3.1 Section 8 Multifamily Housing Programs

3.1 Section 8 Multifamily Housing Programs aetrahan Mon, 01/23/2023 - 16:29

3.1.1 Introduction

3.1.1 Introduction aetrahan Mon, 01/23/2023 - 16:29

Many federally subsidized housing programs provide assistance to tenants in multifamily complexes owned by private owners. These programs are usually subsidized through insured, assigned, or noninsured below-market-interest-rate mortgages or through Section 8 Project-Based Rental Assistance (PBRA). Other common programs include the Section 236 and Section 221(d)(3) mortgage programs, Rent Supplement program, Section 202 senior housing program, Section 8 Loan Management Set Aside program, and the Section 8 New Construction, Moderate Rehabilitation, and Substantial Rehabilitation programs. The subsidies for these programs are tied to the unit, unlike the Section 8 tenant-based voucher program in which the subsidy travels with the tenant. If the tenant is evicted or moves from the unit, the tenant no longer receives a subsidy. In addition to applicable regulations,1  HUD Handbook 4350.3 for multifamily housing controls the operations of these varied programs.2

Over the past few years, the nation has lost more than 100,000 units from the privately owned but federally assisted HUD multifamily housing stock through prepayments of HUD-backed mortgages and Section 8 opt-outs and terminations. These units were originally subsidized with HUD-insured mortgages such as Section 236 or with project-based Section 8 assistance to make the units affordable to low-income persons. The expiration of long-term use restrictions that require rents to be affordable for low-income families has escalated the crisis in preserving affordable housing.

Upon expiration of the restrictions, the owners decide whether to remain in the program or to refuse contract renewal and “opt-out.” In 1997, Congress adopted the Mark to Market (M2M) program to incentive Section 8 multifamily landlords to renew their contracts by offering a mortgage restructuring option.

Some legal services programs have successfully challenged prepayments and Section 8 opt-outs to try to preserve low-income housing in their community.3  Some of the most common legal challenges include improper notice of prepayment, existence of state law mandating preservation of low-income housing, and fair housing challenges.

3.1.2 Eligibility and Admission

3.1.2 Eligibility and Admission aetrahan Mon, 01/23/2023 - 16:31

In these programs, the private owners select the tenants. The tenant’s income eligibility is basically the same as for the upper limit of public housing and tenant-based Section 8. The owner is responsible for developing reasonable selection criteria and may consider housekeeping habits, credit history, demonstrated ability to pay rent, and prior landlord references. Tenant screening criteria must comply with the Fair Housing Act.1  Some federally assisted properties may be designated specifically for seniors or people with disabilities; this  designation does not violate the Fair Housing Act if the designation was done properly.

An applicant has the right to respond to a rejection in writing and to request a meeting within 14 days.2  The person holding the meeting cannot have participated in the decision to reject the applicant. The most common reasons for rejection include poor credit history, prior criminal history, or negative rental history.

As with other federally subsidized housing programs, tenants may be entitled to additional protections if they have a disability or have been affected by domestic violence or if the housing provider receives Low-Income Housing Tax Credits.

3.1.3 Rent Computation

3.1.3 Rent Computation aetrahan Mon, 01/23/2023 - 16:33

If a tenant lives in housing subsidized under Section 236, Section 221(d)(3), or Section 202 and does not receive a Section 8 subsidy, the tenant will have to pay at least the minimum base rent established for the complex. If the tenant’s unit also has a Section 8 subsidy, the rent is determined in the same manner as the rent for a public housing tenant. It is very important to accurately define the fact pattern and the applicable laws and regulations in order to determine how a tenant’s rent is calculated. For information on rent computation for the various programs, make sure to check the regulations for the particular program.

