Chapter 80. Rules and Regulations for Section 8 Moderate Rehabilitation and Project-Based Certificate Assistance Programs
13VAC10-80-10. General description of programs.
The following rules and regulations will be applicable to the moderate rehabilitation and project-based certificate assistance of rental housing units subsidized under Section 8 of the U.S. Housing Act of 1937 (42 USC § 1437 et seq.), as amended ("section 8") and the applicable rules and regulations promulgated pursuant thereto ("section 8 rules and regulations"), 24 CFR 882. These rules and regulations are intended to provide a general description of the authority's processing requirements and are not intended to include all actions involved or required in the processing of applications. Notwithstanding anything to the contrary herein, the executive director is authorized with respect to any application to waive or modify any provision herein where deemed appropriate by him for good cause. These rules and regulations are subject to change at any time by the authority. Unless stated otherwise, the rules and regulations shall apply to both the moderate rehabilitation and project-based certificate programs.
The section 8 moderate rehabilitation and project-based certificate assistance programs (the "programs") are designed to:
1. Rehabilitate rental units which are now substandard or have major building components which need repair or replacement and, in the case of the project-based certificate program, construct new rental units;
2. Provide a rental income to an owner that will repay rehabilitation or construction costs, meet monthly operating expenses, and allow a reasonable profit (not to exceed 8.0% in the case of moderate rehabilitation) on the owner's equity investment in the property; and
3. Provide rental subsidies under section 8 to low and very low income families and single individuals living in the rehabilitated or newly constructed units.
Section 8 funding is received from time to time by the authority from the U.S. Department of Housing and Urban Development ("HUD"). The authority then solicits and receives requests from local governmental entities for allocations of such section 8 funds to their localities. After approval of such requests, persons in such localities may submit applications for section 8 funds under the programs. The executive director may take such action as he deems necessary or appropriate in order to solicit such requests from local governmental entities and applications from persons in the applicable localities.
Persons interested in participating in the programs must first submit applications to the authority meeting program requirements described herein. The application shall be in such form and shall contain such relevant information as the executive director may require. Applications will be reviewed and approved on a first-come, first-serve basis or, in the case of project-based certificate assistance program, on the basis of such selection criteria as may be determined by the authority to best serve the needs of the locality in which the project is to be located.
In the case of rehabilitation, selection of an owner's application is contingent upon the authority's determination that the tenant then occupying the unit to be rehabilitated is eligible to receive section 8 rental assistance under the applicable program. The authority will not permit ineligible families to be displaced by rehabilitation. Therefore, the authority will not provide subsidy under the program for the rehabilitation of units occupied by ineligible families at the time of submission of the application. However, the owner may rehabilitate these units as part of a general upgrading of the property.
In the moderate rehabilitation program, the authority will assist the owner in preparing rehabilitation work write-ups (detailed description of the proposed rehabilitation and estimates of the costs thereof), selecting a contractor, and obtaining financing for the work to be completed. No such assistance is provided under the project-based certificate assistance program.
Prior to the beginning of rehabilitation or new construction the authority will execute an agreement to enter into housing assistance payments contract (the "agreement") which provides that, upon satisfactory completion of all specified improvements in accordance therewith, the unit(s) will be subject to a housing assistance payments contract (the "HAP contract") at a specified rent.
Upon completion of all required improvements to the unit(s), the authority and the owner will execute a HAP contract which establishes the rent ("contract rent") for the unit(s) and describes the rights and responsibilities of the owner and the authority throughout the term. In the case of the moderate rehabilitation program, the term of the HAP contract shall be 15 years. In the case of the project-based certificate assistance program, the HAP contract term may not be less than two years and no longer than 15 years or the period of funding for its funding source.
Subsequent to completion of the required improvements, the authority and its administrative agent ("administrative agent") shall perform their respective administrative functions and responsibilities with respect to the section 8 subsidy and HAP contract as set forth in the authority's rules and regulations for section 8 certificate and voucher existing housing assistance payments program (13VAC10-70-10 et seq.).
The initial occupant of a rehabilitated unit may be either the owner's current tenant or a family selected by the owner from the waiting list maintained by the administrative agent. The initial occupant of a newly constructed project-based certificate assistance unit shall be a family selected by the owner from such waiting list. Vacancies occurring after initial occupancy are to be filled by the owner first from among families on such waiting list. If this waiting list is not sufficient, the owner may solicit his own tenants.
