HUD, IRS, and RD move forward with harmonization

by Richard Michael Price on Nov 22, 2011

This article is reprinted with the permission of Nixon Peabody LLP

Over the past year the White House has sought to align federal rental policy. Sometimes called “Harmonization,” these efforts have focused on several areas where federal programs work in tandem among the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Treasury (essentially the Internal Revenue Service’s Low-Income Housing Tax Credit Program), and the U.S. Department of Agriculture (USDA) (mainly Rural Housing Services’ multifamily programs operated through Rural Development). The White House has convened several working group meetings culminating in a roll out meeting this past July 27. The Administration published its report called Federal Rental Alignment Opportunities—Conceptual Proposals, and sought comments over the summer. The report is broken out by its 11 subject areas: physical inspections, income reporting and definitions, subsidy layering reviews, reduction in state-to-state variability for income definition, financial reporting, common energy efficiency requirements, appraisal primer, market study standards, capital needs assessment, improve sharing of data on owner defaults, and compliance (fair housing MOUs).

The Administration is now starting implementation through pilot programs for physical inspections and subsidy layering reviews. The physical inspection pilot will involve limited numbers of properties in Michigan, Minnesota, Ohio, Oregon, Washington State, and Wisconsin. The subsidy layering pilot will be implemented in certain transactions in North Carolina, South Carolina, Michigan, and Nevada.

The physical inspection pilots have started their roll outs in the past two weeks in different states. Each pilot is focused on executing Memoranda of Understanding (“MOU”) in each pilot state between HUD, USDA, and the state Housing Finance Agency. Indications are that the Uniform Physical Condition Standard or UPCS would become the common inspection standard.

Similarly, the subsidy layering pilot will be implemented by state-specific MOUs between HUD, RD, and the state Housing Finance Agency.


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