Compliance Monitoring Newsletter

Transcription

1 Texas Department of Housing and Community Affairs January 2010 Compliance Monitoring Newsletter INSIDE THIS ISSUE: Administrative Penalties 1 Quarterly Reporting 1 Complying with TDHCA Affirmative 2 Marketing Requirements Lock-Outs are Now Prohibited 2 Noncompliance Methodology Change 3 Using the Annual Eligibility 3 Certification Form Common Compliance Findings 3 New Scoring System for UPCS 4 Inspections HUD Changes 4 Common Construction Inspection 5 Deficiencies Annual Owner s Compliance Report 6 (AOCR) Gross Rent Findings under the 6 Housing Tax Credit Program Previous Participation Reviews 7 TDHCA to Present Inspection Training 7 Housing Tax Credit Program and Full 8 Time Students Tips on How to Submit Satisfactory 8 Corrective Action Utility Allowance Update 9 Supportive Service Requirements 10 Tenant Good Cause Eviction and 10 Tenant Rent Increase Protection Staff Changes in Staff Information 12 Administrative Penalties By: Kim Coldren You may have noticed that the standard compliance monitoring letters now include language referring to administrative penalties; as much as $1000 per day. Since December of 2007, the Department has had the authority to assess administrative penalties for noncompliance. The goal is not to generate revenue, rather to enforce compliance. If noncompliance is identified at your property, a Notice of Noncompliance will be sent to the owner and typically, a 90 day corrective action period will be provided. Owners and managers must respond during the corrective action period to avoid administrative penalties. All owners that are not making reasonable efforts to correct noncompliance are being referred the Department s Enforcement and Administrative Penalty committee. To date, 42 properties have been recommended for Administrative Penalties. Ten of the properties avoided the assessment of penalties by correcting the noncompliance. Penalties between $1,750 to as high as $14,000,000, are being considered for another six developments. The remaining 26 developments are working diligently to resolve the issues and avoid the administrative penalty. Working with affordable housing funds requires a long term commitment and a dedication to keeping abreast of changes in federal and state regulations. Recordkeeping, familiarity with the development s extended use agreement and attending Department trainings regularly will ensure compliance and ultimately avoid enforcement procedures. Declarations of Land Use Restrictive Covenants (LURA s) are available from the county clerk s office where the development is located or by an Open Records request to the Department. Compliance staff regularly partner with the Texas Apartment Association (TAA) to lead trainings that incorporate the latest changes in regulations. Registration is available through the TAA website ( Quarterly Reporting By: Karen Curtice Senate Bill 1717 requires owners of multifamily rental developments that receive funding from the State of Texas, including tax credits, to submit quarterly reports on the number of vacant units to the Texas Department of Housing and Community Affairs (TDHCA). To comply with this requirement, property owners must submit a quarterly Unit Status Report (USR) through the Department s on-line reporting system Compliance Monitoring and Tracking System (CMTS). Quarterly reports are due in January, April, July and October on the 10 th of the month. The report must show occupancy as of the last day of the previous month for the reporting period. For example, the quarterly report due October 10 should report occupancy as of September 30. The first quarterly report is due January 10, reflecting occupancy as of December 31, 2009.

