National Housing Law Project LALSHAC

Statutes:

Multifamily Assisted Housing Reform and Affordability Act of 1997, Pub. L. No. 10565, Title V, 111 Stat. 1343, 1384 (Oct. 27, 1997), codified at 42 U.S.C.A. § 1437f (Historical and Statutory Notes, "Multifamily Housing Assistance"), as amended by Pub. L. No. 106-74, §531 (Oct. 20, 1999);

Pub. L. No. 105276, §549, 112 Stat. 2461 (Oct. 21, 1998), codified at 42 U.S.C. §1437f(c)(8) (restoring the requirement that owners provide oneyear's notice of expiration or termination commencing Oct. 21, 1998)

Pub. L. No. 106-74, §535, 113 Stat. 1121 (Oct. 20, 1999) (removing requirement that notice state reasons for notices served after effective date)

Enhanced Vouchers:

• New Section 8(t) of the United States Housing Act, codified at 42 U.S.C. §1437f(t), enacted by Pub. L. No. 106-74, §538, 113 Stat. 1122 (Oct. 20, 1999).

Regulations: 

Interim Regulations: 63 Fed. Reg. 48,926 (Sept. 11, 1998) (new 24 C.F.R. §401 and 402)

Final Regulations: 65 Fed. Reg. 15,452 (March 22, 2000) (new 24 C.F.R. §401 and 402)

Notices and Other Administrative Issuances:

HUD Notice H 9936 "Projectbased Section 8 Contracts Expiring in Fiscal Year 2000" (Dec. 29, 1999)

HUD Notice H 9834 "Projectbased Section 8 Contracts Expiring in Fiscal Year 1999" (Oct. 16, 1998). 

HUD Notice PIH 2000-09 "Section 8 Tenant-Based Assistance for Housing Conversion Actions in FY 2000..." (March 7, 2000, expires March 31, 2001).

[HUD Notices may be accessed through <www.hudclips.org/sub_nonhud/cgi/hudclips.cgi>]

HUD, Operating Procedures Guide (for PAE administration of Mark to Market Restructuring or "Mark to market Lites"), available from HUD's Office of Multifamily Housing Assistance Restructuring (OMHAR) website, <www.hud.gov/omhar/readingrm>

Prepayment Of HUD-Subsidized Mortgages

Description: Congress first authorized unrestricted prepayment of many federallysubsidized mortgages in 1996, and has provided "enhanced vouchers" to most affected residents through annual appropriations Acts and general authority enacted in 1999. While the Title VI Low-Income Housing Preservation and Resident Homeownership Act ("LIHPRHA") has not been repealed, Congress short-funded the program beginning in 1996 and zero-funded the program in FY `98, and this trend has continued up to the present. 

Statutes:

Prepayment:

• Pub. L. No. 105276, §219, 112 Stat. 2487 (Oct. 21, 1998) (authority for prepayments of "eligible low-income housing" upon giving HUD, tenants and local government at least 150 days, but no more than 270 days written notice).

 
• Section 250 of the National Housing Act, codified at 12 U.S.C. §1715z-15 (standards and procedures governing prepayments of other subsidized properties where HUD approval is required, usually those with other use restrictions).

     
Enhanced Vouchers:
 
• New Section 8(t) of the United States Housing Act, codified at 42 U.S.C. §1437f(t), enacted by Pub. L. No. 106-74, §538, 113 Stat. 1122 (Oct. 20, 1999).

 
Older statutes:

Pub. L. No. 104120, § 2(b), 110 Stat. 834 (1996); Pub. L. No. 104134, § 101(e), Title II, paragraph entitled "Annual Contributions for Assisted Housing," 110 Stat. 1321 (Apr. 26, 1996); Pub. L. No. 104204, 110 Stat. 2874 (Sept. 26, 1996); Pub. L. No. 10565, 111 Stat. 1343 (Oct. 27, 1997); Pub. L. No. 105276, 112 Stat. 2461 (Oct. 21, 1998).

Notices and Other Administrative Issuances:

• PIH 2000-09 "Section 8 Tenant-Based Assistance for Housing Conversion Actions in FY 2000..." (March 7, 2000, expires March 31, 2001).

• PIH 9916 "TenantBased Rental Vouchers for Eligible Residents of Preservation Eligible Projects Approved for Prepayment of the Mortgage or Voluntary Termination" (March 12, 1999). 

• PIH 9819 "TenantBased Rental Vouchers or Certificates for Eligible Residents of Preservation-Eligible Projects Approved for Prepayment of the Mortgage" (April 3, 1998).

[HUD Notices may be accessed through <www.hudclips.org/sub_nonhud/cgi/hudclips.cgi>]

General Description: properties with expiring contracts or use restrictions where market "street rents" will exceed those available from continuing in the subsidized housing or Section 8 program. Subsidized or Section 8 rents are usually below true market value (below "street rents").

