Rent Comparability Studies Chapter 9 Updates

Changes to Chapter 9 Reorganized to identify the responsibilities of the owners, appraisers, and reviewers in one place. Road Map to chapter 9 for the various stakeholders No change in guidance Clarification on existing policies This guidance applies to any Rent Comparability Study signed by the appraiser on or after March 1, 2017.

AAF Rent Adjustments

AAF Rent Adjustments (Section 9-2.C) Owners must use one of the following methods: Submit the new Rent Comparability Grid and other materials required in Chapter 9 (Sections 9-8 through 9-13) Request to use non-Section 8 units at the Section 8 property to set the market rent ceiling (form 9629) Must meet eligibility requirements in Section 9-6.B

Alternatives to the RCS

Alternatives to the RCS (Section 9-4) Owners only under Option 2 may use the alternative methods below: Compare proposed Section 8 rents to Fair Market Rents (Section 9-5) Compare Section 8 rents to rents charged for the other units of that property (Section 9-6)

Adjustments for Comparable Units

Clarification for Appraisers More precise instructions for explanations on why adjustments were made to the rent grid and how the dollar values were derived. (Section 9-12.C) All adjustments exceeding a nominal amount will require a two part explanation as explained in Section 9-12.C.1. (See Section 9- 12.C.3)

Market Rent Threshold

Market Rent Threshold (Section 9-14) All RCS submissions to HUD/CA must include a distribution of RCS rents and the subject property’s Median Rent. These requirements do not apply to studies that are a part of the Mark-To-Market process.

Median Rent 11th unit Odd number of total assisted units Average the first and last unit in the distribution to determine which unit to use. The RCS rent of that unit will be the unit will be the property’s median rent. Total assisted units: 21 Median unit: 11th unit Average of 1st and last unit: (1 + 21) = 22/ 2 = 11 Property’s median rent: $700 11th unit

Property’s median rent: $800 Even number of total assisted units Find the 2 median units. Take the average of the RCS rent(s) for the 2 units to determine property’s median rent. Total assisted units: 26 2 median units: 13th and 14th Property’s median rent: $800 Average the RCS rents of the 2 median units: ($700 + $900) = $1600/ 2 = $800 13th unit 14th unit

Special Exceptions Under Threshold When the Median Gross Rent is estimated at “$2,000+”, “$2,800+, or “**”, see Section 9-14.D to determine if a HUD RCS is required.

Reviewers

Qualifications for Reviewers (Section 9-15) Initial Review (HUD/CA Initial Reviewer) Must have read Chapter 9 guidance within 12 months preceding the first Initial Screening review Substantive Review (State-Certified General Appraiser) Substantive Review (Non-appraiser HUD staff) Minimum of 2 years’ direct multifamily experience Must be approved by the Regional Director

Checklists Initial Review Substantive Review Initial Screening checklist (Appendix 9-5-1) Substantive Review Detailed Screening checklist (Appendix 9-5-2) Rent Grid Analysis checklist (Appendix 9-5-3) Certification (Appendix 9-5-5)

Time Requirements (Section 9-15) More than 90 calendar days since RCS completed and submitted, the RCS must be updated Keep all RCS submissions, correspondence, review materials, for a minimum of 3 years This includes inadequate/ incomplete submissions HUD/CA must convey the results of the substantive review within 30 calendar days after the complete submission of the RCS.

Triggers for Second Review A second review is required when an RCS includes line item adjustments that are triggers, and if the substantive reviewer is a non-appraiser HUD staff. (See Section 9-16.3.c.) Second reviewer must meet the minimum qualification requirements (Section 9-15.A). Second reviewer is required to provide input on the appropriateness and reasonableness of the specific line item; Not the entire RCS. If the first and second reviewers do not reach a consensus, the trigger item will be reviewed by an RCS appraiser. There are 8 items that would trigger a second review. (See Appendix 9-5-4)