Category and special group units have become a very familiar set-aside for affordable housing communities. These units fulfill a needed rental opportunity for farm-workers, fish workers, elderly, and homeless; just to name a few. Maintaining compliance with these requirements can be challenging.
The Owner chooses the special category or special group needs at the time of application. The regulatory agreement (Extended Use Agreement (EUA) or Land Use Restriction Agreement (LURA)) will list the group(s) that will be targeted, the required special group set-aside, and the number of units necessary to maintain the obligation. Management should familiarize themselves with the requirements for their property. This is necessary because the categorical selection is specific to the property. Management should ensure the categorical requirement is met on a monthly basis.
If your property has a Special Needs (SN) requirement, a Memorandum of Understanding (MOU) may be required from an approved agency for special needs referrals. For properties that require an MOU, it is necessary to keep a log showing that vacant units have been held vacant for at least 14 days prior to renting to a non-special needs household. This will show that the property is complying with the requirement and the MOU.
It is imperative to meet the requirement every month. Even one month of falling below the required categorical set-aside will result in a noncompliance, and the property will remain in noncompliance until the requirement has been satisfied. The compliance monitor checks this requirement each month on the program report and during the annual management review. Categorical and special group units provide communities with fair and decent housing where there is a need for such. These programs are necessary and essential to the overall health of the cities and towns where they are located.
Again, please check your regulatory agreement for these special requirements!
A property may get several management companies in its lifespan. It is important that this information be provided to key participants. Management companies should inform their state agency when a property is slated to be added to its portfolio. Even though the management company has been approved in the past, or may have overseen many properties in a specific state, it is still necessary to let the State Agency know that a new affordable property is about to join their portfolio. If there is a third-party monitor, they, too, should be notified as soon as approval has been given. The State Agency requires documents be submitted before a new management company takes possession. In many instances, the state agency or monitor find out there is a new management company at the time of the management review. It is recommended that the owner or owner representative not wait for the review.
Please inform the State Agency and the monitor responsible for the property that there has been a change to the contacts –including, but is not limited to, a new owner, management company, trustee, etc. – as early in the approval process as possible. It is important that the monitors have the most current contact information when sending correspondence. This way, all interested parties are receiving information pertinent to their property(ies) in a timely manner.
Utility Allowances are an important part of the compliance process. These should come from a third party source, such as: the local Public Housing Authority (PHA), a Provider Letter obtained from an approved source, or the Energy Consumption Model (check with your state agency). When determining your specific property needs, indicate amounts specific to the property by circling or placing a check mark next to the amounts. If “Other” costs are noted on the Utility Allowance, include in the total for each unit. Properties using an Energy Consumption Model or Provider Letter should also remember to obtain an appropriate Utility Allowance from a PHA to use for Section 8 households.
Utility Allowances should be updated on the Program Report as households move in or are recertified. Most often, global changes should not be made to the Program Report, though it is important to check with your management company and your state agency to see their recommendation. The most recent Utility Allowance and the former Utility Allowance used should be made available at the management review or by request from the monitors. These charts should agree with amounts used on the Program Report.
The Utility Allowance should be updated at least annually. However, it can be checked more frequently to ensure correct amounts are being used on the property. It is First Housing’s opinion that the Utility Allowances shall be updated on a quarterly basis. The management company may have a schedule for checking this. Utility Allowances should be implemented within 90 days of the change, and management should keep the monitors abreast of any new updates.
A physical inspection is a large part of the State’s annual management review. Management needs to advise all residents of an upcoming review, in writing, at least 24 hours prior to the review. It is not necessary for residents to be home at the time of the review.
Upon arrival for an inspection, the monitor will provide a list of the units to be inspected. At this time, the monitor should be informed if there has been recent bed bug activity on the property, if any units are down and unavailable for occupancy, and any other issues of which the monitor may not be aware.
One unit per building (or BIN if the property has Housing Credits) will be chosen. This may be more or less according to the property’s program requirements. In addition, a sampling of vacant units will be inspected. A minimum of two vacant units (or 15% of the vacant units, depending on the program) will be inspected. When a property is 100% occupied, the monitor will inspect two additional occupied units (according to the program). During the inspection, the monitor will want to see every building, even if a unit is not chosen in all buildings.