Often, these will be properties with HUD-subsidized mortgages and HUD rent control (usually under the Section 236 or 221(d)(3) BMIR programs) that have Section 8 Loan Management Set-Aside contracts, where the opt-out from Section 8 can occur about the time of a mortgage prepayment. Owners of these types of properties seeking to convert to market operation must also "prepay" the mortgage and terminate the Regulatory Agreement in order to obtain higher market-level rents, and many seek to do so without HUD approval (also note that some prepayments require HUD approval under criteria specified in §250 of the National Housing Act, 12 USC §1715z-15). Often properties at risk of conversion will also include newer-assisted Section 8 developments in hot markets. Finally, some Section 8 owners will want to escape government subsidies and regulation altogether, regardless of profit motives.

"Mark-Up" to Market: The Section 8 law (Pub. L. No. 106-74, §531, revising §524(a)(1) of Pub. L. No. 105-65 (MAHRAA)) now requires HUD to offer to raise the Section 8 rents on some properties to market levels, and permits HUD to offer higher rents on others, which may be an essential preservation tool, along with local resources. HUD has implemented this authority most recently via HUD Notice H99-36 (Dec. 28, 1999), which authorizes HUD to offer higher "market comparable" Section 8 renewal rents to those below-market properties meeting certain specific eligibility criteria, and to waive distribution restrictions to enable owners of properties with HUD-subsidized mortgages to obtain these higher returns.

"Enhanced Vouchers" Upon Conversion: If the owner decides to convert by prepayment and/or opt-out, most previously assisted tenants will receive replacement vouchers, with "enhanced" payment standards if necessary to enable the tenants to afford to pay the new market rents for the property.

November 8, 2000

I. Prepayments

A. Federal Law

1. HUD TPA Rules (if transfer or refi involved, and transfer/refi prior to prepayment, then TPA req'ts?)(see Hopkins Villagers)

2. Authority to Prepay: LIHPRHA unrepealed; FY `96& `97 Approps. expressly authorized prepayment (see Hopkins Villagers); FY `99 Sec. 219

3. Notice Violations

1. Statutory (pre-3/99; post-3/99 per FY `99, Sec. 219)

2. Due Process?? (property interest, governmental action issues)

4. Provision of Tenant-Based Assistance (HUD/PHA/Owner duties; HUD anti-displacement duty): only interposes temporary delay at most

5. Fair Housing Law (see below re all conversions): owner and HUD duties

1. Zoning restrictions (e.g. parking variances for elderly buildings)

2. Original Local Development Agreements where public land or funding involved (usually some but often loose affordability restr'ns for some units for X years)

3. Other state law, e.g., CA Govt. Code Sec. 65863.10 (1998) (9-month notice to tenants and state and local governments); WA Preservation Statute, Wash. Rev. Code tit. 59, ch. 189 (1989) (applicability, procedural and substantive requirements: 12-month notice to tenants and state and local governments, impact statements, relocation $??): constitutionality?, federal preemption on Title VI-eligible properties?

4. State or local controls (rent or conversion restrictions; right of first refusal; federal or state preemption?? [Cienega Gardens v. U.S., ___ F.3d ___ , 1998 WL 854,711 (Fed. Cir. Dec.7, 1998) (for lack of requisite privity of contract, vacating and remanding Court of Claims decisions at 33 Fed.. Cl.. 196 (1995), 37 Fed. Cl. 79 (1996), and 38 Fed. Cl. 64 (1997)), thus also vacating the lower court's broad and unsupported preemption holding.]

5. Eminent Domain: Pacifica (1998) and Denver (2000) cases

1. Federal law
 

1. Notice Violations

1. Statutory requirements

(1) Post-Oct. 21, `98, 12 months prior to expiration or termination, per FY `99, Sec. 549, amending 42 U.S.C. §1437f(c)(8); pre-10/20/99 notices must state "reasons" and be clear; see HUD Notice H 99-8 (May 27, 1999); 215 Alliance v. Cuomo (HUD approval on improper notice illegal). "Reasons" repealed by PL 106-74, §535 (10/20/99). HUD also requests add'l 4-month notice to HUD per H 99-36 (12/28/99). 

