Key RAD Goals. Build on the proven Section 8 platform Leverage private capital to preserve assets Offer residents greater choice and mobility

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2 Key RAD Goals 2 Build on the proven Section 8 platform Leverage private capital to preserve assets Offer residents greater choice and mobility

3 RAD Conversion Eligibility 3 Public Housing Mod Rehab Rent Supp & RAP 1 st Component: Competitive: 60,000 Units 2 nd Component: Non-Competitive, No-Cap (subject to availability of TPVs) PBRA PBV PBV

4 Public Housing Conversion Rent Levels 4

5 RAD Inventory Toolkit Snapshot 5

6 RAD Web Page 6 RAD Notice, application materials, and additional resources can be found at questions to rad@hud.gov

7 HUD RAD CONVERSION GUIDE

8 Organized in 5 Phases 8 Planning Identifying RAD projects, building a budget Resident Protections Assembling the Team Confirm Financing Partners

9 Phase 1 Planning 9 Become familiar with the Notice (231 pages, revised Feb 2014) Financial feasibility No PHA may be awarded more than 1,000 units If submitting multiple applications, consider applying for all units Compete only with similar PHAs Initial application Period apps are considered first Use Planning Tool

10 Phase 1 Planning, continued 10 Schedule Planning Meetings and Long- Lead Items Identify Potential Lenders/Investors Resident Meetings (at least 2) Physical Conditions Assessment (et estimate)

11 Phase 1 Planning, continued 11 Determine if properties have existing debt ESCOs are subordinated to new debt CFFP Other mixed-finance Under RAD all existing debt is retained. May require prepayment of project-level debt

12 Phase 2 Identify Projects 12 Operating Budget Rent levels and project income (currently determined by ACC contract) New level set with HUD Section 8 or PBV Operating Expenses Historical expenses Required capital repairs Pilot Management fees Replacement Reserves

13 Phase 2 Identify Projects, continued 13 Development Budget Sources and Uses Construction Costs Acquisition Costs (generally only if LIHTC) Professional Fees (PCA, title, market studies) Loan Costs and Fees Reserves Developer Fees

14 Phase 2 Identify Projects, continued 14 PHA Sources Operating funds, Capital Funds, Replacement Housing Factor Deferred Developer Fee Other Financing Sources Home/CDBG Affordable Housing Program of FHLB Local or State Trust Funds Green Energy

15 Phase 2 Identify Projects, continued 15 Additional Sources 4% or 9% LIHTC Use Tool for LIHTC Estimator which provides a projection of potential LIHTC equity minus transaction costs Following adjustments should be considered Seller Take-Back Financing Acquisition Costs Construction Costs Operating Reserves Developer Fee

16 Phase 3 Resident Process 16 Communications first of 2 meetings as soon as identified a potential RAD project Rights and Requirements no additional screening. Minimize temporary relocation Different provisions under PBV or PBRA (Choice Mobility)

17 Phase 4 Assemble A Development Team 17 Successful mixed-finance experience may be sufficient for many PHAs Absent experience, engage consultants and/or partners NO scoring factors, but HUD will review capacity of the PHA relative to the complexity of proposed project Especially important for LIHTC PHAs may use up to $100,000 in PH funds for RAD predevelopment expenses without prior HUD approval In most cases PHA may ne able to use Small Purchase Procedures

18 Phase 5 Confirm Financial Partners 18 Once projections are complete begin talking to lenders If 4% credits are pursued, talk with providers of financings NO requirement for PHA to secure lender or investor prior to submitting an application. See Appendix B Considerations in Choosing a Lender & Lender Terms

19 OTHER RAD CONSIDERATIONS

20 Funding 20 RAD is revenue neutral in Year 1 No new Funds from HUD! Provisions for operating cost adjustments ( OCAF ) Rents will never decrease Protections from effects of Sequestration PHA subsidies and Capital Fund appropriations are decreasing

21 Choice Mobility Key Components 21 Tenants assisted with PBV can move after one year with a voucher For PBRA units, tenants can move with a voucher after 24 months PHA can limit PBRA turnover with a voucher to 1/3 of turnover in voucher program Can limit moves to 15% of project Good cause exemptions in limited circumstances

22 PBV versus PBRA 22 PVB Pros PHA administers assistance Administrative fees earned Management fees from both site and HCV program for COCC No REAC Inspections Cons Lower cap on maximum rents and thus less potential debt service (110% of FMR) Only 50% of units can receive assistance unless exceptions met Need Capacity to administer PBV assistance (must have existing HCV Program to self administer PBV)

23 PBV versus PBRA, continued 23 PBRA Pros Higher cap on rents support greater debt (120% of FMR) All units can be assisted Cons Must learn to use TRACS Subject to REAC Inspections HUD administers assistance so no administrative fees Possible higher operating costs because site must do subsidy calculations Choice Mobility is still applicable

24 Considerations in Choosing PBRA vs. PBV 24 Item PBRA PBV 1. Baseline Funding Levels Based on 2012 levels, with Operating Fund Allocation Adjustment restored Same 2. Initial Contract Term 20 years 15 years (up to 20 at option of voucher agency); voucher agency may also automatically extend for another 15 years 3. Contract Renewals At end of contract term, Secretary must offer, and PHA must, accept renewal Same 4. Rent Caps Current funding cannot exceed 120% of the FMR, unless the current funding is less than market, in which case the current funding cannot exceed 150% of FMR. 5. Annual Inflation Adjustment Based on Operating Cost Adjustment Factor (OCAF), i.e., the method used to adjust rents for Multifamily projects renewed under the Multifamily Assisted Housing Reform and AffordabilityAct (MAHRAA). 6. Choice Mobility Resident may request next available voucher after two years; however, voucher agency may limit to not more than 15% of project in any year and not more than 33% of voucher turnover due to RAD. 7. Voucher Admin N/A Fee Current funding cannot exceed the lower of (1) reasonable rent or (2) 110% of FMR. Same Resident may request next available voucher after one year, with no limitations. PHA earns Section 8 voucher admin fee for all units converted to PBV. Note: for agencies that do not administer a voucher program, and that convert to PBVs, the voucher agency will be responsible for administration of the waiting list, eligibility, reexaminations, leading to substantial deregulation for the converting agency.

