Transferring Section 8 Budget Authority Under Section 8(bb) Tammy Fotinos, Director of Contracts Southwest Housing Compliance Corporation

Brief history of Section 8 Section 8 Program authorized by Congress in 1974 Project-based Section 8 developed to encourage private partnerships with HUD Subsidy lives with the unit, rather than the tenant Owners can elect to opt-out of the Section 8 HAP contract Approximately 1.4 million units of affordable housing stock remain Ask for a show of hands of who has a HAP contract on their property ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfer of budget authority HUD Notice H-2015-03 (current notice) FAQs issued on 2/18/16, 3/14/16, and most recently, 4/22/16 Allows budget authority to be transferred from one project to another Can occur between two owners or the same owner Owner A: owner wanting to get rid of budget authority Owner B: owner receiving the new budget authority Can be transferred to projects/owners in other states, but HUD will review concentrically Can be transferred to a property without a current HAP contract ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) Goal is to preserve affordable housing Transfer has to be budget neutral Great tool when an owner wants to opt out of the Section 8 program Owners can transfer budget authority within their own portfolio Examples of transfers Owner wants to tear down old project, move subsidy to newly built project Owner wants to move from partially subsidized to wholly subsidized ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) General Requirements for Owner/Project A Must be current in the submission of Annual Financial Statements If 236 property, must have submitted Excess Income Reports for the past 7 years Must resolve all compliance flags If Project A will remain a HUD project after the transfer: Any deficiencies from the last physical inspection must be cured If MOR less than Satisfactory rating, corrective actions must be completed or in a plan for completion Owner must certify that they will make all mortgage payments, meet all physical standards and management requirements ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) Owner A’s Proposal: Written request to terminate the Section 8 Contract to include whether all or a portion of the budget authority will be transferred Description of the proposed transaction, why it is being proposed and how there will be no adverse impact to the existing assisted tenants The number and configuration of the units, current rents and operating budget A relocation plan, if applicable Copy of the Notice to Tenants Owner must identify any Fair Housing litigation settlement agreements, voluntary compliance agreements, or any other remedial agreements between the owner and HUD ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) General Requirements for Owner/Project B Owner must show that receipt of budget authority is warranted by local demands for affordable housing and will ensure the long term preservation of the property Must be an existing multifamily project consisting of existing dwelling units before receiving any transfer of budget authority Conditional approval can be granted for projects under construction Owner B may use approval letter from HUD to secure financing ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) General Requirements for Owner/Project B (cont.) Owner must provide documentation to assist HUD in an environmental review Owner must not be subject to any of the following actions that have not been resolved to HUD’s satisfaction: A charge from HUD concerning a systemic violation of the Fair Housing Act A Fair Housing lawsuit filed by the Department of Justice alleging a pattern of discrimination Project must comply with site and neighborhood requirements Site and neighborhood requirements: Must be suitable from the standpoint of facilitating and furthering full compliance with all of the applicable provisions of Title VI of the Civil Rights Act of 1964, Title VIIO of the Civil Rights Act of 1968, and Executive Order 11063 Must not be one that is detrimental to family life or in which substandard dwelling or other undesirable conditions predominate Must be accessible to social, recreational, educational, commercial, and health facilities and services ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) General Requirements for Owner/Project B (cont.) If Project B is New Construction May not be located in a racially mixed area if the project will cause a significant increase in the proportion of minority to nonminority residents in the area and may not be located in an area of minority concentration There are allowable exceptions Must meet all applicable accessibility requirements Owner must receive 2530 approval Owner must provide a tenant selection plan and an AFHMP If Project B is an FHA insured project, there may be no liens on the project other than the 1st mortgage ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) General Requirements for Owner/Project B (cont.) If Project B is HUD-affiliated If the project received a less than Satisfactory rating on its last MOR, corrective actions must have taken place or have a plan in place Owner must be current in the submission of Audited Financial Statements, if applicable Owner must resolve all noncompliance flags, if any Project B must have a REAC score of at least 60, or if it does not, submit a plan acceptable to HUD to correct any deficiencies If there is an existing HAP contract, Owner B must execute an Amendment B in addition to the new HAP contract If there is no existing HAP contract, Owner B must execute a new Section 8 HAP contract ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) General Requirements for Owner/Project B (cont.) If Project B is not HUD-affiliated Project must have a REAC inspection prior to the transfer and receive a score of at least 60 If project has repair needs, owner must submit a repair plan of how the physical needs will be addressed Owner B must execute a new Section 8 HAP Contract ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) Owner B Proposal Written notification that the owner agrees to accept the transferred budget authority The current number and configuration of the units, current rents, and operating budget; the proposed number and configuration of the units, rents, the amount of budget authority to be transferred, and the operating budget after the transfer Written verification to demonstrate the long term financial viability of the property, including current and proposed financing Written narrative that Owner B has at least 5 years of successful experience owning and managing assisted housing ©2018 SHCC - TX Rental Housing Preservation Academy

8(bb) Transfers (cont.) Proposals will be reviewed and analyzed by the Fort Worth Multifamily Hub (or applicable regional office) before being sent to Headquarters for final approval SHCC and HUD maintains a list of interested owners Email Tammy Fotinos at SHCC to be placed on list Letter must be sent to HUD at applicable email address HUD approval could take up to one year, so plan accordingly ©2018 SHCC - TX Rental Housing Preservation Academy

HUD addresses for owner letter Subject line of email: Property Name-8(bb) Letter of Interest Email addresses for all regions: Northeast: northeast8bb@hud.gov CT, DE, DC, ME, MD, MA, NH, NJ, NY, PA, RI, VT, VA, WV Southeast: Southeast8bb@hud.gov  AL, FL, GA, KY, MS, NC, PR, SC, VI Midwest: CHI.8BB@hud.gov IN, IL, MI, MN, OH, WI Southwest: MFSW8bb@hud.gov AR, IA, KS, LA, MO, NE, NM, OK, TX West I: SF.Incoming@hud.gov AK, CA, HI, ID, NV, OR West II: Den.Incoming@hud.gov  AZ, CO, MT, ND, SD, UT, WA, WY ©2018 SHCC - TX Rental Housing Preservation Academy

Questions? ©2018 SHCC - TX Rental Housing Preservation Academy