Rundown of Recent Updates to HUD’s COVID-19 Q&A

May 29, 2020

In May, HUD’s Office of Multifamily Housing Programs, which oversees contracts with private owners of HUD-assisted properties, made a fifth and sixth update to its “Questions and Answers for Office of Multifamily Housing Stakeholders: Coronavirus (COVID-19).” HUD has been using this document to address the concerns of owners, staff, and residents during the pandemic.

In May, HUD’s Office of Multifamily Housing Programs, which oversees contracts with private owners of HUD-assisted properties, made a fifth and sixth update to its “Questions and Answers for Office of Multifamily Housing Stakeholders: Coronavirus (COVID-19).” HUD has been using this document to address the concerns of owners, staff, and residents during the pandemic.

On May 1, HUD updated the FAQs to include information about the child care deduction, mortgage relief for owners, allowable use of project funds, food resources for residents, and assistance payments for vacant units. Subsequently, on May 21, HUD updated its FAQs again to address resident health issues, extended relief deadlines, and financial issues.

Fifth Update, May 1

The new information in this update covers the following:

Child care deduction. There are five possible deductions that may be subtracted from annual income based on allowable family expenses and family characteristics. The remainder, after these deductions are subtracted, is called adjusted income. And adjusted income is generally the amount upon which rent is based.

One such deduction is the child care deduction. With this deduction, anticipated expenses for the care of children under age 13 (including foster children) may be deducted from annual income if all of the following are true:

  • The care is necessary to enable a family member to work, seek employment, or further his/her education (academic or vocational);
  • The family has determined there is no adult family member capable of providing care during the hours care is needed;
  • The expenses are not paid to a family member living in the unit;
  • The amount deducted reflects reasonable charges for child care;
  • The expense is not reimbursed by an agency or individual outside the family; and
  • Child care expenses incurred to permit a family member to work must not exceed the amount earned by the family member made available to work during the hours for which child care is paid.

In its FAQ, HUD clarified that a resident who is unemployed or furloughed can continue to receive a deduction for reasonable child care expenses if the parent or guardian continues to have child care expenses.

Resources for food-insecure residents. As financial burdens increase among tenant households, there’s a corresponding increase of food insecurity among residents. HUD updated its FAQs to include resources to help residents get access to food. HUD has compiled information on various federal resources available to address food insecurity for site residents. The resource can be found at https://files.hudexchange.info/resources/documents/Food-Resources-for-Residents-of-Multifamily-Properties.pdf. The FAQs also provide a directory of local food pantries based on ZIP code. It can be found at www.hud.gov/findshelter/foodpantries.

Subsidies for move-ins and move-outs. Owners have been dealing with issue of extended vacancies during COVID-19. Extended vacancies might occur from delayed move-ins or a sole tenant in a unit passes and family members can’t, due to travel restrictions, secure the resident’s belongings.

HUD’s FAQs clarify that HUD isn’t expanding the 14-day subsidy cut-off. The FAQ states, “At this time, HUD is not extending subsidy payments past the earlier of 14 days after the date of the tenant’s death or the date the unit was vacated. Owners and family of the deceased should follow Center for Disease Control (CDC) guidelines and the direction of local health officials when determining whether the possessions are safe to remove from the unit.”

Related to move-ins, HUD says that if an owner isn’t able to interview and fill vacancies as a result of the COVID-19 emergency, HUD will review vacancy claims on a case-by-case basis, while taking into consideration restrictions from local or state jurisdictions.

Project funds for PPE, meals. For owners dealing with COVID-19 containment and prevention, HUD is allowing owners to access site operating accounts for all reasonable and necessary COVID-related preparedness and response costs, including supplies, staff hours, and overtime. According to the FAQ, “Due to the extreme public health risk presented by COVID-19 during this national emergency, providing staff and residents access to protective gloves and masks, at the owners’ discretion, is an allowable use of project funds.”

However, payment for direct services to residents, such as meals for those who are home-bound, is not an eligible use of project funds.

Forbearance provisions under CARES Act. In response to declining rent receipts and increased property expenses related to the crisis, HUD issued a standard forbearance agreement dated April 10, 2020. Mortgagee Letter (ML) 2020-09 provides guidelines to assist all FHA-Approved Multifamily Mortgagees in developing forbearance agreements. The letter can be found at www.hud.gov/sites/dfiles/OCHCO/documents/2020-09hsngml.pdf.

In conjunction with the U.S. Consumer Financial Protection Bureau and the Federal Housing Finance Agency, HUD has produced a one-stop web source of information for individuals on eviction protections and foreclosure relief under COVID-19. The site can be found at www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance and discusses mortgage relief options under the CARES Act.

HUD’s new FAQs clarify that this mortgagee letter remains in effect until HUD issues a formal rescission. In addition, the FAQs state that the CARES Act doesn’t require borrowers to have utilized other resources, such as Working Capital Escrow or Operating Deficit Escrow accounts, before accessing mortgage forbearance. In fact, the CARES Act requires lenders to grant forbearance to eligible multifamily borrowers upon request.

