Boston Housing Authority - Boston Real Estate Authority

Note that this Chapter details the rent estimations used for Units rehabilitated prior to the production of this present draft of the Mod Rehab Administrative Plan that are still functional, along with the rent computations to be used in the case of the rehabilitation of new SRO Units under 24 C.F.R. part 882, subpart H.

12.1 Calculating Initial Gross Rents

Gross Rent is the overall month-to-month expense of housing a Qualified Family and is the amount of the Contract Rent and any utility allowance. See 24 C.F.R. § 882.102.

The initial Gross Rent for any Unit must not go beyond the Mod Rehab FMR [12] appropriate to the Unit on the date that the AHAP is executed. See 24 C.F.R. § 882.408(a). Note that the following exceptions apply:

(a) Exception Rents. With HUD Field Office approval, the BHA may authorize preliminary Gro ¬ ss Rents which surpass the suitable Mod Rehab FMRs by approximately 10% for all Units of an offered size in defined locations where HUD has identified that the leas for basic Units appropriate for the Existing Housing Program are more than 10% greater than the Existing Housing FMRs. [13] The BHA will send documentation showing the necessity for such exceptions rents in the location to the HUD Field Office. See 24 C.F.R. § 882.408(a) and (b).

(b) The BHA might authorize changes in the Contract Rent subsequent to execution of the AHAP (see area 5.2) which result in an initial Gross Rent which surpasses the Mod Rehab FMR suitable to the Unit by up to 20%. See 24 C.F.R. § 882.408(a) and (d).

12.1.1 FMR for Structures Containing Four or Fewer SRO Units

If a structure includes four or less SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as relevant) need to be utilized to figure out the FMR limitation rather of using the separate FMR for each SRO Unit. To determine the FMR limitation for each SRO Unit, the FMR for the structure need to be apportioned similarly to each SRO Unit. See 24 C.F.R. § 882.805(d)( 3 ).

12.1.2 FMR Limits for Efficiency Units

The gross rent for effectiveness Units might be no higher than for SRO systems (i.e., 75 % of the 0-bedroom Mod Rehab Fair Market Rent). See 24 C.F.R. § 882.805(d)( 4 ).

12.2 Calculating Initial Contract Rents

The preliminary Contract Rent and Base Rent for each Unit will be calculated in accordance with HUD requirements. See 24 C.F.R. § 882.408(c). The amounts might be figured out in accordance with the following techniques:

(a) Initial Contract Rent: The preliminary Contract Rent is equal to the base lease plus the monthly cost of a rehab loan but not more than the maximum specified at the end of this area. See 24 C.F.R. § 882.408(c)( 2 ).

(b) Base Rent: The base rent need to be calculated utilizing the lease charged for the Unit or the estimated costs to the Owner of owning, handling and keeping the restored unit. See 24 C.F.R. § 882.408(c)( 2 ).

1. The real interest rate on the portion of the rehab costs obtained by the Owner;

2. The HUD-FHA maximum rate of interest for multifamily housing (or another rate recommended by HUD) for rehab expenses paid by the Owner out of non-borrowed funds; and

3. A minimum of a 15-year loan term, except that if the overall quantity of rehab is less than $15,000, the actual loan term will be used for the portion of the rehab costs obtained by the Owner. (HUD Field Offices might license loan terms which differ from the above in accordance with HUD requirements).

If computing the monthly cost of a rehab loan for SRO Units, describe section 12.3.1 of this Administrative Plan.

The preliminary Contract Rent might in no occasion go beyond: the Mod Rehab FMR or exception lease suitable to the Unit on the date that the AHAP is executed, minus any relevant allowance for energies and other services attributable to the Unit. See 24 C.F.R. § § 882.408(a) and (c)( 1 ).

Contract Rents for SRO Units will not consist of the expenses of providing encouraging services, transportation, furniture, or other non-housing expenses, as identified by HUD. See 24 C.F.R. § 882.805(d)( 4 ).

12.2.1 Calculating Monthly Cost of a Rehab Loan for SRO Units

In determining the month-to-month cost of a rehabilitation loan for SRO Units, a loan regard to a minimum of 10 years (rather of 15 years) may be used. The exception for using the actual loan term if the total amount of the rehabilitation is less than $15,000 continues to use. See 24 C.F.R. § 882.805(d)( 1 )(i).

