April 15, 2020
Affordable Housing Alert
The latest COVID-19 FAQs issued by HUD include provisions of the CARES Act on forbearance and eviction moratoriums, guidance to owners on HAP contract renewals, assistance with thorny management questions, and document submission best practices from the Office of General Counsel.
On April 14, the Department of Housing and Urban Development (HUD) issued its latest COVID-19 FAQs (4/14 FAQs), adding new guidance and reorganizing some of the existing guidance. Key additions in the 4/14 FAQs explain provisions of the CARES Act on forbearance and eviction moratoriums, provide guidance to owners on Housing Assistance Payments (HAP) contract renewals, address thorny management questions, and add document submission best practices from the Office of General Counsel (OGC).
The single biggest addition to the FAQs is guidance concerning the implementation of provisions of the CARES Act, including two parts critical to housing providers—its mortgage forbearance and eviction moratorium provisions. Here are the highlights of the new guidance in the 4/14 FAQs on the CARES Act:
The CARES Act contains two eviction moratoriums. First, section 4024 imposes a broad 120-day moratorium on evictions for nonpayment of rent at many federally assisted or supported multifamily housing. In addition, section 4023 contains a separate moratorium for properties that invoke its mortgage forbearance relief. The scope of the eviction moratoriums in the CARES Act is broad and, because of the complexity of federal housing programs, often confusing. The 4/14 FAQs (at pages 10-11) attempt to clarify some of these issues but again leave some issues for later resolution. Here’s the latest from HUD:
The 4/14 FAQs refer to its newly published Mortgagee Letter 2020-09, which sets protocols for the mortgage forbearance program for FHA-insured, Risk Share, and HUD-held mortgages. HUD warns, however, that mortgage forbearance involves a negotiation between borrower and lender, and that HUD will not participate in forbearance negotiations unless the loan involved is a HUD-held loan.
Additional regulatory flexibility
The 4/14 FAQs note that the CARES Act allows HUD to waive some requirements for the Section 8, 202 and 811 programs as “needed to expedite or facilitate the use of the funds to prepare for, and respond to situations” resulting from the COVID-19 emergency. At the moment, however, the 4/14 FAQs don’t identify any specific waivers for these programs.
The 4/14 FAQs provide additional detail to assist owners navigating issues relating to HAP contract renewals, difficulties in obtaining rent comparability studies (RCSs), and logistical issues in connection with processing utility analyses (UAs).
Some HUD RCS’s continue to be suspended
Specifically, “in areas that are under a state or nationally declared emergency or where public health officials have imposed limited travel.” Currently, this is the case in every state, the District of Columbia, and certain territories.
Twelve-month renewals without RCS’s
An RCS may be required in connection with a HAP contract renewal or a required five-year comparability process. For those renewals where an RCS is unavailable, HUD will allow contracts to be renewed as twelve-month short-term renewals at current HAP rents. This includes option one, option two, initial option three renewals, and some option four renewals. Where a contract renewal option does not require an RCS, such as an expiring full market-to-market renewal, then the standard renewal processing can occur. The FAQs do not currently discuss the issue of fifth-year comparability. However, it would be consistent with this guidance to essentially suspend fifth -year comparability in cases where the owner could not obtain an RCS since that would have a materially consistent outcome with the twelve-month short term renewal for an expiring renewal.
UA baseline extended
HUD recognizes that utility data may be impossible to obtain as part of a required UA baseline. Currently, a new utility allowance baseline must be set every third year. For properties subject to that requirement, the 4/14 FAQs ask that owners attempt to obtain utility data directly from tenants, but recognize that in some cases that will not be a workable solution. In those cases, HUD is allowing the use of a utility factor increase for the third year and allowing the new UA baseline to be delayed by one year, meaning that it would be set in the fourth year rather than the third year.
In the first sets of FAQs it issued, HUD laid out a set of important property management topics—What steps should housing providers take to prepare for COVID-19? What options are available to a property manager when a resident needs to be isolated?—but in most cases, HUD referred readers to guidance issued by the Centers for Disease Control and Prevention (CDC), little of which directly addressed problems faced by owners and managers of multifamily housing. In recent weeks, however, HUD and the CDC have provided additional guidance, including confirming that owners and managers can notify residents when another resident has a confirmed case of positive coronavirus cases (so long as the individually identifying information was not disclosed). Nevertheless, there are still large gaps and uncertainties in specific property management issues that housing providers have been left to fill in.
The new FAQs adds to the body of HUD’s property management guidance, including the following:
Can an owner restrict visitors to HUD-assisted properties?
Anxious to prevent the introduction of the virus to their properties, owners and managers have asked if they are allowed to restrict the admission of visitors to their properties. There is tension in imposing such restrictions because, under common law, tenants generally have a right to invite guests to visit their dwelling. At its April 7 Q&A session, HUD warned that owners and managers should not do anything that would violate tenants’ rights and should avoid restrictions on visitors except pursuant to guidance from the CDC and local public health and law enforcement officials. The 4/14 FAQs appear to take a less restrictive view, saying that “owners and agents may have the authority to restrict visitors from HUD-assisted Multifamily housing properties,” but should consider state and local laws before adopting restrictions. HUD warns that any such restriction should be expressly tied to coronavirus prevention and must still allow for “essential services,” such as food deliveries, medications, and personal care assistants.” HUD also warns that any such restriction must follow Fair Housing Act requirements.
Can properties continue to undergo major rehabilitation work?
There is no blanket prohibition on continuing major rehabilitation work, but the decision to continue or suspend such work should be made taking into account the safety of workers, staff, and residents, and should conform to guidance from state and local officials.
How should owners and managers handle in-person meetings, such as tenant meetings, in light of social distancing concerns?
HUD says safety is paramount and that owners and managers considering in-person meetings should follow guidance from the CDC and state and local health officials.
Can a person hospitalized with COVID-19 return to their apartment before they receive a negative test?
Yes. HUD says that “there is no prohibition against a resident returning to their unit until a negative test is received.” This can be an important advantage to overstressed hospitals, which may be able to discharge a recuperating patient to their own home, to make urgently needed hospital space and resources available for other patients. HUD assumes, however, that the discharged patient will continue to follow orders to self-quarantine until they receive a negative test.
What should an owner/manager do to properly disinfect common spaces and units and to protect their staff?
HUD has updated its guidance to include new references to CDC guidance on these topics. In addition, HUD has added new references to HUD-produced guidance focused on multifamily housing for disposing of medical wastes. Some of the guidance, such as techniques for disposal of sharps/needles and expired medication, is generally useful, irrespective of the threat of coronavirus.
OGC has developed a set of “best practices” for its electronic transmission and review process. This adds to guidance provided last month on new transactional protocols in the COVID-19 emergency, which has been moved to a stand-alone document.
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