HUD’s Office of Multifamily Housing Programs issued Policy Notice H-2012-14 setting out policies and procedures for the use of “residual receipts” to offset housing assistance payments (HAP) at certain project-based Section 8 properties. Residual receipts are moneys that exceed amounts needed to operate a property on a monthly basis, maintain a reserve for replacement funds and make allowable payments to the property’s owner. Residual receipts are generally placed in an interest-bearing account that may be used for project-related purposes.
The notice refers to existing “new regulation” project-based Section 8 provisions that explicitly permit HUD to use residual receipts to reduce housing assistance payments to owners. New regulation generally refers to properties that obtained a project-based Section 8 HAP contract after November 5, 1979.
Along with detailed owner and HUD field staff responsibilities, the notice includes several important policy provisions:
- Owners will be allowed an initial reserve of $250 per unit to use for project purposes. This is called a retained balance. According to LeadingAge, historically a $500 per unit retained balance has been allowed before using residual receipts to reduce housing assistance payments.
- Residual receipts greater than $250 per unit may be used to fund a HUD-approved service coordinator program.
- Residual receipts greater than $250 per unit over and above any used to fund a service coordinator program must be applied on a monthly basis to reduce the Section 8 housing assistance payment to the owner.
The explicit service coordinator provision should help owners to continue to provide HUD-approved services. However, advocates are concerned that the new policy might not ensure that adequate reserves will be available for unexpected property expenses such as failed roofs or boilers.
Notice H-2012-14 emphasizes HUD’s intent to reduce the amount of funds used for the project-based Section 8 program while continuing to fund all existing contracts. Advocates are concerned that short-term savings could jeopardize future service coordinator positions as well as the long-term viability of affordable properties.