U.S. Department of Housing and Urban Development Community Planning and Development

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1 U.S. Department f Husing and Urban Develpment Cmmunity Planning and Develpment Special Attentin f: Ntice CPD All Secretary's Representatives All State/Area Crdinatrs Issued: Nvember 1, 1996 Reginal Directrs fr CPD Expires: Nvember 1, 1997 CPD Divisin Directrs All HOME Crdinatrs All HOME Participating Jurisdictins Crss References: 24 CFR Subject: Guidance n Tenant-Based Rental Assistance under the HOME Prgram. TABLE OF CONTENTS I. PURPOSE 2 II. BACKGROUND 2 III. SUSPENSION OF FEDERAL PREFERENCES 3 IV. ELIGIBLE ACTIVITIES 4 V. PROGRAM ADMINISTRATION 5 VI. TENANT SELECTION 7 VII. PROGRAM REQUIREMENTS 12 VIII. SECURITY DEPOSIT PROGRAM 19 APP. SECTION 8 INCOME DEFINITION -- ADDITIONAL EXCLUSIONS 21 DGHP: Distributin: W PURPOSE This ntice utlines the basic requirements fr using HOME funds fr a tenant-based rental assistance (TBRA) prgram. The Department will als issue a mdel prgram that expands upn this ntice. The purpse f the mdel will be t assist State and lcal participating jurisdictins (PJs) with basic decisins regarding TBRA prgram design and peratin. The Department has exercised its discretin based n the statute t make the TBRA prgram, as described in recent regulatins and this ntice, flexible and respnsive t lcal market cnditins and husing needs. The current regulatins may nt address all the design r peratinal cnsideratins. As a result, sme PJs may wish t structure TBRA prgrams in a manner that is nt entirely cnsistent with HOME regulatins. In sme instances, it may be pssible t waive certain regulatry requirements, if statutry flexibility exists and the PJ can demnstrate gd cause fr the request. II. BACKGROUND TBRA was first authrized under sectin 212 f the Cranstn-Gnzalez Natinal Affrdable Husing Act (NAHA). HUD implemented the basic requirements fr using HOME funds fr TBRA thrugh publicatin f interim regulatins at 24 CFR Part 92 n December 16, TBRA prgrams directly assist individual lw-incme families by making up the difference between actual husing csts and what a family can affrd t pay. Tenants are free t select any standard unit, whether

2 r nt it is HOME-assisted. In Octber, 1992, the initial TBRA prvisins were amended by sectin 220 f the Husing and Cmmunity Develpment Act (HCDA) f HCDA made tw significant amendments. First, it eliminated the prvisin that required PJs t use the lcal Sectin 8 waiting list t determine wh wuld receive assistance. Instead, PJs were permitted t select tenants in accrdance with written tenant selectin plicies and criteria that prvide husing t lw and very lw-incme families and were reasnably related t the Federal preferences. Secnd, it permitted PJs t administer prgrams that prvide nly security depsit assistance, rather than requiring that security depsits nly be prvided in the cntext f an nging rental assistance prgram. These statutry revisins have been incrprated by interim rules published in the Federal Register n December 22, 1992 and June 23, HUD als implemented regulatry changes t prvide PJs greater flexibility in administering TBRA prgrams. Publicatin f a rule n April 19, 1994 made it pssible fr a PJ t establish its wn payment standard based n lcal market cnditins and a determinatin f rent reasnableness. The rule further clarified the term "reasnably related t Federal preferences" and permitted a PJ's nn-federal cntributins t a TBRA prgram that is nt HOME-funded, ther than cntributins fr administrative csts, t cunt as match fr the HOME 2 Prgram. A rule published n July 12, 1995 prvided infrmatin n using HOME TBRA t assist special needs ppulatins. On January 26, 1996, the Balanced Budget Dwnpayment Act, I, suspended the Federal preferences applicable t public husing admissins and the Sectin 8 vucher and certificate prgrams fr Fiscal Year 1996 (which ended n September 30, 1996). HUD's FY 1997 apprpriatin act extended this suspensin thrugh Fiscal Year 1997, which ends n September 30, During Fiscal Year 1997, public husing authrities are authrized t establish their wn preferences. These lcal preferences may be established after pprtunity fr public ntice and cmment and must be cnsistent with the jurisdictin's Cnslidated Plan. The temprary suspensin f the Federal preferences extends t the selectin criteria fr TBRA prgrams funded by HOME. III. SUSPENSION OF FEDERAL PREFERENCES As described in the previus sectin f this ntice, the Federal preference requirements applicable t HOME-funded TBRA prgrams have been suspended fr the remainder f Fiscal Year The effect f this suspensin is t permit a PJ t establish and prvide TBRA based entirely n a lcally-established system f written tenant selectin criteria that is cnsistent with its Cnslidated Plan. During this time perid, the preferences established by the PJ must be cnsistent with the purpses f prviding assistance t very lw- and lw-incme families. Hwever, lcally-established preferences will nt be required t be reasnably related t the Federal preferences. Fr a PJ that is currently administering a TBRA prgram, the

