HOTMA Asset Limits Provide No Justification for Displacing Tenants Yet, According to HUD Multifamily Office

HUD Deputy Assistant Secretary for Multifamily Housing Ethan Handelman stated that “there is no reason to displace anyone right now” due to the asset limitation provision in Section 104 of the “Housing Opportunity Through Modernization Act of 2016” (HOTMA). During a virtual meeting organized by LeadingAge and supported by NLIHC, Mr. Handelman and Jennifer Larson, director of HUD’s Office of Asset Management and Operations, repeatedly emphasized that “there should not be any need to evict someone on the basis of HOTMA right now. We don’t want anyone to be displaced unnecessarily.” The message was reinforced in an email distributed by HUD’s Multifamily Asset Management Office to Multifamily owners and operators on November 29. LeadingAge requested the meeting in response to reports from some residents in housing supported by the Section 202 Supportive Housing for the Elderly program that their property owners were planning to evict them due to HOTMA’s asset limit provisions – despite a regulatory provision offering property owners the discretion not to enforce the asset limit provision for existing residents.

Section 104 of HOTMA set asset limits for households seeking or retaining federal rental assistance. Those limits are $100,000 in net household assets and ownership of real property that is suitable for occupancy by a household as a residence. Final HOTMA regulations (see Memo, 2/27) include a list of required exclusions from the calculation of net household assets, as well as exclusions of necessary and non-necessary personal property. Importantly, the final HOTMA rule also provides Multifamily owners and public housing agencies (PHAs) the discretion to not enforce the asset limitation provisions at the time a household’s income undergoes a period reexamination or an interim income reexamination. Mr. Handelman acknowledged that, in line with the statute, owners have discretion not to enforce the asset limitation.

It is important to note that a new applicant for rental assistance must meet the asset limitation test – owners (and PHAs) do not have the discretion to waive the HOTMA asset limitation for households seeking rental assistance for the first time.

Joint Notice H 2023-10/PIH 2023-27 was issued on September 29, 2023, providing guidance regarding implementation of HOTMA Sections 102 and 104. Section 102 pertains to income limitations. The Section 104 asset limitations apply to properties assisted with Section 8 Project-Based Section 8 (PBRA) and Section 202/8 Supportive Housing for the Elderly. The Multifamily officials referred to the Joint Notice and stated that it needed to be supplemented with a clarifying notice. They declared that owners should not enforce the asset limitation ahead of the release of the supplement to the Joint Notice, which they hoped would be issued before the end of the calendar year.

In addition, the HUD officials explained that Multifamily is in the process of updating its TRACs software to accommodate all HOTMA changes, which in turn will require owners to update their site software to be HOTMA-compliant. Other actions are also needed before the asset limit can be implemented. Owners must update their Tenant Selection Plans (TSPs) to include reference to the HOTMA asset limit provisions and include the owner’s policy regarding enforcement or non-enforcement of the asset limit. Multifamily has a list of additional discretionary policies to implement HOTMA. Once a site’s software is HOTMA-compliant, owners must provide residents a 60-day notice informing them of the changes to the TSP and informing them that they will have to sign a new model lease reflecting the HOTMA changes. Only after all the above steps have been taken will an owner’s policy regarding enforcement or non-enforcement of the HOTMA asset limit come into consideration, and only at the time of a household’s periodic income reexamination (or an interim income reexamination).

The November 29 Multifamily email declares, “Until new guidance is released, please be aware of the following: MFH Owners must not enforce the asset limitation or the real property exemption until both the owner’s software is HOTMA compliant (with TRACS 203A), and the family has signed a model lease detailing the new HOTMA provisions.”

Find Multifamily’s HOTMA webpage here.

Read Multifamily’s list of discretionary policies to implement HOTMA here.

More information about Project-Based Section 8 is on page 4-77 of NLIHC’s 2023 Advocates’ Guide.

More information about Section 202 Supportive Housing for the Elderly is on page 4-87 of NLIHC’s 2023 Advocates’ Guide.