New HUD Capital Needs Assessment Tool Available

A Capital Needs Assessment (CNA) is a plan for a site to address existing deferred maintenance, to modernize and rehabilitate, and to ensure that all the needs of a site are addressed well into the future. The assessments are used for applications for funding, planning for rehabs, corrections for handicapped accessibility, and the development of plans for interior updates. Specifically, the purposes of CNAs include:

• Description of the physical features or inventory of a multifamily property and an assessment of its condition or state of repair and durability.
• Identification of the property’s current and future capital repair and replacement needs, estimated in dollars, and the preparation of a financial plan necessary to meet those needs.
• Identification, specification, and cost estimation of immediate repairs, replacements, or new items to be added to correct observed conditions needing immediate or early action to address threats to life or health and/or violations of statutes, rules, or codes; and to: (1) minimize operating costs of housing through energy and water conservation measures; (2) improve indoor air quality through the use of sustainable building components and systems; and (3) compete effectively in the multifamily marketplace.

To improve efficiency and reduce costs, HUD recently launched its Capital Needs Assessment e-Tool that incorporates a standard, automated, electronic template and process for CNAs. The CNA e-Tool must be used for capital needs assessments prepared for all applications for FHA mortgage insurance; Rental Assistance Demonstration and Mark to Market transactions; 10-year update capital needs assessments for FHA-insured multifamily properties; and other asset management milestones, such as transfers of physical assets and partial payment of claims.

This new tool automates and standardizes the preparation, submission, and review of a capital needs assessment. In addition, it supports energy conservation and sustainable housing objectives, resulting in cost savings. The tool also provides a specific method for documenting such savings that can be used by both appraisers in valuation and by underwriters in applying mortgage sizing ratios.

The CNA e-Tool will be available for voluntary use beginning Jan. 15, 2017. Starting July 1, 2017, use of the CNA e-Tool will become mandatory for each CNA prepared for a HUD multifamily site.