3 effect f this suspensin may be simply t permit it t alter the rder in which families n the waiting list are selected, based upn its system f preferences. Alternately, a PJ may wish t fundamentally change its TBRA prgram by establishing a preference system very different than the ne it currently administers. Fr a PJ that is in the prcess f designing a TBRA prgram, this suspensin may affect its prgram design and tenant selectin system. The current suspensin is temprary. Legislative actin will be necessary t extend the suspensin beynd September 30, 1997 r t make it permanent. Befre making any changes t an existing r prpsed TBRA prgram, a PJ shuld cnsider whether it culd easily bring its prgram back int cnfrmance with the law if the suspensin terminates. This ntice assumes that the Federal preference suspensin will cntinue n a prvisinal basis. Hwever, because the suspensin may nt be in effect beynd September 30, 1997, it als utlines the requirements that wuld apply t HOME TBRA prgrams shuld the suspensin nt be extended r made permanent. At the time that this Ntice was published, the Cngress was cnsidering rescinding the Husing Act f 1937 which cntains the Federal preference requirements. 3 Shuld Cngress take such actin, it wuld eliminate the need fr the PJ's written tenant selectin criteria t be reasnably related t Federal preferences. Each PJ wuld be free t establish tenant selectin criteria based slely n the needs identified in its Cnslidated Plan. IV. ELIGIBLE ACTIVITIES A. Eligible Uses HOME TBRA can be used t undertake ne r a cmbinatin f the fllwing activities: Free-standing rental assistance. A PJ may administer a rental assistance prgram t assist lw- and very lw-incme families. These freestanding prgrams are similar t the Sectin 8 certificate and vucher prgrams in that tenants chse their husing within guidelines established by the PJ. Special purpse prgrams. Within limitatins described in Sectin VII, E f this ntice, PJs can use TBRA t supprt a variety f lcal gals including self-sufficiency and hmewnership initiatives and assistance t special ppulatins. Self-sufficiency prgrams. PJs may require HOME TBRA recipients t participate in self-sufficiency prgrams as a cnditin f assistance. Hwever, such cnditins may nt be placed n tenants living in a HOME-assisted prject wh receive TBRA as relcatin assistance. Hmebuyer prgrams. HOME TBRA may assist a tenant, wh has been identified as a ptential lw-incme hmebuyer thrugh a lease-purchase agreement, with mnthly rental payments fr

4 a perid up t 36 mnths. 1 While the HOME TBRA payment cannt be used t create equity, all r a prtin f the hmebuyer's mnthly cntributin tward husing expenses may be set aside fr this purpse. If a PJ determines that a tenant has met the lease-purchase criteria and is ready t assume wnership, HOME funds may be prvided fr dwnpayment assistance. Targeted Ppulatins. PJs may establish lcal preferences fr special needs grups in a brad, cmmunity-wide TBRA prgram r may design a prgram that exclusively serves ne r mre special needs grups. Anti-displacement assistance. TBRA can be used t minimize displacement assciated with HOME-funded activities. TBRA can be 1 HOME TBRA may nt exceed 24 mnths but may be renewed at the PJ's discretin. 4 prvided t incme-eligible tenants wh live in units that will be acquired, demlished r rehabilitated with HOME funds. Existing tenants in HOME-assisted prjects wh receive TBRA may remain in the prject r mve t anther suitable unit. These tenants may be assisted with TBRA regardless f whether the PJ administers a brader TBRA prgram and are nt required t meet written tenant selectin plicies and criteria. 2 Security and utility depsit assistance. PJs may prvide security depsit assistance t tenants regardless f whether the PJ is prviding nging tenant-based rental assistance. Utility depsit assistance may be prvided nly in cnjunctin with a TBRA prgram r a security depsit prgram. B. Ineligible Uses HOME TBRA funds cannt be used fr the fllwing: ); t assist resident wners f cperative husing that qualifies as hmewnership husing (cperative and mutual husing may qualify as either rental r wner-ccupied husing under the HOME Prgram, depending upn the prvisins f the agreement applying t the unit). TBRA may, hwever, be used by a tenant wh is renting frm a cperative unit wner; t prevent the displacement f tenants frm prjects assisted with Rental Rehabilitatin Prgram funds under 24 CFR 511. (See 24 CFR t prvide TBRA vuchers t hmeless persns fr vernight r temprary shelter. The HOME TBRA subsidy must be sufficient t enable the hmeless persn t rent a transitinal r permanent husing unit that meets Husing Quality Standards (HQS).

