Office of Multifamily Housing's 25 Policy Priorities for 2014

On March 5, HUD Deputy Assistant Secretary for Multifamily Housing Ben Metcalf released a memorandum outlining the Office of Multifamily Housing’s highest policy priorities for calendar year 2014. These policies were developed by the Multifamily Housing’s new Program Administration Office (PAO). The PAO was established in February and its mission is to make HUD multifamily programs and services more responsive to stakeholder feedback and to approach policy development in a more strategic and transparent manner.

The PAO is staffed by specialists in the areas of policy development, strategic thinking, project management, communications, and subject matter experts from within multifamily program areas. And it helped established the Office of Multifamily Housing Program’s highest priority policies for development during calendar 2014. These priorities are based on five broad goals, and the office has identified 25 policy priorities under these goals.

Goal #1: Producing and Preserving Affordable Housing

The first goal is to produce and preserve affordable housing for those most in need and in locations where it’s most needed. There are five priorities under this goal:

LIHTC pilot for 223(f) loans. Make policy adjustments to provide more flexibility to facilitate use of the pilot by properties with Low-Income Housing Tax Credits (LIHTC).

LIHTC pilot extension to 221(d)(4) loans. Expand availability of the pilot timelines and underwriting standards to LIHTC transactions that want to access FHA insurance but don’t qualify for 223(f).

Inclusionary requirements. Review the implications of Thompson v. HUD with respect to implementing Multifamily Housing programs. Thompson v. HUD found that HUD violated the Fair Housing Act by unfairly concentrating African-American public housing residents in the most impoverished, segregated areas of Baltimore. As a result of this ruling, HUD published a Federal Register Notice in 2012 announcing a demonstration program to encourage owners and developers of multifamily housing properties in Baltimore’s “communities of opportunity” to make their properties available to low-income persons. HUD plans to analyze the results of this demonstration and consider how FHA programs may be used to facilitate replication in other communities.

Small Multifamily Buildings Risk-Share. Facilitate the development of small multifamily properties (five to 49 units, and/or with loan balances under $3 million) by implementing the risk-share initiative published in the Federal Register in November 2014 that will facilitate the origination of risk-share loans by CDFI and other mission-oriented lenders.

RAD. Lift the Rental Assistance Demonstration program (RAD) cap from 60,000 units of public housing and Section 8 Mod Rehab, and extend the demonstration time frame for Rent Supplement and RAP. Work to encourage the use of RAD to achieve the neighborhood revitalization goals of the new Promise Zone Program. In addition, establish the Recapitalization Office to replace the Office of Assisted Housing Programs (OAHP), thus better aligning staff with the department’s needs.

Goal #2: Improving Risk Management and Preservation Programs

The second goal is to preserve affordable housing by improving risk management practices and expanding or enhancing preservation programs. There are seven priorities under this goal:

Section 8bb Notice. This notice will set forth HUD’s policies and procedures for transferring all or a portion of any remaining budget authority of a project-based Section 8 Housing Assistance Payments (HAP) contract to one or more contracts where the existing HAP contract is terminated by mutual agreement.

Flex Portfolio Pilot (Aggregated Asset Management) Notice. This notice will announce the Office of Multifamily Housing’s intent to conduct a pilot program that would provide high-performing owners and sponsors of certain multifamily properties with the opportunity to exercise greater flexibility in the management of their properties and to receive reduced compliance requirements if they agree to merge affordable properties into portfolios that will be managed as one unit.

Handbook 4350.4. Revise the Mortgagee servicer handbook to reflect current policies and procedures, and include new counterparty oversight and monitoring guidelines.

2530/Active Partners Performance System (APPS). Transform APPS for the 21st century and make the 2530 process and APPS work for HUD and the industry, to insure HUD is doing business with the best partners in the least burdensome way. This is a longer term item with a 2015 completion date.

Handbook 4350.1. Provide clear and current guidelines to industry partners and field staff to improve risk management practices, enhance portfolio oversight, and ensure the availability of high-quality assisted and insured housing opportunities.