25 Considerations in Choosing PBRA vs. PBV, continued REAC / UPCS Inspections Yes No (unless project receives FHA insurance) 9. REAC/FASS-MF Annual Financial Statements Yes No (unless project receives FHA insurance) 10. Management and Yes No (unless project receives FHA insurance) Occupancy Reviews (MORs) 11. Cash Flow Unrestricted Same 12. Appropriations Annual funding subject to appropriations; however, the Congress has never failed to renew a PBRA contract An agency s voucher funding is subject to annual appropriations. Because of the RAD Use Agreement, if Congress provides less than full funding for the Voucher program (i.e., proration), the PHA administering the voucher program may will likely need to absorb the cuts from its non-rad voucher units. 13. Rehab Requirements There is no required level of rehab under RAD (or requirement to leverage debt). The PHA must simply ensure that identified needs are addressed. 14. FHEO Standard FHEO requirements not waived under RAD. Same Site/Neighborhood Standards 15. Income Mixing N/A Under normal PBV rules, not more than 25% of units in a project can be assisted, unless the units are elderly or disabled, scattered site, or receiving supportive services. RAD increased the threshold to 50%, with the same exceptions. Same

26 Considerations in Choosing PBRA vs. PBV, continued Contract Administration For PBV, the CA is the agency the administers the voucher program PBRA is managed by the management agent (may be the PHA) Lender Familiarity lenders are much more familiar with PBRA CAP on assisted units Under RAD only 50% of units can be assisted No CAP on PBRA 26

27 Considerations in Choosing PBRA vs. PBV, continued 27 Reasonable Market Rents PHA needs to determine reasonable rent to complete RAD App For App, no need for a Rent Comparability Study Lender will likely require to determine comparable market rents Vacancy Loss Other Income (Laundry, vending, etc)

28 ACC Unit / Faircloth Limit Reduction 28 Current Capital Fund fungibility is lost Leveraging of Capital Funds for Debt lost Reserves become site specific Residual receipts might not be fungible depending upon ownership structure If PHA eliminates all ACC units, Agency Plan might not be required Could De-Federalize some PHA funds ACC units cannot have Debt

29 Other Considerations 29 Agency Plan Amendment Required Resident Participation Required Choice Mobility Physical Needs Assessment

30 Physical Condition Assessment Requirements 30 A detailed physical inspection of a property to determine critical repair needs, short- and long-term rehabilitation needs, market comparable improvements, and environmental concerns Tool is at Must be completed by a qualified, independent third-party inspector Due to HUD within 90 days of CHAP issuance

31 Physical Condition Assessment - Key Components Utilities and Appliances Site and Infrastructure Windows and Doors Building Envelope and Roof HVAC and Domestic Hot Water Plumbing and Electrical Elevators Fire Protection Unit Interiors 31

32 Financing RAD conversions, rehabilitation and/or new construction 32 Financial transaction examples FHA Insured, 185-unit project replacement value $20 million Sources FHA 223(f) Loan $4,000,000 21,622 Uses total $4,000,000 21,622 Capitalized reserve $449,000 $2,427 Repairs $2,775,000 15,000 Development fee 400,000 2,162 Cash to owner 100, Transaction Costs/Financing Fees 276,000 1,492 total $4,000,000 21,622

33 Financing RAD conversions, rehabilitation and/or new construction 33 Financial transaction example 9% LIHC, 420 unit project Sources Loan (FHA 221(d)(4); conventional) $ 4,351,000 10,359 Seller Note 9,620,000 22,900 LIHC equity 19,800,000 47,140 total $33,771,000 80,410 Uses Acquisition $9,620,000 22,900 Rehabilitation 18,601,000 44,290 Soft Costs 1,017,000 2,420 Financing Fees 662,000 1,580 Development fee 2,100,000 5,000 Operating & Replacement Reserve 1,771,000 4,220 total $33,771,000 80,410

34 Financing RAD conversions, rehabilitation and/or new construction 34 Financial transaction example - 4% LIHTC, 420 unit project Sources Loan (FHA 221(d)(4); Bond) $7,650,000 18,210 Seller Note 9,620,000 22,900 Deferred Development fee 1,050,000 2,500 LIHC equity 9,932,000 23,650 Other Capital 6,149,000 14,640 total $34,401,000 81,900 Uses Acquisition $9,620,000 22,900 Rehabilitation 18,601,000 44,290 Soft Costs 1,017,000 2,420 Financing Fees 1,292,000 3,080 Development fee 2,100,000 5,000 Operating & R4R / Working Capital 1,771,000 4,220 total $34,401,000 81,900

35 Legal Structure and Ownership Considerations 35 RAD Statute provides Ownership or Control by Public or Nonprofit Entity Ownership means legal title Control means ability to direct the financial, legal, beneficial, or other interests of the owner Could be through contract, partnership or voting right of entity 51% or more interest in of the general partner of limited partnership Other forms of control Long term ground lease Subordinate seller (PHA) financing Right of fires refusal in sale of project RAD Notice provides for the following priority in ownership Capable public entity Capable non-publicentity as determined by Secretary For-Profit entity to facilitate use of low-income housing tax credits