5 V. PROGRAM ADMINISTRATION Certificatin - T establish a TBRA prgram, a PJ must certify in its Cnslidated Plan that TBRA is an essential part f its apprved husing strategy and that market cnditins in the lcality make TBRA a viable ptin. This means that an assessment f market factrs has been 2 The 1992 HCDA amendments require the PJ t certify in its Cnslidated Plan that it has a Residential Anti-displacement and Relcatin Plan fr the HOME Prgram equivalent t the Plan required fr the Cmmunity Develpment Blck Grant (CDBG) Prgram. 5 undertaken and, because there is an ample supply f husing, a TBRA prgram is an effective way t expand affrdable husing pprtunities in the cmmunity. Prgram Operatin - A PJ may administer its TBRA prgram r cntract administrative functins ut t anther entity, such as a lcal public husing agency (PHA), anther public r private agency, r a nnprfit rganizatin. In deciding whether t administer its prgram r cntract ut, the PJ shuld cnsider its TBRA prgram design. If its TBRA prgram will be mdeled after the Sectin 8 certificate r vucher prgrams r uses the Sectin 8 waiting list, it may be administratively simpler t cntract with the PHA. Alternately, if the prgram will use an independent waiting list r target special ppulatins, it may be preferable fr the PJ r anther entity t administer the TBRA prgram. A PJ that is an urban cunty r cnsrtium may establish a TBRA prgram that is limited t a single r multiple jurisdictins, but des nt encmpass the entire PJ. Fr instance, ne lcal gvernment participating in a cnsrtium may administer a TBRA prgram in its jurisdictin. It shuld be nted that the prvisin f TBRA is nt an eligible Cmmunity Husing Develpment Organizatin (CHDO) set-aside activity. If a PJ selects a CHDO t administer its TBRA prgram, the CHDO is acting as a subrecipient and general HOME prgram funds (nt CHDO set-aside funds) must be used. Administrative Csts - HOME funds may be used t pay fr reasnable planning and administrative expenses assciated with perating a TBRA prgram, regardless f what entity perates the prgram. Such expenses are limited by the ten percent cap n administrative csts. TBRA administrative csts are nt cnsidered "prject sft csts" under 24 CFR (b). Match - As with all HOME activities, TBRA prgram expenditures require a 25% lcal match. A PJ may cunt nn-federal funds that it cntributes t its HOME TBRA prgram as a matching cntributin. It may als cunt as match any funds it cntributes t a TBRA prgram which des nt use HOME funds but meets the HOME Prgram requirements (see 24 CFR (b)(1)). HOME funds expended fr TBRA may be matched

6 with funds frm any eligible match surce, nt just TBRA-related cntributins. Payment f csts assciated with administratin f a TBRA prgram des nt cunt as match. TBRA Prject Set-Up - T access funds, infrmatin cncerning the prject must first be prvided thrugh the HOME Cash and Management Infrmatin System (C/MI), r the Integrated Data and Infrmatin System (IDIS), which is replacing the C/MI. Until a PJ has been cnverted t IDIS, all TBRA prjects set up thrugh the C/MI system shuld be reprted n Frm HUD Each TBRA prject may include several hundred individual husehlds. Once a TBRA prject has been 6 set up, the PJ may add families t the prject fr up t 6 mnths. The TBRA set-up frm requires each tenant's Scial Security number and certain demgraphic infrmatin. The set-up f TBRA prjects in IDIS is similar t the set-up in the HOME C/Ml. Hwever, there is neither a limitatin n the number f husehlds that can be included in a single prject (referred t as an activity in IDIS) nr a time limit fr adding families t the prject. Drawing Dwn Funds - As with all HOME funds, TBRA funds drawn frm the U.S. Treasury must be expended within 15 days. Thus, draws may nt be made fr TBRA n a quarterly basis. VI. TENANT SELECTION A. Incme Eligibility/Verificatin HOME funds can nly be used t assist lw-incme families with incmes at r belw 80% f area median incme as determined by HUD. In additin, fr each fiscal year's HOME allcatin, 90% f the families assisted with HOME funds fr TBRA and ther rental activities must have incmes which are at r belw 60% f area median incme (see 24 CFR ). The PJ must determine the incme and eligibility f all prpsed beneficiaries befre the TBRA cntract is signed. The HOME final rule, which was published n September 16, 1996, amended the incme definitin t permit PJs t chse frm amng three definitins f incme (the Sectin 8 definitin, the U.S. Census lng frm definitin, and the IRS definitin f adjusted grss incme). A PJ that chses the Sectin 8 definitin f incme fr its TBRA prgram shuld fllw the prcedures utlined in the Technical Guide fr Determining Incme and Allwances fr the HOME Prgram, which HUD issued in May, In additin, PJs shuld nte that a rule published n April 5, 1996 added nine exclusins t the definitin f incme applicable t HOME TBRA prgrams. That definitin was subsequently mved t 24 CFR by a regulatin published n Octber 18, (See the Appendix t this ntice fr a list f the nine additinal exclusins). PJs pting fr the IRS r Census definitins must adhere t the instructins develped by thse agencies fr calculating incme. In accrdance with the Sectin 8 prgram rule at 24 CFR (c)(6), Sectin 8 rental assistance vucher and certificate hlders cannt