2 Compliance Monitoring Newsletter, Page 2 Complying with TDHCA Affirmative Marketing Requirements By: Justin Merrill Most properties monitored by TDHCA are required to Affirmatively Market their property. Properties continue to struggle with having adequate Affirmative Marketing Plans, making this issue one of the most common findings of noncompliance cited during TDHCA onsite monitoring visits. In order to help facilitate properties in developing and using Affirmative Marketing Plans TDHCA is providing some additional guidance on how to have a compliant plan. For a property to be in compliance an Affirmative Marketing Plan must 1) identify those potential residents that are least likely to apply without special outreach, 2) establish tangible and achievable methods to inform those least likely to apply about the availability of the housing, 3) assess the success of the plan, and 4) maintain marketing documentation. Persons with disabilities must always be identified as a group not likely to apply without special outreach; however, the plan should also identify racial and ethnic groups not likely to apply without special outreach. The population(s) selected for marketing must be represented in the geographical area, but under-represented at the property. If a racial or ethnic group is not found in the area, it is a misallocation of resources to market to that group. For example, Native Hawaiians may not be likely to apply at your property without special outreach. However, if Native Hawaiians are not present in the market area it is not an appropriate selection for directing your marketing. To know which racial and ethnic groups are in the area, population data must be reviewed. The U.S. Census Bureau is an excellent source for this information and available online. Compare the area demographics to the property s resident demographics. If there are represented racial and ethnic groups in the area that are not represented as tenants of the property, those groups should be treated as the least likely to apply for housing and the plan should be drafted accordingly. The Affirmative Marketing Plan must establish methods to inform those least likely to apply about the availability of units. Specific organizations and contacts from the area must be listed; these organizations must be specifically associated with the identified population(s). For example, the local public housing authority serves the general public, not a specific racial or ethic demographic; therefore, marketing to the housing authority is not affirmative marketing. A Hispanic Chamber of Commerce, for example, might be an avenue for affirmative marketing to Hispanics. The property must clearly demonstrate that specific marketing has been used to reach out to the identified groups. Advertising, brochures, flyers, letters and logs are great ways (but not the only ways) to demonstrate this. Building and documenting relationships with groups likely to carry the message of rental opportunities to special populations is a must. Over time gradual changes or sudden events may change the characteristics of the area; previous affirmative marketing may have significantly changed representation at the property. Once a calendar year, the plan should be reviewed. Once every five years, the plan should be updated to capture demographic changes in the area. During a monitoring visit, the monitor will look to see how the property has complied with this regulation. To ensure that the monitor can report that the property is in compliance with program requirements, maintain copies of advertisements, brochures, flyers, letters, and logs and have them available for review. More information about Affirmative Marketing is available on HUD s website at Lock-Outs are Now Prohibited By: Bryan Small Effective November 30, 2009, the Department s Compliance Rules have been updated to include a new requirement for tenant protection. Owners of Housing Tax Credit Developments are prohibited from locking out or threatening to lock out any Development resident, or seizing or threatening to seize the personal property of a resident, except by judicial process, for the purposes of performing necessary repairs or construction work, or in cases of emergency. These prohibitions must be included in the lease or lease addendum. Please ensure that your leases or lease addenda include this new requirement to ensure compliance with program rules.

3 Compliance Monitoring Newsletter, Page 3 Noncompliance Methodology Change By: Jeff Piatt A recent change to 10 TAC (j) makes it easier for developments to stay in compliance while continuing to uphold the high standards set by the TDHCA. This rule change should have particular impact on developments under programs that receive periodic file and inspection reviews. The new change allows for corrected noncompliance to drop off of a development s compliance score one year after the date of correction (j). Uncorrected noncompliance events, if applicable to the Development, will carry the maximum number of points until the Department has reported the corrected noncompliance event. Once the Department has reported the corrected noncompliance event, the score will be reduced to the "corrected value". Corrected noncompliance will no longer be included in the Development score one (1) year after the date the Department reported the noncompliance corrected. For Housing Tax Credit properties it is important to keep in mind that changes in TCHCA policy will not affect the IRS requirement to file form 8823 when any noncompliance with program standards is found. Both TDHCA and IRS require that all noncompliance be corrected. Using the Annual Eligibility Certification Form By: Kim Coldren The Housing and Economic Recovery Act of 2008 alleviated federal requirements to recertify households on 100% Low Income Housing Tax Credit (HTC) and Multifamily Mortgage Revenue Bond (BOND) projects. During the first quarter of 2009 the Department incorporated this change into the Compliance Rules. An Annual Eligibility Certification form was created to meet the Department s reporting requirements to federal and state agencies. Many professionals in the affordable housing community have opted to continue full recertifications on their developments. Even if management or the ownership has selected to perform full recertifications of all households, the Department still requires the Annual Eligibility Certification for all 100% lowincome HTC and BOND developments. Failure to complete and maintain this form by the end of the calendar year would be a finding of noncompliance subject to penalties in accordance with Texas Administrative Code. Owners and Managers must review these forms for additions to the household; as further screening of income and assets is required (see Chapter 4 of the IRS Guide for Completing Form 8823). The form will also need to be reviewed for student status to confirm eligibility in accordance with the HTC and BOND programs rules. Common Compliance Findings By: Virginia Vasterling Each year TDHCA staff conducts over 600 onsite monitoring reviews. Here is our top 5 list of the most common findings of noncompliance: 1. Failure to provide Affirmative Marketing Plan no evidence to support marketing to persons with disabilities and those least likely to apply. 2. No evidence of provision of supportive services not providing all services as listed in the LURA 3. Gross rent(s) exceeds tax credit limits due to fees (application fees is the most common) 4. Owner did not properly calculate utility allowance using the wrong / old allowance. Implementing or updating alternative methodology (other than PHA) without Department approval. 5. Household Income Above Income Limit Upon Initial Occupancy units leased to households with incomes in excess of the allowable limit or unclear documentation of household s actual income. TDHCA encourages the use of recent check stubs to document income from employment to avoid this issue.

