New HUD Guidance on HCV Rent Reasonableness and Conversion Action

HUD has revised its restrictions on housing conversion actions and has released new guidance on rent reasonable requirements for the housing choice voucher program (HCV).

Notice PIH 2010-18 (HA), which was issued May 10, 2010 and supersedes Notice PIH 2009-51, says that if a property is undergoing a housing conversion action, any units occupied by residents on the date of the eligibility event who are not receiving vouchers may be considered assisted units if the owner chooses to continue to charge below-market rents to those families by offering lower rents, rent concessions, or other assistance. Therefore, those units will not be taken into consideration for purposes of rent reasonableness determinations.

In its earlier Notice PIH 2009-51, HUD said that if a multifamily property was undergoing a housing conversion action, any households choosing to remain at the property with their HCV assistance could not be charged more rent than households that did not qualify or chose not to accept HCV assistance, even if the owner was charging new households higher rents. HUD revisited this restriction because of the concerns raised by stakeholder groups who said that many non-voucher families in a conversion action are often long-time residents, many of whom are elderly and paying below-market rents prior to conversion action. In addition, HUD was aware of certain local laws that prohibited owners from increasing the rent of non-voucher residents following prepayments and opt-outs, and situations in which an owner may be prohibited from increasing the rents for certain non-voucher households as a result of a court order.

The recent notice also broadens the definition of “assisted units” under federal, state, or local government to include: (a) units where the rents or rent increases are controlled or restricted by a court order not applying to voucher participants; and (b) units occupied by non-voucher households at properties undergoing a conversion action where the owner is offering below-market rents.

PRACTICAL POINTER: One example of a housing conversion action is if an owner decides to opt out of or not renew his Section 8 project-based contract. HUD will provide tenant-based rental assistance to help eligible residents affected by a conversion action, depending on the action, by offering either regular voucher assistance or enhanced voucher assistance.