HUD’s Office of Multifamily Housing Programs issued Notice H-2014-14 on October 9, setting out policies and procedures for transferring all or a portion of any remaining budget authority of a project-based Section 8 Housing Assistance Payment (HAP) contract from one property to one or more other properties. Authority for such transfers has long existed under Section 8bb of the Housing Act of 1937. Section 8bb is a tool for preserving Section 8 budget authority.
The Notice only applies to situations in which the owner and contract administrator (generally HUD) mutually agree to terminate a HAP contract at Project A so that remaining budget authority can be transferred to another multifamily housing project, Project B. A contract at Project A can be subdivided so that one or more of the resulting subcontracts (Contracts A1, A2, etc.) can be terminated and their remaining budget authority transferred to a Section 8 HAP contract on one or more other multifamily housing projects, Projects B, C, D, etc. The other project(s) may be owned by Project A’s owner or different owner(s).
If Project B already has a project-based Section 8 HAP contract, its additional units which are to receive Project A’s remaining budget authority must be ready for occupancy. Project B’s contract must be renewed for a term of 20 years plus the number of years that remained on Project B’s contract before accepting the transfer from Project A. If Project B does not have a HAP contract, a new 20-year contract must be executed. Projects under construction are not eligible to receive transferred budget authority. Conditional approval may be provided, but the transfer of budget authority cannot take place until construction at Project B is complete and there is a certificate of occupancy.
The Notice provides a number of tenant-oriented procedures and protections. HUD must ensure that there is no involuntary displacement. Residents of Project A must be offered a comparable home at Project B, or a tenant protection voucher if they choose not to relocate to Project B. The owner of Project A must give tenants and tenant organizations written notification of the proposed transfer and provide a minimum of 30 days to comment. The notification should include a description of the impact on tenants’ rental assistance and rent contribution. Owner A must also hold a meeting with the tenants and tenant organizations to discuss the details of the notification and answer questions. The notification should provide the name and contact information for the local HUD person responsible for reviewing a proposed transfer.
Under no circumstance shall residents pay any relocation costs, and they must be informed about their relocation rights under the Uniform Relocation Act (URA). Tenants choosing to move from Project A to Project B remain subject to their Project A lease requirements and all occupancy rules. Owner B may not seek to terminate the lease of a tenant from Project A for actions that occurred before the transfer, but the tenant will be subject to ongoing eligibility requirements for actions that take place after the transfer.
The Project B owner must ensure long-term preservation of the project and show that there is a demand for the assisted units by providing a list of current tenants eligible for Section 8 and/or eligible prospective tenants on the waiting list, and/or a market analysis. Project B must comply with HUD’s site and neighborhood requirements. For example, the neighborhood must not be one that is seriously detrimental to family life, or in which substandard dwellings or other undesirable conditions predominate, unless there is a concerted program actively underway to remedy undesirable conditions. Project B must also be accessible to social, recreational, educational, commercial, and health facilities and services, and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting of mostly unassisted, standard housing of similar market rents.
If Project B is a newly constructed property, it may not be located in an area of minority concentration, nor may it be located in a racially mixed area if the project will cause a significant increase in the proportion of minority to nonminority residents in the area. However, Project B may be in an area of minority concentration if it meets one of two exceptions:
- The project is necessary to meet overriding housing needs that cannot be met in that housing market.
- Sufficient, comparable opportunities exist for housing for minority households in the income range to be served by the proposed project outside of areas of minority concentration.
Project B must be in a Small Area Fair Market Rent (SAFMR) neighborhood that has a poverty rate of less than 30%, with some exceptions:
- If Project B is in the same neighborhood as Project A and that SAFMR neighborhood has a poverty rate between 30% and 40%, the transfer may take place if at least 50% of the units at Project B are unassisted and Project B is within a half mile of Project A, or housing market activity within the SAFMR indicates that the area is revitalizing, or the poverty rate has recently declined significantly.
- If Project B is in a different neighborhood than Project A and the poverty rate in Project B’s SAFMR is between 30% and 40%, the transfer may take place if Project B’s site has a higher SAFMR than Project A’s, or Project B is within a half mile of Project A, or housing market activity within the SAFMR indicates that the area is revitalizing, or the poverty rate has recently declined significantly.
Section 8bb is different from Section 214 of the Consolidated Appropriations Act of 2014 and similar appropriations acts going back to FY06 as Section 318 and later as Section 215 in FY08. Section 8bb authorizes the transfer of only any remaining budget authority. Section 214 authorizes the transfer of the project-based assistance contract itself, statutorily-required low income use restrictions, and project debt. Section 214 authority is limited to such transfers approved during FY14 and FY15, unless continued by subsequent appropriations acts.
Notice H-2014-14 is at http://portal.hud.gov/hudportal/documents/huddoc?id=14-14hsgn.pdf