On January 14, HUD’s Office of Housing published a proposed rule to amend existing Project-Based Section 8 regulations pertaining to Management and Occupancy Reviews (MORs) and Vacancy Payments.
Management and Occupancy Reviews
Under the Project-Based Section 8 program, contract administrators, responsible for overseeing privately owned multifamily housing projects, must conduct on-site MORs to ensure that owners comply with their Housing Assistance Payment (HAP) contracts.
HUD explains that over the past three years, projects have been rated “above average” or “superior” 35% of the time, “satisfactory” 57% of the time, and “below average” or “unsatisfactory” 8% of the time. Many of these properties receive high MOR ratings consistently. Because MORs disrupt inspected project operations and consume HUD staff time, HUD proposes to require MOR schedules based on both a project’s previous MOR rating and HUD’s risk-based asset management model, which classifies properties as “troubled,” “potentially troubled,” or “not troubled.” The proposed MOR schedule has 15 combinations of previous MOR and risk classifications that will determine whether the next MOR is to take place within 12, 24, or 36 months.
A Project-Based Section 8 property owner may receive payment for vacant units, but only if the vacancy is not the owner’s fault and the owner takes reasonable action to minimize the likelihood and extent of a vacancy. Current regulations entitle an owner to vacancy payments equal to 80% of the contract rent for a period of no more than 60 days.
HUD observes that the 60-day period for vacancy payments may be too long, resulting in some units staying vacant for longer periods, and therefore not available to eligible households. On the other hand, HUD also observes that most owners turn units around in 30 days, to avoid the reduced vacancy payment. Therefore, HUD proposes to provide a vacancy payment only for the first 30 days of vacancy, rather than the current 60 days of vacancy.
Owners may still apply for debt-service vacancy payments. If a vacancy persists past 60 days (or the proposed 30 days), an owner may receive additional vacancy payments known as debt-service vacancy payments, which are equal to the principle and interest payments needed to amortize the portion of the debt service attributable to the vacant unit for up to 12 additional months.
Comments are due on March 16, 2015.
A notice of the proposed rule is at http://www.gpo.gov/fdsys/pkg/FR-2015-01-14/pdf/2015-00353.pdf, and the actual proposed text changes are at http://www.gpo.gov/fdsys/pkg/FR-2015-01-14/pdf/2015-00357.pdf