New Budget Based Rent Adjustment Options For M2M Properties
HUD’s Office of Multifamily Housing Programs published Notice 2024-05, which implements new authority to make BBRA for Section 8 PBRA contracts subject to M2M Use Agreements. This notice identifies a “First Priority Group” who are invited to apply for these rent adjustments. Any properties who meet the requirements to be considered part of this group are eligible to apply now.
What Properties are in the First Priority Group?
Group A properties must in good standing at the time of closing, but include properties with REAC scores below 30 or successive failed REAC Inspections. Additionally, Group A properties include:
- Properties with operating cost coverage ratios less than 1.0
- The financial statements for a property indicate that the owner has made owner contributions in excess of $3,000 per unit in the most recent year, or more than $1,500 per unit in each of the last three fiscal years.
- Properties with mortgage debt that has been acquired by HUD through a payment of claim on a loan insured by FHA.
- Properties with an average vacancy rate equal to or exceeding 25% for the most recent 24-month period.
How Can a Property Apply?
Eligible Post M2M Properties can submit an initial submission through a form located on HUD’s Post M2M website. Applications will be reviewed on a first come, first serve basis, and with the limited funding available to HUD, owners and managers of eligible properties are encouraged to apply quickly before the March 28, 2024 deadline.
HUD will invite owners that qualify to submit a Final Submission, pending funding availability. The Final Submission will contain all the necessary documentation to confirm eligibility and allows HUD to conduct a complete evaluation of the project to assess the needed BBRA.
What is Needed to Apply
Owners submitting applications will be required to submit a new Capital Needs Assessment using the E-Tool, and it must be inclusive of a Green Analysis. The CNA must have been created within 180 days of the final submission. There are a number of other documents required as well, including a rent comparability study (RCS), detailed operating pro formas, and plans for addressing any MOR and financial issues.
For properties struggling to meet operational goals due to rent levels insufficient to cover costs, this is a terrific opportunity. If you need assistance with preparing a Capital Needs Assessment with Green Analysis and E-Tool submission, our asset management department can help you ensure that all of the property’s long-term needs are included to maximize the effectiveness of this rent restructuring.
