Flat Rent Updates- Learn the Details 5/4/2018 Flat Rent Updates- Learn the Details National Association of Housing and Redevelopment Officials (NAHRO) Copyright © 2014 NAHRO Technical Assistance

National Association of Housing and Redevelopment Officials Today’s Presentation Panelists: Dennis Morgan NAHRO Faculty Member & President of D L Morgan & Associates Sarasota, FL 34243 Tamar Greenspan NAHRO Senior Policy Advisor Washington, DC National Association of Housing and Redevelopment Officials

Are Your Flat Rents in Compliance with the Latest Requirements by HUD? FY 2014 Consolidated Appropriations Act and PIH 2014-12

Flat Rent Session will Cover Flat Rent Updates 5/4/2018 Flat Rent Session will Cover Background on Flat Rents and where this new provision was generated PIH Notice 2014-12 Changes to Flat Rent Requirements Amending your PHA Plan (and language used for the determination of a significant amendment) Calculating the adjustments including allowances for tenant-paid utilities Calculating the new rent -- if changes are required Appropriate notification of residents (including providing them with the option to switch back to income-based rents) Dealing with local and state provisions such as rent control laws or increases in rent Flexibilities that HUD provides to the PHA in the implementation NAHRO Technical Assistance

Where Did This Come From? FY 2014 Consolidated Appropriations Act- Section 210 and Section 234 The 2014 Appropriations Act requires PHAs to establish flat rents at levels no lower than 80 percent of the applicable fair market rent (FMR) under the Act. Some PHAs are out of compliance and should be in the process of implementation of the flat rent requirements. National Association of Housing and Redevelopment Officials

Appropriations Act of 2014 (continued) Directs PHAs to comply by June 1, 2014, with such requirement, except that if a new flat rate amount for a dwelling unit will increase a family's existing rental payment by more than 35%, the new flat rental amount shall be phased in to ensure that the family's existing rental payment does not increase by more than 35% annually. What does this mean? National Association of Housing and Redevelopment Officials

Appropriations Act of 2014- continued Flat Rent Updates 5/4/2018 Appropriations Act of 2014- continued States that this requirement shall not be construed to require establishment of rental amounts equal to 80% of the fair market rental in years when it falls from the prior year. In years where the FMR decreases in the PHA’s area, the PHA does not need to lower the flat rent Provision is for the future and does not take effect until 2015 National Association of Housing and Redevelopment Officials NAHRO Technical Assistance

National Association of Housing and Redevelopment Officials PIH Notice 2014-12 Issued May 19, 2014 Provides further guidance into the adjustments and implementation of flat rent requirements Clarifies HUD’s interpretation of the Appropriations Act Final policies will be set through rulemaking and pubic comment process Impact on budgets and residents National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials Flat Rent The flat rent is based on the market rent charged for comparable units in the private unassisted rental market. It is equal to the estimated rent for which the PHA could promptly lease the public housing unit after preparation for occupancy. However, the flat rent cannot be lower than 80% of the FMR National Association of Housing and Redevelopment Officials

Self-sufficiency Incentives The flat rent is designed to encourage self-sufficiency and to avoid creating disincentives for continued residency by families who are attempting to become economically self-sufficient. National Association of Housing and Redevelopment Officials

Must Use Reasonable Method To determine the flat rent, the PHA must consider: The location, quality, size, unit type and age of the unit; and Any amenities, housing services, maintenance and utilities provided by the PHA. National Association of Housing and Redevelopment Officials

What if the Rent Reasonable is Higher than 80% of the FMR? The 80% requirement is a floor and therefore the flat rent must be at least 80% of the FMR If the rent reasonable amount is higher, then the PHA should use the rent reasonable amount It reflects what the unit is worth in the private unassisted market National Association of Housing and Redevelopment Officials

Records on Establishing and Offer of Flat Rent The PHA must maintain records that document the method used to determine flat rents, and also show how flat rents are determined by the PHA in accordance with this method, and document flat rents offered to families under this method. National Association of Housing and Redevelopment Officials

