Compliance Quandaries

Key to avoid the top noncompliance issues found in NC

in 2010

Recommendations

• Be aware of state agency requirements and expectations

• Review your property from a state agency perspective prior to monitoring review

• Maintain a friendly relationship with agency staff

• Ask questions• Take a ‘proactive’ approach to management

#1 Noncompliance Issue in 2010

Late filing of Annual Owner’s Certification of Continuing Program Compliance report:• Report due annually no later than February 10• 2010 AOC report will be submitted in Rental

Compliance Reporting System (RCRS)

#2 Noncompliance Issue in 2010

Unacceptable Utility Allowance:• 90 day correction period offered

up front• If corrected in the 90 day window,

8823 will not be filed with IRS

Utility Allowances

• Utility Allowance regulation found in §1.42-10, which was revised July 30, 2008

• Effective date of 2008 revision: January 1, 2009

• NCHFA Utility Allowance Policy updated: January 22, 2010

• Instructions issued: March 11, 2010

Utility Allowances

Utility Allowance Methodologies:• Rural Housing services (RHS)• Housing and Urban Development (HUD)• Public Housing Authority (PHA)• Written estimate from local provider• Agency estimate • HUD Utility Schedule Model • Energy Consumption Model

Utility Allowances

RHS Utility Allowance: 1.42-10(b)(1)• If the building or its tenant’s receive assistance

from RHS, the applicable utility allowance for all rent-restricted units in the building is the applicable RHS utility allowance

• The RHS UA is the applicable allowance even when there are units receiving HUD rental assistance

No Fee

Utility Allowances

HUD Utility Allowance 1.42-10(b)(3)• If the rents and utility allowances are

reviewed by HUD on an annual basis (HUD regulated buildings), the applicable utility allowance is the applicable HUD utility allowance.–Project-Based Section 8

• The HUD UA is utilized for entire building/property, regardless of whether each unit receives rental assistance. No Fee

Utility Allowances

Public Housing Authority (PHA) 1.42-(B)(4)(ii)(A)

• The local PHA allowance may be used for all units

• Must use PHA allowance for any unit occupied by a voucher holder

• Changes in the PHA utility allowance must be implemented within 90 days of the effective date

No Fee

Utility Allowances

Written local estimate: 1.42-10(b)(4)(ii)(B)

• Actual estimate of future useage• Must be in writing for the local utility provider• Estimated cost of the utility for a unit of similar

size and construction in the geographic area• Estimate should include all component service

charges

$150 Fee

Utility Allowances

Agency Estimate: 1.42-10(b)(4)(ii)(C)• Average based on historical info• Actual utility company usage data and rates

from a sample occupied units to establish the allowance

• Sample units must be geographically dispersed across the property

$150 Fee

Utility Allowances

• Must provide information required of NCHFA Utility Allowance policy including:– Consumption data for at least 25% of each unit type

(bedroom size) or a minimum of 5 units of each type, whichever is greater

– Consumption history must be a 12 months of continuously occupied units of each bedroom size

– Months where the Unit is vacant for more than 2 weeks with not be included

– Copies of actual tenant billing records are acceptable

Utility Allowances

• Consumption history must be entered into Agency Estimate Spreadsheet.

• Agency Estimate Spreadsheet will calculate the utility allowance average for each bedroom size and utility type and print a Certification.

• The Certification is signed by NCHFA, the person compiling the information and the owner (GP)

Utility Allowances

• New: If the utility company computes the average using requirements required by NCHFA for properties using Consumption history, this will be accepted.

• Under no circumstances will averages be accepted if the minimum sample size is not provided or if the average is computed on less than 12 months. (i.e., Duke Power letter w/ 3 units)

Utility Allowances

HUD Utility Schedule Model 1.42(b)(4)(ii)(D)• Developed by HUD for tax credit properties• Must obtain utility rates from utility

companies to input into the modelModel found

on-www.huduser.org/datasets/lihtc.html

$150 Fee

Utility Allowances

Energy Consumption Model 1.42(b)(4)(ii)(E)• Owners can calculate allowance using an

energy, water and sewer consumption and analysis model

• The consumption estimates must be calculated by a properly licensed engineer or a qualified professional approved by the Agency

$150 Fee

Utility Allowances

New: What documentation is required by NCHFA for this method?– Properly licensed engineer – Certification only, no

backup documentation required– Qualified professional - All backup used to

calculate allowance must be submitted. If backup documentation does not meet requirements, utility allowance will not be approved. (i.e., Duke Power letter is not sufficient even if provided by Qualified Professional)

$150 Fee

Utility AllowancesRequirements for All Methodologies• Utility Allowances must be updated annually• Estimates except RHS, HUD and PHAs must be

submitted to the Agency for review and approval prior to implementation

• Utility Allowance changes must be in effect within 90 days of the effective date

• Owners must pay all costs incurred in obtaining and providing the estimates to residents and the Agency

