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Budget-Based Rent Increase

HUD Budget-based Rent Increases
Rentals/Carrying Charge Increases (Cooperatives)

Notice H-2012-14, SUBJECT:   Use of “New Regulation” Section 8 Housing Assistance Payments (HAP) Contracts Residual Receipts to Offset Project-Based Section 8 Housing Assistance Payments

HUD June 20, 2011 Memo, Clarification Utility Allowance Regulations

24 Code of Federal Regulations (CFR) 245

  HUD Profit and Loss Statement

  HUD Chart of Accounts

Owner Equity (DOES NOT APPLY TO NON-PROFITS)

Exception: From time-to-time Contract Administrators/HUD Multifamily Asset Management Staff are asked to process special rent increases for projects that have been sold at foreclosure sales to third parties or sold by HUD, as a HUD-owned property.  In either case, if a property was sold without financing, there are special processing procedures that must be followed. These procedures are intended to provide a mechanism to deal with projects that were financed by the owner after acquisition on an all-cash basis.

Note: To do a comprehensive analysis, based on HUD outstanding instructions, my services would include a complete submission in collaboration with your staff, which consist of completing all HUD required forms, completed proposal on your company letterhead, with one original bound copy for mailing to Contract Administrator/HUD and two bound office copies.

HUD Directives, provides procedures for processing budgeted carrying charge and rent increases in certain HUD projects. All project owners whose mortgages are insured under Section 231, 232, 202 projects (who do not use the Section 8 Annual Adjustment Factor (AAF)), 213, 236 (including cooperatives), Rent Supplement, 221(d)(3) Market Rate and 221(d)(3) Below Market Interest Rate (BMIR) rental and cooperative projects, 207's and 231's both regulated and controlled by alternative rent mechanism; Section 220 and 221(d)(4)'s that are regulated; and all of the above that are not automatically preempted by HUD and request exemption from local rent control, are required to use the Budget Approach when requesting HUD to increase the Maximum Allowable Rent Potential.

We have developed a computerized version of the budgeted carrying charge/rent increase process. Our prepared proposals have been accepted and approved by HUD Field Offices in several states. If you provide us with the necessary information, we will prepare complete budget proposals for rentals and cooperatives projects. 

From HUD’s standpoint, the expenses from the Profit & Loss of the owner’s annual financial audit for the most recent fiscal year is their primary consideration. They consider the demonstrated expenses for that period as a starting point for the new budget period. Their thinking is that the demonstrated expenses for the audit period is a measuring stick against the current annual gross rent income potential.

Theoretically, in order for the project owner to break even, he must recoup any shortfall in income from the previous fiscal year, due to any increase in expenses. When you think it through, HUD’s Budget-based method for processing rent increases makes sense. 

This process has served my clients well and gotten them rent increases. 

Proposals are prepared on your letterhead, and packaged for submission to your local HUD Field Office at a reasonable cost. You only have to sign it. We can offer guidance to walk you through the steps, and prepare the formal request to HUD.

Contact me  by phone 301-277-3465, fax 925-380-4578, or
email (alvinl.sutherlin@verizon.net)

 

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Date Updated: 12/05/2014 10:04:14 AM