3.1.4 Eviction

3.1.4 Eviction aetrahan Mon, 01/23/2023 - 16:33

Owners of multifamily federally assisted housing are required to have good cause to refuse to renew a lease or to evict a tenant. Tenants may only be evicted for material noncompliance with the rental agreement, material failure to carry out obligations under any state or local law, criminal activity, or other good cause.1  Material noncompliance includes one or more substantial violations of the lease; repeated minor violations of the lease that disrupt the livability of the project, adversely affect health, safety, or the right to peaceful enjoyment of the premises, interfere with management of the project, or have an adverse financial impact on the project; nonpayment of rent or other charges; criminal or drug-related activity; and failure to comply with the recertification process.

The owner must serve a termination notice upon the tenant by sending a letter properly addressed and stamped to the tenant at the tenant’s address in the project with a proper return address and by serving a copy of the notice on the tenant by delivering it to any adult person answering the tenant’s door, or if no adult responds, by placing the notice under the tenant’s door or affixing the notice to the door. Service is not deemed effective until service has been made by both methods.2

The notice of termination must be in writing and must state that the tenancy is terminated on a date which is specified therein; state the reasons for the eviction with enough specificity for a tenant to prepare a defense; advise the tenant that if the tenant remains in the premises on the date specified for termination, the landlord may seek to enforce the termination by bringing court action, at which time the tenant may present a defense; and be served properly.3

Many HUD multifamily properties use the HUD Model Lease for Subsidized Programs.4  The form lease and the HUD handbook require that any termination notice advise the tenant of the right to request a meeting to discuss the proposed lease termination and that the request be granted if made within 10 days of receipt of the notice. Even if the lease does not expressly provide for such a meeting, you should always ask for one per HUD Handbook 4350.3 Chapter 8 (if the handbook applies to the property’s subsidy program).5  This will give you a chance to negotiate and, even if a compromise cannot be reached, the meeting is an opportunity for pre-trial discovery.

The time period for the notice of termination depends upon the reason for the eviction. In material noncompliance terminations, state law and the lease determine the length of notice required. A 30-day notice of lease termination is required for terminations based upon “other good cause.” A landlord under the federally assisted multifamily housing programs may not rely upon any grounds at trial that were not stated in the notice of lease termination unless the owner had no knowledge of those grounds at the time of the notice to vacate.

As of November 8, 2021 and until rescinded by HUD, 30 days’ notice is required for eviction for nonpayment of rent from most HUD Section 8 Project-Based Rental Assistance properties or from Section 221(d), 236, and 202 below-market-interest-rate mortgage properties. The notice must include information about available rental assistance.6

3.1.5 Repairs or Abatement

3.1.5 Repairs or Abatement aetrahan Mon, 01/23/2023 - 16:37

Private owners who participate in the HUD multifamily housing programs have agreed to rent their complex or a portion of their complex to low-income families for a given term, usually at least 20 years. They are subject to periodic REAC (Real Estate Assessment Center) inspections by HUD. When operating costs for the units rise and the subsidized owners run short of money, they usually reduce services and maintenance. HUD has published a pamphlet for families living in multifamily housing called “Resident Rights and Responsibilities.” This pamphlet, available from HUD and the local HUD field office, describes tenants’ right to decent, safe, and sanitary housing.1

Residents of HUD multifamily complexes cannot use the local PHA to try to get the owner to make repairs or abate their rent because the landlord’s contract for subsidy payment is directly with HUD. When confronted with a need for repairs, tenants should report maintenance concerns to management of the complex. If the problem is not rectified in a timely fashion, the tenant should make a complaint to their local HUD field office. The tenant may also call the HUD National Multifamily Clearinghouse at 1-800-685-8470 or the HUD Office of the Inspector General Hotline to report fraud, waste, or mismanagement at 1-800-347-3735. This approach may be successful in getting the repairs made to the premises. If HUD cancels its contract with the owner or forecloses on a HUD-insured mortgage, the tenant may then be eligible for replacement housing in the form of relocation vouchers and relocation assistance payments.

Note that HUD is implementing new standards to replace HQS starting in 2023 across all HUD programs.2