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HomeMy WebLinkAboutBack-Up DocumentU.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-7000 OFFICE OF THE ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT April 10, 2020 MEMORANDUM FOR: All Community Planning and Development Field Office Directors, Deputy Directors, and Pro„ram Managers FROM: John Gibbs, Acting Assistant Secretary for Community Planning and Development (D) SUBJECT: AvailabiLity of Waivers and Suspensions of the HOME Program Requirements in Response to COVID -19 Pandemic This memorandum provides guidaace and the necessaiy statutory suspensions and regulatory waivers to enable HOME participating: jurisdictions (PJs) affected by the Corona «us Di., 2019 (COVID-19) pandemic to use HOME funds to address immediate housing needs and to help prevent spread of the virus. The memorandum is divided into two sections. Section I addresses PJs located in areas covered by a major disaster declaration made under Title TV of tlh,; T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). Section II describes regulatory waivers available to all HOME PJs, not just those included in a major disaster declaration. Provisions that are not specifically suspended or waived remain in full effect. CPD Field Offices shall inform PJs of the availability of these suspensions and waivers. A PJ that intends to implement the HOME statutory suspensions and/or regulatory waivers identified below, must send written notification via e-mail to the CPD Division in its local HUD Field Office before it implements the waiver or suspension. This written notification must identify which suspensions and/or waivers the PJ plans to use. Waiver and Suspension Authority Section 290 of the Cranston -Gonzalez National Affordable Housing Act of 1990 (NAHA), as amended, authorizes HUD to suspend HOME statutory requirements to assist PJs in addressing the damage in an area for which the President has issued a major disaster declaration under Title IV of the Stafford Act and to assist them in disaster recovery. Upon determination of good cause, in accordance with 24 CFR 5.110, HUD may waive regulatory provisions subject to statutory limitations. These provisions provide HUD the authority to make waiver determinations for the HOME program. I. Statutory Suspensions and Regulatory Waivers Available Only to Major Disaster Areas Pursuant to the authority provided in Section 290 of NAHA and 24 CFR 5.110, I hereby find good cause, as stated in the justifications that follow, to suspend the statutory provisions and waive the related regulatory provisions described below for PJs covered by a major disaster declaration under Title IV of the Stafford Act as a result of the COVID-19 pandemic. These suspensions and waivers are also available to any PJ that receives a major disaster declaration related to the COVID- www.hud.gov espanol.hud.gov 2 19 pandemic after the date of this memorandum. These suspensions and waivers are intended to provide maximum administrative flexibility to PJs and better assist low -and very low-income households as they deal with the effects of the COVID-19 pandemic. 1. 10% Administration and Planning Cap Requirement: Limitation on the Use of HOME Funds for Administrative Costs Citations: Section 212(c) of NAHA and 24 CFR 92.207 Explanation: These provisions limit the amount of HOME funds that a PJ may use for administrative and planning costs associated with its HOME award. A PJ may expend up to 10 percent of its annual HOME allocation, plus any program income received, for administrative and planning costs. These provisions are suspended to enable the PJ to expend up to 25 percent of its FY 2019 and FY 2020 allocations and program income received for administrative and planning costs. Justification: This suspension is required to provide the PJ adequate funds to pay for the increased cost of administering HOME -related activities to address the effects of COVID-19, including attempts to prevent the spread of the virus. The suspension is also intended to relieve the PJ of the burden of identifying other general funds to pay HOME administrative and planning costs at a time when the State and local tax revenues that provide general operating revenue are decreasing. Applicability: This suspension and waiver applies to the FY 2019 and FY 2020 HOME allocations of PJs that are covered by a major disaster declaration. 2. CHDO Set -aside Requirement Requirement: Set -aside for Community Housing Development Organizations (CHDOs) Citations: Section 231 of NAHA and 24 CFR 92.300(a)(1) Explanation: These provisions establish a set -aside for CHDOs. The PJ must use 15 percent of each annual allocation of HOME funds only for housing owned, developed, or sponsored by CHDOs. Justification: The suspension and waiver are required to relieve the PJ of requirements that may impede the obligation and use of funds to expeditiously assist families affected by the COVID-19 pandemic. Suspension of the CHDO set -aside will immediately make additional HOME funds available for activities such as tenant -based rental assistance for which CHDO set -aside funds cannot be used. 3 Applicability: The CHDO set -aside requirement is reduced to zero percent for the fiscal year 2017, 2018, 2019, and 2020 allocations of State and local PJs. 3. Limits and Conditions on CHDO Operating Expense Assistance Requirement: Citations: Explanation: Justification: Applicability: Operating Assistance for Community Housing Development Organizations (CHDOs) Section 212(g) and 234(b) of NAHA; 24 CFR 92.208 and 24 CFR 92.300(e) and (f) Section 212(g) of NAHA and 24 CFR 92.208 limit the amount of CHDO operating assistance that a PJ may provide to 5% of each annual HOME allocation. Section 234(b) of NAHA and 24 CFR 92.300(f) limit the amount of CHDO operating assistance, in combination with certain other forms of assistance, that each CHDO may receive to the greater of 50% of its annual operating budget or $50,000. 