(2) former §1437f(c)(8) 90-day notice of rent increase at termination repealed by FY `99, Sec. 549

(3) MAHRA §514(d) 12-month notice probably applicable only to M2M-eligibles that opt-out or convert

2. Due Process?? (property interest, governmental action issues)

2. Provision of Tenant-Based Assistance (HUD/PHA/Owner duties; HUD anti-displ duty): only interposes temporary delay at most

3. Fair Housing Law (claim differs from prepayments): owner and HUD duties (see attached)

FY `96 Approps: Pub. L. No. 104-134 (April, 1996)
FY `97 Approps: Pub. L. No. 104-204 (Sept. 26, 1996)
FY `98 Approps: Pub. L. No. 105-65 (Oct. 27, 1997)

"MAHRA" (Multifamily Assisted Housing Reform and Affordability Act) is Title V of Pub. L. No. 105-65 (Oct. 27, 1997)

215 Alliance v. Cuomo, 61 F.Supp. 2d 879 (D. Minn.1999) (HUD approval of opt-out using HUD form notice illegal due to no reasons and unclear; HUD enhanced voucher policy of refusing to cover subsequent rent increases beyond payment standard illegal)

1. Constitutional and statutory (Title VIII, 42 USC §3601 et seq.) bases

2. HUD affirmative duty to further Fair Housing (§3608(d) and (e)): NAACP v. HUD (1st Cir., Breyer, J)

3. Denial of housing opp'ys ("otherwise making unavailable") on basis of protected statuses (effect on analysis of replacement Vouchers, now "enhanced")

4. Intent vs. disparate impact; impact test applicable to private defendants? (Brown v. Artery Org.; Green v. Sunpointe Assocs.)

5. Impact:

prima facie case (greater adverse impact or perpetuation of segregation) (Green v. Sunpointe Assocs.)

business justification defense

• if prepayment, need program or other option for market return on all Us (Sec. 8 may not exist or may be partial)

   
• if Sec. 8 opt-out, then (1) HUD "mark up" offer per new §524(a)(4), but what if no owner request? Does Title VIII restrict owner's choice and HUD's discretion? (2) Effect of new "enhanced vouchers"if opt-out?

Roisman, Florence W., "An Outline of Principles, Authorities and Resources for Fair Housing Litigation", updated October 27, 2000 (available from NHLP website under "Fair Housing")

Gillanders v. Smith, No. S-86-867 (E.D. Ca. filed 1986) (Clearinghouse No. 41,556).
Young v. United States Dep't of HUD, No. C-85-4642-EFL (N.D. Ca. Prelim. inj. denied Sept. 1985), injunction pending appeal denied, No. 85-2584 (9th Cir. 1985) (Clearinghouse No. 39,655)
Hopkins Villagers v. Cuomo, No. 98-1794 (D. Minn., filed 1998) (available from "www.mhponline.org", use "facts and research" link, then "Preservation/prepayment") 
Brown v. Artery Org., 654 F. Supp. 1106 (D.D.C. 1987)
Green v. Sunpointe Assocs., Ltd., No. C96-1542C, 1997 WL 1526484 (W.D. Wa. Order granting summary judgment May 12, 1997)

Enhanced vouchers are:

• available to tenants in residence upon prepayment of "eligible low-income housing" or termination of project-based Section 8 ("opt-out"); now covers opt-outs back to at least 10/01/96 per PL 106-377, §228 (10/27/00)

  
• not like regular vouchers, yet administered by the local PHA

   
• can use to stay or move

   
• Key Differences: value and displacement protection

• minimum rent: tenant pays at least same absolute rent or percentage of income paid before prepayment (could be > 30% of income if not on Section 8), whether stay or move; FY `99 revision; some non-Section 8 tenants may have to pay substantial rent increase to 30% of income

• for tenants who stay, can cover the entire amount of rent increase beyond 30% of income if PHA finds new rent "reasonable" for market; if not, tenant could be forced to move; unit must pass PHA's Housing Quality Standards (HQS)

• for tenants who move, value is based on regular PHA payment standard or FMR, tenant income, & tenant's prior rent (or 30% of income, if higher); PHA payment standard usually between 90%-110% of FMR

• @later years, Congress says value for stayers renewable at higher level and now can be further increased to cover subsequent rent increases (PL 106-74, §538)

• Law now clarified: tenant choice to remain, no stated qualifications Pub. L. No. 106-246, §2801 (July 13, 2000) (FY' 01 Mil. Constr'n and FY `00 Suppl. Approps); HUD Notice H99-36 (12/28/99)

• second year?: displacement risk by owner rejection or Section 8 Voucher eviction with no cause at expiration of initial lease term?