In addition, the cost of the rehab that might be consisted of for the function of determining the quantity of the preliminary Contract Rent for any Unit must not go beyond the lower of:

(a) The forecasted cost of rehabilitation; or

(b) The per unit cost constraint that is established by Federal Register notification, plus the expense of the fire and safety improvements needed by 24 CFR § 882.605(b)( 4 ). [14]

Note that HUD may, however, increase this latter per unit limitation by an amount it figures out is affordable and necessary to accommodate special local conditions, such as high building and construction costs or rigid fire or building regulations. For additional requirements see 24 C.F.R. § § 882.805(d)( 1 )(i)(B) and (d)( 1 )(ii)

12.3 Changes in the Initial Contract Rents During Rehabilitation

In accordance with 24 C.F.R. § 882.408(d), the preliminary Contract Rent as calculated under area 12.2 will be the Contract Rents on the reliable date of the Contract, other than under the following situations:

(a) When, during rehabilitation, work items (including considerable and needed style modifications) which (A) could not fairly have actually been anticipated or are required by a modification in local codes or regulations, and (B) were not noted in the work article prepared or approved by the BHA, are consequently required and authorized by the BHA. See 24 C.F.R. § 882.408(d)(i).

(b) When the real cost of the rehabilitation carried out is less than that estimated in the estimation of Contract Rents for the AHAP or the real certified expenses are more than approximated due to unpredicted elements beyond the Owner's control (e.g., strikes, weather condition hold-ups or unanticipated delays triggered by regional governments). See 24 C.F.R. § 882.408(d)(ii).

(d) When the real relocation payments made by the Owner to briefly relocated Families varies from the cost approximated in the estimation of Contract Rents for the AHAP. See 24 C.F.R. § 882.408(d)(iv).

(e) When essential to correct mistakes in computation of the base and Contract Rents to comply with the HUD requirements. See 24 C.F.R. § 882.408(d)(v).

Should such situations happen during rehab (either an increase or reduction), the BHA will approve any needed change in work and amendment of the work review and expense price quote, recalculate the initial Contract Rents, and modify the Contract or AHAP, as appropriate, to reflect the revised rents. See 24 C.F.R. § 882.408(d)( 2 ).

In recalculating the preliminary Contract Rents, the BHA must figure out that the resulting Gross Rents do not go beyond the Mod Rehab FMR or the exception rent in result at the time of execution of the AHAP. The FMR or exception rent, as appropriate, might only be gone beyond when the BHA figures out in accordance with the above circumstances that it will be required for the modified Gross Rent to exceed the Mod Rehab FMR or exception lease. Should this determination be made, the BHA will not perform a revised AHAP or Contract for Gross Rents surpassing the FMRs by more than 10 % up until it gets HUD Field Office approval. The HUD Field Office might approve revised Gross Rents which go beyond the FMRs by up to 20 percent for the scenarios listed above upon appropriate validation by the BHA of the necessity for the boost. See 24 C.F.R. § 882.408(d)( 3 ).

12.3.1 Further Limits for SRO Units

In authorizing modifications to initial Contract Rents during rehabilitation for SRO Units, the revised preliminary Contract Rents might not reflect an average per system rehab cost that exceeds the limitations defined in section 12.2.1 of this Administrative Plan. See 24 C.F.R. § 882.805(d)( 2 ).

12.4 Contract Rents at End of Rehabilitation Loan Term

For a Contract in which the preliminary Contract Rent was based upon a loan term much shorter than ten years, [15], the Contract will attend to reduction of the Contract Rent effective with the lease for the month following the end of the term of the rehab loan. The quantity of the decrease will be the regular monthly expense of amortization of the rehabilitation loan. This decrease must result in a brand-new Contract Rent equal to the Base Rent plus all subsequent adjustments. See 24 C.F.R. § 882.807(e).

12.5 Rent Increases

12.5.1 AAF Limits to Annual Contract Rent Adjustments

The amount of any lease increase can not surpass the quantity developed by multiplying HUD's Annual Adjustment Factor ("AAF") [16] by the Base Rents. See 24 C.F.R. § 882.410(a)( 1 ).

If the quantities obtained to fund the rehab expenses or to finance purchase of the residential or commercial property go through a variable rate or are otherwise renegotiable, Contract Rents may be adjusted in accordance with other procedures as prescribed by HUD, and specified in the Contract. However, any such adjusted Contract Rent may still not go beyond the quantity obtained by increasing the AAF by the Contract Rents. See 24 C.F.R. § 882.410(a)( 1 ).

To get an annual agreement lease change the Owner should request the rent increase in writing at least 75 days prior to the anniversary of the HAP contract. The next section describes cases in which even more "special modifications" might be made with HUD approval. See 24 C.F.R. § 882.410(a)( 2 ).

12.5.2 Special Rent Adjustments Subject to HUD Approval

Special lease adjustments may be advised by the BHA for approval by HUD in the following situations:

(a) Increased Ownership/Maintenance Costs - An unique modification, to the level determined by HUD to show increases in the real and necessary expenditures of owning and keeping the Unit which have actually resulted from substantial general boosts in real residential or commercial property taxes, evaluations, utility rates, may be advised by the BHA for approval by HUD. See 24 C.F.R. § 882.410(a)( 2 )(i).