Utility Allowances

• Owners are not required to update, or implement new utility allowances until the building has achieved 90% occupancy for a 90 day period, or the end of the first year of the credit period (whichever is first)

• Owners are allowed to switch utility allowance methodologies from year to year

Utility Allowances

• With the exception of HUD regulated and RHS buildings, owners are allowed to mix and match the options

• For example: the PHA utility allowance for water and sewer can be used with the Agency estimate for electricity

• Utility Allowance estimates and supporting documentation must be retained in compliance with the program’s record keeping provisions

#3 Noncompliance Issue in 2010

Violations of Uniform Physical Conditions Standards (UPCS):• Multiple physical inspection issues• If corrected while we are on site, no

8823 is generated

Top UPCS Violations:

1. Missing or inoperable smoke detector

2. Broken windows3. Inaccessible playgrounds or

amenities4. Blocked egress5. Inoperable appliances, exhaust fans

or other equipment

Recent Major Changes:

2010 Income Limits Effective 5/14/2010

• Per IRS Guidelines: 45 days to implement changes to income limits

• Tax Credit & Bond income limits are “held harmless” for properties that are in service

• NCHFA had to reprogram system in order to publish 2010 applicable to each property

Changes to 2010 Income Limits

• Alamance• Buncombe• Chatham• Cleveland• Davidson• Durham• Granville• Guilford

• Henderson• Lincoln• Madison• Orange• Randolph• Rowan• Wilkes

NC Counties with decreases to Income Limits:

No change in Pitt County

Changes to 2010 Income Limits

• So many charts to choose from! How do I know which one(s) apply to my property?

• Necessary to know:– Placed in service date– Date of carryover agreement if PIS is 5/14/2010 or

later(Reservation Letter for Bond properties)

– Rural status– ALL funding sources

Placed in Service Date:

1. Prior to January 1, 2009 (Eligible for HERA Special and Hold Harmless)

2. On or after January 1, 2009 but before May 14, 2010 (Eligible for Hold Harmless)

3. On or after May 14, 2010 (Effective date of new income limits)

Date of Carryover:Determines Gross Rent Floor -

(necessary to determine rent limit for properties placing in service on or after 5/14/2010)

1. On or after 05/14/2010 (2010 rent limits)2. 03/19/2009 - 05/13/2010 (2009 rent limits)3. 02/13/2008 - 03/18/2009 (2008 rent limits)4. 03/20/2007 - 02/12/2008 (2007 rent limits)5. 03/08/2006 - 03/19/2007 (2006 rent limits)

Rent limit will be the greater of the rent limit above or the 2010 rent limit

Rural Status:

• LIHTC projects located in a rural area (as defined in Section 520 of the Housing Act of 1949) use the greater of area median gross income (AMGI) or national non-metro median income for rent and income limit determinations.

• Projects financed with tax-exempt bonds under IRC Section 142, HUD or RD are generally not eligible to use this provision.

Effects of Different Funding Sources:

• LIHTC – Greater of 2010 MTSP/HERA Special Limits or 2009 MTSP/HERA Limits or Rural Limits, as applicable based on preceding factors

• Bond – Greater of 2010 MTSP/HERA Special Limits or 2009 MTSP/HERA Limits, as applicable based on preceding factors

Effects of Different Funding Sources:

• HOME – Income limits subject to decrease; Rents held harmless

• Section 8 (Both Project-based & Vouchers) – Income limits subject to decrease; Rents held harmless

• Rural Development – Income & Rent limits are held harmless

Effects of Different Funding Sources:

• NC’s State Tax Credit – Deeper targeting income and rent limits required by the state TC is a set amount regardless of placed in service date

• NC’s HTF – Same as state TC above

• NC’s Key Program – 30% Income Limits from state TC chart; set rent amounts

• NC’s SHDP – Same as HOME

• Mixed Subsidy – Follow most restrictive chart to maintain compliance with all applicable programs

2010 Sample: Chatham County, NC1 person 50% income limit; 1 BR rent limit

Funding Source: PIS Date: IL Chart Used:

Income Limit: RL Chart Used:

Rent Limit:

Additional info:

TC Onlyprior to

12/31/082010 HERA

Special $ 26,750 2010 HERA Special $ 716

TC Only1/1/09 - 5/13/10

2009 HERA Special $ 26,300 2009 HERA Special $ 705

TC Onlyon or after

5/14/10 2010 MTSP $ 23,750 2008 Rent Limit $ 636 Carryover 9/1/2008

HOME or SHDP any 2010 Sec 8 $ 23,750

Minimum: 2009 HOME limits $ 538 Low HOME

Sec 8 any 2010 Sec 8 $ 23,750 As approved

by HUD

RD any 2009 Sec 8 $ 24,950 As approved

by RD State TC or

HTF any NCHFA $ 26,750 NCHFA $ 716

Key any NCHFA (30%) $ 16,050 Current payment

standard $ 364

Questions or Comments??