36 May Be Dependent on Financing Plan 36 No New Financing or Debt Only Financing PHA or other public entity could be Owner with FNA or conventional financing Single Asset Borrower Requirement for FHA Financing Must be eligible mortgagor under FHA guidance Creation of PHA affiliate or Instrumentality No competitive requirements for contractor selection

37 Bond and Tax Credit Financing 37 Considerations for PHA or Another Entity as Developer Development Financing or Tax Credit Experience Management Experience section 8/LIHTCs Guarantees HUD limitations on PHA guarantees Investor Requirements Limited Partnership or LLC Need to create owner entity for tax credit purposes General Partner Role Investor Limited Partner Role

38 Additional Requirements 38 Ongoing Ownership Eligibility Requirements Standard or High Performer under PHAS and SEMAP Maintain compliance with HUD reporting and programmatic requirements No debarment, suspension of LDPs Compliance with all Fair Housing and Civil Rights Compliance PBV and PBRA Considerations with respect to PHA ownership PHA Ownership Interest under PBV Program Broad definition in regulations

39 ASSET MANAGEMENT

40 Asset Management 40 Regulatory Requirements for LIHTC/SLIHC are 15 years with a 35 Year extended use agreement, total 50 Years. Once you have satisfied LIHTC requirements you should seek to satisfy any remaining or more restrictive requirements of your other programs. Reporting Requirements: Syndicators Monthly, Quarterly and Annually NY State HCR Annually (Budgets and Audits) HUD Annually Inspections Performed: Syndicator Annual File Testing and Site Visit NY State Every Three Years HUD REAC (If PBRA or have HUD Mort.) Income Limits: PHA up to 80% of the AMI LIHTC program up to 60% of AMI, SLIHC 90% of AMI

41 Factors Owner Structure 41 PHA or non-profit entity (control) Liability and insurance Property tax exemption Private enterprise agreements Management Continued existence of other public housing Low income housing tax credits (LIHTC) FHA loan Borrower Status Single asset entity Mission

42 Ownership Structure Example 42

43 TYPICAL RAD PROFORMA ENTITY CONSIDERATIONS WITH A SINGLE ASSET ENTITY (SAE)

44 Revenue 44 Pre-RAD Based on HUD determined formula (recently 82-85% of eligibility) AMPS portion of capital fund is applied as physical issues demand/5-year planning tool Tenant rent Post-RAD RAD rents represent a combination of revenue (based on the 2012 public housing subsidy at 95%, if 2013 application deadline met), the property s portion of capital fund and tenant rents In the RAD deals MHA has closed and are pending closing, the GPR represents an average 36% increase in revenue

45 Salaries 45 Pre-RAD Property Manager Assistant Property Manager Maintenance Supervisor Maintenance Assistant Typically, salary expenses are paid by the AMP, often consisting of multiple properties, which means that several projects could contribute economies of scale.

46 Salaries 46 Post-RAD Same management personnel requirements, but: Manager/Assistant Manager: New skill expectations (Section 8 multi-family, , possible TC rules, waiting list administration, etc.) Consider having the property contracting with site staff (cost benefit analysis) Maintenance: No new skills needed, unless major upgrades occur with new equipment, green requirements, etc.

47 Maintenance 47 Pre-RAD Typical allowable fee paid by AMP to COCC as a maintenance fee In many cases, this is substantial Maintenance salaries tend to get out of proportion with true stand-alone market properties since they are typically ties with the PHA benefit packages Post-RAD Fee paid to COCC may go away (depends on how the fee measures up in the marketplace) Property Manager can contract for services based on best price and services Consider paying maintenance personnel with an employee contract (no longer an employee of PHA, but now an employee of the property)

48 Tenant Services 48 Pre-RAD Sky is the limit with social/tenant services Public housing tenant governance structure Tenant committees/tenant council/resident associations, etc. Post-RAD $25 PUPY=regulatory minimum for expense level No additional space is required (may be desired, but not required) Property can contract with various providers as needed, based on best service, price, and needs Requirements for tenant services tend to fluctuate from year to year with tax credit applications (with tax credits, DCA requirements can represent a considerable expense)

49 Insurance 49 Pre-RAD General property liability insurance Post-RAD General property liability insurance Depending on financing and tax credits, could have more expensive criteria as required by investor Major renovations could increase premium due to solar panels, untested technologies, equipment, etc.

50 Pilot 50 Pre-RAD Shelter rent formula as calculated using the HUD form and agreed upon with local jurisdiction Post-RAD Start early with local assessor/mayor/county commissioner PILOT preferred Granted in our case in writing The argument being that a RAD conversion does not change the purpose/demographic being served Represents substantial savings as compared to local property tax

51 Vacancy Loss/Allowances 51 Pre-RAD Budget based on AMP s vacancy history Post-RAD RAD proforma requires not less than the greater of 3% of historical average for the property. If FHA loan is considered, typically 7% is budgeted for proforma. With improvements, property may be less than 5-7% with a nice renovated product.

52 Management Fee 52 Pre-RAD Property management fees allowed by HUD: Property Management Fee (PUPOM) + Bookkeeping Fee (PUPOM) + Asset Management Fee (PUPOM) = Substantial fee for PHA MHA = $72.18 Post-RAD Fee based on multi-family s allowable local/regional level $43.00 for typical Macon market PBRAs Significant drop! But, this is where retaining cash flow makes up the difference and it becomes unrestricted

53 Reserves 53 Pre-RAD Operating reserves as generated by the AMP from year to year Post-RAD Derived from HUD s required RPCA (which can be problematic, but quantifiable) Designed to act as capital fund moving forward Able to bring pre-rad property reserves with the property under a RAD conversion Budget for it based on an established amount per month

54 Mortgage Payment 54 Pre-RAD Typically no existing debt on public housing Post-RAD With repairs, financing likely to be involved with a resulting mortgage payment 223(f) FHA loan (light rehab) 221(d)(4) FHA loan (heavy rehab) FHA loan = due diligence Tax credit Private loan, etc.

