The Housing Opportunity Through Modernization Act of 2016 (HOTMA) was enacted on July 29, 2016, and contained several long-advocated for provisions intended to streamline administrative processes and reduce burdens on public housing agencies (PHAs) and private owners. This proposed rule would revise HUD regulations to put sections 102, 103, and 104 of HOTMA into effect, though changes would not actually be implemented until the beginning of the calendar year after HUD has issued an actual notice or regulation implementing the change.  Two of the three sections (102 and 104) are specific to project-based Section 8 programs in the office of multifamily housing.  The third is specifically for public housing programs.

Section 102 proposes changed requirements pertaining to income reviews for public housing and HUD’s Section 8 programs, Section 104 sets maximum limits on the assets or ownership of a home suitable for occupancy that families residing in public housing and Section 8 assisted housing may have but includes owner flexibilities in establishing their own policies that may vary.

Though comments may be submitted regarding any part of the proposed rule, HUD is specifically seeking feedback on the potential administrative burden or other considerations (particularly related to Rental Assistance Demonstration or RAD conversions) that HUD should be aware of in relation to certain sections applying to public housing and the HCV and project-based voucher (PBV) programs, but not to project-based rental assistance (PBRA) and Section 202/811.  HUD has also provided a number of specific questions that it hopes commenters will address (see below for details).

Highlights of Key Changes Proposed

• Annual income would now include the imputed return on assets over $50,000 based on the current passbook savings rate, as determined by HUD, if the actual income on assets over $50,000 cannot be computed. (As opposed to the current requirement to impute income from assets over $5,000.)
• The list of items to exclude from annual income is revised and updated – and most notably would exclude payments related to Veteran Aid and Attendance (financial assistance provided by the Veterans Administration to help meet veterans’ need for regular aid and attendance).
• Income certification for applicant families would require income estimates for the upcoming 12-month period, but a look-back to the previous 12-month period will be used for annual review of current residents, except where the PHA or owner has implemented streamlined income determination processed (conducting full reviews only every three years for fixed income sources, with annual adjustments for years two and three) or has done an interim redetermination of income. (NOTE: This change would not apply to HOME or Housing Trust Fund programs.)
• Upfront income adjustment would be increased from the current $400 to the new $525, for any elderly family or disabled family.
• Deduction of unreimbursed medical expenses of any elderly family or disabled family would be increased from current sums in excess of 3 percent of annual income to sums in excess of 10 percent of annual income.
• Restrictions on eligibility for assistance, based on net household assets over $100,000 and/or property ownership “in the jurisdiction in which the property is located” provided such real property is suitable for occupancy by the family as a residence would go into effect. Except this restriction would not apply to properties listed for sale, owned by victims of domestic violence (other VAWA protected individuals), or where a property does not meet the disability-related needs for all members of the family, including physical accessibility requirements; or any property that is jointly owned by a member of the family and another individual or individuals who would not reside with the family.
• Owners would have discretion on enforcing the asset limitation discretion to set their own policies adopting or declining to adopt such limitations, with the specific notation that “eligibility criteria for establishing exceptions may provide for separate treatment based on family type and may be based on different factors, such as age, disability, income, the ability of the family to find suitable alternative housing, and whether supportive services are being provided” provided such policies not “be implemented in a manner that discriminates against any protected classes.”
• Families would be allowed to self-certify that they are not subject to the limitation on net assets exceeding $100,000, do not have any present ownership interest in any real property, or have assets which exceed $50,000 subject to the imputation on income from assets.
• Interim recertifications are no longer mandatory where resident income will change by less than 10 percent, provided the owner has established this as a formal policy. Owners may also choose not to conduct an interim reexamination in the last three months of a certification period.
• Section 102(g)(2) requires that HUD submit a report to Congress identifying and calculating the impact of changes made by sections 102 and 104 of HOTMA during each of the first 2 years after the implementation of section 102. Section 102(i) requires HUD to conduct a study on the impact any decreased amount of deductions in income that result from the implementation of this section has on elderly and disabled families.

HUD Solicits Comments on Specific Issues

HUD is specifically seeking comment about several elements of the proposed rule. These include the following detailed questions:

• What administrative burdens or other considerations (particularly related to Rental Assistance Demonstration conversions) should HUD be aware of in relation to certain sections applying to public housing and the HCV and project-based voucher (PBV) programs, but not to project-based rental assistance (PBRA) and Section 202/811?
• What constitutes a “reasonable period of time” in which the PHA and owner must conduct an interim reexamination? HUD wants to know what should be considered reasonable and whether this rule should contain a specific time frame by which the PHA or owner must complete an interim reexamination. HUD seeks comment on what such a time frame might be (for example, 2 weeks from the time of the family request, or the time the PHA or owner is aware of the change in income or family composition).
• Should HUD continue to require PHAs and owners to use the Enterprise Income Verification (EIV) System for every income examination, or revise its regulations at 24 CFR 5.233 to require use of EIV only at initial and annual reexaminations and not at interim reexaminations? HUD indicates that if HUD were to adopt such a proposal, housing providers could still use EIV for interim reexaminations but would not be required to use EIV. But HUD is seeking comments on whether such a proposal would save time for PHAs and owners without significantly impacting the accuracy of the reexaminations.
• Should HUD allow PHAs and owners to use income determinations from other forms of public assistance? If so, how might this impact program administration, and should HUD establish requirements as to which income determination should be used if there is more than one determination of income from other public assistance programs available to the PHA or owner?
• Are there other forms of Federal public assistance that should be added to the “safe harbor” list or whether HUD should limit the number of such programs? The proposed rule already incorporates the Veterans Aide and Attendance program. Are there others that operate similarly which should be added? This might provide a useful opportunity for some of the early Assisted Living Conversion Program (ALCP) providers to identify or address conflicting policies regarding treatment of sources of income and supports where assistance from one counts as income against a determination of eligibility for assistance for another.
• Does the proposed redefinition of annual income simplify the understanding of what is included in annual income? This would be a good opportunity for members with concerns about the confusion created over insurance policies and trusts to chime in.
• Should subsequent withdrawals of an insurance payment or settlement for personal or property losses (whether related to a minor or not), or amounts recovered in the aforementioned civil action or settlement, be counted as income? The proposed rule provides that distributions from a nonrevocable trust fund specifically provided to cover the cost of medical expenses for a minor is excluded income, as are any amounts recovered in any civil action or settlement based on a claim of malpractice, negligence, or other breach of duty, owed to a family member arising out of law, that resulted in a member of the family being disabled. Distributions from a nonrevocable trust fund provided for other purposes would be considered income. Additional scenarios can be found on page 48825 under specific comment solicitation #10.