24 CFR 92.300(e) requires a CHDO receiving operating assistance that is not currently receiving CHDO set -aside funding for a specific project to be expected to receive such funding within 24 months. These statutory provisions are suspended and regulatory provisions are waived to permit a PJ to provide up to 10% of its FY 2019 and FY 2020 HOME allocations as operating assistance to CHDOs and to permit a CHDO to receive funding to fill operating budget shortfalls, even if the amount exceeds the higher of $50,000 or 50% of its annual operating budget. Furthermore, PJs will not be required to include a provision in the written agreement with the CHDO that the CHDO is expected to receive CHDO set - aside funds within 24 months of receiving the additional operating assistance, as required in 24 CFR 92.300(e). The suspension and waiver of these requirements is required to ensure that CHDOs are able to maintain operations and retain staff capacity to own, develop and sponsor housing with CHDO set -aside funds to serve communities impacted by the COVID-19 pandemic. PJs in areas covered by a major disaster declaration may use up to 10% of their FY 2019 and FY 2020 allocations for CHDO operating assistance. A CHDO receiving increased operating assistance must use the assistance to maintain organizational capacity during the COVID-19 pandemic. CHDOs may receive increased operating assistance under these suspensions and waivers through June 30, 2021. 4 4. Matching Contribution Requirements Requirement: Reduction of Matching Contributions Citation: 24 CFR 92.218 and 92.222(b) Explanation: The provisions of 24 CFR 92.218 and 24 CFR 92.222(b) require all HOME PJs to contribute throughout the fiscal year to housing that qualifies as affordable housing under the HOME program. The contributions must total no less than 25 percent of the HOME funds drawn from the PJ's HOME Investment Trust Fund Treasury account. The COVID-19 pandemic has drastically reduced economic activity, reducing state and local tax revenues and placing financial strain on PJs as they deliver urgently needed public health, emergency housing, education, community and social services. Reducing the matching requirement for PJs in areas covered by a major disaster declaration by 100 percent for FY 2020 and FY 2021 will ease the economic burden on PJs and eliminate the need for them to identify other sources of match for HOME activities. Justification: Given the urgent housing and economic needs created by COVID-19, and the substantial financial impact the PJ will face in addressing those needs, waiver of these regulations will relieve the PJ from the need to identify and provide matching contributions to HOME projects. Applicability: This match reduction applies to funds expended by a PJ located in Presidentially declared -disaster area between October 1, 2019 and September 30, 2021. II. Regulatory Waivers Available to All Participating Jurisdictions The following regulatory waivers are available to all PJs, not just those PJs covered by a major disaster declaration under Title IV of the Stafford Act. Pursuant to the authority provided in 24 CFR 5.110, I hereby waive the HOME regulatory requirements specified below for all HOME PJs. 1. Citizen Participation Reasonable Notice and Opportunity to Comment Citation: 24 CFR 91.105(c)(2) and (k) (Local governments), 24 CFR 91.115(c)(2) and (i) (States), and, 24 CFR 91.235(e) (Insular areas) 24 CFR 91.401 (Consortia) Explanation: The regulations at 24 CFR 91.105(c)(2) and (k) (Local governments), 24 CFR 91.115(c)(2) and (i) (States), 24 CFR 91.235(e) (Insular Areas), and 24 CFR 91.401 (Consortia) set forth the citizen participation requirements for PJs. For substantial amendments to the consolidated plan, the regulations require the PJ to follow its citizen participation plan to provide citizens with reasonable notice and opportunity to comment. The citizen participation 5 plan must state how reasonable notice and opportunity to comment will be given. This waiver will permit PJs amending their plans as a result of the COVID-19 pandemic to reduce the comment period to 5 days. Justification: Given the unprecedented economic disruptions caused by the COVID-19 pandemic, PJs may need to expeditiously reprogram HOME funds to activities that more directly meet their immediate housing needs, including reprogramming funds to cover increased administrative costs or away from other development activities. Requiring these PJs to complete the required public comment period would cause undue delays in the face of urgent and growing need. PJs must have the ability to respond immediately to the unprecedented housing need caused by the COVID-19 pandemic. Applicability: This waiver is in effect for any necessary substantial amendments to FY 2020 and earlier consolidated plans or action plans. 