Boston Housing Authority - Boston Real Estate Authority

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Note that this Chapter details the rent estimations used for Units restored prior to the creation of this current draft of the Mod Rehab Administrative Plan that are still operational, as well as the rent computations to be utilized when it comes to the rehabilitation of new SRO Units under 24 C.F.R. part 882, subpart H.
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12.1 Calculating Initial Gross Rents


Gross Rent is the overall regular monthly cost of housing an Eligible Family and is the sum of the Contract Rent and any energy allowance. See 24 C.F.R. § 882.102.


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


(a) Exception Rents. With HUD Field Office approval, the BHA might approve initial Gro ¬ ss Rents which exceed the appropriate Mod Rehab FMRs by as much as 10% for all Units of a provided size in defined areas where HUD has figured out that the rents for basic Units appropriate for the Existing Housing Program are more than 10% greater than the Existing Housing FMRs. [13] The BHA will submit documentation demonstrating the need for such exceptions leas in the area 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 section 5.2) which lead to an initial Gross Rent which surpasses the Mod Rehab FMR appropriate to the Unit by as much as 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 contains 4 or fewer SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as suitable) must be utilized to figure out the instead of utilizing the separate FMR for each SRO Unit. To identify the FMR limitation for each SRO Unit, the FMR for the structure must be allocated equally to each SRO Unit. See 24 C.F.R. § 882.805(d)( 3 ).


12.1.2 FMR Limits for Efficiency Units


The gross lease for performance Units may 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 initial Contract Rent and Base Rent for each Unit will be computed in accordance with HUD requirements. See 24 C.F.R. § 882.408(c). The amounts may be figured out in accordance with the following approaches:


(a) Initial Contract Rent: The initial Contract Rent amounts to the base lease plus the month-to-month 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 must be determined using the lease charged for the Unit or the approximated expenses to the Owner of owning, handling and keeping the restored unit. See 24 C.F.R. § 882.408(c)( 2 ).


(c) Monthly Cost of a Rehabilitation Loan: The month-to-month expense of a rehabilitation loan should be computed using:


1. The actual interest rate on the portion of the rehabilitation costs borrowed by the Owner;


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


3. At least a 15-year loan term, except that if the overall amount of rehab is less than $15,000, the real loan term will be used for the part of the rehabilitation costs obtained by the Owner. (HUD Field Offices may license loan terms which vary from the above in accordance with HUD requirements).


If computing the monthly cost of a rehab loan for SRO Units, refer to area 12.3.1 of this Administrative Plan.


The preliminary Contract Rent might in no occasion go beyond: the Mod Rehab FMR or exception rent suitable to the Unit on the date that the AHAP is carried out, minus any appropriate 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 include the expenses of providing supportive services, transport, furniture, or other non-housing costs, 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 ten years (rather of 15 years) might be utilized. The exception for using the real loan term if the overall 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 may be consisted of for the purpose of computing the amount of the preliminary Contract Rent for any Unit need to not surpass the lower of:


(a) The predicted cost of rehab; or


(b) The per system cost constraint that is established by Federal Register notice, plus the expense of the fire and security improvements required by 24 CFR § 882.605(b)( 4 ). [14]

Note that HUD may, nevertheless, increase this latter per system restriction by a quantity it identifies is sensible and necessary to accommodate unique local conditions, such as high construction costs or strict fire or structure codes. For more 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 initial Contract Rent as calculated under section 12.2 will be the Contract Rents on the effective date of the Contract, except under the following circumstances:


(a) When, throughout rehab, work products (consisting of considerable and needed style modifications) which (A) could not reasonably have actually been prepared for or are necessitated by a change in local codes or ordinances, and (B) were not listed in the work write-up ready or authorized by the BHA, are consequently needed and authorized by the BHA. See 24 C.F.R. § 882.408(d)(i).


(b) When the actual expense of the rehab carried out is less than that approximated in the calculation of Contract Rents for the AHAP or the actual licensed costs are more than approximated due to unanticipated factors beyond the Owner's control (e.g., strikes, weather condition delays or unanticipated hold-ups brought on by local federal governments). See 24 C.F.R. § 882.408(d)(ii).


(c) When the BHA (or HUD) authorizes changes in funding. See 24 C.F.R. § 882.408(d)(iii).


(d) When the real relocation payments made by the Owner to temporarily moved Families varies from the expense estimated in the computation of Contract Rents for the AHAP. See 24 C.F.R. § 882.408(d)(iv).


(e) When required to proper errors in calculation of the base and Contract Rents to abide by the HUD requirements. See 24 C.F.R. § 882.408(d)(v).


Should such scenarios happen during rehabilitation (either an increase or decrease), the BHA will approve any necessary change in work and modification of the work review and expense price quote, recalculate the initial Contract Rents, and modify the Contract or AHAP, as suitable, to show the modified rents. See 24 C.F.R. § 882.408(d)( 2 ).