4 Compliance Monitoring Newsletter, Page 4 Effective December 1, 2009 significant changes took place to 10 TAC governing the scoring of UPCS inspections. A development is now cited for Major Violations of the UPCS if: Exigent Fire and Safety Violations are not corrected within 24 hours of notification or, Certification of such correction is not submitted to the department within 72 hours or, The UPCS inspection score is below 70 (69 or lower). A development is now cited for Patterns of Minor Violations of the UPCS only if: The UPCS inspection score is between 70 and 89. Findings of both Major and Patterns of Minor Violations will be New Scoring System for UPCS Inspections By: Jeff Piatt assessed if deficiencies reported meet the criteria for both. UPCS inspection scores of 90 and above will not result in findings by the Department. For Housing Tax Credit properties, Treasury Regulation requires the Department to report all deficiencies noted during an inspection to the IRS via form The issuance of 8823s for HTC properties that score over a 90 will be recorded as an Administrative Reporting in the Department s Compliance Status System. This violation has no points under the material noncompliance methodology. As always, developments in all programs must correct all deficiencies. Items noted on the List of Deficiencies section of the Inspection Report must be corrected, and corrections must be properly documented and reported to the Department within the ninety (90) day corrective action period. HUD Changes By: Jennifer Rhode On June 23, 2009 The U.S. Department of Housing and Urban Development (HUD) issued a third revision to the HUD Handbook, Change 3 is effective August 1, There are several changes to the Handbook, some of which are outlined below: Garnishments from Pensions: The change extends to social security, military, state, local or private pensions, the provision that payments made to a former spouse are not income for the person paying them but are income for the person receiving them. For example: If a household member is required by a divorce decree to pay part of his federal pension to his former spouse, only the amounts the household member actually receives after the amount paid out to the former spouse is counted towards income, not the total gross amount prior to any deductions. Foster Adults and Children: Earned (employment) and unearned (SSI) income of foster adults as well as asset and asset income for both foster adults and children are now included in household income. Payments received by the family for the care of foster children and adults are still not counted. Note that Foster adults and children do not count as household members. Live-in Aides: Change 3 revised the requirements of a live-in aide. Owners must verify the need for a live-in aide. Verification that the live in aide is needed to provide the necessary supportive service essential to the care and wellbeing of the person must be obtained from the person s physician, psychiatrist or other medical practitioner or health care provider. Owners may not require applicants or tenants to provide access to confidential medical records or to submit to a physical examination. Owners should not be gathering information about the nature of a person s disability.

5 Compliance Monitoring Newsletter, Page 5 Common Construction Inspection Deficiencies By: Kimbal Thompson Prior to receiving a final allocation of funds or 8609s, a final construction inspection is completed. The inspection checklist used by the Department focuses on verifying that application commitments are fulfilled and facilities comply with accessibility requirements for residential design. Experience has shown that owners meet compliance regulations as long as the requirements are clearly defined and information is readily available. Toward this end, developers and designers are encouraged to download the current inspection checklist and review the criteria inspectors are using in the field. The checklist is posted on the Department website at Also, the Compliance and Asset Oversight section of the TDHCA website is in the process of being revised with new pages of resources and guidance to help designers avoid common inspection deficiencies that become apparent only after construction is complete and units are being occupied. To illustrate the kind of information that will be on the construction inspection website, listed below are some of the most common or most difficult to correct deficiencies developers encounter: 1. Disproportionate Accessible Unit Distribution. Compliance Rule (b): Recipients must give priority to methods that offer housing in the most integrated setting possible (i.e., a setting that enables qualified persons with disabilities and persons without disabilities to interact to the fullest extent possible). So that the choice of living arrangements of persons with disabilities is comparable to that of other persons, Department inspections verify that accessible units are, to the maximum extent feasible, distributed throughout the sight, and that the different bedroom/bathroom types are made available in the same proportion that the total of each type is in relation to the total of units on the property. 