Management should organize the inspection so that occupied units, vacant units, and amenities are inspected in a uniform manner. The monitor will inspect each bedroom and all living spaces. Photographs will be taken of any deficiencies identified. It is vital that the entire unit be accessible. Doors should not be locked and pets should be contained in a manner that the entire unit can be inspected. During the unit inspection, the manager (or maintenance representative) should turn on the stove top and oven, flush the toilets, and test the smoke alarm(s).
All required amenities will be inspected and photographed. If deficiencies are noted, a work order and/or invoice will be required. If the deficiency is corrected prior to the end of the review, a copy of the work order will need to be supplied prior to leaving the premises.
So, the infamous day has arrived. Compliance monitors are arriving at your property within minutes. You’ve known for approximately a month. So, what should you have prepared to make this day run smoothly? This may not be an exhaustive list; however, below are items that monitoring agents may need to complete a management review. Please check with your state agency to see what, if any, requirements may be different.
1. First and foremost, the list of files is very important. You will be given this list upon the agent’s arrival. It’s a good idea to provide some files for the monitor to get started. It is expected that the property will pull and deliver all files in a timely manner as the day of the review is not the time for you to review the files.
2. The current and last year’s Utility Allowance (HC/HOME). If the Utility Allowance has not changed, please state the date and who you spoke with to verify the information.
3. Completed questionnaire.
4. Current and accurate rent roll.
5. Updated Program Report that matches the rent roll and the Tenant Income Certifications.
6. Updated contact sheet.
8. Copy of lease and application.
9. MOU (TCAP/TCEP).
10. AFHMP (HOME/HUD Risk Sharing). Include advertising.
11. Marketing Plan (HUD Risk Sharing; and if the property document requires one).
12. REAC Inspection (HUD Risk Sharing).
13. Tenant selection criteria.
14. List of vacant units.
15. Pull keys as soon as monitor provides list of units to be inspected.
16. Notify monitor if any units have had bed bugs.
17. Inform monitor if any units are down.
18. Provide work orders for any deficiencies corrected during the inspection, if possible.
19. Homebuyer’s Program: Inform agent if anyone took advantage of the program during the past 12 months.
21. Next Available Unit Documentation (LIHTC).
22. Waiting list.
23. Documentation of required tenant programs and services (check the property’s document(s) to determine the specific requirements). Tenant programs and services should include at least a flyer advertising the event, date, time, and list of residents who participated in each event.
24. Know unit’s square footages. Don’t guess. Check the property documents. If there is a difference, determine why and take steps to resolve differences with your State agency.
25. Exiting interview may be conducted several ways. Monitor may go through the discrepancies/deficiencies noted to inform you of what to expect when report is received. Or, the monitor may inform you that a report will be provided within 30 days.
26. Please do not send corrections until the review findings are sent to you. Include work orders or any backup requested. Please do not add additional statements to the review. Respond to the specifics of the review.
27. Answer your phone on review day. It may be the monitor asking for directions!
See you next year (or the third year if LIHTC)!
Utility Allowances are an important part of the compliance process, and should come from a third party source. For this, there are several options available, including the local Public Housing Authority (PHA), a Provider Letter obtained from an approved source, and the Energy Consumption Model, as approved by your state agency. When determining your specific property rents, indicate the amounts specific to that property by circling or placing a check mark next to the appropriate amounts on the chart. If your property is using the PHA Utility Allowance, and “other” costs are listed, such as “other-natural gas” or “other-electric”, be sure to include these costs in the total for each unit. Properties that use an Energy Consumption Model or Provider Letter should also remember that these amounts are not appropriate for Section 8 assisted households.
Utility Allowances should only be updated on the Program Report for households at move in or at time of recertification, and global changes should not be made to the Program Report. However, it is important to check with your state agency to determine their recommendations. In order to ensure compliance, the most recent Utility Allowance as well as the formerly used Utility Allowance should be made available at the management review. These charts should always agree with amounts used on the Program Report and Income Certification.
The Utility Allowance should be reviewed at least once per calendar year. However, it is recommended that it be checked more frequently to ensure the correct amounts are being used on the property. In First Housing’s opinion, you should confirm the Utility Allowances on a quarterly basis for each property. Furthermore, Utility Allowances must be implemented within 90 days of the effective date.
Remember, as a best practice, management should always keep the monitors abreast of any new updates to the Utility Allowances for a property. If you keep these things in mind, this key piece of the compliance process can be a simple process that is easy to abide by.