7 als receive TBRA under the HOME Prgram because the tw prgrams wuld prvide duplicative subsidies. HOME TBRA recipients wh are ffered a Sectin 8 vucher r certificate must relinquish HOME assistance, if they wish t accept the Sectin 8 assistance. Similarly, a family currently receiving Sectin 8 rental assistance may nt accept HOME TBRA withut relinquishing 7 the Sectin 8 assistance. Hwever, a Sectin 8 rental assistance receive HOME-funded security depsit and utility depsit assistance. Similarly, a family cannt receive HOME TBRA if they are receiving rental assistance under anther Federal prgram (e.g., Sectin 521 f the Husing Act f 1949 prvided thrugh the Rural Husing Service) r a State r lcal rental assistance prgram, if the HOME subsidy wuld result in duplicative subsidies t the family. [NOTE: Sme State and lcal rental assistance prgrams d nt prvide assistance in amunts sufficient t lwer a tenant's rental payment t 30 percent f incme. In such cases, HOME TBRA culd be prvided as supplemental assistance t further reduce the tenant's rent payment t 30 percent f incme.] In additin, HOME TBRA shuld nt be prvided t a family wh prpses t rent a unit that receives prject-based rental assistance thrugh Federal, State r lcal prgrams, if the HOME assistance wuld prvide a duplicative subsidy. Incme and eligibility determinatins fr a newly-participating tenant remain valid fr up t six mnths. Incme eligibility criteria must be met, regardless f the type f TBRA prgram the PJ will administer (i.e., anti-displacement, security depsit, r freestanding). Special needs ppulatins are nt presumed t be lw-incme. The PJ (r TBRA administratr) must reexamine family incme, size, and cmpsitin at least annually. The family's cntributin tward rent may need t be adjusted as a result f the annual incme reexaminatin. Althugh nt required by the HOME regulatins, the PJ may require families t reprt changes in incme that ccur between annual incme examinatins. Because HOME funds may nly be used t assist families with incmes at r belw 80% f area median incme, assistance t tenants whse incmes rise abve 80% f area median incme must be terminated after the PJ gives reasnable ntice t tenant and wner. Since the PJ nrmally wuld make any required payment adjustment r cntract terminatin at the end f the rental lease perid, it shuld time the incme recertificatin prcess s that tenants whse assistance will be terminated r whse required cntributins tward rent will be increased can be given reasnable ntice f the change. In determining what perid cnstitutes reasnable ntice, the PJ shuld cnsult bth State law and cmmn practice in the area. B. Tenant Selectin Criteria Scenari 1: Under the Federal Preference Suspensin The HOME Prgram rule requires that PJs select tenants in accrdance with written tenant selectin plicies and criteria. These plicies

8 and criteria must be cnsistent with the purpse f prviding husing t very lw- and lw-incme families. Under the temprary suspensin f the Federal preferences in effect until September 30, 1997, PJs may establish their wn preference systems fr selecting families fr rental assistance. 8 The lcally-established preference system must be cnsistent with the pririties established in the Cnslidated Plan. The Federal preference suspensin applies t PHAs administering Sectin 8 rental assistance, as well as t PJs administering HOME TBRA. A PHA and a PJ administering rental assistance in the same jurisdictin are nt required t use the same preference system. Hwever, HUD encurages entities prviding assistance t families within the same jurisdictin t crdinate their effrts t the greatest extent pssible. Scenari 2: Eliminatin f the Husing Act f 1937 Shuld Cngress rescind the Husing Act f 1937, there wuld n lnger be any Federal preferences fr admissin t public husing and Sectin 8 assistance. Cnsequently, PJs wuld n lnger be required t establish preferences fr their TBRA prgrams that are reasnably related t the Federal preferences. Each PJ administering a TBRA prgram wuld establish a written tenant selectin system cnsistent with the needs identified in its Cnslidated Plan. Scenari 3: Federal Preference Requirements In Effect (suspended thrugh 9/30/97) PJs that perate TBRA prgrams must select tenants in accrdance with written tenant selectin plicies and criteria. The plicies and criteria must be cnsistent with the purpse f prviding husing t very lw- and lw-incme families and be reasnably related t preference rules established under sectin 6(c)(4)(A) f the U.S. Husing Act f The term "reasnably related t Federal preference rules" means that at least 50% f the families assisted must qualify fr ne f the three Federal preferences. Thse Federal preferences are: families living in substandard husing, including families that are hmeless r living in a shelter fr hmeless families; families paying mre than 50% f family incme (grss) fr rent; r families invluntarily displaced at the time they are seeking TBRA assistance. PJs may rank the Federal preferences t serve thse families they deem mst in need. Fr instance, a PJ may give preference t families wh are invluntarily displaced ver thse living in substandard husing. In additin, the PJ may rank the definitinal elements f each Federal preference t reflect its wn pririties.

9 Sectin 6(c)(4)(A) f the Husing Act f 1937 requires that PHA's prhibit any individual r family evicted frm public husing r assisted under 9 Sectin 8 because f drug-related criminal activity frm having a preference fr three years, unless the evicted tenant successfully cmpletes a rehabilitatin prgram apprved by the agency. Each PJ shuld determine whether this r a similar plicy is apprpriate fr its HOME TBRA prgram. The PJ may establish lcal preferences fr assisting the 50% f families wh are nt required t qualify fr a Federal preference. Lcal preferences must be established in writing and respnd t lcal husing needs and pririties. Examples f lcal preferences that might be prvided include preferences fr families wh: have veteran's status; lack adequate husing and whse children eventually may be prpsed fr placement in fster care as a result. (These families are usually identified by lcal agencies that are invlved in prviding fr children's welfare); are members f special needs ppulatins, such as battered spuses, persns with AIDS, senir citizens r thse with disabilities. In establishing lcal preferences, PJs must cnsider hw specific preferences will impact fair husing effrts in its cmmunity. The lcal preferences must nt result in discriminatin against any persn n the basis f race, clr, religin, sex, natinal rigin, handicap r familial status. In mnitring a PJ's fair husing effrts, HUD's Office f Fair Husing and Equal Opprtunity will cnsider bth the intent and the effect f lcal preference rules. C. Waiting Lists T implement its tenant selectin plicies fr an nging TBRA prgram in a fair and rderly manner, a PJ must use a waiting list fr families applying fr TBRA. The PJ may chse t use a Sectin 8 waiting list that cvers the jurisdictin r may establish a separate waiting list fr HOME TBRA applicants. In determining which list t use, the PJ will need t cnsider the fllwing factrs: The preferences established by the PHA and hw thse preferences cmpare with the Pj's pririties fr assistance. If the PHA has adpted its wn preferences as permitted under the temprary suspensin f Federal preferences, the PJ shuld examine thse preferences. If the suspensin is terminated r the PHA has chsen nt t establish its wn preference system, the PJ shuld examine bth the lcal preferences established by the PHA and the manner in which it priritizes the Federal preferences. If the

