Contract Renewals and Rent Adjustments by wit47392

VIEWS: 12 PAGES: 48

									                                                  Contract Renewals and
                                                  Rent Adjustments


California Affordable Housing Initiatives, Inc.                     _experience the commitment TM
Introductions


• California Affordable Housing Initiatives (CAHI)
• Darline Ellis, Central Contract Specialist Supervisor
• LeAnn Downing, Central Contract Specialist




        California Affordable Housing Initiatives, Inc.   2
Agenda

•   Contract Renewals
    • When to Start the Process/Workflow
    • Review of Option Types
    • Complete Package Requirements
    • 20 Year Renewal Option
•   Rent Adjustments
    • When to Start the Process
    • Review of Rent Adjustment Types
    • Complete Package Requirements
• 30 Day Tenant Comment Period and Certification of
  Compliance
• Utility Allowance Analysis, Summary and Recommendation


           California Affordable Housing Initiatives, Inc.   3
Contract Renewals vs. Rent Adjustments

• Contract                         Renewals
 •   In order to receive subsidy payments, a Housing
     Assistance Payment (HAP) contract must be in force.
• Rent   Adjustments
 • Pre-MAHRA: Can submit request for increase anytime, but
   only one increase granted in any 12 month period
 • Post-MAHRA: Must submit rent adjustment request
   annually




          California Affordable Housing Initiatives, Inc.    4
                                                  Contract Renewals


California Affordable Housing Initiatives, Inc.                       _experience the commitment TM
When to Start the Process

• 120days (4 months) prior to property’s HAP
 contract expiration date




        California Affordable Housing Initiatives, Inc.   6
Workflow of a Contract Renewal
                                                        Complete Package Received




                  RCS is sent to CAHI                                                     3rd part RCS request
                  appraiser & approved                                                        sent to HUD &
                                                                                                approved




                       Rent adjustment is                    Rent schedule sent to           Owner returns
                          processed                           owner for signature        executed rent schedule




                Funding is requested &                      Contract is generated with    Contract is returned
                  received from HUD                         BA & term. HAP is sent to     and sent to HUD for
                                                              owner for signature              signature




                                                               CAHI sends fully
                                                             executed HAP & rent
                                                              schedule to owner



                                                             Owner receives fully
                                                             executed documents
                                                              & implements new
      California Affordable Housing Initiatives, Inc.
                                                                    rents                                         7
Five Renewal Types

1.   Mark-up-to-Market
2.   Rents Below Market
3.   Referral to OAHP (Office Of Affordable Housing
     Preservation)
4.   Projects Exempt from OAHP
5.   Preservation Projects




         California Affordable Housing Initiatives, Inc.   8
Contract Renewals – Mark Up To Market
Option 1a
• Ownership    must be profit-motivated or limited-
  distribution entity
• Rent Comparability Study must show comparable
  market rents are at or above 100% of the Fair
  Market Rent Potential
• No low-and-moderate-income use restrictions that
  cannot be eliminated by unilateral action by the
  owner
• Subsequent renewals under MAHRA only (not initial
  renewals).
• A REAC inspection score of 60 or above is required


       California Affordable Housing Initiatives, Inc.   9
Contract Renewals – Mark Up To Market
Option 1b
• To  further preserve funding for vulnerable properties
  and for owners requesting increase above 150% of
  Fair Market Rents
• Must meet one of three criteria:
   • Vulnerable population (more than 50% elderly,
     disabled or large families)
   • Vacancy rate (low-vacancy market area)
   • Community support (high priority for local
     community)



        California Affordable Housing Initiatives, Inc.   10
Contract Renewals – Option 2 Current Rents
At or Below Comparable Market Rents
• Rent Comparability Study shows the current rents
  are at or below comparable market rents
• Owner is not applying for an Option 1




         California Affordable Housing Initiatives, Inc.   11
Contract Renewals – Option 3 Referral to
OAHP
• Property                                   doesn’t qualify as an exception
 project
 • Current Section 8 rents exceed comparable
   market rents
 • Owner may request renewal with either a
   reduction in rents and/or a restructuring of the
   mortgage
    • OAHP Lite vs. OHAP Full




       California Affordable Housing Initiatives, Inc.                         12
Contract Renewals – Option 4 Projects
Exempted from OAHP
• Current rents may exceed market rents
• Property is defined as an “exception project”
• A “Lesser Of” Test is required at contract renewal,
  so owner must submit both a budget and an OCAF
  worksheet




       California Affordable Housing Initiatives, Inc.   13
Contract Renewals – Option 5 Portfolio Reengineering
Demonstration or Preservation Project

