In a pivotal update published on February 29, 2024, the United States Department of Agriculture (USDA) announced a significant regulatory waiver for stakeholders involved in Rural Development (RD) Housing.
USDA/RD’s regulations at 7 CFR 3560.8 require that a tenant’s adjusted household income review be conducted in accordance with HUD’s regulations at 24 CFR 5.609. However, USDA requested and received a waiver that excludes some of the annual income requirements found in HOTMA. USDA/RD is opting to implement some of the HOTMA changes – while keeping many of the practices long-observed by RD.
RD regulations found at 7 CFR 3560.157 state that for purposes of determining annual income for eligibility purposes, HUD regulations found at 24. CFR 5.609 are to be followed. However, the Housing Act of 1949 does not incorporate the updates found in 24 CFR 5.609(c).
In response, the Rural Housing Service (RHS), has leveraged its Administrator’s Exception Authority (7 CFR 3560.8), effectively issuing a waiver that exempts Rural Development (RD) from implementing the new subsection (c) of 24 CFR 5.609.
This means RD will not adopt the following HOTMA provisions found in 24 CFR 5.609(c)
- -Safe Harbor Income Determinations.
- De minimis Errors
While RD regulations have never referred to HUD regulations as it relates to conducting Interim certifications, RD also made clear that the requirements for conducting Interim Recertifications have not changed.
RD is requiring that RD properties be fully compliant with HOTMA by January 1, 2025. RD is actively working on guidance and updates for its handbook and systems, including the Management Interactive Network Connection (MINC).
During 2024, RD aims to support stakeholders by not penalizing owners for any HOTMA-related tenant file issues identified in supervisory reviews before January 1, 2025. This grace period is intended to allow adequate time for owners and management agents to adjust to the new requirements and ensure their systems and processes are fully compliant ahead of the 2025 deadline.
Details on Which Parts of HOTMA USDA/RD is Not Implementing
Rural Development (RD) will not adopt the following HOTMA provisions, effective retroactively to January 1, 2024:
• Interim tenant income reexaminations where adjusted income is estimated to increase or decrease by 10%.
- While RD regulations have never referred to HUD regulations as related to Interim certifications, RD makes it clear that the requirements for conducting Interim Recertifications have not changed.
- Note that tenants at RD properties must be income recertified at least annually and whenever household income changes by $100 or more per month, or changes of $50 or more per month if the tenant requests that such a change be made.
- Under HUD, if a tenant has an income change between annual income recertifications, the department performs a midyear “interim” recertification, but the annual recertification remains pegged at the original annual date. With RD, if there is an income change, residents undergo a new “annual” inspection, which establishes a new anniversary date.
• Use of other programs’ determination of income. RD does not currently allow other programs’ determination of income for verification purposes.
• HUD will allow owners with de minimis errors resulting in $30 or less per month to remain in compliance.
When Does it Go into Effect?
USDA/RD is requiring that RD properties be fully compliant with HOTMA by January 1, 2025. USDA/RD is actively working on guidance and updates for its handbook and systems, including the Management Interactive Network Connection (MINC).
During 2024, RD aims to support stakeholders by not penalizing owners for any HOTMA-related tenant file issues identified in supervisory reviews before January 1, 2025. This grace period is intended to allow adequate time for owners and management agents to adjust to the new requirements and ensure their systems and processes are fully compliant ahead of the 2025 deadline.