• one year, same as other vouchers; on expiration, Congress must appropriate new funds to continue assistance; this has been done annually for FYs '98-'00

• PHA must find owner's new rent "reasonable" (per market); if not, tenant could be forced to move; unit must pass HQS

• HUD says PHA can apply their own Voucher program's tenant selection criteria via new "screening"; owners can charge new higher security deposits

• Some owners claim they do not have to accept voucher for specific tenant or for all tenants (no knowledge of new law)

• Unit size problems for currently overhoused or overcrowded families

• No relocation costs if voluntary or forced displacement

• Money must be appropriated every year to renew Enhanced Vouchers; HUD can now cap subsidies at some "reasonable" % of local FMR (Pub. L. No. 106- 377, §205 (FY `01Approps))

Last year, in the HUD-VA FY 2000 appropriations bill, to protect tenants facing displacement, Congress passed unified authority for HUD to provide "enhanced vouchers" for all tenants facing housing conversion actions, including owner opt-outs and prepayments.¹ Recently, Congress just clarified that tenants receiving these protections may elect to remain in their units.² Unfortunately, in several other respects detailed infra, the law as passed and implemented by HUD fails to clearly protect tenants. The general principle linking all of these situations is that a change in the form of assistance from project-based to tenant-based (voucher) should jeopardize neither a tenant's level of assistance nor her ability to remain in her home. Appropriations legislation for FY 2001 provides an important opportunity to address these shortcomings.

1. Securing the Tenant's Option to Remain in the Building or the Neighborhood

• Voucher "stickiness": the owner's obligation to accept the vouchers

Congress has now clarified that tenants receiving enhanced vouchers for conversion events, including prepayments of HUD-subsidized mortgages or Section 8 opt outs, may elect to remain.³ This change should require owners to accept these vouchers provided to tenants to prevent displacement if a tenant chooses to stay.⁴ This provision does not expire annually. Although we believe that under this language tenants may elect to remain as long as they choose to do so, not just for the first lease following conversion, Congress should instruct HUD to clearly state that owners must accept these vouchers, and that this protection continues after the first lease term, absent good cause to terminate the tenancy.

• PHA re-screening of recipients

Another problem under enhanced vouchers is that HUD (pursuant to Notice PIH 2000-09) permits PHAs to re-screen prior Section 8 tenants that are prospective voucher recipients as if they were brand new Section 8 applicants. Occasionally, this results in a tenant being denied voucher benefits. There is no reason that a change in the form of subsidy should trigger a reevaluation of the recipient's suitability for assistance, when the tenant was previously assisted. Indeed, we believe that existing law does not allow HUD and PHAs to establish additional eligibility conditions for tenants facing housing conversion actions.⁵ To ensure that existing tenants receive protection from displacement, Congress should instruct HUD that PHAs cannot apply their usual application criteria where housing faces conversion.

• Protecting "Empty Nesters"

  
Tenants facing housing conversion, especially elderly tenants where household members have moved or died, sometimes reside in units that are too large for their current family size under normal program occupancy requirements. In PIH Notice 2000-9, HUD has issued a policy that enhanced voucher recipients living in inappropriately sized units must, if an appropriate unit is unavailable at the property, search for a unit elsewhere (with only a regular local payment standard). Only if an appropriate unit cannot be found can a tenant remain in her home, and even that is limited to one year after conversion. This policy on enhanced vouchers, however, is inconsistent with HUD's policy on project-based Section 8, which would have applied absent the conversion.⁶ No tenants facing housing conversion due to circumstances beyond their control, especially elderly tenants, should have to search for other housing beyond the property where they have made their home, or should have an arbitrary one-year limit placed upon their residency. Congress should direct HUD to reconcile this inconsistency between the Section 8 project-based and enhanced voucher programs by allowing tenants to remain in their homes until a unit of appropriate size becomes available at the property.

• Establishing enhanced voucher payment standards at local neighborhood levels for tenants that move.

In some situations, tenants will choose to move, or must move from the property (e.g., irreconcilable owner/PHA disagreement about "reasonable" rents for the voucher, seriously substandard conditions). In these situations, tenants receive an "enhanced voucher", but the payment standard then equals the ordinary local voucher payment standard, which typically uses a below-median rent covering a large geographical area. Especially in tighter housing markets, where rents in their old neighborhood exceed the local payment standard, tenants may be forced into cheaper neighborhoods, often with housing in poorer condition, with a higher racial and economic concentration, and with less access to job opportunities, thus increasing segregation. Separate payment standards for off-site use of enhanced vouchers, similar to those in effect were a tenant to remain in place, should be established to reflect housing costs within the neighborhood of the converted property, if higher than the local payment standard, e.g., within the zip code or the local census tract. This revision would help ensure that tenants are able use their vouchers to find affordable housing in the vicinity of the converted property, thus maintaining access for tenants to diverse neighborhoods.