2. Inaccessible amenities. Fair Housing Act Design Manual page 2.12: Whenever one of a type of element, feature, or space is provided for public or private use of residents, it must be on an accessible route and meet applicable specifications of ANSI. Whenever multiple features or facilities are provided, sufficient accessible features of each type must be provided to assure equitable opportunity for use by people with disabilities. Department inspections verify that at least one of each type of recreational amenity such as a barbecue grill and picnic table is on an accessible route to covered units. At least one access point on the perimeter of each type of play area and the apron of swimming pools must be on an accessible route. At least one trash dumpster must be accessible and on an accessible route. At least one accessible parking space at recreational areas with parking must be accessible. 3. Not 18 inches toilet-to-sidewall. Fair Housing Act Design Manual page 6.5: The 18 inches from the centerline of the toilet to the wall is an absolute measurement and will accommodate a grab bar and the shoulders of a person seated on the toilet. UFAS, ANSI, and TAS specify the 18-inch dimension with no plus or minus range in common-use restrooms and mobility units, as does the Fair Housing Design Manual in dwellings with a toilet next to a wall. Provision of one specification B bathroom in a multi-bathroom Fair Housing-covered unit does not exempt other bathrooms from this requirement. Because there is no margin for error and so many chances during the course of construction for error to occur, the toilet-to-wall dimension should be carefully managed from beginning to end. This common deficiency is usually corrected by installing an offset commode flange. An expanded list of common and difficult to correct deficiencies will be available soon on the construction inspection website. New issues will be addressed throughout the year. Check out the website at or call Kimbal Thompson at (512) or Gavin Reid at (512) if you have comments or questions about these Department inspections.

6 Compliance Monitoring Newsletter, Page 6 Annual Owner s Compliance Report (AOCR) By: Karen Curtice The Annual Owner Compliance Report (AOCR) is due March 1 of every year. The information in the report will reflect data current as of December 31 of the previous year (the reporting year). The first AOCR is due the second year following the award of funding. For example, if a development is awarded funds in the calendar year of 2008, the first report is due March 1, The report is due even if the property is still under construction. The AOCR consists of four parts. Part A The Owner s Certification of Program Compliance, Part B The Unit Status Report, Part C Housing for Persons with Disabilities Report and Part D - The Owner s Financial Certification. Parts A, B and C are due March 1. Part D is due April 30. For more information concerning these reports, please refer the Department s Compliance Rules at Title 10 of the Texas Administrative Code, subchapter A, Gross Rent Findings under the Housing Tax Credit Program By: Wendy Quackenbush The release of the updated 8823 Audit Guide in October 2009 (Chapter 11) specifies how Housing Tax Credit properties comply with gross rent(s), in regards to fees, deposits and compliance with other federal programs. Under IRC 42(g)(2)(A),.a residential unit is rent restricted if the gross rent with respect to the unit does not exceed 30% of imputed income limit applicable to such unit. The income limit used to compute the maximum rent is never less than the income limit applicable to the earliest period the building was included in the lowincome project. Gross rent includes: Household s portion of rent Utility allowances Mandatory fees Gross rent does not include: Rental payments under the Section 8 program or another comparable rental assistance program Fees paid to the owner by any governmental program of assistance for supportive services Rent overages paid to USDA Rural Housing under section 515 of the Housing Act of HUD publishes income limits annually and the new income and rent limits must be implemented within 45 days after the date HUD publishes the limits or the effective date, which ever is later. Since HUD determines a resident s rent on a monthly basis, state agencies must also determine if an owner is in compliance with the gross rent limits each month. Noncompliance with gross rent(s) will occur in the following scenarios: Rent exceeds the limit on a monthly basis. Rent exceeds the limit within a tax year basis (calendar year) Non allowable fees are charged Once a unit is determined to be out of compliance with the rent limit, the unit ceases to be a low-income unit for the remainder of the owner s taxable year. For monitoring purposes, TDHCA assumes that owners tax year is a calendar year. Refunding excess rent or fees will not correct noncompliance. The noncompliance cannot be reported as corrected until the first day of the next taxable year, provided that the owner has ceased charging the fees or the rent is now under the limit. Even if a household moves out and the noncompliant unit is reoccupied by a household that was not overcharged, the corrected date is still the first day of the next taxable year. For example: An owner charges a fee to change the locks when the household moved in May 1, The property is monitored in July 10, 2009 and ceases charging the fee August 1, The unit will not be reported back in to compliance until January 1, 2010 even though the owner corrected the noncompliance issue in August. The unit ceases to be a low-income unit for the remainder of the calendar year. If a property has multiple units with gross rent(s) findings this could impact the property s minimum set aside requirement.