55 Cash Flow 55 Pre-RAD Classified as residual receipts and considered project or program funds Restricted Post-RAD Distributions are unrestricted Property to distribute cash flow days after FYE, after: All expenses Insurance premiums Reserves, PILOT, etc. Mortgage payment, if any

56 Summary 56 Make sure the property can sustain the reserve requirement and debt service long term Once a property converts, the majority of public housing rules/way of doing things goes away Closing pitfalls Questions?

57 PH PBRA TRANSITION

58 Things to Remember as You Transition from PH - PBRA 58 Must develop a new mind set Must learn RAD/PBRA rules Must learn new terms and acronyms Some section 8 rules are waived RAD is a work in progress Ensure employees receive training

59 HUD Offices/Contacts 59 PUBLIC HOUSING HUD Office of Public and Indian Housing (PIH) HUD Program Analyst PIC/EIV Coach REAC HUD Office of Fair Housing PBRA (RAD) HUD Office of Multifamily Housing (Housing) HUD Project Manager TRACS Help Desk REAC HUD Office of Fair Housing RAD Coach

60 Primary Resource Documents 60 PUBLIC HOUSING Public Housing Guidebook Instruction Guide HUD PIH Notices PBRA (RAD) HUD (Occupancy) HUD (Financial) Special Claims Guidebook MAT Guide (50059/50059A) HUD Housing Notices RAD Final Rule (PIH )

61 Required Policies 61 PUBLIC HOUSING PHA Agency Plan ACOP Pet Policy EIV Security/Use Policy (PIH Rules) Grievance Procedures PBRA (RAD) Tenant Selection Plan House Rules Pet Policy (If applicable) EIV Security/Use Policy (Multifamily Rules) Affirmative Fair Housing Marketing Plan (AFHMP) Management Policies and Procedures Manual (Recommended)

62 Program Comparisons 62 PUBLIC HOUSING Performance Based Funding IMS-PIC Database Max Tenant Rent = Flat Rent Security Deposit = $50 Minimum Rent (TTP) = $50 PH Lease Interim Re-Cert Policy PHA Rules No Special Claims PBRA (RAD) Monthly Vouchers TRACS Database Max Tenant Rent = Contract Rent Security Deposit > TTP/$50 Minimum Rent (TTP) = $25 HUD Model Lease/VAWA Interim Re-Cert Policy HUD Rules Special Claims Rent Loss Tenant Damages

63 Program Comparisons 63 PUBLIC HOUSING PIH Forms/Notices Flat Rent Updates Utility Allowances Utility Rate Method No Late Charges (optional) Resident Organizations Waiting List Global Unit Inspections Move-In Annual Move-Out PBRA (RAD) Multifamily Forms/Notices Annual OCAF Utility Allowances Average Usage Method Late Charges - $1/Day Resident Organizations Owner Must Contribute Waiting List Site Based Unit Inspections Move-In Annual Move-Out

64 Program Comparisons, continued 64 PUBLIC HOUSING Earned Income Disregard (EID) FSS Program Community Service Requirement PBRA (RAD) No EID for New Tenants No FSS for New Tenants No Community Service EID and FSS Continue for Initial RAD tenants

65 Program Comparisons, continued 65 PUBLIC HOUSING Pets Must be Allowed Pet Deposit PHA Set Must Accept Service Animals Pet rule do not apply Sanitation rules apply Reasonable Accommodation PBRA (RAD) Pets Discretionary for New Tenants Existing Pets Must be Accepted. Pet Deposit = Max $300 Payment Agreement $50 Down Payment $10/Month Must Accept Service Animals Pet rules do not apply Sanitation rules apply Reasonable Accommodation

66 Eligibility Criteria New Tenants 66 PUBLIC HOUSING Low Income Limit (80% AMI) Criminal Screening Sex Offender Screening PHA Required Screening Citizenship Status No Dual Subsidy No Debts Owed Federal Housing Programs Verification of SS numbers *No Section 8 Student Rule PBRA (RAD) Low Income Limit (80% AMI) Criminal Screening Sex Offender Screening PHA Required Screening Citizenship Status No Dual Subsidy No Debts Owed Federal Housing Programs Verification of SS numbers *Section 8 Student Rule

67 Section 8 Student Rule 67 Assistance shall not be provided to anyone who: Is enrolled in an institution of higher education Is under 24 years of age Is not married Is not a veteran Does not have a dependent child Was not disabled and receiving assistance on 11/30/05 Was not living with parents Does not have parents eligible for Section 8 assistance Qualifies as in Independent Student under Higher Education Act

68 Section 8 Student Rule 68 PUBLIC HOUSING Financial Aid exempted from annual income PBRA (RAD) Financial Aid in excess of tuition is included as income unless the student is over 24 with dependent children or the student is not living with parents If household does not meet requirements of Student Rule family must be evicted Include student questions on application and recertification update form Initial RAD tenants with students are grandfathered in

69 Student Affidavit At Move-In and Annual Recertification 69 Is any household member a student at an institution of higher education? Institutes of higher education include postsecondary vocational institutions; proprietary institutions of higher education which prepare students for gainful employment in a recognized occupation, and accredited post-secondary colleges and universities. If tenant answers no, must sign and date form If tenant answers yes, the owner agent is required to determine eligibility of the student. Tenant must complete questionnaire, sign and date the form.