(b) Drug-related Criminal Activity Prevalent - Subject to appropriations, a special change might likewise be suggested by the BHA for approval by HUD when HUD determines that a task is located in a neighborhood where drug-related criminal activity is usually common, and not particular to a particular project, and the task's operating, upkeep, and capital repair work expenses have actually considerably increased mainly as an outcome of the occurrence of such drug-related activity. HUD may, on a project-by-project basis, offer changes to the optimum regular monthly rents, to a level no higher than 120% of the existing gross rents for each Unit size under a HAP agreement, to cover the expenses of maintenance, security, capital repairs and reserves needed for the Owner to bring out a method acceptable to HUD for addressing the issue of drug-related criminal activity. Prior to approval of an unique modification to cover the expense of physical improvements, HUD will perform an environmental review to the degree needed by HUD's ecological guidelines at 24 C.F.R. § 50, consisting of the relevant associated authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).

The previously mentioned unique lease adjustments will just be approved if and to the degree the Owner plainly demonstrates that these general increases have triggered increases in the Owner's operating expense which are not sufficiently made up for by yearly adjustments. See 24 C.F.R. § 882.410(a)( 2 )(ii).

The Owner should submit monetary details to the BHA which plainly supports the boost. For Contracts of more than twenty (20) systems, the Owner should submit audited monetary information. See 24. C.F.R. § 882.410(a)( 2 )(iii).

12.5.3 Further Overall Limitation to Rent Adjustments

Rent adjustments made might not result in material differences in between the leas charged for assisted and equivalent unassisted Units, as figured out by the BHA (and authorized by HUD, in the case of changes made pursuant to area 12.8.3). This additional restriction will not restrict differences in rents between assisted and similar unassisted Units to the level that distinctions existed with respect to the initial Contract Rents, unless the leas have actually been changed in accordance with 24 C.F.R. § 882.409 as discussed in area 12.5 of this Administrative Plan. See 24 C.F.R. § 882.410(b).

12.6 Tenant Share of Rent

12.6.1 Determination of Tenant Rent

Tenant Rent is the amount payable monthly by the Family to the Owner and amounts to the Total Tenant Payment minus any Utility Allowance. See 24 C.F.R. § 5.634(a).

12.6.2 Total Tenant Payment

In accordance with 24 C.F.R. § 5.628, the Total Tenant Payment will be the highest of the list below quantities, rounded to the nearest dollar:

( 1) 30 percent (30%) of the Family's month-to-month adjusted earnings; [17];

( 2) 10 percent (10%) of the Family's regular monthly income;

( 3) If the Family is receiving payments for well-being assistance from a public agency and a part of those payments, adjusted in accordance with the Family's actual housing expenses, is specifically designated by such company to satisfy the Family's housing costs, the portion of those payments which is so designated;

12.6.3 Tenant Payment to Owner

See section 8.8.4 of the HCVP Administrative Plan.

12.6.4 Limit of BHA duty.

See section 8.8.5 of the HCVP Administrative Plan.

12.6.5 Utility Reimbursement

In accordance with 24 C.F.R. § 5.632(b)( 1 ), the BHA will pay an Utility Reimbursement if the Utility Allowance (for tenant-paid utilities) goes beyond the amount of the Total Tenant Payment.

The BHA will pay the Utility Reimbursement straight to the Family.

12.7 Down payment

12.7.1 General

An Owner may collect a down payment at the time of the preliminary execution of the Lease. If a Household abandons the Unit, the Owner, based on Massachusetts and regional law, may use the security deposit as compensation for any overdue Tenant Rent or other quantity owed for which the Family owes under the Lease (such as damages beyond regular wear and tear). See 24 C.F.R. § 882.414(a) and (b).

Security deposit limitations and procedures utilized by the BHA are constant with M.G.L. ch. 186, § 15(b)(i)(iii) and HUD memoranda.

The optimum quantity of the deposit shall be the greater of one month's TTP or $50. Furthermore, this quantity shall not exceed the optimum amount allowable under Massachusetts or local law. For Units leased in place, down payment gathered prior to the execution of a Contract which are in excess of this maximum quantity do not have to be refunded until the Family leaves the Unit topic to the Lease terms. The Family is expected to pay security deposits and utility deposits from its resources and/or other public or private sources. See 24 C.F.R. § 882.414(a).

12.7.2 Owner's Obligation to Refund

If a Family leaves the Unit the Owner shall refund the down payment if needed to do so under Massachusetts law.

12.7.3 Interest Accrued on Security Deposits

The Owner shall adhere to all Massachusetts and regional laws concerning interest payments due Tenants on down payment. Owners will take any owed interest payments into factor to consider when calculating reimbursements for unpaid lease or refunds to Families. See 24 C.F.R. § 882.414(c).