7 Compliance Monitoring Newsletter, Page 7 Previous Participation Reviews By: Stephanie Givens Prior to providing any Department assistance, executing a Carryover Allocation Agreement, or processing a request for a Qualified Contract, the Compliance and Asset Oversight Division will conduct a previous participation review to determine if the requesting entity controls a Development that is in Material Noncompliance, owes the Department any fees, is sixty (60) days delinquent on a loan payment, has a past due single audit or single audit certification form, or has any unresolved audit or monitoring findings identified by the Contract Monitoring Section of the Compliance and Asset Oversight Division. Assistance includes but is not limited to allocating any Department funds or tax credits, engaging in loan or contract modifications that result in increased funding, approving a modification to a LURA (other than a technical error) and providing incentive awards. Previous participation reviews are like a background check that entities have to pass before the Department will grant whatever request is being asked. HOME properties are treated slightly differently than other properties monitored by the Department. If the owner of a HOME rental development is requesting assistance from the Department and there is any noncompliance with the HOME final rule, the application for assistance will be terminated. Say for example, a HOME property is not in compliance with the Affirmative Fair Housing Marketing requirements. By itself, this is not Material Noncompliance. However, since affirmative marketing is required by the HOME final rule if the owner requested any assistance from the Department, this would be an issue during a previous participation review. Note that during a previous participation review for an ownership transfer, the Department is checking to make sure the incoming owner is in good standing. The Department is not checking the status of the seller. If the property being transferred is in Material Noncompliance or has uncorrected issues of noncompliance, as long as the incoming owner is good standing and committed to curing the noncompliance, the request will not be denied because of the previous participation review. If an issue comes up during a previous participation review, staff will contact the requesting entity and provide a 5 day period to resolve the issues. Five days may not seem like a long time, but remember, whatever the issue is; the responsible party has already been notified. For example, if a property is in Material Noncompliance, the owner has already been provided a 90 day corrective action period to cure the issues. Or, if a fee is due, an invoice requesting payment has already been sent. The 5 day period during the previous participation review is kind of like a last chance to fix the issue. If the issue cannot be cured in 5 days, the application for assistance will be terminated. If an application is terminated, the Department s governing Board may consider reinstatement of the application only in the event that it determines that: (1) it is in the best interests of the Department and the State to proceed with the award; (2) the award will not present undue increased program or financial risk to the Department or State; (3) the applicant is not acting in bad faith; and (4) the applicant has taken reasonable measures within its power to remedy the cause for the termination. Note that reinstatement of a terminated Application merely makes the Application eligible to be considered and does not, in and of itself, constitute approval. For more detailed information about previous participation reviews please see 10 TAC TDHCA to Present Inspection Training By: Michael Garrett The Inspection Section of the Compliance and Asset Oversight Division has developed a one day presentation on preparing for your Uniform Physical Condition Standards inspection. As with other training presented by the Division, this training will be conducted in coordination with the Texas Apartment Association. The first sessions are scheduled in Houston on January 26, 2010 and in Fort Worth on January 28, Details and registration are available on the TAA website ( Additional presentations will be announced on the Department s listserv and posted on the TAA site as scheduled.