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71 TTP/Rent Calculations 71 PUBLIC HOUSING HUD TTP = >30% of AI or 10% GI Elderly Deduction = $400 Medical/HC Expenses Elderly/Disabled Family Expenses over 3% of AI Dependent Allowance $480 X # Dependents Adult Students Disabled Adults PBRA (RAD) HUD 50059/50059A TTP = 30% of AI or 10% GI Unless phase-in applies Elderly Deduction - $400 Medical/HC Expenses Elderly/Disabled Family Expenses over 3% of AI Dependent Allowance $480 X # Dependents Adult Students Disabled Adults

72 Resident Protections at RAD Conversion No rescreening of current tenants for eligibility factors Earned income disallowance continues FSS participants continue program Rent increase phase-in IF Tenant rent increases $25 or 10% per month due to RAD Tenants have a right to return after temporary relocation PH tenant rights preserved in grievance process 72

73 RAD Transition Team 73 Include all stakeholders in your team Have regular meetings Develop a transition matrix Assign tasks to team members Make policy decisions Set tentative target dates Develop a model a for future RAD conversions

74 Major Topics to Include in Matrix 74 Actions Prior to Closing: Submit Affirmative Fair Housing Marketing Plan (AFHMP) Implement TRACS compliant software convert data Create site-based waiting list Develop tenant selection plan Develop house rules/pet rules/list of changes Develop PBRA compliant application form/notices/letters Calculate Phase-In rents Meet with tenants Provide tenants with notice of termination of lease Provide training to staff occupancy/software

75 Major Topics to Include in Matrix, continued 75 Actions at or Post Closing: Submit EOPs to PIC Submit RAD disposition application to PIC Obtain access to multifamily secure systems APPS/TRACS/EIV Obtain WASS numbers for security systems coordinator and users Obtain TRACS mail ID number Obtain DUNS number Execute 50059s/leases/required forms with residents Submit baseline submission Submit first HAP voucher Assemble files flag as RAD initial file Run EIVs within 90 days of HAP contract execution date

76 HUD SYSTEMS BASICS

77 HUD Multi-Family Systems 77 APPS: Active Partners Performance System EIV: Enterprise Income Verification TRACS: Tenant Rental Assistance Certification System imax: Integrated Multifamily Access Exchange SAM: System for Award Management FASS: Financial Assessment Subsystem PASS: Physical Assessment Subsystem

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79 APPS System 79 Allows new agents and owners to complete online business partner registration Allows new agents and owners to complete an online previous participation certification, form HUD 2530 as required by the RAD Program see chart Is a pre-requisite to obtaining WASS access to HUD systems For RAD participants, the first HUD 2530 will be completed and submitted in hard copy to the RAD Transaction Manager. All principals must sign. SPECIAL NOTE: The Ownership Entity in APPS will be matched against information on Rent Schedules and HAP renewals.

80 APPS System - Website 80

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82 Obtaining Mult-family System Access Current System User 82 Current WASS System User Manual Activation System Coordinator: Contact the PIH-REAC Technical Assistance Center (TAC) Helpdesk. TAC will send the owner on-record a letter containing Activation Key Code to use to activate the Business Partnership relationship with the new entity. Therefore, the Business Entity (TIN) must already be in the system for this to occur. NOTE: Keep both the HUD letter as well an Owner Authorization letter (on Owner Letterhead) or memo for future audit purposes.

83 Obtaining Multifamily System Access New System User 83 New WASS System User Register for either a Coordinator or User role on HUD s PIH-REAC Online Systems:

84 Obtaining Multifamily System Access New System User, continued 84 New WASS System User, cont. Select the Multifamily Housing Entity site:

85 Obtaining Multifamily System Access New System User, continued 85 New WASS System User Complete the online registration for either a User or Coordinator You are registering under an organization, not as an individual. Therefore you will need the TIN of the organization. Submit the online application and provide a copy of the registration confirmation page to your system coordinator. If you apply to become a system coordinator, the assigned M-ID number will be sent to the owner/organization on record.

86 System Coordinator Role 86 System Coordinator The system coordinator has responsibility for assigning roles and associated contracts to all System Users. First, the system coordinator must assign all necessary roles and actions to him/herself. The system coordinator is also responsible for protecting access to the HUD system, ensuring sensitive information is protected or properly disposed of, and for terminating access for users who no longer need access to HUD systems.

87 System User Role 87 System User The system user is assigned roles that are necessary to perform his/her job, such as an EIV HSC or HSU. Upon assignment, the User can access property-specific information in one or several of HUD submenus: APPS, EIV, imax, TRACS, REAC/PASS.

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89 Becoming an EIV Multifamily System Coordinator 89 After closing, submit a HUD end of participation record for each tenant and submit to PIC Complete the Coordinator Access Authorization Form (CAAF) and fax to the multifamily helpdesk HUD will approve the CAAF and fax back to you All paperwork necessary to gain access to the EIV system must be kept on file

90 Becoming an EIV Multifamily System User 90 Complete the User Access Authorization Form (UAAF) and provide a signed copy to your system coordinator The system coordinator will establish your role and assign contracts/properties. All paperwork necessary to gain access to the EIV system must be kept on file NOTE: Future CAAF and UAAF requests are completed online

91 Changes to your WASS ID Status 91 Anytime changes to your WASS ID are needed, such as an upgrade from a User to a Coordinator Role, fax a letter to the attention of WASS REAC/TAC Administrator and request a change: include in the fax the User s ID, Owner Entity tax ID, and the action requested. The fax or letter must be on the property or company s letterhead and signed by the owner/principal/ceo.

92 TRACS and EIV Systems 92 HUD s Multifamily system allows the User to obtain property specific information, to include unit specific data, which should be used to track and monitor the property operations.

93 EIV System View 93

94 System Access and Security Training Requirements 94 Complete a Rules of Behavior (ROB) form and Security Awareness training each are required annually. Security Training can be completed online by viewing a video, Cyber Awareness Challenge, provided by the federal government. Print out the course certification when completed. NOTE: Security Awareness Training must be completed no later than 30 days after Rules of Behavior are accepted. The Security Awareness Training certification is good for one year and is also valid for all HUD programs.