• Ensuring that all conversion vouchers are enhanced vouchers

Enhanced vouchers are distinguished primarily by their potential higher value and their anti-displacement protection (for tenants choosing to stay). Sometimes, at the moment of conversion, housing conversion vouchers for stayers do not require payment standards beyond the local payment standard. However, this does not mean that a regular voucher would always be adequate. Because both housing markets and PHA payment standards can change, higher payment standards could be required in the future. Also, for all housing conversion actions, it is vital that converting owners be required to accept the vouchers, regardless of whether a higher payment standard is required. While the enhanced voucher law apparently suggests that all housing conversion vouchers are "enhanced" and carry these features, regardless of when they are needed, HUD's Notice (PIH 2000-09, p. 5, authorizing "regular vouchers") creates some ambiguity, especially as to enforcement and disposition actions. To protect tenants against displacement upon conversion or later, Congress should direct HUD to clarify that all vouchers issued to tenants who stay in converted properties are "enhanced" vouchers, so long as rents are "reasonable" and housing quality standards are satisfied.

The primary distinguishing feature of enhanced vouchers is that they can cover the entire amount of a new market rent level for a converted unit, so long as the PHA determines the amount is market-comparable, so that tenants can afford to stay in their homes. The pending FY 2001 VA-HUD Appropriations bill (H.R. 4635, §205), however, would allow HUD to set "other reasonable limits" on the enhanced voucher payment standard. Any additional limit, beyond the PHA's approval of the rent as market "reasonable", conflicts with the central purpose of providing enhanced vouchers in the first place -- to enable tenants facing conversions to afford to remain in their homes, especially in high cost local submarkets. Congress should therefore reject the pending proposal to establish other limits on enhanced voucher payment standards.

1. Extending enhanced voucher eligibility to previously converted tenants

Congress' FY 2000 law expanded eligibility for enhanced vouchers to tenants of project-based Section 8 properties facing opt-out or termination, protecting such families against rent increases. However, the law failed to protect those tenants, usually Section 8 tenants, whose properties experienced conversion in the years prior to FY 2000 — those whose situations gave rise to the reform — many of whom remain in occupancy paying higher rents with vouchers that were not enhanced. Often these tenants are seniors or people with disabilities on fixed incomes who can ill-afford these rent burdens. Nor does the law compensate these tenants for the increase in rent paid since the conversion. Fairness requires that Congress revise the enhanced voucher language to provide enhanced voucher benefits to all tenants still in occupancy, and provide appropriate reimbursements to tenants that have paid higher rents since conversion.

As a result of HUD's former policy⁷ that enhanced voucher payment standards were not adjustable to cover rent increases occurring after the owner's prepayment, many tenants have not been able to afford to stay in their homes or have been forced to divert precious funds at the expense of other life necessities. HUD's policy was ruled illegal by the only federal court to address it,⁸ and, in specifically revising the law, Congress recently clarified that HUD's policy was contrary to the prior law.⁹ HUD has so far refused to provide tenants reimbursement for the benefits required by law. Congress should direct HUD to identify promptly all affected tenants and to provide reimbursements immediately, in order to prevent further hardship to tenants (including forced relocation due to unaffordable rents).

Although Congress has clarified that enhanced voucher tenants should receive subsidy adjustments to cover subsequent rent increases, HUD's PIH Notice 2000-09 denies prospective rent adjustment benefits for prior enhanced voucher tenants until their next recertification on or after October 20, 1999, which could be as long as 12 months after a rent increase. Congress should direct HUD to provide adjustments effective upon the effective date of any rent increase.

Ordinarily, both project and tenant-based Section 8 subsidies are adjusted when tenants experience changes in income. The enhanced voucher law departs from that normal rule, establishing minimum rent requirements as a condition for project-based Section 8 tenants receiving enhanced vouchers.¹⁰ Initially applicable only to prepayment tenants paying flat Section 236 basic or market rents, these minimum rent requirements were intended to ensure that tenant rent burdens would not decrease merely because of conversion. Because some tenants experienced hardship from this requirement, in 1998 Congress clarified that the tenant's rent burden as a percentage of income should not change, and that subsidy adjustments could be provided for tenants experiencing "significant" income reductions. HUD then established a trigger for income losses of over 15%. Although relatively few tenants were affected by the minimum rent requirement and the 15% standard when it applied only to prepayments, now the number of affected tenants will be much greater, since enhanced vouchers have been extended to all project-based Section 8 tenants facing conversion.

This HUD policy, as applied to former project-based Section 8 tenants receiving enhanced vouchers, not only conflicts with the policy governing all other Section 8 assistance, but also introduces unnecessary complexity. Project-based Section 8 or ordinary voucher tenants do not have to show income reductions of at least 15% in order to receive a rent adjustment. There is no sound reason that a different rule should apply to former project-based Section 8 tenants receiving enhanced vouchers. A mere change in the form of Section 8 subsidy should not trigger a different rule about rent adjustments: former Section 8 tenants receiving enhanced vouchers should remain on an income-based rent system, like all other Section 8 project-based and voucher tenants, and be subject to the same rent adjustment policies. Congress should clarify that minimum rents apply only to tenants that were formerly paying Section 236 basic or market rents, not Section 8 income-based rents.