2. Income Documentation Requirement: Source Documentation for Income Determinations Citations: 24 CFR 92.203(a)(1) and (2), 24 CFR 92.64(a) (Insular Areas) Explanation: These sections of the HOME regulation require initial income determinations for HOME beneficiaries by examining source documents covering the most recent two months. 24 CFR 92.64(a) applies these requirements to Insular Areas. Justification: This waiver permits the PJ to use self -certification of income, as provided at §92.203(a)(1)(ii), in lieu of source documentation to determine eligibility for HOME assistance of persons requiring emergency assistance related to COVID-19. Many families affected by actions taken to reduce the spread of COVID-19, such as business closures resulting in loss of employment or lay- offs, will not have documentation that accurately reflects current income and will not be able to qualify for HOME assistance if the requirement remains effective. Applicability: The waiver applies to individuals and families that have lost employment or income either permanently or temporarily due to the COVID-19 pandemic and who are applying for admission to a HOME rental unit or a HOME tenant -based rental assistance program. This waiver also applies to homeless individuals and families who are applying for admission to a HOME rental unit or a HOME tenant -based rental assistance program. Timely provision of this assistance will reduce the spread of COVID-19. If a PJ chooses to use this waiver availability, the PJ must ensure that self - certified income takes into consideration all income, including any 6 unemployment and emergency benefits the applicant will receive. However, for purposes of an applicant's self -certification, emergency tax relief (commonly referred to as stimulus payments) is not to be included as an emergency benefit. Also, the PJ must arrange to conduct on -site rent and income reviews within 90 days after the waiver period. The PJ must include tenant income certifications in each project file. This waiver remains in effect through December 31, 2020. 3. On -Site Inspections of HOME -assisted Rental Housing Requirement: Ongoing Periodic Inspections of HOME -assisted Rental Housing Citation: 24 CFR 92.504(d)(1)(ii) and 24 CFR 92.64(a) (Insular Areas) Explanation: These provisions require that during the period of affordability PJs perform on -site inspections of HOME -assisted rental housing to determine compliance with the property standards at §92.251 and to verify the information submitted by the owners in accordance with the income and rent requirements of §92.252. On -site inspections must occur at least once every three years during the period of affordability. 24 CFR 92.64(a) applies these requirements to Insular Areas. Justification: Waiving the requirement to perform ongoing on -site inspections will help protect PJ staff and limit the spread of COVID-19. To protect PJ staff and reduce the spread of COVID-19, this waiver extends the timeframe for PJs to perform on -going periodic inspections and on -site reviews to determine a HOME rental project's compliance with property standards and rent and income requirements. Applicability: The waiver is applicable to ongoing periodic inspections and does not waive the requirement to perform initial inspections of rental properties upon completion of construction or rehabilitation. Within 120 days of the end of this waiver period, PJs must physically inspect units that would have been subject to on -going inspections during the waiver period. The waiver is also applicable to on -site reviews to determine a HOME rental project's compliance with rent and income requirements if the project owner is unable to make documentation available electronically. The waiver is in effect through December 31, 2020 4. Annual Inspection of Units Occupied by Recipients of HOME Tenant -Based Rental Assistance (TBRA) Requirement: Annual Inspections of TBRA Units 7 Citation: 24 CFR 92.504(d)(1)(iii); 24 CFR 92.209(i) requirement for annual re -inspections and 24 CFR 92.64(a) (Insular Areas) Explanation: These provisions require PJs to annually inspect each unit occupied by a recipient of HOME TBRA. 24 CFR 92.64(a) applies these requirements to Insular Areas. Justification: Waiving the requirement that these annual inspections be performed according to schedule will protect the health of both inspectors and TBRA tenants by observing physical distancing recommendations to limit the spread of COVID-19. Applicability: The waiver is applicable to annual HQS inspections required to occur from the date of this memorandum through December 31, 2020. At the end of this waiver period, PJs must inspect units that would have been subject to HQS inspections during the waiver period within 120 days of the expiration of the waiver. In addition, PJs shall make reasonable efforts to address any tenant - reported health and safety issues during the waiver period. 