On July 27, the White House's Domestic Policy Council (DPC) announced the launch of two federal “alignment pilot” programs in a total of 10 states to better serve low-income families who rent, while reducing the regulatory burden on affordable housing owners.

Background

For owners and developers, federal funds often make up a significant share of a site's financing structure. But owners and developers can be burdened by overlapping administrative requirements associated with those federal affordable housing programs.

Having affordable housing programs supported and administered separately by different federal departments has generally been good for the rental housing field, as different programs respond to different needs. But over time, developers and owners of affordable housing have become increasingly reliant on multi-layered finance and subsidy structures. But these programs have not always been designed well to work with each other.

White House's Response

Responding to this need for a better coordinated federal rental policy, the White House's Domestic Policy Council established the interagency Rental Policy Working Group in 2010. As part of its coordinating efforts, the Rental Policy Working Group has engaged state, local, and private stakeholders to identify administrative changes that could increase overall efficiency and further enhance the ability of communities to create and preserve affordable housing. Through this process, recommendations have been developed to align:

• Physical inspections;

• Financial reporting;

• Appraisals;

• Market studies;

• Capital needs assessment;

• Energy efficiency;

• Fair housing enforcement compliance;

• Subsidy layering reviews; and

• Tenant income certifications.

Of these opportunities, two in particular—physical inspections and subsidy layering reviews—were deemed to be particularly ripe for immediate implementation.

Physical Inspections Pilot Program

The group found that federally assisted site owners are subject to multiple physical inspections as a result of utilizing more than one federal funding stream for property acquisition, repair or rehabilitation, or rental income subsidy, when programs are combined on a property.

State-level teams are now testing whether solutions can be found to achieve one federally sponsored physical inspection at each multifamily property financed with multiple federal funding sources. Currently, the pilot program calls for expanding HUD Real Estate Assessment Center (REAC) tests to be used for all Uniform Physical Conditions Standards (UPCS) inspections on federally assisted properties or adjusting REAC input methods to allow for non-REAC inspections to be “read” into the system.

Subsidy Layering Review Alignment Program

Almost all federal housing programs have statutory requirements requiring the administering agencies to confirm that, at the time of making a grant or subsidized loan, the total amount of subsidy being provided by public sources does not exceed eligible costs.

When developers of affordable housing are awarded multiple sources of public funding, they consequently become subject to multiple subsidy layering reviews, which causes delays and adds costs to projects that are preparing to start construction.

This particular program was designed to address the delays by testing different strategies for standardizing and aligning subsidy layering review requirements across agencies.

Pilot Program Participants

Several state housing finance agencies are participating in the pilot programs. Housing finance agencies from Michigan, Minnesota, Ohio, Oregon, Washington, and Wisconsin are part of the physical inspection teams testing how to limit the number of federally sponsored physical inspections at each multifamily property financed with multiple federal funding sources.

And housing finance agencies from Michigan, Ohio, and Wisconsin are also participating in the subsidy layering review pilot, joined by housing finance agencies from Nevada, North Carolina, Pennsylvania, and South Carolina, to test how to standardize and align subsidy layering review requirements across agencies.