Boston Housing Authority - Boston Real Estate Authority

Note that this Chapter information the rent calculations utilized for Units fixed up prior to the development of this present draft of the Mod Rehab Administrative Plan that are still functional, in addition to the lease computations to be utilized in the case of the rehab of brand-new SRO Units under 24 C.F.R. part 882, subpart H.


12.1 Calculating Initial Gross Rents


Gross Rent is the total month-to-month cost of housing a Qualified Family and is the sum of the Contract Rent and any energy allowance. See 24 C.F.R. § 882.102.


The preliminary Gross Rent for any Unit must not exceed the Mod Rehab FMR [12] applicable to the Unit on the date that the AHAP is performed. See 24 C.F.R. § 882.408(a). Note that the following exceptions use:


(a) Exception Rents. With HUD Field Office approval, the BHA might authorize initial Gro ¬ ss Rents which go beyond the suitable Mod Rehab FMRs by as much as 10% for all Units of a given size in defined areas where HUD has figured out that the rents for basic Units suitable for the Existing Housing Program are more than 10% higher than the Existing Housing FMRs. [13] The BHA will send paperwork demonstrating the requirement for such exceptions rents in the area to the HUD Field Office. See 24 C.F.R. § 882.408(a) and (b).


(b) The BHA may approve modifications in the Contract Rent subsequent to execution of the AHAP (see area 5.2) which lead to a preliminary Gross Rent which surpasses the Mod Rehab FMR applicable to the Unit by approximately 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 consists of four or less SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as relevant) must be used to figure out the FMR constraint rather of utilizing the different FMR for each SRO Unit. To determine the FMR restriction for each SRO Unit, the FMR for the structure should be apportioned similarly 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 effectiveness Units may be no greater 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 quantities might be figured out in accordance with the following methods:


(a) Initial Contract Rent: The initial Contract Rent amounts to the base rent plus the monthly expense of a rehabilitation loan but not more than the maximum specified at the end of this section. See 24 C.F.R. § 882.408(c)( 2 ).


(b) Base Rent: The base lease need to be calculated utilizing the rent charged for the Unit or the approximated costs to the Owner of owning, handling and preserving the fixed up system. See 24 C.F.R. § 882.408(c)( 2 ).


(c) Monthly Cost of a Rehab Loan: The month-to-month expense of a rehab loan must 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 rehab costs paid by the Owner out of non-borrowed funds; and


3. A minimum of a 15-year loan term, other than that if the total quantity of rehabilitation is less than $15,000, the actual loan term will be utilized for the portion of the rehabilitation costs borrowed by the Owner. (HUD Field Offices might authorize loan terms which vary from the above in accordance with HUD requirements).


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


The preliminary Contract Rent might in no event go beyond: the Mod Rehab FMR or exception rent relevant to the Unit on the date that the AHAP is executed, 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 costs of supplying supportive services, transport, furnishings, or other non-housing expenses, as determined 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 identifying the monthly expense of a rehabilitation loan for SRO Units, a loan term of at least 10 years (rather of 15 years) may be utilized. The exception for utilizing the actual loan term if the overall amount of the rehabilitation is less than $15,000 continues to apply. See 24 C.F.R. § 882.805(d)( 1 )(i).


In addition, the cost of the rehab that may be consisted of for the function of computing the amount of the preliminary Contract Rent for any Unit must not exceed the lower of:


(a) The projected expense of rehab; or


(b) The per unit expense limitation that is established by Federal Register notification, plus the expense of the fire and safety enhancements needed by 24 CFR § 882.605(b)( 4 ). [14]

Note that HUD may, however, increase this latter per system restriction by an amount it figures out is sensible and essential to accommodate unique local conditions, such as high construction costs or rigid fire or building regulations. For further 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 preliminary Contract Rent as calculated under area 12.2 will be the Contract Rents on the effective date of the Contract, except under the following scenarios:


(a) When, throughout rehab, work items (consisting of significant and required design changes) which (A) could not fairly have been expected or are required by a change in local codes or regulations, and (B) were not listed in the work article ready or approved by the BHA, are subsequently required and authorized by the BHA. See 24 C.F.R. § 882.408(d)(i).


(b) When the real expense of the rehabilitation performed is less than that approximated in the calculation of Contract Rents for the AHAP or the real licensed costs are more than approximated due to unanticipated factors beyond the Owner's control (e.g., strikes, weather condition delays or unexpected delays triggered by city governments). See 24 C.F.R. § 882.408(d)(ii).


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


(d) When the real moving payments made by the Owner to temporarily relocated Families differs from the cost approximated in the estimation of Contract Rents for the AHAP. See 24 C.F.R. § 882.408(d)(iv).


(e) When needed to proper errors in computation of the base and Contract Rents to comply with the HUD requirements. See 24 C.F.R. § 882.408(d)(v).


Should such circumstances happen during rehabilitation (either a boost or reduction), the BHA will authorize any needed change in work and modification of the work review and cost quote, recalculate the initial Contract Rents, and modify the Contract or AHAP, as appropriate, to show the revised leas. See 24 C.F.R. § 882.408(d)( 2 ).


