PIH Notice 2017-22: Asset Repositioning Fee Guidance (ARF)

November 2017

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This is the first time in many years that HUD has a tentative operating subsidy submission due date before the calendar year begins. HUD plans to release the operating subsidy tools November 27th with an anticipated due date of December 18th. Even though HUD has not published their annual PIH Notice for 2018 operating subsidy eligibility, they recently issued PIH Notice 2017-22 which provides updated guidance on the implementation of ARF for the approval of public housing units for demolition, disposition, or homeownership in accordance with 24 CFR 990.190(h).

A Public Housing Agency (PHA) that transitions projects or entire buildings within a project out of its public housing inventory may be eligible for ARF, which is an add-on to operating subsidy eligibility. ARF supplements costs associated with administration of demolition and disposition, tenant relocation, and minimum protection and services associated with such efforts.

PHAs should verify their data contained in the Public and Indian Housing Information Center (PIC) to ensure it ties to the ARF calculation. Beginning in FY 2018, Field Offices (FOs) will use the ARF MicroStrategy Report to determine ARF eligibility from information contained in PIC. If the PHA is unsure of the correct amount of ARF funding they should be receiving, they should request a copy of the MicroStrategy Report to assist with completing HUD Form 52723. All units in a project (or for partial demolition, an entire building in a project) must transition out of the PHA’s inventory to be eligible for ARF. The following dwelling units are eligible for ARF: 
  • Units Approved by HUD for Demolition and/or Disposition Under Section 18: Eligible demolitions and dispositions are those approved by HUD under regulatory requirements at 24 CFR 970, other than dispositions for mixed finance modernization because they are immediately put back into inventory, placed under a mixed finance ACC amendment, and become eligible for regular operating subsidy. 
  • Units Approved by HUD for Demolition Pursuant to a HOPE VI Revitalization Plan or a Choice Neighborhoods Plan: The ARF for units demolished under Section 24 are equal to the ARF for demolition per 24 CFR 990.190(h)(3).  
  • Units Sold Pursuant to an Approved Homeownership Plan: Units transitioned to homeownership (i.e. sold and removed from inventory) under a homeownership plan pursuant to Section 32 (or former Section 5(h) of the 1937Act) are eligible for ARF on a building-by-building basis equal to the ARF for disposition per 24 CFR 990.190(h)(4).

The following are not eligible for ARF:
  • Units converted to Project-Based Vouchers (PBV) or ProjectBased Rental Assistance (PBRA) under the Rental Assistance Demolition (RAD) program
  • Units approved by HUD for voluntary or required conversion under Section 22 (conversion of a public housing project to vouchers) or Section 33 (conversion of a distressed public housing project to tenant-based assistance) unless the HUD-approved conversion plan also includes demolition or disposition approved under 24 CFR 972
  • Units retained by a PHA after conversion under 2 CFR Part 200 (i.e., units that are neither demolished nor disposed of) and used as affordable housing (with or without tenant-based or project-based assistance) X Units a PHA demolishes in accordance with de minimis demolition authority
  • Unit months for units that have reached the end of their ARF timeline but remain under the ACC (i.e., have not yet been removed from inventory); such unit-months are identified at Section 2, Column A, line 13 of HUD-52723
The method by which the PHA will transition the units out of inventory will determine the length of ARF funding for the subsidy calculation. ARF funding for demolition is calculated at the rate of 75 percent of the PEL per unit for the first 12 months, 50 percent of the PEL per unit for the next 12 months, and 25 percent of the PEL per unit for the next 12 months, for a total of 36 months. ARF funding for non-homeownership disposition and homeownership are the same—at the rate of 75 percent PEL per unit for the first 12 months and 50 percent of the PEL per unit for the next 12 months, for a total of 24 months. 

Each year the PEL will be inflated using the base year (first year) PEL’s inflation rate. For example, if the base year inflation factor was 1.032 the PEL would be inflated the following way. 

The reason why the ARF add-on is measured in months is because the funding may kick in mid calendar year (All PHAs are funded on a calendar year, regardless of this fiscal year. The add-on funding is based on the formula in 24 CFR 990.190(h)(2): 

“The first day of the next quarter six months after the date the first unit becomes vacant after the relocation date included in the approved relocation plan.” 
For example, a PHA has HUD’s approval to demolish a 100- unit project from its 1,000 unit inventory. On January 12th, in conjunction with the PHA’s approved relocation plan, a unit in that project becomes vacant. The project is eligible for an asset repositioning fee on October 1st.

January 12th + six months = July 12th
The first day of the next quarter is October 1st

Since the ARF funding starts on October 1st, that means the PHA will only receive three months of ARF funding the first year, 12 months of funding the second year, 12 months of funding the third year and nine months of funding the fourth year. The fourth year (if demolition) and the third year (if disposition) if often missed and the FO may not always catch it. The ARF funding can be permanently lost if the add-on is not submitted on HUD Form 52723.

Please refer to the PIH Notice for more guidance of when the funding begins and join us for the Operating Subsidy Bootcamp webinar on December 1st for more detailed information to prepare an operating subsidy calculation. 

If you have questions related to matters discussed above, please contact Brian Alten.

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