ResMan was excited to participate IN PERSON at the 2021 Council for Affordable and Rural Housing (CARH) Mid-Year Conference which took place in late June in Arlington, Va.
While we’d like to think the launch of our Rural Housing compliance solution was the most important headline from the conference, other topics also shared the limelight. The event featured lively discussions about several topics, not surprisingly most related to fallout from the pandemic and how operators were managing things such as work-from-home challenges and digitization of files, evolving regulatory or legislative issues, the definition of a “remote” site, rent collections and post-pandemic takeaways regarding operations during emergency situations.
On a more macro level, however still applicable to rural housing, federal financial assistance programs and stipulations involving the average income test.
The special keynote speaker was U.S. Rep. French Hill (2nd District-Arkansas), who spoke about the value rural housing brings to its communities and the legislative attention and support he is providing.
Operations Challenges and Solutions
Use of Technology.
Technology proved to be important for the industry during the pandemic. Rural housing operators and regulators that had been slow to adopt came to appreciate the need for technology in rural housing. Electronic signatures were one area in particular where progress was made along with the adoption of online payment methods. The industry also saw a move towards more online submissions for maintenance requests from residents.
The move away from wet signatures in particular was applauded. An option put in place during the lockdowns by the U.S. Department of Housing and Urban Development was also granted to Rural Housing properties by the U.S. Department of Agriculture. This allowed applicants and residents to electronically sign documents related to leasing and recertifications, eliminating the need for either party to come into the office.
Loan Specialist Confusion.
Too often members spoke of a lack of continuity with the loan specialists assigned to their sites. It was shared that every loan specialist they reached out to tended to provide a different answer to their questions. One tip that operators shared was to go “up the ladder” and ask the next highest person on the agency’s organizational chart if they weren’t comfortable with the answer they received.
“Remote Site” Definition.
The idiosyncrasies of defining remote sites in order to collect a remote fee in addition to collecting management fees have been perplexing for some. The rural housing handbook defines “remote” as an area that is “sparsely populated,” or where it is difficult for vendors or suppliers to reach – one example given was that the nearest plumber was 150 miles away.
But what does that mean? Some attendees suggested that for cities and towns, it equates to a population of 5,000; and for a county, a population of 25,000. Additionally, if an operator has 10 sites, is it based on which site is the most remote? If the operator has 100 sites, is it based on the 10-most remote sites? Operators cannot claim that half of their portfolio is remote. A consensus determined that the group should proffer a definition, submit it, and see if it’s accepted.
Facing Emergency Situations.
While most conversations over the past year have focused on post-pandemic operational takeaways, one operator in the Pacific Northwest spoke of the struggles it had during the horrific wildfires in September 2020.
His communities quickly realized they needed a way to transmit emergency broadcasts to residents and solved this by using technology to send automated calls and texts. But in some cases, if residents weren’t aware of the situation, didn’t have sufficient smartphone access or suffered from hearing issues, the manager needed to use a bullhorn and bang on doors with hard objects that made lots of noise.
Once the power went out, the options for electronic communication were greatly reduced so the teams preprinted notices that they could distribute to alert residents to get ready, prepare to evacuate, and evacuate. These operators also advised having resident emergency kits assembled ahead of time to help residents cope with such difficult situations.
Topics to Keep an Eye On
Renter Assistance Programs.
The Emergency Rental Assistance Program (ERAP) has had issues regarding funds distribution at the state level – 75 percent of its funds go through State Housing Finance Agencies (HFAs). This is a difficult program to stand up, and states without similar programs have struggled.
There is a misconception in the industry regarding the September 2021 deadline. The Treasury Department can reallocate unused funds ONLY if state hasn’t spent 65% of the funds. While some states have made good progress, there is another $12B left to distribute.
Average Income Test.
The Average Income Test is a new set-aside option that was introduced in 2018 that allows investors to rent units to households between the 20 and 80 percent income limits as long as the property averages to the 60 percent limit.
Conference speakers from the National Council of State Housing Agencies (NCSHA) and Internal Revenue Service (IRS) are not seeing this in practice as some investors are concerned about operators whose applicants might go over the test’s 80 percent limit and wonder if they could lose their credits. On the other hand, some operators applaud this test, saying that it gives them more opportunity to raise rents while still serving low-income residents. Industry stakeholders have submitted comments to the IRS’s proposed rule for changes and are awaiting a final rule.
For more information on these topics, listen to ResMan’s Proptalk Cocktails and Compliance Episode 2 podcast or watch ResMan’s Affordable Housing Market Mid-Year Update webinar.