In recalculating the preliminary Contract Rents, the BHA needs to figure out that the resulting Gross Rents do not surpass the Mod Rehab FMR or the exception lease in impact at the time of execution of the AHAP. The FMR or exception rent, as proper, might only be surpassed when the BHA determines in accordance with the above scenarios that it will be required for the modified Gross Rent to surpass the Mod Rehab FMR or exception lease. Should this decision be made, the BHA will not execute a revised AHAP or Contract for Gross Rents exceeding the FMRs by more than 10 % up until it gets HUD Field Office approval. The HUD Field Office might authorize modified Gross Rents which go beyond the FMRs by approximately 20 percent for the scenarios noted above upon proper validation by the BHA of the need for the increase. See 24 C.F.R. § 882.408(d)( 3 ).


12.3.1 Further Limits for SRO Units


In authorizing modifications to initial Contract Rents throughout rehab for SRO Units, the revised initial Contract Rents may not reflect a typical per unit rehabilitation expense that goes beyond the limitations specified 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 a Contract in which the initial Contract Rent was based upon a loan term shorter than 10 years, [15], the Contract will offer reduction of the Contract Rent efficient with the rent for the month following the end of the term of the rehab loan. The amount of the decrease will be the regular monthly expense of amortization of the rehab loan. This decrease must lead to a brand-new Contract Rent equal to the Base Rent plus all subsequent changes. See 24 C.F.R. § 882.807(e).


12.5 Rent Increases


12.5.1 AAF Limits to Annual Contract Rent Adjustments


The amount of any rent increase can not exceed the quantity established 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 borrowed to finance the rehab expenses or to fund purchase of the residential or commercial property are subject to a variable rate or are otherwise renegotiable, Contract Rents may be changed in accordance with other treatments as recommended by HUD, and specified in the Contract. However, any such adjusted Contract Rent may still not go beyond the amount attained by increasing the AAF by the Contract Rents. See 24 C.F.R. § 882.410(a)( 1 ).


To receive an rent change the Owner should request the lease boost in writing at least 75 days prior to the anniversary of the HAP agreement. The next section describes cases in which further "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 adjustments may be suggested by the BHA for approval by HUD in the following circumstances:


(a) Increased Ownership/Maintenance Costs - A special change, to the level determined by HUD to reflect increases in the actual and essential costs of owning and keeping the Unit which have actually arised from substantial general boosts in real residential or commercial property taxes, evaluations, utility rates, may be suggested 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, a special adjustment may likewise be advised by the BHA for approval by HUD when HUD identifies that a job lies in a community where drug-related criminal activity is typically common, and not specific to a specific project, and the project's operating, maintenance, and capital repair work expenditures have significantly increased mostly as an outcome of the occurrence of such drug-related activity. HUD might, on a project-by-project basis, supply changes to the optimum month-to-month leas, to a level no higher than 120% of the present gross rents 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 bring out a method acceptable to HUD for attending to the problem of drug-related criminal activity. Prior to approval of an unique change to cover the expense of physical enhancements, HUD will perform an ecological evaluation to the level required by HUD's environmental policies at 24 C.F.R. § 50, consisting of the suitable related authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).


The abovementioned special lease modifications will just be authorized if and to the extent the Owner plainly demonstrates that these general increases have actually triggered increases in the Owner's operating expense which are not effectively made up for by yearly modifications. See 24 C.F.R. § 882.410(a)( 2 )(ii).


The Owner must submit financial info to the BHA which clearly supports the boost. 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 modifications made might not lead to material distinctions in between the rents charged for assisted and comparable unassisted Units, as determined by the BHA (and approved by HUD, in the case of changes made pursuant to area 12.8.3). This further constraint will not prohibit differences in leas in between assisted and comparable unassisted Units to the degree that differences existed with regard to the initial Contract Rents, unless the rents have actually been adjusted in accordance with 24 C.F.R. § 882.409 as discussed 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 quantity payable month-to-month 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 list below quantities, rounded to the closest 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 welfare assistance from a public firm and a part of those payments, adjusted in accordance with the Family's real housing costs, is particularly designated by such firm to meet the Family's housing expenses, the portion 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 responsibility.


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 Utility Reimbursement if the Utility Allowance (for tenant-paid utilities) exceeds the amount of the Total Tenant Payment.


The BHA shall pay the Utility Reimbursement straight to the Family.


12.7 Security Deposits


12.7.1 General


An Owner might gather a down payment at the time of the initial execution of the Lease. If a Household vacates the Unit, the Owner, based on Massachusetts and local law, may utilize the security deposit as repayment for any overdue Tenant Rent or other amount owed for which the Family owes under the Lease (such as damages beyond typical wear and tear). See 24 C.F.R. § 882.414(a) and (b).


Security deposit limits and treatments used by the BHA follow M.G.L. ch. 186, § 15(b)(i)(iii) and HUD memoranda.


The optimum quantity of the deposit will be the greater of one month's TTP or $50. Furthermore, this amount shall not exceed the optimum quantity allowed under Massachusetts or regional law. For Units rented in location, security deposits gathered prior to the execution of an Agreement which remain in excess of this optimum amount do not have to be refunded up until the Family vacates the Unit topic to the Lease terms. The Family is anticipated to pay security deposits and energy deposits from its resources and/or other public or personal 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 required to do so under Massachusetts law.


12.7.3 Interest Accrued on Security Deposits


The Owner will adhere to all Massachusetts and regional laws relating to interest payments due Tenants on security deposits. Owners will take any owed interest payments into consideration when determining reimbursements for unsettled rent or refunds to Families. See 24 C.F.R. § 882.414(c).