Funding and eligibility:

• "up to $10 million annually" from Section 8 appropriations ("Housing Certificate Fund")

• currently for all expiring Section 8 (not just M2M-eligible) and "Enforcement" projects

• tenant education, outreach, and organizing

• 28 organizations funded in 32 states

• NEW NOFA for $6 M issued 2/24/00

ITAGs (Intermediary Technical Assistance Grants):

• project-specific resident capacity (max. $20,000) and predevelopment grants (max. $70,000) for activities including:
• Transfer of projects to nonprofit owners
• Tenant assistance in identifying and resolving enforcement problems
• Evaluation of management agents 
• Project specific rehabilitation assessments 
• Evaluation of the use of tenant versus projectbased assistance 
• Monitoring of compliance with affordability requirements 

• "Public Entity Grants" to nonprofit community, legal services and public agency organizations ($20,000 max.)

• administered by 3 nonprofit Intermediaries, depending on project location: Northeast — National Center for Tenant Ownership (DC); Southwest, Southeast, and CA — Low-Income Housing Fund (SF, CA); Midwest and West: Amador-Tuolomne Comm'y Action Agency (CA)

General Description: properties with expiring contracts where current Section 8 rents are near or slightly more than current market rents. Some properties may have another restriction on value like a Flexible Subsidy Use Agreement, local zoning variances or rent control.

Owners of "Mark to market"-eligible properties with Section 8 rents slightly above market value might seek this renewal option (by reducing rents with a "haircut" or using slightly higher market comparables than warranted) in order to avoid the effort and expense (consultants, rehab contribution) of restructuring, and preserve maximum flexibility, especially where there are prospects for local market improvement. This renewal without restructuring is often called "Mark to Market Lite".

Drifter properties may at some point lack the revenue or capital for deferred maintenance and rehabilitation, and conditions may begin to deteriorate.

November 8, 2000

General Description: properties with expiring contracts where Section 8 rents exceed true market "street rents", usually by more than 20%. Nonprofit-owned properties may elect to participate even where current rents do not exceed market by much.

For those with HUD-insured loans, restructuring will usually reduce the amount of the first mortgage to levels serviceable with Section 8 set at market rents, placing the non-serviceable portion of the prior loan into a deferred second mortgage. Where even complete debt relief fails to permit operation at market rents, budget-based Section 8 rents ("exception rents") to cover operating expenses can be used.

"Mark to Market" Restructuring brings other risks and opportunities:

• A specific plan must be developed for each property.
• The restructuring process may be transferred to a new agency other than HUD ("Participating Administrative Entity", or "PAE").
• The owner and the PAE must develop a plan for the property ("Restructuring Plan"), with tenant participation, including an evaluation of rehabilitation and management needs.
• In addition, for many properties, the Plan will also evaluate whether the future Section 8 subsidies should be project-based or tenant based Vouchers. PAEs may decide to convert some or all subsidies on these properties to vouchers. Properties located in a PAE-determined "tight market" or serving predominantly seniors and people with disabilities are guaranteed project-based Section 8 renewals.
• Owners that participate in restructuring must also agree to continued use restrictions. Those properties receiving a project-based Section 8 renewal must agree to accept Section 8 renewal contracts for at least 30 years (perhaps one year at a time). Those properties converting to Vouchers must agree not to discriminate against Voucher holders for the same term, and may be limited in the rents they can charge.

• PAE Policies and Program
• Notices
• Meetings
• Access to Info
• Monitoring PAE's program
• Technical Assistance Resources:
• OTAGs
• ITAGs for "PEGs", Resident Capacity Building, and Predevelopment

• Project Eligibility ("Mkt Rent"): Renewal vs. Restr'g
• Rehab and Management Assessment ("CNA"; Mgmt Review)
• Operating Budget
• Rehab Level
• Restructuring Plan ("MRRASP"); Use Agreement
• Form of subsidy ("Rental Assistance Assessment")
• Ongoing Project Monitoring and Oversight
• Any Proposed Sale or Transfer

• Notices:

• One Year Notice of Contract Expiration
• 120-days of Intent to Restructure ("NOIR")
• Notice of Assignment to PAE?

     
• Stakeholder Meeting with PAE?

• First Tenant Meeting

• Access to Information (Restricted By HUD Regs/OPG?)

• Rental Assistance Assessment Plan (Voucher Conversion?)

• Add'l Notice of Proposed Restr'g Plan & Opp'y to Comment

• Second Tenant Meeting

• Informal Appeal to OMHAR?

