HUD Delays HOTMA Implementation for Multifamily Housing

And affirms discretionary enforcement of new asset limits.

HUD recently issued Notice H2023-10, which provides guidance to public housing agencies (PHAs) and Multifamily Housing owners regarding the implementation of the many program changes brought about by the Housing Opportunity Through Modernization Act of 2016 (HOTMA). This notice makes implementation changes for Sections 102 and 104 of HOTMA that were detailed in the final rule that HUD published in the Federal Register on Feb. 14, 2023. In effect, the deadline for implementation and full compliance has been moved up a year to Jan. 1, 2025. However, owners and PHAs who are ready for HOTMA can put the changes into effect as soon as Jan. 1, 2024.

According to HUD, full implementation and compliance with the final rule by Jan. 1, 2024, was unlikely due to systems changes and owners and households needing time to understand the changes and implement them. For example, the system development changes to the Housing Information Portal (HIP) and Tenant Rental Assistance Certification System (TRACS) still need to be done. Also, to implement new policies, owners need to send out resident notifications, and HUD hasn’t made any resident-facing material available to help owners adjust to new HOTMA rules that impact rent calculations and basic eligibility for HUD housing.

We’ll go over the HUD programs that will get more time to implement the new HOTMA policies. We’ll also cover the compliance dates and required actions Multifamily owners must perform before the January 2025 full implementation deadline. And we’ll discuss how HUD is giving owners more discretion in enforcing certain HOTMA rules related to asset limits for current residents.

Impacted Programs

HOTMA updates and creates new rules for Housing Choice Vouchers (including Project-Based Vouchers), Moderate Rehabilitation, Moderate Rehabilitation SRO, Public Housing, and Multifamily Housing (MFH) programs. This recently issued notice delaying HOTMA implementation applies to the following programs:

• Housing Choice Voucher (HCV)
• Public Housing
• Section 8 Moderate Rehabilitation (Mod Rehab) or Section 8 Moderate Rehabilitation Single Room Occupancy (SRO)
• Section 8 Project-Based Rental Assistance (PBRA)
• Section 202/8
• Section 202/811 Capital Advance with Project Rental Assistance Contracts (202/811 PRAC)
• Non-insured 236 projects with Interest Reduction Payments (236 IRP)
• Section 811 Project Rental Assistance (811 PRA)
• Senior Preservation Rental Assistance Contracts (SPRAC)

Compliance Dates and Required Actions

Sections 102 and 104 of HOTMA make sweeping changes to the U.S. Housing Act of 1937, particularly those rules affecting income calculations and reviews. Section 102 changes requirements related to income reviews for Public Housing and Section 8 programs. And Section 104 sets maximum asset limits for Public Housing and Section 8 applicants and participants.

Because HUD acknowledges that implementing the HOTMA final rule will be an ongoing process that will happen over the course of a year as routine program activities occur, the notice establishes required actions owners must do by certain dates before the Jan. 1, 2025, deadline for full implementation.

By March 31, 2024, owners must update their tenant selection plans and Enterprise Income Verification (EIV) system policies and procedures to reflect HOTMA rules and discretionary policies. Owners also must make the revised tenant selection plan publicly available by March 31.

What to Do Once Software Is HOTMA-Compliant

It’s important to note that owners must continue to follow their existing tenant selection plans and EIV policies and procedures until their software is compliant with TRACS 203A updates. Once the owner’s software is HOTMA-compliant, the following things must happen:

• Owners must give tenants at least 60 days’ notice that their lease will be modified at the end of the lease term after the expiration of the 60 days’ notice. Once proper notice is given, owners must begin using the revised model leases at the expiration of a family’s lease term.
• Owners must implement their revised tenant selection plans and EIV policies and procedures.
• All tenant data submissions must comply with the HOTMA regulations. Prior to their first reexaminations under HOTMA, owners must inform families that their income determinations will be conducted in accordance with the HOTMA final rule.
• Owners must use the revised Tenant Consent form (form HUD–9887/9887A) and Fact Sheets (“How Your Rent is Determined”).

How HUD Will Monitor Compliance Before 2025

Prior to Jan. 1, 2025, Multifamily owners won’t be penalized for HOTMA-related tenant file errors during Management and Occupancy Reviews (MORs). Instead, the site’s contract administrator will issue observations with corrective actions.

After Jan. 1, 2025, contract administrators will issue HOTMA-related findings during MORs and owners must correct all HOTMA-related observations that were issued by contract administrators during 2024. After Jan. 1, 2025, owners who fail to implement HOTMA may be found in default of their business agreements with HUD.

Discretionary Enforcement of New Asset Limits

Section 104 of HOTMA, 24 CFR 5.618, creates a restriction on the eligibility of a family to receive assistance if a household owns real property that is suitable for occupancy by the family as a residence or has assets in excess of $100,000, as adjusted annually for inflation. The HOTMA statute, and HUD’s final HOTMA rule from February 2023, indicate that enforcement of the new asset limits should be discretionary for currently served residents. However, in HUD’s initial implementation materials, it indicated that it would not allow for discretionary enforcement.

HUD’s implementation guidance for HOTMA clarifies that PHAs and Multifamily Housing owners are “given discretion at reexamination in enforcing the asset limitation on eligibility for assistance in § 5.618(a).” The new asset limits will apply to project-based Section 8 properties and Section 202/8 sites. HUD says it will issue additional guidance on the use of this discretionary authority.