8 Compliance Monitoring Newsletter, Page 8 Housing Tax Credit Program and Full Time Students By: Ramon Martinez IRC 152(f)(2) defines a student as an individual, who during each of 5 calendar months during the calendar year in which the taxable year of the taxpayer begins, is a full-time student at an educational organization or is pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of an educational organization. [IRC 170(b)(l)(A)(ii)]. The Treasury Regulation (b) further provides that the five calendar months need not be consecutive. Determination of student status is based on the criteria used by the educational institution. These include elementary schools, junior and senior high schools, colleges, universities and technical, trade and mechanical schools. It does not include on-the-job training courses. In general, units comprised of full-time students do not qualify as low-income units. However, there are exceptions outlined in IRC 42(i)(3)(D). The section provides that a unit shall not fail to be treated as a low-income unit merely because it is occupied 1. by an individual who is: a. a student receiving assistance under Title IV of the Social Security Act, b. a student who was previously under the care and placement responsibility of the State agency responsible for administrating a plan under part B or part E of Title IV of the Social Security Act, or c. a student enrolled in a job training program receiving assistance under the Job Training Partnership Act or under other similar Federal, State or local laws. 2. entirely by full-time students is such students are a. single parents and their children and such parents are not dependents of another individual and such children are not dependents of another individual other than a parent of such children, or b. married and file a joint return. In the case of the single parent with children, the legislative history explains that none of the tenants (parent or children) can be a dependent of a third party. In light of these rules, owners must establish that the household is eligible at the time of initial move into low-income unit. Thereafter, this determination must be made annually. For mixed-used projects, where income recertification is required, this determination should be combined with the tenant income recertification. Tips on How to Submit Satisfactory Corrective Action By: Virginia Vasterling Have you ever received something that was just a total mess and you had to sort it out so you could figure out what you had? We have! Here are some tips on how to submit corrective action to show that the noncompliance is corrected: 1. Review the monitoring letter and the Detailed Findings of Noncompliance Report to ensure that what you are sending was requested. Sending too much information could result in additional questions! 2. Please submit the documentation in an organized manner. Label items so that we can determine what we are looking at. Be sure that your property s name is on the materials. 3. Prepare a cover letter to explain the corrective action and put the corrective action in the same order as the monitoring letter. 4. If ing, request an acknowledgment that the person has received the corrective action. Also, if the corrective action is large, you will need to break it up and submit it, in more than one Never send something to the Department without some kind of identifying information or explanation. 6. Don t wait till the last minute to start working on the corrective action. Chances are you will run out of time and could potentially miss the due date. It is okay to turn the corrective action in before the due date.

9 Compliance Monitoring Newsletter, Page 9 Utility Allowance Update By: Stephanie Naquin In October 2009, the Internal Revenue Service (IRS) released an updated Guide for Completing Form Chapter 18 addresses changes to the finding Owner did not properly calculate utility allowance (category 11m) resulting from the amended Treasury Regulation (released July 2008) and IRS Notice (released May 2009). Notice clarified that utilities paid to or through the owner of the building are included in the utility allowance calculation if the billing is based on the household s actual consumption. If residents pay utilities to or through the owner of a building and the billing is based on an allocation formula or RUBS, the utility is considered a mandatory fee; not part of the utility allowance. Although the IRS allows a reasonable fee for the administrative cost of sub-metering to be passed on to a household; Senate Bill 2126 prohibits Housing Tax Credit properties in Texas from imposing a service charge for the sub metering of water or wastewater. When an owner is using a methodology other that the Public Housing Authority (PHA) to calculate the utility allowance, the owner is required to review the basis on which the allowance is established once a calendar year. This annual review requires that the owner notify the residents by posting the proposed allowance in a common area of the leasing office while simultaneously submitting it to the Department for review. This action needs to be completed at the beginning of the ninety (90) days period in which the owner intends to implement the updated allowance. The Guide clarifies when, for each methodology, the 90 day period starts: Written Local Estimate (10TAC (d)(2)): The 90 day period begins with the receipt of the information from the utility company. For example, an owner obtains a written local estimate from a residential utility provider on March 15, The owner is required to notify the residents and the Department on March 15 th, which begins the 90 day notification period. The allowance can not be implemented until rent due after June 13, 2010 (90 days after March 15 th ). HUD Utility Model Schedule (10TAC (d)(3)): The 90 day period begins with the date entered as the Form Date on the Location tab of the spreadsheet. For example, the date entered as the Form Date on the Location tab is March 15, The owner is required to notify the residents and the Department on March 15 th, which begins the 90 day notification period. The allowance can not be implemented until rent due after June 13, 2010 (90 days after March 15 th ). Energy Consumption Model (10TAC (d)(4)): The 90 day period begins sixty (60) days after the end of the last month of the twelve (12) month period for which data was used to compute the estimate. For example, data for January 2009 through December 2009 was used to compute the estimate. The beginning of the 90 day notification period is March 1, 2010, which is 60 days after the end of December The allowance can not be implemented until rent due after May 30, 2010 (90 days after March 1 st ). Actual Use Method (10TAC (e)): The 90 day period begins when the owner receives approval of the allowance from the Department. For example, an owner submits a request to the Department to calculate the allowance using the Actual Use Method on February 1, The Department will review the request within forty five (45) days. The Department completes the review and issues written approval on March 15, March 15 th begins the 90 day notification period, at which time, the owner must notify the residents by posting in a common area of the leasing office the update allowance. The allowance can not be implemented until rent due after June 13, 2010 (90 days after March 15 th ). Please note, the data used to calculate the allowance can be no older than sixty (60) days before the beginning on the 90 day notification period. For this example, if the beginning of the 90 day notification period is March 15 th, the data used can be no older that January 14, For each of the above methodologies, failure to notify the resident or the Department at the beginning of the 90 day notification period or to implement an allowance before the end of the 90 day notification period will result in a finding of noncompliance. Failure comply with all aspects of Treasury Regulation , will be reported to the Internal Revenue Service on form 8823 under the category Owner failed to properly calculate utility Allowance. Effective November 30, 2009, the Compliance Monitoring Rules, found in Title 10, Chapter 60, of the Texas Administrative Code, have been updated. For complete guidance, please refer to the Department s website were both the updated Guide and the Compliance Monitoring Rules can be found.

