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HUD Notice 2016-03 Clarifications & Student Tips for Compliance

Over the last month we have received many questions about the new HUD notice regarding additional scrutiny on the quality of repairs. While many of the questions also expressed a lot of dismay at the stark change of direction, we were able to clarify a number of concerns.

Has this changed all of the deficiency standards?

No, nothing really has changed here in terms of what makes something a deficiency. Everything you learned about REAC before is true. What has changed is an evaluation of how things are repaired. Essentially the previous standard of (for example) "Is that wall cracked" has been replaced by, "Has this wall been properly repaired".

Every Inspector is different - How can I possibly prepare?

Don't personalize your inspections. Your inspection is according to a single set of standards - not Bob or Larry or Susan's standards. If you properly identify issues and repair them professionally, you will be fine. Preparing professionally basically means: don't use spray foam to fit a pothole, or cold patch asphalt to fix a stone retaining wall - don't take the easiest approach.

As far as inspectors being different, this is true and always has been. We look at it as there being the industry standards approach, and then the not so by the book approach. So, long story short: if you properly prepare for an inspection, the variables will take care of themselves.

Other questions that we received from our recent webinars:

  • Can you recommend a solution to repair gaps in breaker panels that would meet industry standards?
  • In order to fill in gaps in a breaker panel, there are a number of products. We have seen sheet metal attached to the panel on the outside of the gap, attached by adhesive and painted to finish. You can also use an electrical gasket, aka spacing gasket (found in the electrical aisle of your hardware store). Whatever change that you make to the panel, ensure that the repair cannot be removed without the aide of special tools and that it is not negatively affecting the electrical equipment. If you have a question, please consult with a licensed electrician before making any changes.
  • Will this [rule change] only pertain to HUD programs where they agency has a financial concern, or do you see this branching out into all projects/programs regardless?
  • This rule change applies to any housing program that is required to utilize the UPCS inspection code as it's monitoring inspection code. This would include: 1) Public Housing, 2) HUD Multifamily Section 8, 3) LIHTC, 4) HOME, 5) HUD mortgaged properties (such as 221d3, 221d4, etc). As HUD REAC dictates what is and isn't in the UPCS Inspection code, when they update rules (such as the one we are discussing here) they are updating it for all funding programs that utilize it, such as Low Income Housing Tax Credits and HOME.

Please let us know if you should have any questions, or if you would like information about scheduling an inspection with one of our staff of professional Inspection Analysts, who will let you know anything and everything you need to do before your inspection.

Join us on one of our upcoming webinars to learn more about how this new rule will affect your property and your preparation for REAC Inspections.

Useful Tips for Student Requirements

As compliance consultants who review thousands of HUD and LIHTC files, we have put together some frequently asked questions regarding student requirements. We are hoping that the following FAQs will provide you with guidance with regard to student requirements.

Q. Do I count all of the income from a full time student over 18 when calculating annual income?

A. If the student is employed but is not the head, co-head or spouse, and is a dependent of the household, you count only the first $480 of their wages for the entire 12-month period. Also, count all unearned income (Social Security benefits, TANF, unemployment, etc.) for any student. Verification of full-time student status is required to be maintained on file for both HUD and LIHTC programs.

Q. Is student financial assistance considered income for purposes of qualifying a household for a tax credit unit? If so, what parts do I count?

A. Only if the tax credit unit or resident is receiving some form of Section 8 rental assistance would you include student financial assistance in excess of tuition in fees as income.

Q. I have an applicant who is expecting a child, is 20 years old and is a part time college student. Does she qualify for a HUD or LIHTC unit?

A. She does not qualify for HUD. She does not meet any of the exceptions of the HUD Student Rules. She is under the age of 24, she is a part time college student and the unborn child cannot be considered a household member. HUD does not consider unborn children as a household member. She does however, qualify for the LIHTC program because the unborn child would be a considered a household member and she is a part-time student. A self-certification of pregnancy must be obtained for both programs. Also note that a part time student is always eligible for the LITHC program as long as student status verification is obtained.

Q. One of my residents has informed me that he has been enrolled as a full time student and he is the only household member. Is my resident still eligible?

A. No. The resident is no longer eligible for the LIHTC program unless they qualify for any one of the following exceptions, which you must third party verify:

  • enrolled in a job training program receiving assistance under the Workforce Investment Act (formerly JTPA) or other similar program funded by a state or local government agency.
  • receiving benefits under Title IV of the Social Security Act (e.g., TANF)
  • a single parent and the single parent is not a dependent of another individual, nor are their children dependents of another individual except another parent of such children.
  • married and eligible to file a joint return.

A student that was previously under the care of a state foster care program.

It is permissible for a unit to be occupied by a full time student where there are other people in the household that qualify. However, when a unit becomes occupied entirely by full time students (defined as individuals enrolled full time at an educational organization for at least five calendar months during the year that need not be consecutive), the unit becomes disqualified unless any of the exceptions above apply.

Q. An applicant for LIHTC graduated from high school on May 2. She was a full time high school student from January 4 until May 2 and does not anticipate furthering her education. There are no other household members applying. Does this person qualify for a HUD or LIHTC unit?

A. She does qualify for HUD since high school is not considered an institution of higher education. She does not qualify for the LIHTC program. A full time student does not qualify for LIHTC if he/she was enrolled full time in school for any five months of the year. A month is included if he/she attended school for any number of days during the month. In the example you provided, the months of January and May are counted as full months because she attended school during those months.

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