Following are more areas where feedback is specifically sought:

• HUD is soliciting feedback about whether there are other income exclusions that should be provided for in this rulemaking. For example, deferred disability benefits are excluded from income under HOTMA and this proposed rule, but the rule could provide for exclusions from income for all veteran’s disability benefits.
• HUD is soliciting feedback from affected parties on the proposed implementation of the hardship exemption for both the health and medical expenses deduction and child care deduction. Specifically, HUD is soliciting comments on whether there are better approaches to implementing the hardship exemptions than what is proposed in this rule, whether HUD should establish specific requirements or parameters as to how the PHA or owner would determine that the family is unable to pay the rent (for example, the percentage of the family’s income paid for rent and health and medical expenses exceeds a certain percentage), or whether PHAs and owners should be given broad administrative discretion to establish their own policies on how to make this determination.
• HUD is soliciting comment about the circumstances under which a family may not have a present ownership interest in, legal right to reside in, or effective legal authority to sell real property in the jurisdiction in which the property is located, and the feasibility of families demonstrating this.
• While HOTMA does not define what it means for a property to be suitable for occupancy, this proposed rule would provide that a property is suitable for occupancy unless that family can demonstrate that the property: (i) does not meet the disability-related needs of the family, including meeting physical accessibility requirements; (ii) is not sufficient for the size of the family, for example, there are not enough bedrooms; (iii) that it is geographically located so as to provide a hardship for the family; and (iv) that it is not safe to reside in because of its physical condition.
• HUD is soliciting feedback from the public on how the exemption for victims of domestic violence, dating violence, sexual assault, or stalking will be implemented and how it will operate.
• HUD specifically seeks comment on the proposal to exclude items of personal property valued $50,000 or less, other than necessary items, from the calculation of net family assets, and comments on what such necessary items of personal property might be. Examples might include a car that the family relies on for transportation, or medical equipment. The new definition for net family assets would exclude equity in a manufactured home where the family receives Section 8 tenant-based assistance and equity in property for which a family receives homeownership assistance from a PHA.
• HUD is seeking feedback from interested parties on whether HUD should adopt all revisions made to adjusted income (mandatory deductions, additional deduction and hardship exemptions, as applicable) when combining HOME and other federal programs such as Section 8 in a rental project. Specific solicitation of comment 18: HUD is seeking feedback from interested parties on whether HUD should adopt financial hardship exemptions for families receiving HOME-funded tenant-based rental assistance. (additional information about how this might play out in HOME-funded programs can be found on p. 48831 under specific comment solicitation #18)
• Also related to the HOME statute interplay with this rule, HUD states that “the HOME statute does not establish a limitation on the amount of and type of assets that a family assisted with HOME funds can have. HUD is not proposing to adopt the new asset restriction for the HOME program.” However, under specific solicitation comment 20, HUD is seeking feedback from interested parties on whether HUD should adopt asset restrictions for any housing programs funded with HOME (e.g., homebuyer, rental, tenant-based rental assistance and owner-occupied rehabilitation), as well as when housing programs funded with HOME are combined with other federal programs such as Section 8.
• HUD is seeking feedback from interested parties on whether HUD should adopt asset restrictions for any housing programs funded with HTF funds (e.g., homebuyer or rental housing), as well as when HTF funds are combined with other federal programs such as Section 8.
• HUD solicits comment on what inflationary index to use for purposes of adjusting the amount of imputed return on assets included in annual income, and other provisions in HOTMA that require amounts to be adjusted annually for inflation.

Submission of Comments

Though most of this rule applies equally to public housing, Section 8 multifamily housing under the project-based rental assistance (PBRA) program, and to the Section 202/PRAC and Section 811/PRAC programs, certain provisions do not apply to the PRAC programs. Specifically, provisions related to adjusted income additional deductions and adjusted income financial hardship exemptions (both of which are specifically for the Section 8 voucher program), as well as the asset restrictions ($100,000 limit on net family assets or homeownership) would not apply to the PRAC programs. Additionally, HUD has proposed to make specific provisions applicable to HOPWA, HOME and Housing Trust Fund programs and is seeking comments on how those rule might impact operations or need to be revised.

Comments are due to HUD no later than November 18 and may be submitted via the regulations.gov portal and should reference Docket Number FR-60570-P-OA.

Questions regarding multifamily PBRA programs and HOTMA may be directed to Kate Nzive, Director, Assisted Housing Oversight Division, Office of Multifamily Housing, at katherine.a.nzive@hud.gov.