Article | HOTMA for Rural Development

Read the Unnumbered Letter HERE.

Read the Memorandum HERE.

For a Quiz on the new rules, see HERE.

Introduction

An important unnumbered letter and accompanying Memorandum were signed March 4, 2024. In these, Rural Development (RD) has provided needed clarity on how HOTMA will apply to RD Multifamily Housing properties. RD regulations require that the calculation of annual household income for RD properties be done according to HUD's regulation 24 CFR 5.609 (7 CFR Part 3560.153(a)). The changes to HUD rules in HOTMA affect the requirements related to income calculations found in 24 CFR 5.609 with an effective date of January 1, 2024.

HOMTA added to 24 CFR 5.609 (a) and (b) a new subsection (c). The unnumbered letter says that the Housing Act of 1949, which governs Rural Development Multifamily Housing, does not incorporate the provisions of this new subsection (c). Also, it clarifies that subsections (a) [income inclusions] and (b) [income exclusions] do apply to RD programs. The Memo also provides relief from strict HOTMA implementation until 1/1/2025, very similar to the relief granted by all the HUD departments affected by HOTMA.

What does not apply to RD?

Effective January 1, 2024, 24 CFR 5.609 (c) will be excluded from the RD regulation reference to
24 CFR 5.609. New regulations found at 24 CFR 5.609(c) will not apply to Rural Development
properties, as existing RD regulations not changed by HOTMA already apply. Although the notice identifies 24 CFR 24 5.609 (b) as the section dealing with adjusted income, this is actually found at 24 CFR 5.611, but this section will also apply, as amended by HOTMA, to RD properties. 

24 CFR 5.609 (c) implements the following provisions that will not apply to RD. HUD owners/agents:

1. must calculate family income at initial occupancy and interim reexaminations where adjusted income is estimated to increase or decrease by 10%,
2. must calculate family income at annual reexaminations except where the owner uses streamlined income determinations,
3. can utilize other programs’ determination of income, and
4. will not be out of compliance solely due to de minimis errors by no more than $30 per month.

Rural Development (RD) addresses these specified items within its current regulations. Specifically, within 7 CFR 3560.152 (e) Tenant certification and verification and 7 CFR 3560 Subpart O, Unauthorized Assistance. Tenants at RD properties must be income recertified at least annually and whenever household income changes by $100 or more per month, or changes of $50 or more per month if the tenant requests that such a change be made. Also, RD does not currently allow other programs’ determination of income for verification purposes. Finally, RD will continue to follow its Unauthorized Assistance rules without de minimus provisions. 

This exception of 5.609 (c) will be in effect until the regulations found at 7 CFR 3560.153 are updated to refer only to 24 CFR 5.609 (a) and (b). Further guidance and handbook updates are underway to incorporate the changes made by HOTMA. Additionally, RD is in the process of updating Form RD 3560-8 and the Management Interactive Network Connection (MINC) system. Changes to MINC will impact the user interface. RD encourages owners and management agents to discuss this with software providers to ensure a seamless implementation and transmission of data. 

What about 2024?

 The Memo also clarifies that RD will not penalize owners for HOTMA-related tenant file issues during RD Supervisory reviews conducted during calendar year 2024 before January 1, 2025. 

For in-depth analyses of HOTMA for RD and other programs, join us at the Compliance Summit. Online or in-person!

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