10 10 PHA's preference system will nt result in assistance being prvided t the subppulatins that the PJ deems mst in need, the PJ shuld cnsider establishing a separate HOME TBRA waiting list. The length f the PHA's Sectin 8 waiting list and the turnver rate f vuchers and certificates. In cmmunities where the existing Sectin 8 waiting list is very lng and the unavailability f new r turnver resurces results in lng perids n the waiting list, a PJ's pririty may be t prvide interim assistance t families wh are currently n the Sectin 8 waiting list. In these instances, the PJ will adpt the Sectin 8 waiting list and use HOME TBRA t supplement the existing Sectin 8 prgram. The PJs preferred prgram design. If the PJ wishes t administer a TBRA prgram that clsely resembles the Sectin 8 vucher r certificate prgram and finds the PHA's preference system acceptable, it may wish t adpt the Sectin 8 waiting list (and, perhaps, t cntract with the PHA as the administering agent) fr simplicity's sake. Hwever, if the PJ wishes t implement a prgram that is very different frm the Sectin 8 prgrams, there may be n advantage in adpting the Sectin 8 waiting list. The Pj's capacity and preference with respect t an administering agent. If the PJ plans t administer the TBRA prgram itself r t cntract ut with a capable nnprfit rganizatin, it will have flexibility with respect t chsing a waiting list fr its prgram. Hwever, if the PJ lacks capacity t administer the prgram and chses t cntract with a PHA, it may have little chice but t adpt the PHA waiting list. The PHA may be reluctant t take n the added respnsibility f establishing and maintaining a separate waiting list and administering selectin criteria that are very different frm its existing prgram. D. Sectin 8 Availability The HOME statute requires that families wh receive HOME TBRA and are als n the Sectin 8 waiting list cntinue t qualify fr Sectin 8 assistance t the same extent as they did befre they received the HOME TBRA. Cnsequently, when the Federal preferences are in frce, the PHA must carefully dcument hw an applicant fr HOME assistance wh is als n the Sectin 8 waiting list meets Federal preference requirements at the time HOME assistance is prvided t preserve the applicant's qualificatin t receive future Sectin 8 assistance. If a Sectin 8 vucher r certificate becmes available thrugh turnver r additinal budget authrity and the next eligible family n the Sectin 8 waiting list is a HOME TBRA recipient, that family must be ffered a Sectin 8 vucher r certificate. The PJ and PHA shuld develp a prcedure fr ffering Sectin 8 assistance t HOME TBRA recipients wh becme eligible fr a vucher r certificate at regular intervals (e.g., mnthly, quarterly, r less frequently, depending n average turnver f vuchers and certificates).

11 11 Under the current suspensin f Federal preferences, the PJ shuld dcument hw the HOME TBRA recipient meets Federal preference requirements and, if the PHA has adpted a lcal preference system, the lcal preference requirements. This will permit the PJ t determine a HOME TBRA recipient's initial eligibility fr Sectin 8 under the Federal preference system if the suspensin lapses. Shuld legislatin permanently eliminate the Federal preferences, the HOME Prgram requirement that HOME TBRA recipients maintain their place and status n the Sectin 8 waiting list wuld als be eliminated. Hwever, HOME TBRA is ften a temprary resurce fr a lw-incme family. Cnsequently, the PJ shuld crdinate with the lcal PHA s that the PHA's plicies d nt disqualify applicants wh cme t the tp f Sectin 8 waiting list because they are currently receiving HOME TBRA. E. Assisting Special Needs Ppulatins HOME TBRA may be used t assist special needs ppulatins regardless f whether the Federal preference suspensin is in effect. This can be dne in ne f tw ways: General TBRA Prgram. A PJ administering a cmmunity-wide TBRA prgram may establish a lcal preference fr persns with special needs (e.g., persns with disabilities) r fr a specific categry f individuals with special needs (e.g., chrnically mentally ill individuals). A preference may be prvided fr persns with a particular type f special need, if the specific categry f need is identified in the PJ's cnslidated plan as having unmet need and the preference is needed t narrw the gap in benefits and services received by such persns. In cnjunctin with the TBRA, the PJ may ffer nn-mandatry services apprpriate fr persns with a particular disability. The nature f these services shuld be identified in cnsultatin with persns with special needs residing in the cmmunity. Generally, TBRA and related services shuld be made available t all persns with disabilities wh can benefit frm such services. TBRA Prgram fr Persns with Special Needs. A PJ may establish a TBRA categry f special needs r disabilities. The PJ may accmplish this simply by limiting eligibility fr assistance t special needs grups it wishes t target. If the Federal preference rules are in effect, then 50% f the individuals assisted must qualify r wuld qualify in the near future fr a Federal preference. As with a general TBRA prgram, the PJ may prvide apprpriate, nn-mandatry scial services in cnjunctin with the TBRA. TBRA may be prvided exclusively t persns with a particular type f special need, if the specific categry f need is identified in the PJ's cnslidated plan as having unmet need and the preference is needed t narrw the gap in benefits and services received by such persns. VII. PROGRAM REQUIREMENTS 12