95 System for Award Management (SAM) HUD Notice H As an owner of a Project-Based Section 8 property, you must obtain a Dun and Bradstreet System (DUNS) number. The DUNS number will allow you to register in the SAM and is a required component of the TRACS Voucher submission. Registration in SAM must remain active and is free of charge. SAM will send reminder notifications to the registered user via 60, 30, and 15 days prior to expiration.

96 Other Multifamily Systems 96 imax TRACS files are sent to HUD using the imax system and requires not only the WASS System User ID and password but also a TRACSMail ID and TRACSMail password. Consult with your software vendor to assist with this interface between the HUD systems and site TRACS software, as there are different ways to send and receive TRACS files based on the software you use.

97 Other Multifamily Systems, continued 97 FASS Owners may be required to submit financial information to HUD on an annual basis through the internet to the Financial Assessment Subsystem Multifamily Housing (FASS). This will apply to owners of properties converting to PBRA which have different tax identification numbers from the PHA, in which case, the Owner will submit an audited or owner-certified financial statement pursuant to HUD s Uniform Financial Reporting Standard.

98 Removal of Your RAD Project from the PIC Inventory System 98 Once your CHAP is received, create and submit an abbreviated application for all units included in your CHAP to be removed from the PIC Inventory this will prevent future scoring of your property under PHAS. Fill out information in Section 1 and Section 5 only. Within section 5, there are only 3 question. (Make sure your have building/units and acreage and non-dwelling building information readily available.) Units will be removed from PIC once the project closes and the new HAP is executed. At which point, your project effectively becomes a Multifamily project for funding purposes.

99 HUD System Recap 99

100 POLICIES AND PROCEDURES HUD

101 Tenant Selection Plan (TSP) 101 Establishes project eligibility and admissions policies Required/recommended topics chapter 4, HUD No board approval required Post for tenant comments HUD approval not required, however: HUD must approve owner preferences not listed in HUD reviews TSP at the time of the annual MOR Ensures WL selection in accordance with HUD requirements Ensures fair and equitable treatment of applicants

102 Tenant Selection Plan 102 Required Topics Project eligibility requirements Income limits Application process Owner adopted preferences Income targeting method (40% rule) Procedures for selecting from waiting list Procedures for rejecting applicants Occupancy standards Unit transfer policies Section 504/Fair Housing Procedures Eligibility of students VAWA protections policies

103 Tenant Selection Plan, continued 103 Recommended Topics Applicant notification of eligibility procedures Identifying need for accessible features Procedures for updating waiting list Security deposit requirements Unit inspections Annual recertification requirements Interim recertification reporting policies

104 Income Targeting 104 Minimum 40% of new move-ins must be at 30% AMI (ELI) Target number based on 40% of previous year s move-ins Review waiting list to determine if targeting is necessary Income targeting includes initial certifications First year target 40% of RAD ICs Must describe targeting method in tenant selection plan Select all ELIs until unit target met Alternate between ELIs and VLIs until target is met Documentation must be available MOR

105 Owner Adopted Preferences 105 Preferences are not required in RAD properties, however: Owner may adopt preferences Preferences must be included in TSP and RAD plan Examples of preferences needing no HUD approval Working families (must include elderly/disabled families) Victims of domestic violence Displaced by government action Examples of preferences requiring HUD approval Homeless preference Residency preference Military veterans preference

106 Preference for Occupancy Elderly Families RAD Requirement 106 PH projects do not retain previous elderly designation To retain or adopt elderly designation must adopt elderly preference May adopt secondary preference of near elderly (50-61 and disabled) Evidence must be available supporting previous PH Elderly Designation Application for elderly status Regulatory agreement Management plan Lease records from earliest two years of operation Evidence of services for elderly If PH elderly designation after 1992 may be required to reserve up to 10% for non-elderly disabled

107 Establishing the Waiting List - RAD Requirements 107 Initial waiting list Contact application on existing site-specific WL or Offer placement to applicants on global WL Mail notification to applicants specifying a response deadline Maintain a tracking spreadsheet as documentation Ensure effective communication practices Persons with disabilities LEP population After RAD closing mail RAD application to responders Responders retain their original date and time

108 Establishing the Waiting List 108 New Applicants Advertise opening of initial waiting list Advertise in accordance with Tenant selection plan and Affirmative fair housing marketing plan Application Form Options Pre-application Contains minimum information to determine eligibility May use at time of initial application Full application Detailed family information Required at final eligbility

109 Establishing the Waiting List, continued 109 Required Information on Waiting List Report Date and time application received Name of head of household Annual income level (LI, VLI, ELI) Unit size Need for accessible unit Preference type (if applicable) Comments and applicant contact log

110 Establishing the Waiting List, continued 110 Sorting of Waiting List Bedroom size Preference type Date and time application received Income targeting

111 Contents of Application 111 Household characteristics Name, sex, age, race/ethnicity Social Security numbers General contact information Disability status Need for accessible unit Identification of preferences Sources and amount of annual income/assets Assets disposed of during the past two years Marketing questions HUD required screening criteria Citizenship status Student status

112 Attachments to the Application 112 HUD-92006: Supplement to application HUD 9887/9887A: Document package for consent HUD H: Race and ethnic data reporting form Owner developed releases Student affidavit Affidavit of assets disposed of during past two years

113 Affirmative Fair Housing Marketing Plan (AFHMP) 113 HUD 935.2A (Exp. 12/31/2016) Properties with five or more units must adopt AFHMP Purpose is to offer equal housing opportunities including Protected classes/populations least likely to apply Sets forth marketing activities Must be approved by HUD and Office of Fair Housing Must submit with RAD management plan Must be posted on bulletin board Must be reviewed annually and updated every five years Must maintain AFHMP folder with documentation for review