10 Compliance Monitoring Newsletter, Page 10 Supportive Service Requirements By: Francisco Rosales The Compliance Monitoring Rules found in 10 TAC, Subchapter A, Chapter explain what is required for Supportive Services. If a Development s Land Use Restriction Agreement (LURA) requires the provision of supportive services, the Department will confirm this is being met during regularly scheduled onsite monitoring reviews. The Development must offer all services specified in the LURA and those services must be provided throughout the entire Affordability Period, beginning once the Development completes lease up. To evidence compliance, documentation must be kept. Many properties maintain a three ring binder with copies of flyers, sign in sheets, calendars, etc. that document what services were offered and when. If the services required by your Land Use Restriction Agreement are not of interest to the residents of the Development, it is possible to change the types of services offered. However, changes in the scope of services must be reviewed and approved by the Department prior to any changes. For example, suppose your LURA requires Credit Counseling classes and every time you offer the class, no one attends. While technically you are in compliance because you are offering the class, since no one is interested, you could survey the residents and determine an alternative. For example, you may find that residents are interested in after school activities for the children on the property. Since after school activities are significantly different than Credit Counseling classes, your property would need prior approval to make this kind of a change. To request the change, submit a written request to the Compliance Division outlining your proposal. In this example, until approved, you must continue to offer the Credit Counseling classes until your request is approved. Tenant Good Cause Eviction and Tenant Rent Increase Protection By: Meg Tynan For Housing Tax Credit properties, IRS Revenue Ruling prohibits (1) the eviction or termination of tenancy for other than good cause of low-income households and (2) any increase in gross rent not otherwise permitted under 42 throughout the affordability period and for three years after the early termination of an extended use agreement. For HOME properties, the HOME final Rule prohibits owners from evicting low-income residents or refusing to renew a lease except for serious, repeated violations of the terms and conditions of the lease, for violations of applicable federal, state or local law, for completion of the tenancy period for transitional housing, or for other good cause. 10 TAC Chapter requires the use of a lease or lease addendum that incorporates these tenant protections. The Texas Apartment Association has a lease addendum that meets the requirements, or your property could develop their own lease addendum. In addition to using a proper lease, HTC owners must also annually certify that during the preceding 12-month period no tenants in lowincome units were evicted or had their tenancies terminated other than for good cause and that no tenants had an increase in the gross rent with respect to a low-income unit not otherwise permitted under IRC 42. Neither IRC 42 nor TDHCA define good cause. The Compliance Monitoring rules require that determination be made by a court of competent jurisdiction. You should always maintain documentation to evidence the good cause for any eviction. Additional information on the HTC requirements and guidance on maintaining compliance is available in the IRS 8823 Audit Guide, pages 26-1 to 26-5.

