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This type of
Budget Budget-Based Rent
Increase(BBRI) Proposals applies Only to projects refinanced under Section 236
(e)(2)Decoupling of Interest Reduction Payments (IRP).
It also applies to multifamily projects currently receiving
IRP pursuant to Section 236, including all projects with mortgages insured or
held by HUD and all State Agency non-insured projects.
It does not apply to any former Section 236 project owned by HUD or sold
by HUD from the HUD-owned inventory.
This also applicable to Section 236 Basic and Market rent
computations during the term of the Decoupling Use Agreement and allowable
distributions during the term of the Agreement for IRP.
By statute, IRP assistance is paid to mortgagees on behalf
of mortgagors to assist in the debt service payments of the project.
IRP are not and may not be paid directly to project Owners.
The Department must ensure that IRP assistance is paid for projects that
provide habitable, low-income housing; therefore, an acceptable public agency
must provide the regulatory oversight of these projects.
If there is no acceptable agency, then HUD will perform this function.
In a Decoupling transaction, the Section 236 mortgage may
be prepaid and the IRP subsidy will continue and may be used for debt service.
Nonetheless, the original Section 236 requirements must be maintained for
the establishment of Basic and Market Rent schedules, occupancy and habitability
standards, income limits, financial reporting requirements and payment of any
Excess Income to HUD. The Owner must
demonstrate to HUD how the project will be financially feasible under the
continued Section 236 regime.
Projects must maintain the requirements of the Section 236
program after the completion of the Decoupling.
Basic and Market Rent are mandatory rent payment standards for Section
236 units in Decoupling transactions. The
Section 236 rents and the Section 8 rents may be different because of the
differences in calculating rent increases for Basic Rents (which are based on a
budget-based rent increase methodology only) and rent increase policies and
procedures for Section 8 rent adjustments. The
tenant may pay a rent below the Basic Rent only if a subsidy is paid on the
tenant’s behalf that ensures the Owner’s receipt of the approved basic rent
(minimum acceptable rent level). An
Owner may provide such a subsidy, or the subsidy may be provided from Section 8
rental assistance, or other rental assistance such as Rent Supplement or Rental
Assistance Payments (RAP). Overall,
a combination of the Basic Rent and Section 8 rent must be sufficient to operate
the project and pay debt service for the project with the assistance of the IRP
subsidy (with the exception of projects that have an existing Low-Income Housing
Preservation and Resident Homeownership Act (LIHPRHA) or Emergency Low-Income
Housing Preservation Act (ELIPHA) Use Agreement.
These projects must continue to comply with the requirements outlined in
these Agreements).
Any insured, non-insured or HUD-held Section 236 project is eligible for
consideration under the Decoupling program.
Preservation Projects (processed under the Low-Income Housing
Preservation and Resident Homeownership Act (LIHPRHA) and Emergency Low-Income
Housing Preservation Act (ELIHPA) programs) may only participate provided there
is no rent increase required or caused by the Decoupling transaction.
Rent setting requirements and procedures for these properties are
enumerated under a Plan of Action.
Contact
me by phone 301-277-3465 or
email (alvinl.sutherlin@verizon.net)
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Date Updated:
09/27/2023 03:40:49 AM |
