As a key player in the affordable housing industry, we understand that staying up-to-date on regulatory changes is essential. In this post, we’ll explore recent changes related to major regulatory updates. We’ll also touch on the significance of HUD reporting during this time of year and how these updates impact compliance and management for affordable housing providers.
Housing Opportunity Through Modernization Act (HOTMA)
Originally introduced in 2016, HOTMA introduced key changes aimed at increasing the availability of affordable housing. Recent regulatory updates, however, have added more layers of oversight and compliance, particularly regarding income limits and eligibility criteria.
Due to expanded income recertification requirements, HOTMA now allows certain tenants to undergo less frequent income recertification, reducing administrative burdens. However, this also calls for property managers to be precise in their record-keeping to ensure compliance.
Additionally, New rules have clarified the implementation of asset limits, particularly around the treatment of tenant assets in determining eligibility. These adjustments require a careful review of tenant financials and more meticulous screening processes.
Average Income Test (AIT)
AIT was introduced in 2018 as an additional way for LIHTC properties to qualify for tax credits. AIT provides more flexibility, allowing properties to serve a broader range of incomes, from as low as 20% to as high as 80% of the area median income (AMI). However, recent regulatory clarifications have reinforced the need for strict adherence to income averaging.
One significant update is the guidance around how noncompliance on one unit can impact the status of an entire building. This “cliff effect” means that even small errors in compliance can jeopardize the tax credits for a larger portion of the property, making precise income tracking a high priority.
Additionally,the IRS has clarified how changes in income and household composition over time affect unit set-asides. As properties undergo recertifications, they need to ensure the unit mix complies with the AIT requirements.
The National Standards for the Physical Inspection of Real Estate (NSPIRE)
NSPIRE is the newest inspection protocol being rolled out by HUD, set to replace the Uniform Physical Condition Standards (UPCS). NSPIRE focuses on streamlining inspections and prioritizing health and safety over aesthetic concerns, a major shift from the previous inspection system.
Under NSPIRE, properties are scored more heavily on issues that directly affect resident health and safety, such as fire hazards, mold, and accessibility. The scoring system is now less focused on cosmetic aspects, but the new requirements mean managers need to regularly update safety measures to stay compliant.
NSPIRE also introduces a three-tier system, evaluating the physical condition of properties based on severity—low, medium, and high priority. This tiered approach allows for more nuanced inspections and encourages ongoing property maintenance, instead of just passing periodic inspections.
This regulatory shift highlights the need for affordable housing providers to shift their focus to ongoing, real-time property management.
HUD Reporting
During this time of year, many affordable housing providers finalize their year-end submissions for various HUD programs. With regulatory updates like HOTMA, AIT, and NSPIRE in place, HUD reporting becomes even more significant in ensuring compliance and avoiding penalties.
Providers must submit detailed reports on tenant income, property conditions, and compliance with new regulations. Given the introduction of NSPIRE, inspections and physical condition reports are more crucial than ever. Accurate reporting on tenant income, particularly with the AIT’s complexity, is essential to maintain compliance.
Conclusion
As the affordable housing landscape continues to evolve, so too must the strategies and tools used to ensure compliance. By understanding and adapting to the latest updates in HOTMA, AIT, NSPIRE, and HUD reporting requirements, affordable housing professionals can ensure they meet these new standards while continuing to serve their communities effectively.
ProLink’s own Ryan Kim, VP of Professional Services, will be participating as a guest panelist during National Council of State Housing Agencies (NCSHA)’s “Keeping Pace with Multifamily Compliance Through Technology and Training” session during their Annual Conference this year. Ryan will be speaking on Monday, September 30th from 2:45 – 3:45 p.m. MST. Click here if you would like to learn more about the event.
Ryan will also be hosting a panel of industry experts to discuss these regulatory updates during ProLink Technology Live 2024, ProLink’s annual virtual user conference. Click here to learn more and register for the event.
ProLink Solutions is dedicated to providing innovative solutions for the affordable housing industry. Our upcoming NSPIRE inspection mobile app is just one of the many ways we are working to support property owners and managers. Stay tuned for more updates!
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