Owner counterparty ratings. Develop a system to rate borrowers and assisted housing owners to ensure HUD continues to do business with the best partners possible. Rating the borrowers will also facilitate risk mitigation by preventing continued business with “bad borrowers.” This is a longer term item with a 2015 completion course.

Enforcement on failing assets. Implement enforcement as required by Section 230 of the 2014 appropriations bill for all properties receiving REAC scores below 30 and certain properties receiving scores below 60. This provides for enforcement tools (civil money penalties, full/partial abatement of the Section 8 contract, transfer of contract to another owner, judicial receivership) against owners that don’t meet a specific timetable for correcting deficiencies.

Goal #3: Controlling Program Costs

The third goal is to strategically control program costs by taking innovative approaches to managing HUD’s multifamily portfolio. There are five priorities under this goal:

Energy reduction through Better Buildings Challenge (BBC). Issue guidance to participants in the BBC regarding: shared savings models for Section 202 and 811 PRAC properties and project-based Section 8 properties; allowing energy-efficiency measures as part of the management fee; expedited approval for energy-efficiency measures and pulling from the reserve for replacement; inviting on-bill repayment waivers; and allowing the incentive performance fee for Mark to Market Waiver deals using the green capital needs assessment.

Energy reduction through information. Issue the Capital Needs Assessment (CNA) E-Tool, a standardized and automated solution for preparing CNAs that includes a utility conservation component capable of cost/benefit analyses of conservation measures at individual properties. Once available, this will replace the tool currently required for RAD and Mark to Market transactions. In time, all CNAs required by HUD and USDA programs will use the CNA E-Tool, and use of the tool will be available to other agencies. Projected energy savings will be evenly shared between owners and HUD.

Energy reduction through benchmarking. Issue guidance that will facilitate owners’ ability to benchmark their portfolios. This means getting energy data for buildings and comparing it to comparable properties. HUD’s goal is to have the entire assisted portfolio benchmarked over time, as well as all properties that use the CNA E-Tool. This will help target properties in need and improve energy data.

Rent Comparability Study changes. Review and analyze the current requirements for owner submission of Rent Comparability Studies and determine what changes may be necessary to ensure accuracy in the determination of market-rent levels.

Budget-based and PRAC rents. Review the current process and requirements for HUD and PBCA review of budget-based rent increases and analyze whether the process is sufficient for ensuring accurate rent determination.

Goal #4: Invest in Needed Tools

The fourth goal is to make the business case for increased investments in multifamily programs to provide the needed tools. There are two priorities under this goal:

202 Demonstration Notice of Funding Availability (NOFA). Use new authority to issue a 202 Demonstration NOFA. The FY 2014 Omnibus Appropriations Bill authorizes sweeping of residual receipts and using other available Section 202 funds for demonstration programs testing a housing-with-services model to avoid or delay nursing home services. The bill also made changes to Section 202 to eliminate capital advance requirements and authorize operating assistance-only grants.

IT business cases/budgeting. Provide a compelling case for the Office of Chief Information Officer regarding the importance of up-to-date technology to support the work of the Office of Multifamily Housing.

Goal #5: Modernize Customer Service

The final goal is to continue to provide quality customer service while transforming the way HUD works to 21st century best practices. There are four priorities under this goal:

Multifamily transformation. Implement the Office of Multifamily Housing Transformation, which includes four initiatives: workload sharing to address fluctuations in volume; risk-based underwriting and processing in production; Account Executive and Troubled Asset Specialist support in Asset Management; and a streamlined organizational model in both headquarters and the field. Integrating these business changes with the policy development process will lead to improved policy changes.

Enhanced service coordinator program. Promote an outcomes-oriented approach to services coordination for elderly residents. This may include: standardizing the work that service coordinators perform; mandating best practices and facilitating training on best practices; tracking outcomes differently by updating the semiannual performance report; and promoting the use of service coordinators in certain PRAC properties.

Revised delegations of authority. Continue efforts to delegate responsibilities and authorities to the field to maximize field empowerment in support of the multifamily transformation.

Modernized property disposition guidance. Issue updated guidance pertaining to property disposition efforts on determining the disposition method that will bring the highest rate of return to the department, while still meeting mission goals where possible.