 HAP Contract Transferring Owner provides a plan for the future use of the project demonstrating that there is no longer a need for affordable rental housing at the project

• Must include reasons why the Section 8 assistance is no longer needed at the

project and how the transfer will not have an adverse impact on the tenants

Transferor Requirements – Transfer Part

Transferring owner must explain why there is a need for only a portion of the Section 8 assistance and why there will be no adverse impact on the long-term preservation

• f the project or tenants
• Must include a revised budget that shows the project will remain financially viable

after the transfer Owner and Contract Adminstrator execute an Amendment to the HAP Contract which divides the contract

• Owner must renew the HAP contract remaining that property for a 20-year term

Is 8(bb) Applicable?

(pg 1-3)

Is Owner A Eligible?

(pg 8) Yes

Stop Process

Owner A’s Proposal Meet Requirements

(pg 9) Yes No

Transfer All or Part

(pg 7) Yes No

Transfer Part

(pg 7)

Transfer All

(pg 7)

Project B Requirements

(pg 11)

HUD Affiliated

(pg 16)

not HUD Affiliated

(pg 16)

Tenant Protections

(pg 19) Yes No No No

New Const.

Yes

Recipient Requirements

• There can be more than one recipient of the Section 8
• The local demands for affordable housing must show that the receipt of the

budget authority and units assisted will ensure long-term preservation of the receiving property

• Current number and configuration of the units, current rents, and operating

budget as well as the proposed number and configuration of the units, rents, the amount of budget authority to be transferred, and the budget after the transfer

• f the budget authority
• Demonstrate that Project B will be financially viable for the long-term by

providing information of current or proposed financing, approvals of the proposed transaction from any other federal, state, or local agencies with an interest in the project, copies of all existing mortgage documents, and a title report

• Owner narrative demonstrating at least five years of successful experience
• wning, managing, and, if applicable, renovating assisted housing

Recipient Property Requirements

• Common Requirements
• Must show that receipt of budget authority and units assisted is warranted

by local demands for affordable housing and will sustain long-term project preservation

• Documentation to assist HUD in an environmental review
• No subject to action resulting from a violation of the Fair Housing Act, Civil

Rights Act, or Rehabilitation Act of 1973

• Comply with site and neighborhood requirements
• Neighborhood is not one that is seriously detrimental to family life or

in which dwellings or other undesirable conditions predominate

• Housing is accessible to municipal facilities that are at least

equivalent to those typically found in neighborhoods consisting largely

• f unassisted, standard housing of similar market rents

Recipient Property Requirements

• Remaining requirements change depending on the type of property that

the subsidy will be transferred to

• Types of Recipients
• To Existing HUD-Affiliated Projects
• To Existing non HUD-Affiliated Projects
• To New Construction

Recipient – HUD-Affiliated Project

• MORs. Project has not received a less than satisfactory rating in any section of

its last three Management and Occupancy Reviews, or there is a HUD- approved plan in place for corrective actions

• AFS/MARs/EI. Owner B is current in the submission of Annual Financial

Statements and Monthly Accounting Reports for the prior three year period or the period of time the new ownership has been in place, whichever is less. If it is a 236-Project, then Excess Income Reports for the prior seven-year period have been submitted

• No unresolved noncompliance flags
• Project B has a REAC score of at least 60
• Execute new HAP Contract with Contract Administrator

• Project must have a REAC score of at least 60 prior to the transfer
• If there are repair needs, there must be a repair plan in place that details how

the physical needs of the project will be addressed and comments on the status

• f any corrective action in progress
• Owner B and the Contract Administrator enter into a one day New Regulation

part 880 project-based Section 8 HAP contract with a one-day term, which will be renewed with a 20-year HAP contract

Recipient – Not HUD-Affiliated Project

• Transfer of the subsidy cannot occur until construction is complete and

the project is habitable

• May receive conditional approval for transfer which can be used to obtain

financing

• Minority Concentration. If the recipient project is in a racially mixed area,

where the project will cause a significant increase in the proportion of minority to nonminority residents in the area, then FHEO conducts a review of the recipient project.

• Recipient owner must submit supporting data that the project meets one of

the following categories:

• Sufficient comparable opportunities exist for housing for minority

households in the income range served by the proposed project,

• utside areas of minority concentration
• Project is necessary to meet overriding housing needs that cannot be

met in that housing market

Recipient – New Construction

• Must meet all applicable accessibility requirements
• Fair Housing Act
• Section 504 of the Rehabilitation Act
• Americans with Disabilities Act
• Recipient Owner must be approved through Previous Participation

process (HUD 2530)

• Recipient Owner must provide Tenant Selection Plan and Affirmative Fair

Housing Marketing Plan approved by HUD

• Both will be reviewed by FHEO

Recipient – New Construction

• Owner A and B submit proposal memo and supporting documentation to the

local HUD office

• Review by the local HUD office
• FHEO Review
• Upon recommendation for approval, proposal is sent to the Policy Development

and Research Field Economist for review and analysis

• Upon approval by the Field Economist, the HUD Hub Director submits the

package to HUD HQ for approval.

• HQ reviews all information and either approves or denies and returns to the

local HUD office

Submission to HUD

• Termination of existing HAP Contract, or subdivide if Owner A is retaining some
• f the subsidy
• Transfer of the budget authority to Owner B
• Execute renewal of a 20-year HAP Contract(s) with the Contract Administrator

After HUD HQ Approval

HUD Notice H-2014-14 http://portal.hud.gov/hudportal/documents/huddoc?id=14-14hsgn.pdf HUD Notice H-2015-03 http://portal.hud.gov/hudportal/documents/huddoc?id=15-03hsgn.pdf White Paper by MHFA on Unused Project-Based Subsidy in Minnesota http://www.mnhousing.gov/idc/groups/administration/documents/document/mhfa_01 2995.pdf Other Presentations http://www.housingpartnership.net/documents/Section8bb-Housing-Notice- Stakeholder-Call-11-20-14.pdf Articles Providing Overview of the Notice http://nlihc.org/article/multifamily-notice-about-section-8bb-transfer-project-based- section-8-budget-authority http://web20.nixonpeabody.com/ahrc/Lists/Posts/Post.aspx?ID=629&Title=Will- HUD's-new-Notice-on-HAP-Transfers-Amount-to-a-New-Preservation-Tool?

Resources

QUESTIONS ?

Laura Simpson (612) 370-3141