Choice of Rent -- Regulations 24 CFR §960.253   Choice of Rent Once a year, the PHA must give each family the opportunity to choose between the two methods for determining the amount of tenant rent payable monthly by the family. Flat Rent Income-based Rent National Association of Housing and Redevelopment Officials

Information to Families For the family to make an informed choice about its rent options, the PHA must provide sufficient information for an informed choice. Such information must include at least the following written information: The dollar amounts of tenant rent under each option PHA’s policies on switching type of rent in circumstances of financial hardship National Association of Housing and Redevelopment Officials

Annual Choice and Recertification If the family chose a flat rent for the previous year, the PHA is required to provide the amount of income-based rent for the subsequent year only the year the PHA conducts an income reexamination or if the family specifically requests it and submits updated income information. For a family that chooses the flat rent option, the PHA must conduct a reexamination of family income at least once every three years. National Association of Housing and Redevelopment Officials

Choice of Flat Rent Once a Year Except for financial hardship cases as provided in the regulations, the family may not be offered this choice more than once a year. National Association of Housing and Redevelopment Officials

Switching From Flat Rent to Income-Based Rent A family that is paying a flat rent may at any time request a switch to an income-based rent (before the next annual option to select the type of rent) if the family is unable to pay flat rent because of financial hardship. National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials Ceiling Rents Ceiling Rent must mirror the Flat Rent (HUD FAQ) Therefore, if the PHA must adjust the Flat Rent to comply, the Ceiling Rent will also be adjusted. National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials ACOP Provisions The PHA must adopt written policies for determining when payment of flat rent is a financial hardship for the family. National Association of Housing and Redevelopment Officials

ACOP Provisions- continued If the PHA determines that the family is unable to pay the flat rent because of financial hardship, the PHA must immediately allow the requested switch to income-based rent. The PHA shall make the determination within a reasonable time after the family request. National Association of Housing and Redevelopment Officials

PHA Financial Hardship Provisions The family has experienced a decrease in income because of changed circumstances, including loss or reduction of employment, death in the family, or reduction in or loss of earnings or other assistance The family has experienced an increase in expenses, because of changed circumstances, for medical costs, child care, transportation, education, or similar items Such other situations determined by the PHA to be appropriate. National Association of Housing and Redevelopment Officials

Relationship Between FMR and Gross Rent FMR is the estimate of the gross rent (contract rent + utilities) for the area, regardless of who pays the utility expense. Flat rents must consider who is paying the utilities PHA pays all utilities PHA only pays a portion such as water, sewer and trash Tenant-paid utilities National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials Flat Rent Provisions If the family chooses to pay a flat rent, the PHA does not pay any utility reimbursement. National Association of Housing and Redevelopment Officials

PIH 2014-12- FMR and Relation to Gross Rent Estimates Part 3 of the notice further reinforces the requirement that when PHAs are reviewing and establishing the flat rent, that the flat rents are further adjusted to reflect if the property has tenant paid utilities vs. PHA paid utilities. 1-BR with a $500 FMR x 80%= $400 If PHA supplied all utilities- then the flat would be at least $400 If tenant paid utilities of $50- the flat rent would be at least $350 National Association o of Housing and Redevelopment Officials

Example of Flat Rent and Utility Relationship FMR for the area is $700 for a 1-bedroom unit 80% of the FMR would be $560 If all utilities are paid by the PHA- then the flat rent on a 1-bedroom unit for that development would be no less than $560 for that development National Association of Housing and Redevelopment Officials

Example of Flat Rent and Utility Relationship (cont.) If the tenant pays for some utilities (electric and gas) at another development and the reasonable utility allowance is $100 for the tenant-paid utilities, then the flat rent for a 1-bedroom unit at that development would be at least $560 - $100 = $460. Utility provisions apply, even if setting the flat rent above the 80% threshold National Association of Housing and Redevelopment Officials

Setting Utility Allowances Utility allowances should reflect the “costs of an energy-conservative household of modest circumstances consistent with the requirements of a safe, sanitary, and healthful living environment.” National Association of Housing and Redevelopment Officials

