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January 28, 2016: New Utility Allowance Methodology in HUD Multifamily Properties in Effect

Notice H 2015-04 establishes a required methodology for calculating utility allowances. Starting December 18, 2015, owners must perform a new baseline utility analysis at their contract anniversary dates.

HUD’s Notice H 2015-04 (June 22, 2015) establishes a required methodology for calculating utility allowances. The Notice applies to Project-based Section 8, and Section 101, 202, 811, 236 and 221(d)(3) assisted projects. Starting December 18, 2015, owners must perform a new baseline utility analysis at their contract anniversary dates. The UAs will therefore be changing at almost every property, thus affecting every tenant's rent contribution to the landlord. To determine when properties in your area will be affected, search the NHLP spreadsheet of contract start dates (note that “contract anniversary date” under HUD's Notice may not always be the same as the "Start Date" indicated in the database.)

Under the new methodology, owners must calculate baseline allowances for each bedroom size every three years using the average of a sample of actual tenant utility costs. In the two years between baseline analyses, owners may adjust the allowances using an increase factor that HUD provides. Finally, owners must continue to increase allowances mid-year whenever utility rates increase by 10% or more.

For more information, please refer to the attached memo.

Attachment: http://nhlp.org/files/NHLP_MFUtilityPracticePointer_Full-FINAL.pdf

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