HUD provides guidance on CARES Act relief payments

Regulation | July 23, 2020 | by Juliana Bilowich

HUD Multifamily Housing owners can request a one-time supplemental payment for COVID-19 expenses incurred between March 27th and July 31st. The deadline to request funds is August 5, 2020, and HUD has prioritized communities serving older adults to recieve funds.

On July 23rd, HUD published guidance for owners to access COVID-19 Supplemental Payments, or CSPs, for Project-Based Section 8, Section 202, and Section 811 communities. HUD is making available one-time supplemental payments to owners of CARES Act funds to help offset property expenditures for COVID-19 preparedness and response. The Notice comes after a LeadingAge request that the agency expedite CARES Act funding awards for communities navigating the public health emergency.

HUD staff to discuss CARES Act Payments on LeadingAge Housing Advisory Group Call

To help answer questions about the CARES Act payments, LeadingAge is hosting a special Housing Advisory Group call hosting HUD staff on Monday, July 27th, at 12:30pm EST. To join the LeadingAge Housing Advisory Group, email Juliana Bilowich at Advance questions for the call are welcome.

COVID-19 Payment Tiers

The Notice provides a method for owners to request payments at two tiers: a standard base amount per property, including extra funds for senior housing and budget-based service coordinators, and an additional payment for “exceptional” COVID-19 costs. The funds are separate from CARES Act funds that HUD has made available to offset rent receipt declines resulting from interim income recertifications and vacancy claims; the methodology prioritizes senior housing communities.

The supplemental payments are divided into two tiers (if CARES Act appropriations are insufficient to fully fund all eligible CSP requests, HUD may partially fund individual requests):

  • Tier I: Payments under this tier are standardized and are primarily intended to help offset costs for COVID-19 prevention and preparation
  • Tier II: Owners may request larger sums under “Tier II Exceptional Cost Payments” to address cost increases associated with responding to reported COVID-19 outbreaks among property residents or in response to extensive community exposure that creates a greater threat to the health and safety of residents within the community

For properties requesting reimbursement, the CSPs can cover additional cleaning and disinfecting, additional staff, PPE for staff and residents, and other expenses to help keep properties safe. The Housing Notice allows owners to submit payment requests for expenses incurred between March 27, 2020 and July 31, 2020, and requests are due to HUD or the Contract Administrator by midnight on August 5, 2020.

COVID-19 Supplemental Payments: Tier I

HUD has established an initial payment tier to allow owner requests for the reimbursement of expenses up to a capped amount, based on a formula that considers property size, whether the property has a service coordinator funded from HUD rent receipts, and whether the property serves elderly residents.

Communities participating in Project-Based Section 8, Section 202, and Section 811 programs can request the following standard allocations per property (not per contract); scattered-site projects are considered one property under the Notice:

  • $2,000 base amount per property, plus $60 per assisted unit
  • $1,000 additional per-property allowance for properties specified to house elderly residents
  • Up to $3,000 additional allowance for properties with a budget-based service coordinator program

COVID-19 Supplemental Payments: Tier II

In order to respond to reported COVID-19 outbreaks among property residents or extensive exposure in the surrounding areas, owners may request larger sums under Tier II Exceptional Cost Payments. Requests for Tier II payments must be substantiated by supporting documentation for expenses and evidence of specific COVID-19 impacts that necessitated the exceptional expenditures. There is no cap on Tier II payments to individual properties except as limited by the availability of funds.

HUD will apply varying levels of pro-ration to CSP requests under each priority category with a goal of targeting more funding to properties with the greatest relative need. Tier II CSPs will be grouped into four priority cohorts, listed in descending order from highest to lowest priority:

  • Properties specified to house elderly residents and that have contract rents below Fair Market Rent (FMR)
  • Elderly properties with rents at or above FMR
  • Non-elderly properties with rents below FMR
  • Non-elderly properties with rents at or above FMR

Property Eligibility for COVID-19 Supplemental Payments

CSPs will be approved only for critical funding needs, meaning those financial needs that cannot be addressed with other project funds or external resources, including surplus cash or residual receipt levels above $250 per unit.

CSPs are currently the only permitted mechanism for owners to receive compensation from HUD for COVID-19 cost increases incurred by communities from March 27, 2020, through July 31, 2020. One-time or temporary expenses reimbursed with a CSP should be excluded from future budget-based rent adjustment (BBRA) requests.

According to the HUD Notice, routine annual BBRAs should not annualize their temporary COVID-19 expenses; the increase requests should incorporate COVID-19 cost impacts only if an increase can be anticipated to persist on a long-term basis, including insurance premium increases. HUD has said they will issue further guidance for Budget-Based Rent Increase requests during COVID-19.

Requesting Funds

Of the $50 million approved in the CARES Act for Section 202 relief, the total amount available under HUD’s Notice for senior housing cost reimbursement requests is $25 million; HUD previously announced $10 million for grant-funded service coordinators programs navigating COVID-19 costs, resulting in an estimated 9% bump per grantee. Project-based Section 8 and Section 811 are receiving up to $190 million and $9 million, respectively, under this Housing Notice.

**Update** On July 24th, HUD issued the final version of the CSP Request Form (HUD 52671-E). The form must be sent to HUD or the PBCA electronically. HUD Notice 20-08, titled “Availability of Funds for COVID-19 Supplemental Payments for Properties Receiving Project-Based Rental Assistance under the Section 8, Section 202, or Section 811 Programs,” is also available online.**