Tampa-St. Petersburg-Clearwater, FL MSA Final FY 2014 FMRs By Unit Bedrooms Size of Unit Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom Fair Market Rent $605 $758 $951 $1,269 $1,520 National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials 80% of the FMR Size of Unit Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom Fair Market Rent $605 $758 $951 $1,269 $1,520 80% of FMR $484 $607 $761 $1,016 $1,216 National Association of Housing and Redevelopment Officials

Compared to Current Flat Rents- Tampa- all utilities paid by the PHA Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom Fair Market Rent $605 $758 $951 $1,269 $1,520 Current Flat Rent $550 $650 $850 $1,100 $1,300 Current Percentage 90.9% 85.7% 89.3% 86.68% 85.55% National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials Tampa PHA Program Everything is within the requirements—no further action is required on adjusting the flat rent No significant changes in the PHA Plan No additional notice requirements to the residents PHA should monitor on an annual basis to ensure continued compliance National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials Compared to Current Flat Rents- Clearwater PHA- all utilities paid by the PHA Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom Fair Market Rent $605 $758 $951 $1,269 $1,520 Current Flat Rent $400 $500 $600 $750 $850 Current Percentage 66.1% 65.96% 63.09% 59.10% 55.92% 80% of FMR $484 $607 $761 $1,016 $1,216 $ Difference (Below 80% of FMR) $84 $107 $161 $266 $366 National Association of Housing and Redevelopment Officials

Clearwater PHA Actions Rents are below 80% of the FMR for each bedroom size, therefore action will be required in all bedroom sizes to bring them to the minimum of 80% of FMR PHA determination of significant impact PHA Plan revision required if it is significant According to 2014-12, if PHA must increase rents then it is considered significant National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials Significant Impact Number of residents impacted The level of increase in the flat rent Could have an impact on only certain bedroom sizes Number of families currently paying flat rent and by bedroom size Families current TTP and differences in Flat Rent National Association of Housing and Redevelopment Officials

Phase-in Requirements 2014-12 directs PHAs to comply with such requirement to increase, except that if a new flat rate amount for a dwelling unit will increase a family's existing rental payment by more than 35%, the new flat rental amount shall be phased in to ensure that the family's existing rental payment does not increase by more than 35% annually. National Association of Housing and Redevelopment Officials

Phase-in Requirements PHAs may take up to three years to phase in increased flat rents For example, a PHA that must increase flat rents by 60% may elect to phase the increases in over three years using equal increments each year PHAs are not required to use the 35% annual maximum increases unless the total increase is so large that smaller annual increases would not be sufficient to fully implement the total increase within three years PHAs may only take more than three years if necessary to comply with the 35% annual increase cap or other local or state restrictions that limit annual increases National Association of Housing and Redevelopment Officials

Clearwater Phase-in Period (cont.) Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom 80% of FMR $484 $607 $761 $1,016 $1,216 Current Flat Rent $400 $500 $600 $750 $850 $ Difference (Below 80% of FMR) $84 $107 $161 $266 $366 % Increase 21% 21.4% 26.83% 35.46% 43.05% Increase of 35% $540 $675 $810 1012.50 1147.5 Phase-in Required No Yes National Association of Housing and Redevelopment Officials

Phase-In Timeline (cont.) Phase-in required on 3- and 4-bedroom units No phase-in required on efficiency, 1- and 2-bedroom units PHA may still choose to use phase-in timeline up to three years Residents will receive notice of the rent increase at the next annual recertification and the choice to select the income-based rent or the new flat rent National Association of Housing and Redevelopment Officials

Phase-In Flexibility (cont.) For example, Clearwater could: increase the three- and four- bedroom by two periods- the first period by 35% ($262 for a three bedroom and $297 for a four-bedroom) and the balance is then increased in the second year by the difference, choose to use three equal annual increments, or develop some other phase-in plan that complies with the phase-in requirements National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials PHA Plans PHAs will need to revise the Agency Plan if Flat Rents Increase This will be considered a significant amendment if there is an increase Impact on family rent payments HUD provided the PHA with language in PIH 2014-12 that will help expedite the process Appendix A National Association of Housing and Redevelopment Officials

Process for Amending Plans (cont.) Qualified PHAs (550 or fewer combined units) 45-day notice Public hearing and comment opportunity Board adopts new policy Non-Qualified PHAs (more than 550 combined units) Submit amendment to HUD Field Office National Association of Housing and Redevelopment Officials