11 Compliance Monitoring Newsletter, Page 11 Staff Changes in 2009 Albert Murray (Bert) started working for TDHCA as a Credit Underwriter in the Real Estate Underwriting division in February Bert moved into the Asset Management area in August 2005, which was incorporated into the Compliance Monitoring and Asset Oversight Division in May Bert has extensive experience in both Residential and Commercial Real Estate underwriting, lending and Asset Management, and has worked for Lending Institutions, as well as Mortgage Bankers/Brokers and the FDIC prior to coming to TDHCA. Bryan Small started working for TDHCA in the Compliance Monitoring and Asset Oversight Division in May Bryan has seven years of experience working in the private sector monitoring program compliance for multiple affordable programs. Jeff Piatt joined the Physical Inspection team in September Jeff has an extensive background in residential construction. He is an experienced carpenter and has many years of residential construction management experience as both an employee and as an independent contractor. He has several years experience in the real estate industry selling houses and working in the broker side of the industry. He has held the office of President (as well as several other board positions) of his homeowners association and continues to be involved in leadership roles in various organizations in Austin. Francisco Rosales joined TDHCA in February 2009 with over five years of experience in Section 8 Contract Administration. Francisco has also worked in the banking industry as a loan officer and assistant branch supervisor. Ramon Martinez has been a Compliance Monitor in the Compliance and Asset Oversight Division since October Ramon has 11 years combined experience with the Housing Authorities in El Paso and Austin in Public Housing and Project Based Section 8 to include admissions, HQS/UPCS inspections and property management. Since then, his experience has been as an independent contractor and employment with a property management company monitoring compliance of the Affordable Housing Tax Credit, Bond, HOME, HTF and PBS8 programs. His current certifications are as a Certified Occupancy Specialist and a Tax Credit Specialist through National Center for Housing Management (NCHM). Virginia Vasterling returned to TDHCA in the Compliance and Asset Oversight Division in January 2009 as a compliance monitor. Virginia worked for two and a half years as the compliance manager for a management company. She also worked for Monitoring Data Systems, Inc. (MDSI) as a compliance specialist with the Affordable Housing Disposition Program for 9 years. Prior to MDSI, Virginia worked for TDHCA in the compliance department for 7 years. Virginia has many years of experience in various housing programs (Housing Tax Credits, Affordable Housing Disposition Program, BONDS, HOME, etc). Virginia is COS and HCCP certified. Justin Merrill joined TDHCA in the Compliance and Asset Oversight Division in July 2009 as a compliance monitor. Prior to joining TDHCA, Justin worked for the private sector for nine years monitoring Housing Tax Credit, Bond, Home, Housing Trust Fund and Project-based Section 8 as property manager; team lead compliance officer, and regional compliance supervisor. Justin is COS, TCS, and HCCP certified.

12 Compliance Monitoring Newsletter, Page 12 Staff Information Below is a complete listing of the Compliance Monitoring and Inspection Specialist staff with telephone numbers and addresses. As always, staff is available to answer your questions. However, please keep in mind the responsibility of the Compliance Division is to monitor the long-term compliance regulations and provide information, in addition to training for the various housing programs administered by the TDHCA. Compliance Monitors are tasked with ensuring that tenants are income eligible and the rents comply with limits established according to the specific housing funding programs, i.e. Housing Tax Credit, HOME, Tax Exempt Multifamily, Housing Trust Fund and Affordable Housing Disposition Program. TDHCA and the Compliance Division do not have the authority to address landlord or tenant issues which are outside the scope of our responsibility. The below information is for internal use only and not for publication or distribution to residents. Staff Telephone (512 Area Code) and Addresses Or toll free in Texas at (800) Albert Murray albert.murray@tdhca.state.tx.us Bryan Small bryan.small@tdhca.state.tx.us Cherie Shearfield cherie.shearfield@tdhca.state.tx.us Daniel Valles daniel.valles@tdhca.state.tx.us Francisco Rosales francisco.rosale@tdhca.state.tx.us Gavin Reed gavin.reid@tdhca.state.tx.us James Roper james.roper@tdhca.state.tx.us Jeff Piatt jeff.piatt@tdhca.state.tx.us Jennifer Head jennifer.head@tdhca.state.tx.us Justin Merrill justin.merrill@tdhca.state.tx.us Karen Curtice karen.curtice@tdhca.state.tx.us Kimbal Thompson kimbal.thompson@tdhca.state.tx.us Kimberly Coldren kimberly.coldren@tdhca.state.tx.us Manuel Pena manuel.pena@tdhca.state.tx.us Meg Tynan meg.tynan@tdhca.state.tx.us Michael Garrett michael.garrett@tdhca.state.tx.us Patricia Murphy patricia.murphy@tdhca.state.tx.us Ralph Davis ralph.davis@tdhca.state.tx.us Ramon Martinez ramon.martinez@tdhca.state.tx.us Stephanie Givens stephanie.givens@tdhca.state.tx.us Stephanie Naquin stephanie.naquin@tdhca.state.tx.us Virginia Vasterling virginia.vasterling@tdhca.state.tx.us Wendy Quackenbush wendy.quackenbush@tdhca.state.tx.us