Income Limits — A Double Gift From HUD

Editor’s note: Jed Graef, Bostonpost Product Manager, provides the latest information on the affordable housing industry’s specification updates. To read Jed’s previous post, click here.

we enter the holiday season, you might say that we have been doubly blessed—not only did HUD give us the expected gift of a new set of HUD and tax credit (MTSP) income limits but it saw fit to give us still another set. Unfortunately, they asked us to return the first one.

shutterstock_89957470-resized-600But first, some history. In the good old days HUD released income limits whenever they happened to complete work on them. The publication date was generally in the February to May date range and some of us who live and breathe things like this would start nervously checking the HUD website daily around the end of January. After all, among a certain group of policy geeks, one’s status can take a big hit if you are clueless about the release of new income limits. People start talking. Then, back in 2011, HUD announced that henceforth they would release the limits each year on December first so that there would be some predictability in the process. Also, since USDA and HOME base their limits on the HUD ones, they could now plan for when they would need to start their work. Life was looking up — just check the HUD web site every minute from dawn to dusk on December first and you could relax for the rest of the year. Last year everything worked without a hitch. The limits were published late in the day on the first and were effective on the first.

Fast forward to this year. Because MRI Bostonpost Property Manager loads the new income limits to all customer databases so that customers do not have to be obsessive about watching for their publication and to help avoid data entry errors and the follow-on compliance problems, just after Thanksgiving we alerted the members of our Global Professional Services and Development teams who would be involved in the effort to be ready to drop everything and spring into action. This was the first year where December first fell on a weekend and there was speculation that HUD might drop the limits on Saturday, but the team was committed to working over the weekend should that happen. Monday the third came and went with no limits. Finally, they appeared late afternoon on December fourth.

The limits and supporting documentation were downloaded, reviewed, and handed off to the team that evening. Late the next morning, breaking all previous MRI Bostonpost speed records for getting the limits into the databases, we were done and customers notified. In retrospect we should probably have been a tad worried. The usual implementation notice giving the effective date was not part of the package, one of the other documents did not contain what it should but rather was a copy of another document, and there was one  document that was simply missing. But we were flushed with victory and ignored the warning signs.

That day rumors started to swirl that a couple of states were taking the position that the limits were effective on the first as that is when HUD had promised them. I contacted the person at HUD in charge of their effort and he quickly squelched that rumor, verified that the fourth was the effective date and got the word out to the state agencies saying that he would publish the missing documents.

All was wonderful until the morning of December eleventh when HUD sent out an urgent email saying that there had been a major error in the production of the limits—the median incomes on which the limits are based had been underestimated across the board by 3% plus or minus. This meant that the majority of the limits were too low. As you know, for brand new tax credit projects, this kind of mistake has a large economic impact as the rents are based on the limits. That afternoon, HUD published a new package of limits effective December eleventh and rescinded the December fourth limits, leaving unanswered policy questions related to those who had moved in residents pursuant to the old new limits. Most limits had dropped relative to the prior year but some had gone up. It was possible that a move-in was fine with the December fourth numbers, but not good if the prior year’s figures were used. It was also possible that someone was denied admission as a result of the now defunct lower limits.

Once again the Bostonpost team rose to the occasion and loaded the December eleventh data to the databases on the twelfth and deleted the December fourth data in accordance with HUD guidance.

The time since then has been spent on a blizzard of emails and phone calls to industry partners, state agencies, HUD, and the IRS concerning the compliance issues raised by the demise of the December fourth limits. At this point we have some tentative information but nothing definite.

As for HUD, its policy shop appears committed to a blanket amnesty for any actions taken based on the first set of new limits that are problematic in retrospect, but HUD is still investigating other issues and has not published anything yet. It is researching whether it has the statutory authority to allow owners the same 45-day grace period for implementing new limits as is true for the tax credit program. Finally, HUD has had some discussions concerning resurrecting the December fourth limits and having them effective for seven days.

As for the IRS, nobody has been able to get any response or reaction. Some tax credit professionals would like to see the December eleventh limits made effective retroactively to December fourth as that would cure most tax credit problems.

With regret, therefore, we have to ask you to stay tuned. As solid information is made available we will let you know. But rest assured, MRI Bostonpost will continue to stay on top of the latest in affordable housing compliance, whether it’s the latest HUD income limit changes, the upcoming TRACS 202D update, or any of the multitude of compliance and policy changes that occur throughout the year. In the meantime you are encouraged to take questions to your regulators or counsel for advice. Some of the changes being contemplated at the federal level would likely force us to change how we distribute income limits to give you more control, but that is a topic for the future.

 

Jed Graef has posted a follow up on HUD income limits hereHUD and Tax Credit Income Limit Update.

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