Tenants occupy the units and receive assistance by signing a lease in the form required by the authority and other documentation required by HUD. The tenants must comply with all applicable requirements imposed by HUD under the section 8 rules and regulations and the applicable program. The tenant pays no more than 30% of his adjusted income (as determined in accordance with the section 8 rules and regulations) for rent and utilities, to the extent of the allowance therefor. The difference between the rent (plus any utility allowance) and the tenant's contribution is paid as housing assistance payments to the owner by the authority with section 8 subsidy funds received from HUD. The housing assistance payments are applied by the owner toward the rent on the rental housing unit. The tenant pays directly to the owner the portion of the rent not paid by the authority. In certain instances, the amount of the housing assistance payments may exceed the rent, and the balance is paid by the authority to the tenant as a utility reimbursement.
Housing assistance payments may be made available to eligible persons and families pursuant to these rules and regulations only if and to the extent that the authority has received from HUD section 8 subsidy funds therefor.
The programs shall in all respects be governed by, and administered in accordance with, the section 8 rules and regulations and all other applicable procedures and requirements imposed by HUD with respect to the programs. The section 8 rules and regulations and such other procedures and requirements imposed by HUD shall control over any inconsistent provision herein.
The executive director or any authorized officer of the authority acting under his supervision is authorized to act on behalf of the authority with respect to all matters hereunder. The executive director or such authorized officer may delegate all or part of his authority to any employee who is acting under his control and supervision.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 1, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-20. Eligible rental housing.
The housing to be assisted must be eligible under the applicable section 8 rules and regulations. In addition, housing assisted under the programs must be located within an area for which the authority has received funding from HUD. The authority must have also been requested by the local governmental entity to make section 8 funding available.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 2, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-30. Eligible owners.
All owners of eligible property may participate in the programs with the exception of the following (who are excluded during their tenure and for one year thereafter from participation because their relationship with the authority or the program would constitute a prohibited interest under federal regulations): (i) present or former members or officers of the authority or the administrative agent, (ii) employees of the authority or the administrative agent who formulate policy or influence decisions with respect to the program, and (iii) public officials or members of a governing body or state or local legislators who exercise functions or responsibilities with respect to the program. In addition, current members of or delegates to the Congress of the United States of America or resident commissioners are not eligible property owners.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 3, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-40. Eligibility of initial tenants of units to be rehabilitated.
In the case of a unit to be rehabilitated, any tenant occupying such a unit at the time of submission of the application must satisfy the eligibility criteria in the section 8 rules and regulations in order for that unit to be assisted (subject to certain exceptions in the section 8 rules and regulations).
Owners may not combine two or more units, if that rehabilitation activity will result in fewer units than tenants currently in residence and therefore require displacement.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 4, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-50. Rehabilitation and construction standards.
Housing units rehabilitated under the programs must meet the following standards:
1. Subject to HUD approval, the executive director is authorized to establish and from time to time modify rehabilitation standards which shall specify the standards for work and materials to be incorporated into the rehabilitation of housing units under the program. Housing units proposed for rehabilitation under the program will be inspected by the authority for compliance with the authority's rehabilitation standards. All state and local building codes are incorporated by reference in the rehabilitation standards, and in the event of any conflict or inconsistency between such codes and the standards expressly set forth therein, the more restrictive standards shall control over the less restrictive standards. A copy of these standards shall be available upon request. All deficiencies found in the inspection must be corrected by the owner as part of the owner's rehabilitation activity.
2. Eligible rehabilitation activities under this program include work to major building systems or components. Such work is basically limited to complete wiring, new plumbing pipes, new boiler or furnace or heating distribution pipes, new roof, and exterior structural elements.
3. Rehabilitation items not required by the authority are not considered eligible work items under the program. Routine maintenance activities, such as repainting, are also not eligible items. If the owner elects to undertake cosmetic, optional, or routine maintenance work while also doing eligible work, only the cost of the eligible work will be taken into account in calculating the contract rent.
4. Caulking and weatherstripping are required in all units rehabilitated under the program. The authority will require other energy-conserving improvements such as insulating windows and floor, wall and ceiling insulation if economically feasible.
5. Property improvements to make a housing unit accessible to the physically handicapped are eligible under the program. If an owner anticipates making such improvements, the authority will assist in evaluating the work required.
6. All rehabilitation work under the program must be completed in a cost efficient and workmanlike manner. Extravagant or luxury quality improvements are not allowable. All work should be of sufficient quality to serve for the duration of the HAP contract, and any improvements for which building permits are required must meet local building code quality standards.