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120 Affirmative Fair Housing Marketing Plan Attachments 120 Copy of fair housing poster posted on bulletin board Picture of property sign (or additional signage) Fair Housing logo TDD number Disabled/handicapped logo Copies of letters to agencies Evidence of fair housing training Copies of fair housing training certificates of property staff

121 Model Lease for Subsidized Programs HUD 90105a (2/2007) 121 Effective date of lease = RAD HAP contract effective date Required attachments to the lease Violence Against Women s Act Addendum (HUD 91067) HUD Move-In Inspection report House rules HUD approved owner addendums (as applicable) Pet addendum Live-in aide Police or security personnel LIHTC Addendum

122 Major Terms of the Lease 122 Initial term must be one year (365 days) Provision for automatic renewal (not less than 30 days) Security deposit Fees for late rent/returned check/keys and locks Utility responsibility (who pays utilities) Annual recertification requirements Owner must send 120 day, 90 day, 60 day notices Interim recertification Tenant must report increases in income >$200/month Required transfer if family size changes Termination of tenancy Tenant must give 30 day notice Owner special RAD tenant protections must be in house rules

123 Modifying the HUD Model Lease 123 Changes to the HUD Model Lease may be made only to comply with documented state or local laws, or a management practice generally used by management entities of assisted projects. Owners must obtain written approval from HUD prior to implementing an addendum to the HUD Model Lease. HUD will not approve modifications to any statutory or regulatory requirements listed in the HUD Handbook

124 House Rules Key Requirements 124 House rules must be Related to safety, care, and cleanliness Compliant with fair housing must not create a disparate impact on tenants based on race, color, national origin, religion, sex, disability, or familial status Compliant with HUD requirements Compliant with state and local laws Identify both allowable and prohibited activities Attached to the lease

125 House Rules/Grievance Procedures RAD Requirements 125 PH resident rights and participation procedures retained House rules must include language in attachment three RAD adopts PH procedural rights Section 6 of the act Termination of tenancy and assistance Grievance process Property continues to use PH grievance procedures

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127 Pet Policy HUD Exhibits 6-4 and Mandatory pet rules Inoculation Sanitary standards Pet restraint Registration Discretionary pet rules Pet size/type Density of tenants and pets Pet care standards Pet deposit not to exceed $300 Waste removal charge - $5.00 per occurrence HUD approved pet addendum to lease Paragraph 16 of the HUD model lease b

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129 EIV Use/Security Policies 129 Describe purposes EIV data will be used and reports filed Describe how discrepancies will be addressed Form 9887/9887A EIV confidentiality EIV & You brochure Repayment agreement procedures (optional) Must establish a property notebook containing EIV monthly/quarterly reports CAAF forms UAAF forms Rules of behavior Security tests

130 EIV Use/Security Policies 130 Describe when and how reports are used and filed Income summary Income report (detail) Income discrepancy report No income on 50059/No income from HHS or SSA New hires report Failed EIV pre-screening and failed verification reports Pending verification report Multiple subsidy report Deceased tenant report Existing tenant search

131 EIV Use/Security Policies 131 EIV security policy must describe Technical safeguards Use only assigned security M-IDs/Passwords CAAF and UAAF forms executed Pass online security test Pass cyber awareness test Administrative safeguards Destroy data at end of retention period Specify method(s) of destruction Reporting process for security breaches Physical safeguards Security storage and transmission methods Office security procedures

132 HUD & VOUCHER PROCESSING

133 HUD RAD Conversion 133 HUD Record Type = Initial Certification (IC) Retain same annual re-certification date Re-verification of income not required No rescreening for eligibility factors Convert tenant data from last HUD Tenant and manager must sign HUD HUD attached to lease

134 Rent Phase-In Procedure 134 Tenant rent must be phased in if Tenant rent increases by $25 or 10% due to RAD Phase-In period 3 years or Can be extended to 5 years Phase-In percentage increases at each annual recertification Phase-In ends when Phase-In period ends or Multifamily TTP is equal to or less than the previous TTP.

135 Phase-In Calculation 135 Three year phase-in method Year 1: 33% of increase in TTP Year 2: 66% of increase in TTP Year 3: 100% of TTP Five year phase-in method Year 1: 20% of increase in TTP Year 2: 40% of increase in TTP Year 3: 60% of increase in TTP Year 4: 80% of increase in TTP Year 5: 100% of TTP

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138 Baseline Submission 138 First electronic transmission to HUD Populates TRACS database for voucher transmissions Enter all data Create electronic baseline transmission file 202C MAT guide Must obtain TRACS mail ID Software provider instructions TRACS will notify of fatal errors Errors must be corrected prior to first voucher submission

139 Monthly Voucher Processing 139 Must electronically submit voucher in order to receive subsidy Voucher uploads tenant data from 50059s Voucher includes special claims and repayment agreements Deadline for transmission of vouchers and supporting TRACS files is the 10 th calendar day of each month directly preceding the voucher payment month. For example: February voucher due January 10 th Creation of voucher based on software provider rules

140 Procedure for First Voucher Submission RAD Requirement 140 Calculate 50059s for all tenants Create electronic baseline file and submit to TRACS Correct fatal errors on 50059s Run HAP voucher (do not transmit) If subsidy paid by PH Show OARQ adjustment zero subsidy or fax copy of voucher to HUD project manager Transmit electronic voucher to HUD Subsequent months transmit directly to HUD

141 Special Claims 141 HUD CHG-3 Special claims processing guide Types of special claims Normal Vacancies Debt Service Tenant rent/damages Owner must certify Security deposit collected at move-in Units are rent ready Vacant units were marketed Must retain documentation for 3 years

