Late Answers to Questions as Section 202 Deadline Approaches

Regulation | August 19, 2019 | by Colleen Bloom

The August 28 Section 202 notice of funding availability (NOFA) submission deadline is close at hand, and there are several questions that have been asked and answered, including an updated FAQ on 7/26.  But several questions asked by LeadingAge have been answered by HUD, but not yet posted to the public information site. Read those Q & A’s here.

It is hard to tell how many applications will be received for the current $50 million under the FY18 notice of funding availability (NOFA) because of certain challenges identified by LeadingAge members, challenges which have been shared with HUD in hopes of modifying the competition requirements in the next round. And a second tranche, including the balance of the FY18 funds and all the FY19 funds, is expected to be released in a second NOFA in 2020.

In the meantime, HUD has posted a new FAQ dated 7/26/19 on its 202 NOFA webpage. While questions 1 – 33 appear to include and closely track with the prior FAQ (dated 5/30/19), the new FAQ document continues on through question 60.

In addition, the owing are six questions LeadingAge submitted on behalf of members which have been answered by HUD but not yet released publicly.

Q1 - In a rehabilitation project, where capital advance funds are being requested to construct additional units (while simultaneously leveraging other funding to renovate the existing non-assisted units at the property), could the applicant request project rental assistance for the existing units in addition to requesting project rental assistance for the new units to be constructed with capital advance funds? We received guidance that we could, but is there a limit to the number of units requested and are those PRAC dollars factored into our request amount?

A1 - Capital Advance funds (along with PRAC) can be used to rehab existing units and/or build new ones. With respect to the existing units, as long as they meet the requirements of the NOFA you can have both, rehabbed units and new construction. There is no limit to the number of units requesting Capital Advance/PRAC, however, it may not be more than the Total Development Cost.

Q2 - Is the total amount of funds requested by an applicant tied to the Total Development Cost (TDC) limits provided by HUD strictly relative to the creation of units? As a rehabilitation project planning to add 7 units as part of the project, is the requested capital advance amount bound to the TDC cost limits multiplied by the number of units we plan to add?

A2 - Yes, units (either new and/or rehabilitated units are bound by the Total Development Cost limits.

Q3 - Section IV.F: “Capital Advance awards are not available in connection with the financing or re-financing of federally assisted or insured projects.” – Many mixed-finance transactions will require soft funding, like HOME or CDBG, and HUD-insured mortgages. Does this statement preclude the use of Capital Advance funding in these types of transaction?

A3 - A unit that is funded by any type of federal funds is not eligible for capital advance/PRAC funds.

Q4 -The issue of obtaining exceptions for new construction in a minority elderly concentrated area seems to be a stumbling block for many potential applicants. Though the FAQ dated 5/30/19 provides detailed information on types of information needed to seek an exception, potential applicant/sponsors desire a way to obtain assurances that, specifically for this category, their application will not be found unacceptable. Can HUD provide (or would HUD consider providing in the next NOFA) an upfront approval process that a site can use to obtain a pre-qualification (or non-disqualification) statement regarding this exception requirement?

A4 - The need to develop affordable housing is different from the exception, which focuses on the economic opportunities, amenities, etc. in the neighborhood the housing is to be located in, and what plans there are to develop and improve those. There are currently no plans in place to provide a pre-qualification (or non-disqualification) regarding this exception requirement.

Q5 - How is PRAC assistance calculated in mixed-finance units, for example, in tax credit funded senior units that may have some design elements beyond the design standards of the Capital Advance – like two-bedroom units that exceed the square footage of a one-bedroom?

A5 - PRAC funds are equivalent to 75% of the Operating Cost Standard for units covered by the PRAC. In the case of two (2) bedroom units, the applicant will need to provide the square footage of the one (1) bedroom unit as well as the square footage of the two-bedroom unit. That square footage difference is defined as an “amenity”. PRAC funds will only be available on the portion of the one (1) bedroom unit.

Q6 - The NOFA appears to incorrectly state that the PRAC allowable add-on of $15 PUPM for services is to be used intended to cover costs of hiring a service coordinator. We contend that the service coordinator cost is an allowable project cost that is outside of the $15 per unit per month – a concept borne out by the referenced CFR and USC references, as well as the Operating Cost Standards document in its reference to adjustments made at the presumptive cost of $110 per unit per month. So we ask HUD to provide a clarification on this matter in a future FAQ.

On page 40 of 52 of the NOFA, in the section on Supportive Services, it read ” Owners must also commit to a plan to coordinate and adequately deliver supportive services onsite. This may include hiring, contracting with or otherwise retaining a full- or part-time Service Coordinator, who will assist residents in identifying, locating and acquiring those supportive services necessary for independent living and aging-in place. Per 24 CFR 891.225, up to $15 per unit per month of PRAC funds may be used to pay for salary, fringe benefits, eligible training, and related administrative costs of employing a Service Coordinator.

However, 24 CFR 891.225, separating out the costs for the provision of services; and the costs associated with the employment of a service coordinator as “also” being an eligible cost, indicates:

“the cost of provision of services (as described in section 202 (12 U.S.C. 1701q(g)(1) - which refers to (A) meal service adequate to meet nutritional need; (B) housekeeping aid; (C) personal assistance; (D) transportation services; (E) health-related services; (F) providing education and outreach regarding telemarketing fraud, in accordance with the standards issued under section 671(f) of the Housing and Community Development Act of 1992(42 U.S.C. 13631(f)); and (G) such other services as the Secretary deems essential for maintaining independent living) shall be an eligible cost under the contract for project rental assistance. The HUD-approved service costs will be an eligible expense to be paid from project rental assistance, not to exceed $15 per unit per month. The balance of service costs shall be provided from other sources, which may include co-payment by the tenant receiving the service. Such co-payment shall not be included in the Total Tenant Payment.

“Any cost associated with the employment of a service coordinator shall also be an eligible cost, except if the project is receiving congregate housing services assistance under section 802 of the National Affordable Housing Act.”

The Operating Cost Standards document references specific account lines ( · 6500T Total Operating and Maintenance Expenses: · 6263T Total Administrative Expenses · 6700T Total Taxes and Insurance) and continues later with the statement, “HUD built into the Operating Cost Standards listed in the tables below annual Service Coordinator expenses of $66,000 per year ($110 per unit per month) and a monthly deposit to the capital replacement reserve of $600 per year ($50 per unit per month).”

A6 -24 C.F.R. §891.225 dictates a [$15 PUPM] cap on the amount of funding available for the provision of services. Separately, PRAC rents can also include the costs of a service coordinator. These costs have already been factored into the Operating Cost Standards.