12 A. Rent Requirements Payment Standards Each PJ administering a TBRA prgram must establish a payment standard fr units f each available bedrm size. This standard is intended t represent the rent and utility csts f mderately priced units that meet the Sectin 8 Husing Quality Standards (HQS) in the jurisdictin. It is imprtant that the PJ establish its payment standard carefully. A standard that is set t lw in cmparisn t the market will result in assisted families experiencing difficulty in finding husing. A payment standard that is set t high will result in excessive subsidies and fewer families being assisted. A PJ may determine its HOME payment standard in ne f tw ways: 1) The PJ may develp a standard based n dcumented lcal market cnditins. 2) T cnfrm mre clsely t PHA rent standards, the PJ may adhere t the fllwing: Fr each unit size, the rent standard may nt be less than 80% f the published Sectin 8 Existing Husing fair market rent (FMR) in effect when the PJ adpts its rent standard amunt. Fr each unit size, the rent standard may nt be mre than the FMR r HUD-apprved cmmunity-wide exceptin rent (discussed belw) in effect when the PJ adpts its rent standard amunt. Fr nt mre than 20% f the ttal number f units assisted in their TBRA prgram, a PJ may apprve, n a unit-by-unit basis, a subsidy based n a rent standard that exceeds the applicable FMR by up t ten percent. NOTE: The PJ must disapprve a lease if the rent is nt reasnable, based n rents that are charged fr cmparable unassisted rental units. Cmmunity-wide Exceptin Rents 13 Under certain circumstances, HUD apprves maximum grss rents fr the Sectin 8 Certificate Prgram fr units in a designated municipality, cunty r similar lcality that are higher than the FMR (see 24 CFR, (a)(3)). These rents, generally referred t as cmmunity-wide exceptin rents, may equal up t 120% f the FMR applicable t the entire jurisdictin. The PJ may use HUD-apprved exceptin rents in lieu f the FMR t establish the rent standard fr HOME TBRA. HOME des nt require that a PJ prvide additinal ratinale fr adpting exceptin rents. TBRA in HOME-Assisted Units

13 Rents in HOME-assisted units must meet the requirements f 24 CFR When a family that receives HOME TBRA resides in a HOME-assisted unit, the maximum rental assistance subsidy is the difference between the HOME rent and 30% f the family's adjusted mnthly incme. PJ and Tenant Rent Cntributins The maximum amunt f subsidy the PJ may prvide t a family is ' the difference between 30% f the family's mnthly adjusted incme and the payment standard established by the PJ fr the size f unit the family will ccupy. The PJ's cntributin tward rent may vary each year because the family mves, the rent n the unit increases r decreases, r the family's incme changes. The PJ als must establish a minimum tenant rent cntributin. If the PJ is assisting a tenant with a very lw-incme, that cntributin may be minimal. If a PJ cntracts with a PHA t perate its prgram, it may wish t adpt the Sectin 8 husing certificate r vucher prgram rules. Under the certificate prgram, families pay a specified percentage f their incme fr husing, usually 30%, and a limit is set n what the wner can charge fr rent. Husing vuchers assume that the family will pay 30% f adjusted incme, but d nt limit the amunt an wner can charge fr rent. Vuchers limit nly the subsidy amunt and, therefre, a family may pay mre than 30% f its incme fr rent. A tenant's cntributin t rent may change each year as a result f changes in adjusted family incme. HUD generally publishes area median incmes in January. Rent Increases and Decreases The wner may adjust the rent levels as leases are renewed. They must be reviewed and apprved by the PJ. HUD generally publishes FMRs in late September. B. Terms f Assistance 14 Unlike the Sectin 8 prgrams which make payments t the landlrd, HOME TBRA payments may be made either t the unit wner r the tenant. The term f the rental assistance cntract must begin n the first day f the lease. Fr a rental assistance cntract between the PJ and an wner, the term f the cntract must end upn terminatin f the lease. If a PJ makes payments directly t the family, that agreement need nt end upn terminatin f the lease, but n payments may be made after terminatin f the lease until the family enters int a new lease. TBRA agreements may nt exceed 24 mnths. Hwever, the PJ, at its discretin, may renew a TBRA agreement. C. Lease Requirements The term f the lease between a tenant and the wner must be fr nt less than ne year, unless anther term is mutually agreed upn by the