142 Repayment Agreements 142 EIV Notice: H Tenants must reimburse the owner if Tenant under reports income Due to a civil action Result of OIG audit Repayment options Lump sum Repay agreement Combination of both Tenant and owner must agree on terms Monthly payment plus TTP cannot exceed 40% of monthly annual income unless tenant agrees to terms

143 Repayment Agreements, continued 143 Voucher Adjustments Miscellaneous accounting request owneragent request (OARQ) Owner completes retroactive corrections Adjustment will be reflected as a negative amount Must reverse the entire amount of adjustment Voucher billing is unaffected Enter tenant payments as a negative amount Owner may deduct administrative costs lesser of Actual costs of expenses incurred or 20% of amount received from tenant Amounts retained deposited in operating account Owner must keep records of expenses incurred

144 HAP Funding in the Initial Partial Year (2013 Guidance) 144 For the remainder of the calendar year in which a project converts, a project will be funded through the public housing accounts at the level of public housing subsidy available to that project in that fiscal year. HUD will not make up the deficit based on the HAP subsidy calculation. The PHA makes up this deficity with Operating Reserves, Capital Fund contributions, financing proceeds, or other sources as approved by HUD. Submit vouchers showing OARQ adjustment zero subsidy

145 Disbursement in the Initial Year (2013 Guidance) 145 Example: RAD closing date = October 15, 2013 HAP contract effective: November 1, 2013 Subsidy funding: public housing November and December Subsidy funding: multifamily January 1, 2014 and on

146 Service Bureaus (Optional) 146 Organizations that provide electronic data transmission functions Prepare 50059s based on ownerprovided information Prepare monthly vouchers Electronically transmit monthly vouchers to HUD Prepare and transmit special claims

147 OCAF RENT ADJUSTMENTS UTILITY ALLOWANCES

148 What is an OCAF Rental Adjustment 148 Definition An operating cost adjustment factor established by HUD that is applied to the existing contract rent, less the portion of the rent paid for [current] debt service (Reference: PIH (HA) Rental Assistance Demonstration Final Implementation, REV-1, page 12.)

149 OCAF: Operating Cost Adjustment Factor 149 OCAF is published in the Federal Register each fall (Sept/Oct) and is effective the following February 11 of each year Provides an additional, forecasted rate on existing funding:

150 OCAF: Operating Cost Adjustment Factor, continued 150 Rents will typically increase each year but have in some years remained flat OCAFs are different for each state. Future rents are not subject to a Rent Comparability Study (RCS). RAD deals that close in 2014 will receive the 2014 OCAF. RAD deals which close in 2015 will receive both the 2014 and 2015 OCAF.

151 Submitting the OCAF Rent Adjustment 151 When: 120 days prior to the HAP anniversary date How: TO your assigned HUD project manager, with the following documentation A cover letter requesting a rent increase A completed OCAF rent adjustment worksheet, HUD form 9265 Verification of debt service - mortgage statement, amortization schedule (Mortgage Insurance Premium MIP) Verification of replacement reserve monthly amount, HUD form-9250 (HUD may complete this task internally) Utility allowance analysis

152 HUD Form 9625 OCAF Worksheet 152 Straightforward Calculation with three basic steps: 1. Calculate the current Section 8 rent potential First year will be rents in your HAP contract 2. Calculate Increase Factor adjusted by OCAF 3. Calculate OCAF adjusted contract rents to establish the new rents and annual rent potential. NOTE: See example in Training Guide, page 65

153 Utility Allowance Analysis 153 The Utility Allowance (UA) analysis is required each year when submitting the OCAF rent adjustment. The only utilities that can be included are gas, electric, water, and sewage. Monthly UA is based on the combined average of each utility type. Sample size includes 12 months of actual consumption Data sample varies for each state but for Georgia 50% of each unit type is required High and low amounts are tossed if property has >5 units

154 Utility Allowance Analysis, continued 154 If data represents less than 50% of any unit type, the cost analysis will not be processed (deemed incomplete), unless the owner can demonstrate all reasonable efforts were made to obtain the data. If less than 6 months of utility is received for a particular unit, that unit is not counted in the analysis. If the cumulative change (+/-) in the allowance is $5 or less, a change is not required. There is a floor (no more than 10% of current utilities) but no cap in how much the allowance can increase. (GA only)

155 Posting Requirements 155 First Notice: Prior to submitting the Utility Allowance Analysis to the CA/HUD, the owner must post their recommendation of a utility allowance change if there is a decrease in the utility allowanace amount for any one unit, to allow for a 30-day tenant comment period. NOTE: a sample tenant notice follows this section. After the 30-day period, any comments received by tenants must be forwarded to CA/HUD along with a copy of Owner s Certification as to Compliance with Tenant Concern Procedures, for final consideration before approval of UA changes.

156 Decrease in Utility Allowance 156

157 Posting Requirements 157 Second Notice: The owner must also give the tenants a 30-day notice of an increase in rents, pursuant to the condition of their lease, and must be 30 days in advance of the effective date of the rent change. NOTE: Failure to provide proper notice will result in the owner absorbing the difference in utility allowance amount up until a 30-day notice is properly given. HUD/CA will analyze the information submitted by the owner. Calculation differences, and any other concerns will be communicated with the owner in writing. HUD/CA will ultimately determine the utility allowance for each unit type.

158 Rent Schedule and Replacement Reserves 158 HUD/CA will issue three approved Rent Schedules, form HUD-92458, with the new Contract Rents and UAs. Approved rents must be implemented on time and a copy submitted to your Service Bureau, if applicable. HUD-approved increases in your Reserve for Replacements, HUD form 9250, should be incorporated into your annual operating budgets.