Penalties for Poor-Performing HCV and PBV Owners

HUD recently published Notice PIH 2023-06, Notice on Remedies PHAs have for Poor Performing Owners in the Housing Choice Voucher and Project-Based Voucher Programs. The notice informs public housing authorities of the available remedies they have when owners of Housing Choice Voucher (HCV) and project-based voucher (PBV) units fail to comply with their housing assistance payment (HAP) contracts or policies and procedures of the voucher program.

Although the notice doesn’t contain any new guidance, it serves to remind to owners and housing authorities of what remedies there are for noncompliance with the HAP contract. The notice also reminds PHAs of when owners must be prohibited from participating in their HCV and PBV programs and when PHAs may exercise discretion to prohibit owners from participating.

What Constitutes a Breach of the HAP Contract?

The HAP contract is the primary document that governs the relationship between the owner of a unit in the HCV and PBV programs and the PHA. The HAP contract and HUD regulations identify the following as breaches of the contract by an owner:

• If the owner has violated any obligation under the HAP contract for the dwelling unit, including the owner’s obligation to maintain the unit in accordance with the Housing Quality Standards (HQS);
• If the owner has violated any obligation under any other HAP contract under Section 8 of the 1937 Act (42 U.S.C. 1437f);
• If the owner has committed fraud, bribery, or any other corrupt or criminal act in connection with any federal housing program;
• For projects with mortgages insured by HUD or loans made by HUD, if the owner has failed to comply with the regulations for the applicable mortgage insurance or loan program, with the mortgage or mortgage note, or with the regulatory agreement; or if the owner has committed fraud, bribery, or any other corrupt or criminal act in connection with the mortgage or loan;
• If the owner has engaged in drug-related criminal activity; and
• If the owner has committed any violent criminal activity.

According to HUD, the most common violation is failure to maintain the unit in accordance with HQS.

Remedies for Noncompliance with HAP Contract

When the PHA determines the HAP contract is breached for HQS or other reasons, the PHA must take certain steps to comply with the HAP contract and program requirements. The PHA may inspect the unit and premises at any time the PHA determines necessary to ensure that the unit meets HQS and must notify the owner of any HQS deficiencies uncovered. The PHA must not make any housing assistance payments to the owner if the unit is in violation of HQS unless the owner corrects the deficiencies within the required time frame and the PHA verifies that the corrections have been properly made. If a defect is life threatening, the owner must correct the defect within no more than 24 hours. For other defects, the owner must correct the defect within 30 calendar days (or any PHA-approved extension).

In the event of the breach of the HAP contract, the PHA must notify the owner in writing of the determination of the breach and the reasons for that determination. The written notice may require the owner to take a corrective action by an established deadline.

The PHA may recover any overpayment, suspend housing assistance payments, abate, or reduce the housing assistance payment, terminate the payment, or terminate the HAP contract. The PHA may also obtain additional relief by judicial order or action, including specific performance, other injunctive relief, or order for damages. The PHA must provide the owner with written notice of any termination or reduction in housing assistance payments or the termination of the HAP contract.

When PHAs Must Exclude Owners

Prior to PHA approval of the assisted tenancy and the execution of a HAP contract, the PHA must ensure the owner is eligible for the program. A PHA can’t approve an owner’s participation in the program if:

• The PHA is informed (by HUD or otherwise) that the owner is debarred, suspended, or subject to a limited denial of participation under 24 CFR part 24;
• HUD directs the PHA not to approve the owner’s participation in the program because the federal government has instituted an administrative or judicial action against the owner for a violation of the Fair Housing Act or other federal equal opportunity requirements, including, but not limited to, Title VI of the Civil Rights Act, Section 504 of the Rehabilitation Act, the Violence Against Women Act, or the Americans with Disabilities Act, and such action is pending; or
• HUD directs the PHA not to approve an owner’s participation in the program because a court or administrative agency has determined that the owner violated the Fair Housing Act or other federal equal opportunity requirements, including, but not limited to, Title VI of the Civil Rights Act, Section 504 of the Rehabilitation Act, the Violence Against Women Act, or the Americans with Disabilities Act.

When PHAs Have Discretion to Exclude Owners

PHAs can adopt policies that prospectively exclude owners from participating in their HCV and PBV programs. HUD says, in adopting these policies, PHAs should consider the severity of the owner’s previous infractions, whether it is a pattern or practice, and the potential impact on the PHA’s HCV and PBV programs. A PHA may exclude owners from participating in the program for any of the following reasons:

• The owner has violated obligations under one or more HAP contracts under the HCV or PBV programs or any other housing program under Section 8 of the U.S. Housing Act of 1937;
• The owner has committed fraud, bribery, or any other corrupt or criminal act in connection with any federal housing program;
• The owner is currently engaged in or has participated in recent drug-related criminal activity or violent criminal activity;
• The owner has or has had a practice of noncompliance with HQS in HCV or PBV program units or with applicable housing standards for units leased under any federal housing program;
• The owner has a history or practice of refusing to evict tenants assisted under the HCV or PBV programs or other federally assisted housing for activity that threatens the right to peaceful enjoyment of the premises; threatens the health or safety of residents, persons, or employees in the immediate vicinity of the premises; or is currently engaged in drug-related criminal activity or violent criminal activity;
• The owner has a history or practice of renting units that fail to meet state or local housing codes; or
• The owner hasn’t paid state or local real estate taxes, fines, or assessments.

HUD reminds PHAs that they shouldn’t penalize owners that consider the nature, severity, and recency of tenant offenses, including mitigating circumstances such as participation in substance use treatment services or other rehabilitative services, before evicting. Owners can adopt and implement alternatives to eviction to address tenant actions that are in breach of the lease agreement and use eviction as a last resort option to remedy noncompliance.

When deciding whether to exclude an owner from participation for a history or practice of refusing to evict, PHAs should take into account whether an owner implements sound practices when determining whether to evict individuals based on criminal activity. Sound practices include (but are not limited to) relying on accurate and reliable objective evidence, conducting individualized assessments that consider mitigating factors, and considering the potential applicability of the Violence Against Women Act’s housing protections for survivors of domestic violence, dating violence, sexual assault, and stalking. PHAs should also take into account whether an owner institutes policies or practices that promote eviction in a manner that gives rise to fair housing concerns.