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?? 8bb Helps Prevent This Current Section 8 Project
8bb?? Current Section 8 Project Existing Building that is (Project A) HUD Affiliated 8bb New Construction Existing Building that is not HUD Affiliated
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 obsolete 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) Yes Tenant Protections (pg 19) Stop No Process Yes No Is Owner A Eligible? No (pg 8) Execute New Contracts Yes HQ Approval Owner A’s Proposal Meet Requirements No (pg 9) PD&R Field Economist Yes Hub Review Transfer All Transfer All or Part HUD not HUD (pg 7) New (pg 7) Affiliated Affiliated Const. (pg 16) (pg 16) No Transfer Part Project B Requirements Yes (pg 7) (pg 11)
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 % or 5 units)
Is 8(bb) Applicable? (pg 1-3) Yes Tenant Protections (pg 19) Stop No Process
Tenant Protections • 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)
Is 8(bb) Applicable? (pg 1-3) Yes Tenant Protections (pg 19) Stop No Process Yes No Is Owner A Eligible? No (pg 8) Yes Owner A’s Proposal Meet Requirements No (pg 9) Yes Transfer All Transfer All or Part (pg 7) (pg 7) Transfer Part (pg 7)
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 of 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
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