14 tenant and the wner. The lease may nt cntain any f the fllwing terms (see 24 CFR (b)): agreement by the tenant t be sued, t admit guilt, r t a judgment in favr f the wner in a lawsuit brught in cnnectin with the lease. agreement by the tenant that the wner may take, hld r sell persnal prperty f husehld members withut ntice t the tenant and a curt decisin n the rights f the parties. This prhibitin, hwever, des nt apply t an agreement by the tenant cncerning dispsitin f persnal prperty remaining in the husing unit after the tenant has mved ut f the unit. In that case, the wner may dispse f this persnal prperty in accrdance with state law. agreement by the tenant nt t hld the wner r the wner's agents legally respnsible fr any actin r the failure t act, whether intentinal r negligent. agreement f the tenant that the wner may institute a lawsuit withut ntice t the tenant. agreement by the tenant that the wner may evict the tenant r husehld members withut instituting a civil curt prceeding in which the tenant has the pprtunity t present a defense r befre a curt decisin n the rights f the parties. agreement by the tenant t waive any right t a trial by jury. 15 agreement by the tenant t waive the tenant's right t appeal r t therwise challenge in curt a decisin in cnnectin with the lease. agreement by the tenant t pay attrney fees r ther legal csts even if the tenant wins in a curt prceeding by the wner against the tenant. The tenant, hwever, may be bligated t pay csts if the tenant lses. D. Terminatin f Tenancy The PJ must develp standards utlining when unit wners may terminate tenancy r refuse t renew a lease in its TBRA prgram. These standards must be established in writing and be included in the lease between the wner and the TBRA recipient and/r, if apprpriate, the TBRA agreement between the PJ and tenant. The PJ shuld address the permissible grunds fr terminatin r tenancy/refusal t renew and establish ntificatin requirements fr these actins. Please nte that the requirement fr 30 days ntice fr terminatin f tenancy/refusal t renew in HOME-assisted units des nt apply t wners f units ccupied by HOME TBRA recipients.

15 E. Prtability The PJ may require tenants t use their TBRA within the PJ r may establish a prtability plicy, allwing use f TBRA utside f the jurisdictin. The experience f many PHAs using prtable husing vuchers has been that mst tenants mve t nearby jurisdictins, usually nly acrss city r cunty lines. If a PJ permits prtability, it must develp prcedures t satisfy HOME TBRA requirements at a distance. Unless it limits prtability t cntiguus jurisdictins, it may be impractical fr the PJ t attempt t versee the prgram itself. Thus, it may wish t make arrangements with a gvernment agency r PHA in the jurisdictin t which the family is mving t administer the TBRA r t use a subrecipient r cntractr t d s. Requirements that the PJ shuld cnsider in establishing a prtability plicy include the need t: initially and annually inspect units ccupied by TBRA families; execute necessary dcuments with the family and the wner; and make mnthly rent payments and/r security depsit payments n behalf f the PJ t the wner and/r utility cmpanies. F. Eligible Units 16 The PJ must establish ccupancy standards that will be used t determine the unit size (i.e., number f bedrms) that TBRA families f varius sizes and cmpsitin will be permitted t ccupy. The PJ's standards fr ccupancy must be at least as stringent as thse set ut in the Sectin 8 Husing Quality Standards (HQS). At the time that it is apprved fr TBRA, the family shuld be cunseled regarding the size f the unit fr which it is apprved, whether it will be permitted t select a unit that is larger r smaller than the apprved unit size and what the cnsequences f such a decisin will be with respect t the family's mnthly cntributin tward rent. The PJ may refer the TBRA family t suitable units. Hwever, the PJ must infrm the family that it is nt bligated t select a referral unit. Rental units are selected by the tenant, and: may be wned by the PJ, a PHA r anther public entity r be privately wned husing; may include units develped r rehabilitated with HOME assistance; may be transitinal husing units, if the lease terms meet the minimum lease requirements; must nt be units receiving public r Indian husing assistance, any Sectin 8 rent subsidies, r any ther Federal, State r lcal subsidy that prvides a duplicative subsidy t the HOME TBRA recipient r the unit which they

16 prpse t rent; and if part f a cperative, must be rented frm the wner f the cperative unit. HOME TBRA cannt be used t pay cperative shares if the cperative membership is cnsidered wnership under HOME. In cnjunctin with the annual reexaminatin f incme, the PJ must reexamine the TBRA family's size and cmpsitin t determine whether its circumstances have changed. Depending upn the ccupancy requirements established by the PJ, a family whse size r cmpsitin has changed may be required t find a unit that is suitable t its current circumstances. Husing ccupied by a family receiving TBRA must meet Sectin 8 HQS. The husing must meet bth the perfrmance and acceptability requirements utlined at 24 CFR PJs may request waivers t permit specific variatins n HQS. Examples that may justify deviatins include lcal climatic r gelgical cnditins r lcal cdes. The PJ must inspect units selected by families receiving TBRA t determine whether they 17 meet HQS befre authrizing their initial rental and, thereafter, must inspect the units annually. The wner must maintain the premises in cmpliance with all applicable husing quality standards and lcal cde requirements thrughut the perid f the TBRA family's ccupancy. G. Self-Sufficiency Prgrams PJs administering a freestanding TBRA prgram may require HOME TBRA recipients t participate in self-sufficiency prgrams as a cnditin f assistance. All terms and cnditins f participatin shuld be clearly spelled ut in the written agreement between the tenant and the PJ. During the term f the TBRA cntract, the PJ may nt withdraw rental assistance based n the tenant's failure t cntinue participatin in the prgram withut prviding prper ntice in accrdance with the standards the PJ established in the TBRA agreement. Because it may prve administratively simpler, PJs cnsidering cnditining rental assistance n participatin in such prgrams may wish t limit the term f assistance t a shrt perid f time (e.g., 6 r 12 mnths) rather than attempting t terminate assistance fr nncmpliance during the cntract term. In such instances, TBRA participants shuld be assured that the assistance will be renewed if the cnditins established by the PJ are met. H. Making the Payments Unlike the Sectin 8 prgram, which requires that subsidy payments be made directly t the wner, a PJ using HOME TBRA funds may prvide mnthly payments t the tenant directly r t the wner n behalf f the tenant. Paying tenants directly may eliminate paperwrk and save staff time