When Do the New Requirements Take Effect? According to the notice, PHAs have 90 days from the date of “formal adoption” to begin offering the new flat rents Qualified PHAs: when the Board votes to adopt Non-Qualified PHAs: when HUD approves the change to the PHA plan For PHAs that use the pre-approved template, approval is automatically granted on the date of submission. National Association of Housing and Redevelopment Officials

How Often Must Flat Rents Be Reviewed? Current provisions require that a PHA must review flat rents on an annual basis (new FMRs posted) Most PHAs review at the time of the Agency Plan New process will include reviewing the floor to make sure PHA is at least at 80% of the FMR (adjusted for tenant paid utilities) PHA must still apply and document the rent reasonable test, based on the location, utilities, amenities, age, etc. National Association of Housing and Redevelopment Officials

How Often Must Flat Rents Be Reviewed? (cont.) If the FMR decreases from the prior year, PHA is not required to decrease the flat rent to 80% of the new FMR PHA will need to update the records and revise the ACOP if flat rent schedule changes National Association of Housing and Redevelopment Officials

How Often Must Flat Rents Be Reviewed? (cont.) Obtain new actions and Board approval- if changed Allow new admissions the option Allow participating families the option to choose National Association of Housing and Redevelopment Officials

Flat Rent Policies- How to Comply on an Annual Basis 1. Calculate the flat rents using a rent reasonable methodology for determining flat rent based on the market 2. If rent reasonable amount is determined to be at least 80% of FMR, then PHA will set the flat rent at the rent reasonable amount 3. If rent reasonable amount is less than 80% of the FMR, then the PHA must set the flat rent no lower than 80% FMR National Association of Housing and Redevelopment Officials

Flat Rent Policies- How to Comply on an Annual Basis (cont.) 4. If the flat rent is lower than the previous year, PHA may, but is not required to, lower the flat rent 5. Include a description of the flat rent policies in the PHA Annual Plan and documents available for public viewing 6. Update the flat rent policies in the ACOP 7. Provide all new admissions the choice of flat or income-based rent National Association of Housing and Redevelopment Officials

Compliance on an Annual Basis (cont.) 8. For families already paying flat rent, PHA must offer updated flat rent at the next annual rent option- usually at the annual recertification 9. Upon issuance of the new FMRs by HUD, PHA will start the process again to determine if meeting the 80% minimum If need revision- update the flat rent amounts within 90 days of the HUD published FMRs National Association of Housing and Redevelopment Officials

What if a Family Moves/Transfers? If moving to another complex- then the family is offered the option to pay the flat rent or the income based rent at the new complex they are moving into. What if they transfer to a different sized unit within the same complex? In that case, they will be offered the different sized unit’s flat rent or the income-based rent National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials What do I need to do now? Compare the current flat rent to the FMR If existing is less than 80% of the FMR (adjusting for reasonable utility allowance for those complexes that have tenant-paid utilities) then the PHA must revise the flat rent Include the information and changes in the flat rent and begin the process of making a significant change to the PHA Plan National Association of Housing and Redevelopment Officials

What do I need to do now? (cont.) Update the ACOP and flat rent schedule on the development to reflect the changes in the flat rent Once new flat rents are adopted by the Board, then PHA must offer them to all new admissions to the program Once flat rents are established, participants are offered the choice at the next annual recertification, subject to the phase-in requirement National Association of Housing and Redevelopment Officials

National Association of Housing and Redevelopment Officials What is Next? The PIH Notice has been published The notice provides methods to help streamline and expedite the process Appendix A has a Streamlining Notice to help expedite the process PHAs may follow the expedited process to save time and increase the ability of the PHA to stay fully compliant National Association of Housing and Redevelopment Officials

Obtaining the Information Current Fair Market Rents (FMR) http://www.huduser.org/portal/datasets/fmr/fmrs/FY2014_code/select_Geography.odn Select the area for the PHA Updated FMRs published annually PIH Notice 2014-12 NAHRO news coverage National Association of Housing and Redevelopment Officials

Thank You and Questions Time for the Q&A National Association of Housing and Redevelopment Officials