However, HUD has said that construction or rehabilitation loans under Section 221(d)(4) will be considered “temporary financing,” making them ineligible for forbearance in the context of the CARES Act.

Another importance consideration for providers in need of forbearance is the role of the Active Partners Participation System (APPS) flags. According to the new FAQs and a previously recorded HUD update, the agency won’t consider loans that are in forbearance to be delinquent or in default, as long as the forbearance agreement occurs before a payment is missed; however, HUD retains the discretion to place a flag if the borrower defaults under the forbearance agreement.

SBA loans for payroll protection. Because of the financial downturn, owners have had many questions about their eligibility for the Small Business Administration (SBA) Payroll Protection Program (PPP) loans. HUD is trying to clear obstacles for HUD sites that are seeking to participate in the program. But it’s letting the SBA determine further eligibility for housing providers.

HUD says it’s “reviewing its subordinate financing requirements for compatibility with the SBA PPP program and has given Multifamily field staff guidance to approve SBA PPP loans without limiting repayment to surplus cash for borrowers with market rate properties. However, repayments must come first from available surplus cash, if any, before drawing on other funds to repay the loan.”

Sixth Update, May 21

The new information in this update covers the following:

Resident health. Residents aren’t required to notify housing administrators of a positive COVID-19 diagnosis. But if an owner of a HUD-assisted site becomes aware of a confirmed case on site, HUD continues to encourage owners to notify the local health department immediately.

HUD also recommends that owners consult CDC guidance related to shared housing facilities, and to minimize in-person interaction with exposed residents (in particular for staff who are at higher risk of COVID-19 illness). The CDC guidance can be found at www.cdc.gov/coronavirus/2019-ncov/community/shared-congregate-house/guidance-shared-congregate-housing.html.

Messaging to residents about confirmed cases on site. When an owner becomes aware of a confirmed case at a site, HUD guidance says, in coordination with local health officials, to “communicate the possible COVID-19 exposure to all residents and workers, volunteers, and visitors.”

This can be accomplished through signs in common areas and at entrances, as well as through direct communication to all residents. HUD’s FAQs also say that this messaging should “attempt to counter potential stigma and discrimination,” and to encourage residents to notify others they may have come into contact with. Printable COVID-19 material for community-based settings are available on the CDC website at www.cdc.gov/coronavirus/2019-ncov/communication/print-resources.html.

It’s important to note that when communicating about confirmed cases, site owners are required to maintain confidentiality under the ADA and the Privacy Act. This means that notification can’t disclose personally identifiable information such as names and unit numbers. In addition, HUD also says owners should consult local and state health and privacy laws before making any disclosures.

Late fees during the eviction moratorium. HUD is interpreting the CARES Act eviction moratorium provision to mean that fees and charges that couldn’t be assessed during the moratorium should not accrue. Therefore, those should not be charged after the moratorium ends. However, rents not paid during the moratorium, as well as fees assessed before the moratorium, which took effect on March 27, can be collected after the 120-day period.

Additionally, during the 120-day moratorium, owners can’t take adverse action against residents for nonpayment of rents or fees, even if they were assessed before the moratorium.

Disinfection. In the most recent update to the FAQs, HUD expanded on guidance related to cleaning and disinfection for infectious disease prevention. HUD refers to specific instructions from the CDC and the EPA on practices for public spaces, workplaces, and building facilities.

HUD has also made best practices available for medical waste disposal in Multifamily properties, which includes waste associated with infectious diseases. This resource can be found at https://files.hudexchange.info/resources/documents/Medical-Waste-Disposal.pdf.

Internet access. Although HUD encourages owners to make their sites “Internet-ready,” broadband or Internet fees for individual units may not be included in tenant rent charges or utility allowances for Project-based Rental Assistance sites. However, low-income tenants may be eligible for low-cost Internet services. Interested owners and tenants should contact local Internet service providers or visit https://conecthomeusa.org for more information.

Audit extensions. For situations where auditors are unwilling or unable to complete audits of an owner’s financial statements, HUD FAQs extend audited financial reporting deadlines until June 30, 2020. The waiver applies only to entities that are required to submit financial information by June 30; these entities now have 180 days after the end of the fiscal year to submit the information. The waiver also doesn’t apply to submission information that was already delinquent by the start of the crisis as of March 23, 2020.

TAKEAWAYS

  • An unemployed or furloughed resident can continue to receive a deduction for reasonable child care expenses.
  • HUD isn’t expanding the 14-day vacancy subsidy cut-off, but is reviewing vacancy claims on a case-by-case basis.
  • HUD is allowing owners to access site operating accounts for all reasonable COVID-related costs, including supplies, staff hours, and overtime.
  • Rents not paid during the eviction moratorium, as well as fees assessed before the moratorium, can be collected after the 120-day period.

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