• Notice of Plan Approval

SECTION 8 EXPIRING CONTRACTS: RESOURCE LIST

(most recent articles listed at the end; useful basics in bold)

1. "The New Section 8 Renewal and Restructuring Program: An In-Depth Review," 27 HOUSING LAW BULLETIN 175 (Nov. 1997) (long summary).

2. "Moving Forward on Project-Based Section 8 Expiring Contracts," 27 HOUSING LAW BULLETIN 195 (Dec. 1997) (next steps).

3. "HUD Provides Improved Data on Section 8 Projects Via the Internet," 27 HOUSING LAW BULLETIN 201 (Dec. 1997).

4. "What Might Happen to Section 8 Properties Under the New Law?", 28 HOUSING LAW BULLETIN 17 (Feb. 1998) (how to begin categorizing properties).

5. "Section 8 Renewal and Restructuring: Working At the State Level", 28 HOUSING LAW BULLETIN 35 (Mar. 1998) (commencing state and local activities).

6. "Why Does the Section 8 Budget Estimate Keep Changing?", 28 HOUSING LAW BULLETIN 80 (May 1998).

7. "IRS Issues Favorable "Mark to Market" Revenue Ruling", 28 HOUSING LAW BULLETIN 134 (Aug. 1998).

8. "HUD Issues Regulations for Section 8 "Mark to Market" Program", 28 HOUSING LAW BULLETIN 143 (Sept. 1998).

9. "HUD Solicits PAE Applications for Mark to Market Program", 28 HOUSING LAW BULLETIN 158 (Sept. 1998).

10. "Important New Laws for HUD Multifamily Housing", 28 HOUSING LAW BULLETIN 191(Oct./Nov. 1998) (reviews relevant provisions of FY `99 HUD Approps Act).

11. "HUD Issues Guidance Re FY 1999 Expiring Section 8 Contracts", 28 HOUSING LAW BULLETIN 213 (Dec. 1998) (reviews HUD Notice H 98-34 re FY `99 expirations).

12. "HUD Selects PAEs for Mark to Market Program", 28 HOUSING LAW BULLETIN 217 (Dec. 1998).

13. "HUD's Fair Housing Duties and the Loss of Public and Assisted Housing", 29 HOUSING LAW BULLETIN 1 (Jan. 1999).

14. "Although PAEs Selected, Outstanding Issues Delay Finalizing of Contracts", 29 HOUSING LAW BULLETIN 38 (Feb. 1999).

15. "New Preservation Proposal Introduced in Congress," 29 HOUSING LAW BULLETIN 52 (March 1999) (describing Vento-Ramstad bill, H. R. 425 (106^th Cong. 1^st Sess. 1999)).

16. "Preservation Crisis Mounts: HUD and Congress Respond" 29 HOUSING LAW BULLETIN 67 (April 1999).

17. "New HUD Data on Section 8 Projects", 29 HOUSING LAW BULLETIN 106 (May 1999).

18. "HUD Finally Announces "Mark-Up" Policy to Prevent Some Section 8 Opt-Outs", 29 HOUSING LAW BULLETIN 96 (May 1999). 

19. "House Republicans Introduce Preservation Bill", 29 HOUSING LAW BULLETIN 120 (June 1999) (reviewing HR 1336).

20. "Preservation Issue Heats Up in Congress, " 29 HOUS. L. BULL. 133 (July/Aug. 1999) (describing new and revised legislative proposals, including H.R. 202. S. 1318 and S. 1319 on "mark ups", enhanced vouchers, and preservation matching grants).

21. "HUD's Final "Mark-Up" Notice Contains Important Changes", 29 HOUS. L. BULL. 138 (July/Aug. 1999) (reviewing the final HUD "Mark Up" policy Notice H 99-15).

22. "Minnesota Section 8 Tenants Win Major Preservation Victory", 29 HOUS. L. BULL. 161 (Sept. 1999) (reviewing 215 Alliance v. Cuomo).

23. "Preserving Federally Assisted Housing at the State and Local level: A Legislative Tool Kit," 29 HOUS. L. BULL. 183 (Oct. 1999) (survey of state and local preservation initiatives).

24. "FY 2000 HUD Appropriations Bill: Section 8 Renewal Provisions (Including "Mark Up to Market')", 29 HOUS. L. BULL. 211 (Nov./Dec. 1999).

25. "New Guidance re FY 2000 Project-Based Section 8 Contract Renewals," 30 HOUS. L. BULL. 9 (Jan. 2000) (reviewing HUD Notice H99-36).

26. "HUD Submits Promising FY 2001 HUD Budget Request to Congress," 30 HOUS. L. BULL. 19 (Feb. 2000).

27. "Final Mark to Market Regulations," 30 HOUS. L. BULL. 61 (May 2000).