17 because n cntract between the PJ and wner is necessary. The PJ must, hwever, examine the lease t make certain it des nt cntain prhibited lease terms and inspect the unit. A "real-wrld" tenant-wner market relatinship, in which tenants pay wners, results. If the PJ makes payments directly t tenants, the cntract shuld include prvisins t recup HOME funds fr nnpayment f rent. If the PJ decides t pay wners directly, the PJ has the advantage f negtiating the rent. Als, paying the wner directly may encurage private wners t participate because they will receive at least a partial rent payment frm the PJ each mnth. If a PHA administers the prgram fr the PJ, this prcedure may be preferable because Sectin 8 payments are made nly t wners. Cnsequently, the HOME TBRA payments can be easily integrated int the PHA's financial management system, resulting in lwer frnt-end and prcessing csts. The PJ als may chse t reimburse tenants fr rent paid t the wner. Hwever, this may nt be practical because families may nt have the mney up-frnt t make their entire rent payment. I. Utility Depsits 18 The PJ may pay utility depsits fr tenants wh are als participating in a TBRA prgram r a security depsit prgram. Depsits may be made fr utilities authrized under the Sectin 8 utility allwance (such as electric, gas, water and trash). Depsits fr services incidental t husing, such as telephne service and cable televisin, cannt be paid with HOME funds. The PJ may make the utility depsit available t the family as a lan r grant r may make payment directly t the utility cmpany. If ffered as a grant, the tenant may keep any remaining funds when the family departs frm the unit. If ffered as a lan, the PJ must make arrangements with the tenant r utility cmpany t return any remaining funds t it. Returned funds are treated as prgram incme and must be reinvested in ther HOME-eligible activities (see 24 CFR (b)). In determining whether t grant r lan these funds, the PJ shuld cnsider the time and effrt invlved in cllecting any remaining funds frm the tenant r utility cmpany. VIII. SECURITY DEPOSIT PROGRAM TBRA may be used fr security depsits, regardless f whether the tenant is receiving nging rental assistance. Fr a security depsit prgram: the relevant state r, lcal definitin f "security depsit" in the jurisdictin where the unit is lcated applies. the maximum amunt f HOME funds that may be prvided fr a security depsit is the equivalent f tw mnths rent fr the unit. nly the prspective tenant, nt the unit wner, may apply fr HOME security depsit assistance.

18 all f the abve TBRA requirements apply except fr the term f assistance and maximum subsidy amunt. the lease assciated with the security depsit may nt cntain the prhibited lease prvisins utlined in Sectin VII, C, f this ntice and must be in effect fr at least ne year unless there is mutual agreement between landlrd and tenant. payment may be made t the tenant r the landlrd. 19 The PJ may prvide security depsits as either a grant r a lan. If ffered as a grant, the tenant may keep any remaining funds when the family leaves the unit. If the PJ lends the funds, it must arrange fr the tenant r wner t return the funds. If the unit wner subtracts funds frm the security depsit t cver damages, the PJ may accept the remaining balance as repayment r require the tenant t repay the entire amunt. This requirement shuld be set ut in the written agreement between the PJ and the tenant. In determining whether t grant r lan these funds, the PJ shuld cnsider the time and effrt invlved in cllecting any remaining security depsit funds frm the tenant r wner after the tenant leaves the unit. Returned security depsit funds are treated as prgram incme and must be reinvested in HOME-eligible activities (see 24 CFR (b)). 20 APPENDIX: Exclusins frm Incme Under Sectin 8 Incme Definitin Annual incme des nt include the fllwing: 1) Resident service stipends f less than $200 per mnth (e.g., fire patrl, hall mnitring, lawn maintenance, resident initiatives crdinatin, and resident management). 2) Adptin assistance payments. 3) The full amunt f student financial assistance paid directly t the student r t the educatinal institutin. 4) Earned incme f full-time students age 18 years r lder. 5) Payments received fr the care f fster adults (usually persns with disabilities, unrelated t the tenant family, wh are unable t live alne). 6) State r lcal emplyment training prgrams and training f resident management staff. 7) State tax rent credits and rebates fr prperty taxes paid n a dwelling unit. 8) Hmecare payments made by a State agency t families that have develpmentally disabled children r adult family members living at hme. 9) Deferred peridic payments f Scial Security. Supplemental Incme

19 payments and Scial Security payments received in a lump sum. Surce: 24 CFR 5.609(c). 21