• Preservation  projects are 236 and 221d3 BMIR
  projects whose owners entered into long term use
  agreements with HUD under the Preservation
  Program
• Portfolio Reengineering Demonstration Program
  Project is any project that completed the Demo
  Program with an executed and recorded Demo
  Program Use Agreement




       California Affordable Housing Initiatives, Inc.   14
                                                  Contract Renewals –
                                                  Complete Packages


California Affordable Housing Initiatives, Inc.                         _experience the commitment TM
Contract Renewal Complete Package
Documents – All Options
1.   Attachment 3A-2 - Renewal Request with original owner’s
     signatures, option selected must match cover letter
2.   Tenant One-Year Notification Letter
3.   30 Day Tenant Notification Letter and Posting
4.   Owner’s Certification of Compliance with Tenant Comment
     Period (executed after the 30 day period has expired)
5.   Rent Comparability Study, if applicable
     •   Post-MAHRA RCS’s must be completed once every 5 years
6.   Owner’s RCS Certification, if applicable
7.   Full Utility Allowance analysis, UA summary or PHA
     schedule and recommendation, if applicable

                                                               PLUS…
             California Affordable Housing Initiatives, Inc.           16
Complete Package – Option 1A

• Initial    Eligibility Worksheet




            California Affordable Housing Initiatives, Inc.   17
Complete Package – Option 1B

• Initial
        Eligibility Worksheet
• Documentation supporting one of the three eligibility
  requirements
  • Vulnerable populations
  • Vacancy rates
  • Community support




            California Affordable Housing Initiatives, Inc.   18
Complete Package – Option 2 - OCAF

• Attachment 3B - OCAF Worksheet
• Loan information (bank statements, audited annual financial
  statement, amortization schedule) for properties with no
  HUD-held loan (to calculate the debt service rate)




        California Affordable Housing Initiatives, Inc.         19
Complete Package – Option 2 - Budget Based

•   Budget Worksheet HUD 4350.1 Chapter 7 Appendix 4d
•   Cover letter briefly summarizing need for increase
•   Statement explaining any line item in the budget sheet with an
    increase greater than 5% and $500
•   Certification as to Purchasing Practices and Reasonableness of
    Expenses, HUD 4350.1 Chapter 7 Appendix 3
•   Energy Conservation Plan Certification for 202 with direct loan
    more than 15 years old, 236, BMIR and projects converted from
    Rent Supplement (certification must be signed and dated)
•   HUD 9250 – Funds Authorization for Reserve of Replacement
    increase request, if applicable
•   Bank statement or HUD approval documentation for Residual
    Receipts account


           California Affordable Housing Initiatives, Inc.        20
Complete Package – Option 3

•   Certification that project rents exceed comparable rents
    •   OAHP-Full does not need an RCS or owner’s RCS certification




              California Affordable Housing Initiatives, Inc.         21
Complete Package – Option 4
•   OCAF Worksheet
    •   Loan information (bank statements, audited annual financial statement,
        amortization schedule) for properties with no HUD-held loan (to
        calculate the debt service rate)
•   Budget Worksheet or USDA Letter of budget increase if a
    515 property
    •   Statement explaining any line item in the budget sheet with an increase
        greater than 5% and $500
    •   Certification as to Purchasing Practices and Reasonableness of
        Expenses
    •   Energy Conservation Plan Certification for 202 with direct loan more
        than 15 years old, 236, BMIR and projects converted from Rent
        Supplement (certification must be signed and dated)
    •   HUD 9250 – Funds Authorization for Reserve of Replacement increase
        request (must be supported by a 5 year analysis), if applicable


              California Affordable Housing Initiatives, Inc.                22
Complete Package – Option 5

•   Attachment 3B - OCAF Worksheet (if provided for in
    Plan of Action)
    •   Loan information (bank statements, audited annual financial
        statement, amortization schedule) for properties with no HUD-
        held loan (to calculate the debt service rate)
•   Rent Comparability Study (if provided for in Plan of
    Action)
    •   Owner’s Rent Comparability Certification
•   Subsequent Renewals for Demonstration projects are
    under Option 5. HUD is no longer permitting initial
    renewals under the Portfolio Demonstration Program.