In recalculating the preliminary Contract Rents, the BHA must identify that the resulting Gross Rents do not surpass the Mod Rehab FMR or the exception lease in result at the time of execution of the AHAP. The FMR or exception lease, as suitable, might only be gone beyond when the BHA identifies in accordance with the above circumstances that it will be necessary for the revised Gross Rent to exceed the Mod Rehab FMR or exception lease. Should this determination be made, the BHA will not execute a modified AHAP or Contract for Gross Rents exceeding the FMRs by more than 10 % up until it receives HUD Field Office approval. The HUD Field Office may approve revised Gross Rents which surpass the FMRs by up to 20 percent for the scenarios listed above upon correct reason 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 approving changes to initial Contract Rents during rehab for SRO Units, the modified preliminary Contract Rents might not show an average per system rehabilitation expense that surpasses the constraints 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 an Agreement in which the initial Contract Rent was based upon a loan term shorter than ten years, [15], the Contract will offer decrease of the Contract Rent reliable with the lease for the month following the end of the regard to the rehab loan. The amount of the reduction will be the regular monthly cost of amortization of the rehabilitation loan. This reduction ought to result in a brand-new Contract Rent equivalent to the Base Rent plus all subsequent modifications. See 24 C.F.R. § 882.807(e).


12.5 Rent Increases


12.5.1 AAF Limits to Annual Contract Rent Adjustments


The quantity of any lease boost can not exceed the amount 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 costs or to finance purchase of the residential or commercial property go through a variable rate or are otherwise renegotiable, Contract Rents might be changed in accordance with other treatments as prescribed by HUD, and specified in the Contract. However, any such adjusted Contract Rent might still not go beyond the amount achieved by increasing the AAF by the Contract Rents. See 24 C.F.R. § 882.410(a)( 1 ).


To receive an annual contract lease modification the Owner must ask for the lease increase in composing at least 75 days prior to the anniversary of the HAP contract. The next area describes cases in which even more "special changes" 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 modifications may be suggested by the BHA for approval by HUD in the following circumstances:


(a) Increased Ownership/Maintenance Costs - A special adjustment, to the extent figured out by HUD to reflect increases in the actual and needed expenditures of owning and preserving the Unit which have resulted from considerable basic boosts in real residential or commercial property taxes, evaluations, energy rates, might 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, an unique modification may also be advised by the BHA for approval by HUD when HUD identifies that a project is located in a community where drug-related criminal activity is typically prevalent, and not particular to a specific project, and the task's operating, maintenance, and capital repair work costs have significantly increased mainly as an outcome of the occurrence of such drug-related activity. HUD might, on a project-by-project basis, provide modifications to the optimum regular monthly leas, to a level no greater than 120% of the existing gross leas for each Unit size under a HAP agreement, to cover the costs of maintenance, security, capital repair work and reserves required for the Owner to perform a method appropriate to HUD for dealing with the problem of drug-related criminal activity. Prior to approval of an unique change to cover the cost of physical enhancements, HUD will carry out an environmental review to the degree needed by HUD's environmental policies at 24 C.F.R. § 50, including the appropriate related authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).


The abovementioned unique rent changes will just be authorized if and to the level the Owner clearly demonstrates that these basic boosts have actually triggered increases in the Owner's operating expense which are not properly compensated for by annual changes. See 24 C.F.R. § 882.410(a)( 2 )(ii).


The Owner needs to submit financial info to the BHA which clearly supports the increase. For Contracts of more than twenty (20) units, the Owner should send 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 may not result in material differences in between the leas charged for assisted and comparable unassisted Units, as identified by the BHA (and approved by HUD, in the case of adjustments made pursuant to section 12.8.3). This more restriction will not prohibit differences in rents between assisted and similar unassisted Units to the degree that differences existed with respect to the initial Contract Rents, unless the rents have been changed in accordance with 24 C.F.R. § 882.409 as gone over 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 greatest of the following amounts, rounded to the nearest dollar:


( 1) 30 percent (30%) of the Family's regular monthly adjusted earnings; [17];


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


( 3) If the Family is receiving payments for well-being support from a public firm and a part of those payments, adjusted in accordance with the Family's real housing expenses, is specifically designated by such firm to fulfill the Family's housing expenses, the part of those payments which is so designated;


12.6.3 Tenant Payment to Owner


See area 8.8.4 of the HCVP Administrative Plan.


12.6.4 Limit of BHA obligation.


See area 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 Energy Reimbursement if the Utility Allowance (for tenant-paid energies) goes beyond the quantity of the Total Tenant Payment.


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


12.7 Down payment


12.7.1 General


An Owner might collect a down payment at the time of the preliminary execution of the Lease. If a Household vacates the Unit, the Owner, subject to Massachusetts and regional law, might utilize the security deposit as repayment for any unsettled Tenant Rent or other amount 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).


Down payment limits and treatments utilized by the BHA follow M.G.L. ch. 186, § 15(b)(i)(iii) and HUD memoranda.


The optimum quantity of the deposit shall be the higher of one month's TTP or $50. Furthermore, this amount will not surpass the maximum amount allowable under Massachusetts or local law. For Units leased in place, security deposits collected prior to the execution of a Contract which are in excess of this maximum quantity do not need to be refunded up until the Family abandons the Unit topic to the Lease terms. The Family is anticipated 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 Household leaves the Unit the Owner will reimburse the down payment if needed to do so under Massachusetts law.


12.7.3 Interest Accrued on Down Payment


The Owner shall comply with all Massachusetts and regional laws relating to interest payments due Tenants on down payment. Owners shall take any owed interest payments into consideration when computing repayments for unpaid lease or refunds to Families. See 24 C.F.R. § 882.414(c).