7. Housing units rehabilitated under the program must require improvements costing at least $1,000 per unit in order to meet the above standards.
Housing units to be constructed under the project-based certificate assistance program must meet the housing quality standards established by HUD.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 5, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-60. Determination of contract rents for units.
The contract rent for a unit under the project-based certificate assistance program plus the allowance to be paid by the tenant may not exceed the section 8 existing fair market rent.
The contract rent for a unit under the moderate rehabilitation program is calculated using a two-step process. The authority first computes a "base rent" for the owner's unit and then adds to it the monthly cost of amortizing the owner's rehabilitation expenditure in the following manner.
1. The base rent shall be calculated in accordance with whichever of the following methods produces the higher rent:
a. The average rent collected for the unit during the 18 months preceding the owner's proposal, plus an adjustment factor for inflation and trending; or
b. A rent based on the anticipated costs of owning, managing and maintaining the rehabilitated unit. The formula used to calculate this base rent takes into account all operating expenses and allows a return (not to exceed 8.0%) on owner equity.
2. To the base rent is added the actual or imputed monthly per unit debt service cost for eligible rehabilitation costs, including the cost of any required temporary relocation of current tenants during the rehabilitation period.
Under the moderate rehabilitation program, the contract rent for a rehabilitated unit plus the allowance for any utilities to be paid by the tenant may not exceed the moderate rehabilitation fair market rent established by HUD for a unit of that size. The allowances for any utilities to be paid by tenant will be established by the authority and will be made available to the owner upon request.
In the moderate rehabilitation program, contract rents are tentatively calculated and the feasibility of the owner's proposal evaluated at several times during the processing period, as information concerning base rents, anticipated rehabilitation costs, and the terms of financing is received by the authority. The final calculation of the contract rent is made after the rehabilitation work has been completed and the owner's construction costs, temporary relocation costs, and financing terms are established, subject to the approval of the authority. In the project-based certificate assistance program, the initial contract rents shall be as set forth in the agreement unless adjusted in accordance with the section 8 rules and regulations.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 6, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-70. Fair market rents for units.
The moderate rehabilitation fair market rents (in the case of the moderate rehabilitation program) and section 8 existing fair market rents (in the case of project-based certificate assistance program), including the cost of utilities, for units assisted under the program are established from time to time by HUD.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 7, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-80. Sources of financing for rehabilitation and new construction.
Property owners participating in the program may obtain financing for rehabilitation or construction expenses from a number of sources, including the following:
1. Owners may pay for property improvements using personal savings, personal credit cards or store accounts.
2. Owners may obtain financing from any commercial lending institution, including commercial banks, savings and loan associations, and credit unions.
3. Owners participating in the program may also qualify for rehabilitation or construction financing made available through the redevelopment and housing authority, housing agency and/or industrial development authority.
4. The authority may from time to time make financing available for the rehabilitation or construction. In the case of such financing, the application for such financing shall be processed, the improvements shall be completed, and the rehabilitated or constructed unit shall be owned, operated and managed, all in accordance with the authority's rules and regulations for multi-family housing developments, to the extent required by the authority consistent with the section 8 rules and regulations.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 8, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-90. Federal requirements which the owner must meet during rehabilitation or construction and management.
An owner shall comply with the section 8 rules and regulations and all other applicable federal requirements under the program. In addition, the authority may take into account applicable environmental laws and requirements in evaluating and selecting owner proposals.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 9, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-100. Processing of owner proposals.
In the moderate rehabilitation program, owner proposals submitted to the authority will be processed as follows:
Step 1 - Preparation and submission by owner of a proposal.
Step 2 - Preliminary screening of proposal by the authority and disqualification of incomplete or clearly ineligible proposals.
Step 3 - Inspection by the authority of owner's property to determine the work items necessary to bring the unit(s) up to program standards.
Step 4 - Preparation by the authority of list of deficiencies to be corrected, estimate by the authority of rehabilitation costs, and preliminary determination by the authority of project feasibility, taking into account current rents or operating expenses, the estimated cost of requiring improvements, and the terms of available financing. Notification by the authority to the owner of results.
Step 5 - Selection for processing by the authority of owner's proposal.
Step 6 - Determination by the authority of eligibility of tenants currently occupying unit(s) to be rehabilitated. Notification by the authority to the owner of results.