5. Four -Year Project Completion Requirement Requirement: Four -Year Project Completion Deadline Citation: 24 CFR 92.205(e)(2) and 24 CFR 92.64(a) (Insular Areas) Explanation: The provision requires that projects assisted with HOME funds be completed within 4 years of the date that HOME funds were committed. If the project is not complete, in accordance with the definition of "project completion" at 24 CFR 92.2, by the deadline, the project is involuntarily terminated in HUD's Integrated Data Information System (IDIS), and the PJ must repay all funds invested in the project. The regulations permit a PJ to request an extension of the deadline for up to one-year. 24 CFR 92.64(a) applies these requirements to Insular Areas. Justification: This waiver is necessary to provide additional time to permit completion of HOME -assisted projects that may be delayed as a result of the impact of COVID-19 on project timelines. These delays may occur as a result of worker illnesses or efforts to reduce the spread of COVID-19, such as smaller construction crews or delays in local permitting or inspections due to government office closures. Applicability: This waiver applies to projects for which the 4-year project completion deadline will occur on or after the date of this memorandum. The completion deadlines for covered projects are extended to December 31, 2020. 8 6. Nine -Month Deadline for Sale of Homebuyer Units Requirement: Qualification as Affordable Housing: Homeownership Citation: 24 CFR 92.254(a)(3) and 24 CFR 92.64(a) (Insular Areas) Explanation: This provision requires that a homebuyer housing unit developed with HOME funds have a ratified contract for sale to an eligible homebuyer within 9 months of the date of completion of construction or rehabilitation. If there is no ratified sales contract with an eligible homebuyer within 9 months of completion of construction or rehabilitation, the housing must be rented to an eligible tenant in accordance with §92.252. 24 CFR 92.64(a) applies these requirements to Insular Areas. Justification: Many PJs will not be able to meet this deadline due to the effect the COVID-19 pandemic will have on the ability of eligible households to qualify for mortgages as a result of income losses or the inability to schedule inspections, titles searches, or closings during periods of business closures. The waiver is necessary to prevent the loss of homeownership opportunities for HOME -eligible families and temporarily suspend the required corrective action of repayment of HOME funds or conversion of the homebuyer units to rental housing. Applicability: The waiver applies to projects for which the 9-month homebuyer sale deadline occurs on or after the date of this memorandum and extends the deadline for those projects to December 31, 2020. This waiver does not apply to the remaining requirements of the regulation, including that a homebuyer must receive housing counseling, and that a PJ must determine eligibility of a family by including the income of all persons living in the housing. 7. Use of HOME Funds for Operating Reserves for Troubled HOME Projects Requirement: Troubled HOME Projects Citations: 24 CFR 92.210(a) and (b) and 24 CFR 92.64(a) (Insular Areas) Explanation: 24 CFR 92.210 establishes provisions to permit HOME rental projects that are not financially viable (i.e., projects for which operating costs significantly exceed operating revenue) to be preserved through the use of HOME funds to recapitalize project reserves. 24 CFR 92.210(a) requires HUD to review market needs, available resources, and the likelihood of long-term viability of the project before approving this use of HOME funds. 24 CFR 92.210(b) requires a written memorandum of agreement between HUD and the PJ as a precondition of this funding and certain 9 limitations on the amount of funding. 24 CFR 92.64(a) applies these requirements to Insular Areas. Justification: The waiver is necessary to enable PJs to take rapid action to preserve the financial viability of HOME -assisted affordable rental projects currently under a HOME period of affordability. Because existing tenants in HOME units may be unable to meet their rent obligations due to the economic impact of the COVID-19 pandemic, HOME rental projects may experience operating deficits due to the sudden decrease in rental revenue. Applicability: The waiver applies to HOME -assisted rental projects currently within the period of affordability established in the HOME written agreement. PJs will not be required to obtain HUD approval or execute a memorandum of agreement with HUD before providing this assistance. PJs may only exercise this waiver authority when the project owner agrees to forego: 1) any distributions of residual receipts resulting from the project throughout the waiver period and for a period of 6 months thereafter; 2) any right under the existing lease agreement or State or local law to pursue legal action against tenants of HOME -assisted units for non-payment of rent and the collection of any fees associated with late payments without prior approval of the PJ; and 