             California Affordable Housing Initiatives, Inc.            23
20 Year Renewal Option

• HUD   is offering a 20-year renewal extension for
  Options 1, 2 and 4 properties
• Amendment of Contract Renewal can be requested
  annually with contract renewal or with rent
  adjustment request
• Send letter to HUD requesting renewal
• Attachment 3 to CAHI for 20 year renewal
• All documents required for regular renewal or rent
  adjustment to CAHI


        California Affordable Housing Initiatives, Inc.   24
                                                  Rent Adjustments


California Affordable Housing Initiatives, Inc.                      _experience the commitment TM
When to Start the Process

• Post-MAHRA   contracts (contracts executed after
1999) must have a funding or rent adjustment
request submitted at least 120 days prior to the
expiration of the funding annually
 •   CAHI sends a reminder letter 6 months prior to the contract expiration.


• Pre-MAHRA  contracts can adjust rents with an AAF,
budget, or special adjustment
 •   Property will be renewed under MAHRA upon contract
     expiration




           California Affordable Housing Initiatives, Inc.                 26
Rent Adjustment (RA) Types

• Pre-MAHRA   RA Types include:
  1. Annual Adjustment Factor (AAF)
  2. Special Adjustments
  3. Budget-Based Rent Adjustment
• Post-MAHRA RA Types include:
  1. Operating Cost Adjustment Factor (OCAF)
  2. Budget-Based Rent Adjustment
  3. Funding Only
  4. Option 5 Rent Adjustment type is determined by
     the Plan of Action (POA) or Use Agreement

       California Affordable Housing Initiatives, Inc.   27
Late Submissions

• Retroactive  rent increases are not allowed if a
  complete package is not submitted 120 days prior to
  contract anniversary
• If the submission is late, rents will be effective at
  least 30 days from the date the rent schedule is sent
  to the owner for signature (only exception is when
  the delay is caused by CAHI or HUD).




       California Affordable Housing Initiatives, Inc.   28
Pre-MAHRA RA: Annual Adjustment Factor
(AAF)
• Only contracts not renewed under MAHRA unless
  specified by Plan of Action
• AAF factors published annually at various times
• Pre-MAHRA contracts cannot receive OCAF
  adjustments




         California Affordable Housing Initiatives, Inc.   29
Pre-MAHRA RA & Post-MAHRA RA: Budget-
Based
• Designed to cover increase in cost of operations where
  current rent levels are not sufficient to cover these increases
• Post-MAHRA (Options 2, 4 & 5): May be requested at
  contract anniversary date or contract renewal
• Some pre-MAHRA contracts are also eligible for budget-
  based rent adjustments based upon contract language




         California Affordable Housing Initiatives, Inc.            30
Post-MAHRA RA: Operating Cost Adjustment
Factor (OCAF)
• HUD  published annual factor published annually on
  February 11
• Owners may apply for this rent increase on the
  anniversary date of their contract after renewed
  under MAHRA
• Post-MAHRA Options 1, 2, 3, 4 and maybe 5….




        California Affordable Housing Initiatives, Inc.   31
Post-MAHRA RA: Funding Only

•APost-MAHRA property must request funding
annually even if no rent increase is requested




      California Affordable Housing Initiatives, Inc.   32
                                                  Rent Adjustments –
                                                  Complete Packages


California Affordable Housing Initiatives, Inc.                        _experience the commitment TM
Rent Adjustments Complete Package – All RA
Types
• 30 Day Tenant Notification Letter and Posting
• Owner’s Certification of Compliance with Tenant Comment
  Period Rent Comparability Study, if applicable
• Owner’s RCS Certification, if applicable
• Full Utility Allowance analysis, UA summary, or PHA
  schedule and recommendation, if applicable.

                                                          PLUS…




        California Affordable Housing Initiatives, Inc.           34
Complete Package – AAF Part 1

•   Part 1: This form is applicable for New Construction and
    Substantial Rehabilitation Contracts for which the pre-
    adjustment gross rent exceeds the current published
    applicable FMR. Part I does not apply to LMSA or PD.

    •   RCS – Unlike Post-MAHRA contract, the RCS does not have a life of
        five years. However the RCS may be updated every year for up to four
        years instead of doing a completely new RCS.
    •   HUD Form 92273-S8 – the Comparability Analysis
    •   Estimates of Market Rent by Comparison – Appendix 6 of Notice 02-10
    •   Copy of the Owner’s Certification (Appendix 3 of Notice 02-10)
    •   Number of Units in which turnover occurred since the last HAP contract
        anniversary for each unit type (sample format in Appendix 4 of Notice
        02-10)


              California Affordable Housing Initiatives, Inc.               35
Complete Package –AAF Part 2

• Part 2 (the most common AAF submission): This
 form is applicable for New Construction (NC) and
 Substantial Rehabilitation (SR) Contract where
 existing gross rent for the specific unit type does not
 exceed the current published applicable Fair Market
 Rent (FMR) AND also applies to all Section 8 Loan
 Management (LMSA) and Property Disposition (PD)
 contracts that are eligible for an AAF
  • The number of units in which turnover occurred
    since the last HAP contract anniversary


