Attorneys from our Affordable Housing and Real Estate group gathered to discuss cross-cutting federal requirements and regulations affecting a wide range of companies and businesses in the affordable housing space. Our moderator was Richard Price, partner in the Affordable Housing group, and the panelists were as follows:
- Harry Kelly, Partner
- Nick Tsimortos, Associate
- Deborah VanAmerongen, Strategic Policy Advisor
- Rebecca Simon, Associate
- Chaundi Randolph, Counsel
- Karla Chaffee, Counsel
- Alison Torbitt, Partner
- Sami Groff, Partner
- Kelly Behr, Associate
- Brendan Cardella-Koll, Associate
The panelists discussed the following:
Cross-cutting federal requirements impact affordable housing programs and transactions in a variety of ways, and it is important to call on the appropriate professionals to assist with the nuances that come with each. Post-COVID, changes in regulations continue to be made, and keeping abreast of these updates will save headaches in the late stages of affordable housing transactions as well as missteps in the operations of affordable housing projects.
The Fair Housing Act is an example of regulations having unequal impacts on families with uncommon circumstances—solutions are possible, but it is crucial to understand the language within related restrictions. Partner Harry Kelly spoke to some of the new rules impacting owners.
In federally funded projects involving the displacement of people from their homes, protections under the Uniform Relocation Assistance and Real Property Acquisition Act establish standards that agencies must follow, including the mandatory 90-day notice that must inform displaced persons of their earliest required date of moving. Owner must be aware of these regulations ahead of time to properly budget and plan for their impact.
In instances of combined, or “layered” subsidies, a Subsidy Layering Review conducted by HUD or a Housing Credit Agency prevents excessive assistance from being provided—problems often arise relating to operating costs later on in a project, so ensuring cash flow does not exceed 10% of those costs helps to mitigate this issue. Again, awareness of how to avoid raising flags during these reviews will save a potential buyer significant time and effort during the middle of complicated processing.
The team also discussed the impacts of environmental reviews on affordable housing transactions and programs. Engaging the correct vendors to conduct the correct reviews is a determination that must be made at the beginning of any transaction to avoid significant issues that could delay closing.
Another important environmental consideration for affordable housing transactions is lead-based paint and lead poisoning, materials that continue to pose threats in homes, schools, industrial facilities, and more. Ensuring that a lead-certified contractor has renewed their certification since the requirements changed during COVID is crucial to meeting the new requirements for an affordable housing project.
In April 2022, HUD changed the processing requirements related to the System for Award Management (SAM). New owners are now required to submit the SAM registration to HUD prior to taking on a new affordable housing project. The SAM registration must include the unique entity identifier (UEI) number and expiration date in the future. HUD no longer requires confirmation of the DUNS number from owners. This change should ultimately simplify the process for HUD participants, but the growing pains evident in the present mean potential owners should start the process early on in processing of a transaction and should continue to check in on the progress.
Finally, physical inspections are a hot topic impacting all HUD-properties. After suspending certain REAC inspections in 2020, HUD resumed and “substantially increased” housing inspections in June 2021 after an initial announcement in April 2021. As all HUD-owners know, receiving a REAC score of below 60 triggers additional review procedures and may jeopardize future requests to HUD.
Our Affordable Housing and Real Estate team will continue to monitor new guidance and changes within the industry. Please reach out if you have any further questions that we can assist with.