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HUD Implements $5 Million FY17 Set-Aside for Tenant Protection Vouchers

HUD issued a Notice implementing the use of the $5 million set-aside in the FY17 Appropriations Act for tenant protection vouchers (TPVs) for low income households who may have to pay more than 30% of their adjusted income for rent if they are living certain HUD-assisted multifamily housing in a low-vacancy area. The $5 million is a set-aside from the $110 million FY17 appropriation for all tenant protection vouchers. Even though FY18 began last October, HUD has only now issued the FY17 directions. It is not known how many households that could have been assisted in FY17 were economically displaced or housing cost-burdened as a result of the delay.

The Notice is a joint Notice H 2018-1 from the Office of Multifamily Housing Programs and PIH 2018-2 from the Office of Public and Indian Housing. The new Notice introduces a number of changes from previous years (see Memo, 8/22/16, 5/23/14, 4/19/13, and 9/28/12). Tenant protection vouchers may be either enhanced vouchers (EVs) or project-based vouchers (PBVs). Exhibit C of the Notice provides an excellent description of enhanced vouchers and project-based vouchers.

To be eligible for TPVs, one of two potential “triggering” events must have taken place in the five years prior to February 8, 2018 (the date the Notice was issued) or are expected to take place within 180 days. New in this Notice is the prior-five-year limitation; previous Notices applied to trigger events in the fiscal year of the notice or any year before. The two potential triggering events are:

  1. The maturation of a HUD-insured, HUD-held, or Section 202 loan that would have required HUD permission to prepay a loan. These include Section 236, 221(d)(3) Below Market Interest Rate (BMIR), and Section 202 Direct Loans.
  2. The expiration of affordability restrictions accompanying a mortgage or preservation program administered by HUD. These include Section 236, Section 221(d)(3) BMIR, or Section 202 Direct Loan mortgages for which permission from HUD is not required, but the underlying affordability restrictions expired when the mortgages matured. This category also includes properties with stand-alone “Affordability Restrictions” that expire in FY18 or in the five years prior to February 8, 2018. (Previous Notices included the expiration of a rental assistance contract for which the tenants are not eligible for enhanced voucher or tenant protection assistance under existing law. Those included properties with a Rental Assistance Payment [RAP] contract that expired before FY12, or a property with a Rent Supplement [Rent Supp] contract that expired before FY2000. In a footnote to the new Notice, HUD explains that the expiration of a Rent Supp or RAP contract triggers the provision of TPVs under existing law, which has been the case since FY2000 for Rent Supp contract expirations and since FY12 for RAP contract expirations.)

A project must be in a HUD-identified low-vacancy area. There are many more counties on HUD’s list of low-vacancy areas than in previous years because HUD decided to select counties with public housing and multifamily-assisted properties that had occupancy rates greater than or equal to 90%. Previous Notices used a county’s overall vacancy rate, which included non-assisted rental housing. Advocates had long urged HUD to revise the way it determined low-vacancy areas because many otherwise eligible properties were not allowed to apply for TPV assistance. Attachment E of the Notice provides a link to HUD’s list of low-vacancy areas at: http://bit.ly/2nUfTLg

As with previous Notices, only owners may request TPV assistance. Advocates have urged HUD to allow residents to request TPV assistance if an owner is not responsive. Also like previous Notices, the new one requires owners to notify residents; new this time is a requirement that owners also notify any legitimate resident organizations. The new Notice does not, however, require owners of projects approaching an expiration of restrictions to provide residents a one-year advance notice, as advocates have urged.

Applications will be accepted on a rolling basis, as in the past; however, unlike previous Notices the funds will be available until the FY17 set-aside is exhausted or until a new Notice for FY18 TPV set-aside assistance is issued. This is an improvement advocates have long sought. In prior years set-aside funds not awarded were no longer available at the end of the relevant fiscal year. Because HUD failed to issue Notices in a timely fashion, significant sums were left unused. For example, the FY16 Notice was issued on August 18, 2016, two months before the end of the fiscal year.

As in the past, owners must indicate their preference for either enhanced vouches or project-based vouchers (PBVs). The new Notice adds a requirement that owners state whether they are willing to accept the alternative form of assistance if the PIH Field Office is unable to find a public housing agency (PHA) willing to administer the owner’s preferred assistance type. For example, if an owner prefers PBVs, the application will have to specify whether the owner consents to enhanced vouchers if the PIH Field Office is unable to find a PHA to administer PBV assistance.

To determine whether a household might become rent-burdened (paying more than 30% of household income for rent and utilities), the new Notice requires owners to divide the 2018 Small Area FMR (SAFMR) in metropolitan areas or FMR in non-metro areas by a household’s adjusted income. In the past, a numerator (a proxy for market rents) was HUD’s most current low income limit for the metro area.