Step 7 - Preparation by the owner and/or the authority of work write-ups, bidding of work, selection of contractor, preparation of lease, obtaining of financing, and final determination of project feasibility.
Step 8 - Execution of an agreement providing that upon owner's satisfactory completion of all required work, the authority will provide section 8 housing assistance payments on behalf of eligible tenants occupying the rehabilitated unit(s). Initial calculation of contract rent(s).
Step 9 - Execution by the owner and contractor of a construction contract and completion of required work. Inspection by the authority of work upon completion.
Step 10 - Recalculation by the authority of contract rent. Execution of a HAP contract by the owner and the authority.
Step 11 - Occupancy of the unit(s) by the assisted tenant(s), who may be the current eligible tenant(s) or tenant(s) selected by the owner from the locality's waiting list. Execution of an approved lease.
Step 12 - Commencement of section 8 housing assistance payments on behalf of the tenant. Performance by the owner, the authority and its administrative agent of all activities required following rehabilitation.
In the project-based certificate assistance program, units will be selected as follows:
Step 1 - The authority will submit information to HUD concerning the number of units currently under the authority's annual contributions contract with HUD for the authority's section 8 certificate program, the total number of units for which the authority is requesting approval to attach assistance, the number of units by unit size to be assisted from each funding source and the estimated termination dates for the HAP contracts.
Step 2 - HUD shall review the information and notify the authority of approval or disapproval.
Step 3 - The authority will advertise in a newspaper of general circulation that the authority will accept applications for project-based certificate assistance.
Step 4 - The owner will submit an application containing a description of the housing to be constructed or rehabilitated, evidence of site control, evidence of proper zoning, the proposed contract rent per unit, information concerning temporary relocation of site occupants, identity of the owner and development team, a management plan, information concerning the financing, the proposed term of the HAP contract and such other information that the authority believes to be necessary.
Step 5 - The owner's proposal's will be ranked and selected by the authority, in accordance with selection criteria determined by the authority pursuant to 13VAC10-80-10.
Step 6 - The authority will enter into the agreement with the owner.
Step 7 - Execution by the owner and contractor or a construction contract and completion of the required work. Inspection by the authority of work upon completion.
Step 8 - Execution of a HAP contract by the owner and the authority.
Step 9 - Occupancy of the unit(s) by the assisted tenant(s), who may be the current eligible tenant(s) or tenant(s) selected by the owner from the locality's waiting list. Execution of an approved lease.
Step 10 - Commencement of section 8 housing assistance payments on behalf of the tenant. Performance by the owner, the authority and its administrative agent of all activities required following rehabilitation.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 10, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.
13VAC10-80-110. Requirements following rehabilitation and construction.
Subsequent to completion of the required improvements or new construction (as applicable) for any rental housing unit, the authority and its administrative agent shall perform their respective administrative functions and responsibilities with respect to the section 8 subsidy and HAP contract for such unit as set forth in the authority's rules and regulations for section 8 existing certificate and voucher housing assistance payments program. Following initial leasing of the assisted unit and during the entire period of the HAP contract, the owner must fill all vacancies with section 8 eligible families referred by the authority or its administrative agent, and where required by the authority, the owner shall develop and utilize tenant selection procedures and standards acceptable to the authority. The owner also must maintain the unit in its rehabilitated or newly constructed condition, as applicable, less normal wear and tear, and such maintenance of the unit will be monitored through annual inspections. The owner may not terminate a tenant lease except for tenant failure to comply with the lease or obligations under state law.
Annually, the authority will process requests by the owner for annual rent adjustments in accordance with the HAP contract. Special rent adjustments may also be approved by the authority and HUD in certain circumstances authorized by the HAP contract. The owner is also eligible to receive payments for vacancy losses, tenant damages and unpaid rent.
In the case of the moderate rehabilitation program, the maximum annual return or profit which the owner may receive from the rental of the assisted unit(s) shall not exceed 8.0% of the owner's equity as determined in accordance with HUD's requirements.
The owner must comply with all terms and conditions of the HAP contract and with the section 8 rules and regulations. Any successive owner shall be subject to the terms and conditions of the HAP contract. The authority shall have the right to terminate the HAP contract in accordance with its terms in the event of noncompliance by the owner with its provisions.
Statutory Authority
§ 36-55.30:3 of the Code of Virginia.
Historical Notes
Derived from VR400-02-0007 § 11, eff. July 1, 1989; amended, Virginia Register Volume 11, Issue 17, eff. May 1, 1995.