3) any adverse credit reporting against tenants of HOME - assisted units for nonpayment of rent or fees without prior approval of the PJ. The PJ may provide additional HOME funds to recapitalize operating deficit reserves for HOME -assisted rental projects if the PJ determines that the project is experiencing operating deficits related to the economic effects of the COVID-19 pandemic during the waiver period. The PJ may only provide this assistance to projects experiencing operating deficits that will not be covered by insurance or other sources (e.g., other private, local, state, or federal funds). The maximum amount of HOME assistance that may be provided is equal to the total of the project's operating expenses, previously scheduled payments to a replacement reserve, and actual debt service (excluding debt service of loans in forbearance) multiplied by the proportionate share of HOME - assisted units to the total number of units in the project for the period beginning on April 1, 2020 and ending on December 31, 2020. Project operating expenses may be demonstrated by one of the following: • The Owner's most recent year to date financials for the project; • Certified project -level accounting records covering the most recent 3 months; and • Copies of project -level bank statements covering the most recent 3 months. 10 Project operating expenses may also be adjusted due to COVID-19-related expenditures and foregone expenses due to social distancing measures and other COVID-19-related impacts. An owner may demonstrate these expenses with recent receipts, copies of work orders, revised budgets that have been certified by the project owner as true, accurate representations of current expenditures. In order to take advantage of this waiver, PJs must amend the HOME written agreement with the project owner to include the amount of HOME funds that will be provided to an operating reserve (i.e., the proportion of total costs attributable to HOME units as described in the paragraph above), the costs eligible to be paid with HOME funds in the operating reserve (i.e., operating expenses, scheduled payments to a replacement reserve, and qualifying debt service), and the documentation the PJ is required to maintain to demonstrate the allowable amounts and eligibility of costs paid with the HOME funds in the operating reserve. The written agreement must specify that the owner must forego: 1) any distributions of residual receipts during the period this waiver is in effect and for a period of 6 months thereafter; 2) any right under the existing lease agreement or State or local law to pursue legal action against tenants of HOME -assisted units for non-payment of rent and the collection of any fees associated with late payments without prior approval of the PJ; and 3) any adverse credit reporting against tenants of HOME -assisted units for nonpayment of rent or fees without prior approval of the PJ. Within 6 months following the waiver period, the PJ must review the project's records of actual revenue and operating expenses, total amount of HOME funds expended from the operating reserve, and the eligibility of expenses by examining invoices and receipts. The written agreement must require the project owner to repay any expenditures for costs determined to be ineligible and any balance of HOME funds remaining in the reserve after December 31, 2020. Any HOME funds repaid to the PJ must be deposited in the local HOME account and reported as program income in IDIS. The waiver is effective through December 31, 2020. 8. Timeframe for a Participating Jurisdiction's Response to Findings of Noncompliance Requirement: Corrective and Remedial Actions Citations: 24 CFR 92.551(b)(1) and 24 CFR 92.64(a) (Insular Areas) Explanation: 24 CFR 92.551(b)(1) requires that if HUD determines preliminarily that a PJ has not met a provision of the HOME regulations, the PJ must be notified and given an opportunity to respond within a time period prescribed by 11 HUD, not to exceed 30 days. 24 CFR 92.64(a) applies this requirement to Insular Areas. Justification: The waiver is necessary to permit HUD to provide PJs with an extended period to respond to findings of noncompliance in recognition of the unanticipated circumstances created by the COVID-19 pandemic. While HUD must continue its oversight function for the HOME Program, requiring PJs to respond to all findings of noncompliance within 30 days may interfere with a PJ's ability to address the unprecedented housing needs caused by the COVID-19 pandemic. Applicability: The waiver applies to all findings of HOME regulatory noncompliance issued from the date of this memorandum through December 31, 2020. In the notice of findings, HUD will specify a time period for the PJ's response based on the nature of the noncompliance and required corrective action(s). HUD may also, upon request by the PJ, extend time periods imposed before the date of this memorandum. Questions regarding this waiver should be directed to Virginia Sardone, Director, Office of Affordable Housing Programs (OAHP), or your OAHP desk officer. Participating jurisdictions and other HOME Program participants should contact the CPD Division of their local HUD Field Office.