         California Affordable Housing Initiatives, Inc.   36
Complete Package - OCAF

• OCAF    Worksheet (Attachment 3B)
• If HUD-held loan has been terminated, bank
  statements or audited financial statement and
  amortization schedule to calculate debt
  service
• If requesting a change in utility allowance, a
  tenant comment period posting and owner’s
  certification of compliance are required


      California Affordable Housing Initiatives, Inc.   37
Complete Package – Budget-based

• Budget           Worksheet HUD 4350.1 Chapter 7 Appendix
  4d
• Cover letter briefly summarizing the need for
  increase and percent of increase requested
• Statement explaining any line item in the budget
  sheet with an increase greater than 5% and $500
• Certification as to Purchasing Practices and
  Reasonableness of Expenses, HUD 4350.1 Chapter
  7, Appendix 3



       California Affordable Housing Initiatives, Inc.   38
Complete Package – Budget-based

• Energy   Conservation Plan Certification for 202 with
  direct loan more than 15 years old, 236, BMIR and
  projects converted from Rent Supplement
  (certification must be signed and dated)
• HUD 9250 – Funds Authorization for Reserve of
  Replacement increase request (must be supported
  by a 5 year analysis), if applicable
• Section 8 Renewal Guide Attachment 5, Projects
  Preparing a Budget-Based Rent Increase, if
  applicable (Allowance for Owner Distribution)



        California Affordable Housing Initiatives, Inc.   39
Complete Package – Funding Only

• Cover  letter requesting funding with no rent increase
• If requesting a utility allowance change, tenant
  comment posting requirements apply




          California Affordable Housing Initiatives, Inc.   40
Complete Package – USDA/RHS (515)
Property
• Letter from USDA/Rural Housing with approved
  rents and utility allowance
• If owner chooses not to wait for annual letter from
  USDA, they may apply for an OCAF increase, but
  then must forgo the USDA approved rents
  •   An OCAF (Attachment 3B) and loan information
      (amortization schedule, audited AFS, bank statements) to
      verify debt service calculation




           California Affordable Housing Initiatives, Inc.       41
                                                  In Depth:
                                                  Utility Allowance Analysis,
                                                  Summary and
                                                  Recommendation
California Affordable Housing Initiatives, Inc.                         _experience the commitment TM
Utility Allowance Submission Requirements

• Establish Baseline
• With each request for an increase in rents, the owner must
  recommend a utility allowance (no change, increase or
  decrease)
    •   Whenever a utility rate change would cause a cumulative
        increase of 10% or more in the most recently approved utility
        allowances, or if property improvements will cause utility costs to
        vary significantly, the owner must submit a Utility Allowance
        analysis
•   Each utility allowance analysis must also be accompanied
    by:
    •   A recommendation as to what utility allowance is appropriate for
        each unit type
    •   And a summary of how the owner/agent arrived at that amount

                                                                              43
Baseline Utility Allowance Analysis
Requirements
• Summary                                   for increase or decrease in utility
  allowance
• Identify types of utilities covered
• State if utility rate increases/decreases were
  implemented in the past 12 months and amount of
  rate change
• State how conservation initiatives will impact
  consumption
• Provide an appropriate sample of utility costs
  incurred over the last 12 months for each unity type.


       California Affordable Housing Initiatives, Inc.                            44
Full Utility Analysis Example

• Select 10% of 1 bedroom, 2 bedroom, etc units
  (including highest consumers and lowest
  consumers, plus the average consumer) and supply
  12 months of utility company statements for each
  unit selected.
• Create a spreadsheet averaging these costs and
  compare against the current utility allowance
  amount.
• Create cover letter recommending the new utility
  allowance requested. Provide copies of the
  statements, the analysis spreadsheet and the
  recommendation cover letter to CAHI
           California Affordable Housing Initiatives, Inc.   45
Subsequent Utility Allowance Requirements

  •   A recommendation as to what utility allowance is
      appropriate for each unit type
  •   And a summary of how the owner/agent arrived at that
      amount or a copy of the local Public Housing Authority’s
      Schedule of Utilities to support recommendation




         California Affordable Housing Initiatives, Inc.         46
                                                  Questions and Answers


California Affordable Housing Initiatives, Inc.                     _experience the commitment TM
Documents

• HUDCLIPS;   www.hudclips.gov
• Section 8 Renewal Policy Guide




       California Affordable Housing Initiatives, Inc.   48

								
To top