28. "HUD Issues Guidance for FY 2000 Enhanced Vouchers," 30 HOUS. L. BULL. 64 (May 2000).

29. "New Studies Assessing Risk of Opt-outs Enable Advocates to Target Preservation Efforts," 30 HOUS. L. BULL. 82 (June 2000).

30. "Important Features of the Final Admission and Occupancy Regulations Affecting Project-Based Section 8 Units," 30 HOUS. L. BULL. 100 (July 2000).

31. "Senate Considers New Preservation Legislation," 30 HOUS. L. BULL. 103 (July 2000).

32. "HUD Issues Final Rule on Tenant Organizing," 30 HOUS. L. BULL. 113 (Aug. 2000).

33. "Congress Clarifies Tenants' Right to Remain in HUD Multifamily Conversions," 30 HOUS. L. BULL. 138 (Sept. 2000).

34. "Denver Adopts Preservation Ordinance," 30 HOUS. L. BULL. ___ (Oct. 2000).

Useful Websites:

• You can get articles from this list that are more than one year old free of charge from NHLP's Website (<www.nhlp.org>). If you want newer articles, PLEASE SUBSCRIBE TO THE HOUSING LAW BULLETIN!! (order form on NHLP website).

• the National Low-Income Housing Coalition Website at <www.nlihc.org/marktomarket>. 

• HUD's Website <www.hud.gov/mfh/fha/pre>. New HUD data on Section 8 projects (except Mod Rehabs) compiled from its various information systems is now available at: <http://www.hud.gov/fha/mfh/mfhdiscl.html>

• HUD's Office of Multifamily Housing Assistance Restructuring (OMHAR) <www.hud.gov/omhar> has some data on project filings, rules and guidelines, PAEs, and other helpful information

• the HUDClips Website has the applicable statutes, regs, Notices, and guidelines <www.hudclips.org/sub_nonhud/cgi/hudclips.cgi >. 

• the National Housing Trust's Website at <www.nhtinc.org> has data on Section 8 Opt-Outs and Terminations through 12/31/98, updated occasionally

• Tenants and local and regional tenant coalitions should also contact the National Alliance Of HUD Tenants, a tenant-controlled national organization of local tenant organizations working to preserve and improve Section 8 housing, at 353 Columbus Ave., Boston, MA 02116, phone (617) 267-9564, fax (617) 267-4769.

¹Pub.L. No. 106-74, §538, establishing a new Section 8(t) of the United States Housing Act, 42 U.S.C. §1437f(t).

²Pub. L. No. 106-246, §2801 (July 13, 2000) (H.R. 4425, FY 2001 Military Construction and FY 2000 Emergency Supplemental Appropriations) (amending Section 8(t) to state that "the assisted family may elect to remain in the same project in which the family was residing on the date of the eligibility event..."). The Conference Report states that this is a clarification of law: "inserts language as proposed by the House and the Senate clarifying the intent of title V, subtitle C, section 538 of Public Law 106-74." H. Rep 106-710 (June 29, 2000).

³ Id.

⁴ Prior to the formal statutory clarification, based on former law and a December 23, 1999 letter from Senator Bond, HUD restated the tenant election language in several notices, including Notice H99-36, p. 30 (Dec. 29, 1999) and Notice PIH 99-16.

⁵ E.g., Section 524(d) of MAHRAA, Pub. L. No. 106-74, §531(a), 113 Stat. 1113 (Oct. 20, 1999) (HUD "shall make enhanced voucher assistance ... available on behalf of [each family residing at contract expiration]"). 

⁶ HUD Handbook 4350.3 (paras. 2-19 and 5-9) for multifamily programs states that if a unit becomes oversized as a result of changes in the household, the remaining tenants must accept an alternative unit in the property when available, but are not required to move from the property.

⁷ See HUD Notices PIH 98-19 and 99-16.

⁸ 215 Alliance v. Cuomo, 61 F. Supp.2d 879 (D. Minn. 1999).

⁹ See Pub. L. No. 106-74, Sec. 538, establishing new Section 8(t) covering subsequent rent increases ("as such rent may be increased from time to time", subject to PHA rent reasonableness test). The legislative history confirmed that Congress interpreted HUD's policy to be illegal. See House Rep. 106-286 ("[The FY 1997 Appropriations Act] created a special section 8 enhanced voucher to provide a higher subsidy for residents in properties where an owner prepays the mortgage and then charges a higher rent . . . . the committee intended that it cover initial rent increases, as well as subsequent rent increases . . . . [T]o clarify any ambiguity, language is included ... to ensure that subsequent rent increases, if reasonable, are covered by the enhanced voucher.").

¹⁰ Section 8(t)(1) (A) and (D).
 

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