Boston Housing Authority - Boston Real Estate Authority

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Note that this Chapter details the lease computations used for Units fixed up prior to the development of this current draft of the Mod Rehab Administrative Plan that are still operational, in addition to the rent estimations to be used 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 monthly cost of housing a Qualified Family and is the sum of the Contract Rent and any utility allowance. See 24 C.F.R. § 882.102.


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


(a) Exception Rents. With HUD Field Office approval, the BHA may authorize preliminary Gro ¬ ss Rents which exceed the appropriate Mod Rehab FMRs by approximately 10% for all Units of an offered size in specified locations where HUD has determined that the leas for basic Units ideal for the Existing Housing Program are more than 10% higher than the Existing Housing FMRs. [13] The BHA will submit paperwork showing the necessity for such exceptions rents in the location 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 area 5.2) which lead to an initial Gross Rent which exceeds 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 four or less SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as appropriate) need to be utilized to determine the FMR restriction rather of utilizing the separate FMR for each SRO Unit. To determine the FMR restriction for each SRO Unit, the FMR for the structure should be allocated similarly to each SRO Unit. See 24 C.F.R. § 882.805(d)( 3 ).


12.1.2 FMR Limits for Efficiency Units


The gross rent for performance Units might 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 quantities may be figured out in accordance with the following methods:


(a) Initial Contract Rent: The initial Contract Rent amounts to the base rent plus the month-to-month cost of a rehab loan however 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 lease should be computed using the rent charged for the Unit or the approximated costs to the Owner of owning, handling and keeping the fixed up unit. 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 utilizing:


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


2. The HUD-FHA optimum rates of interest for multifamily housing (or another rate prescribed by HUD) for rehabilitation expenses paid by the Owner out of non-borrowed funds; and


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


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


The initial Contract Rent may in no event exceed: the Mod Rehab FMR or exception rent applicable to the Unit on the date that the AHAP is executed, minus any relevant allowance for utilities 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 offering encouraging services, transportation, furnishings, or other non-housing costs, as determined by HUD. See 24 C.F.R. § 882.805(d)( 4 ).


12.2.1 Calculating Monthly Cost of a Rehabilitation Loan for SRO Units


In identifying the month-to-month cost of a rehab loan for SRO Units, a loan regard to a minimum of ten years (instead of 15 years) may be used. The exception for utilizing the real loan term if the overall quantity of the rehab is less than $15,000 continues to apply. See 24 C.F.R. § 882.805(d)( 1 )(i).


In addition, the expense of the rehabilitation that may be consisted of for the function of computing the amount of the preliminary Contract Rent for any Unit must not go beyond the lower of:


(a) The forecasted cost of rehab; or


(b) The per system expense limitation that is developed by Federal Register notice, plus the cost of the fire and safety enhancements required by 24 CFR § 882.605(b)( 4 ). [14]

Note that HUD may, however, increase this latter per unit constraint by an amount it identifies is affordable and essential to accommodate unique local conditions, such as high building and construction costs or stringent fire or building codes. 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, other than under the following situations:


(a) When, during rehab, work products (consisting of significant and necessary style modifications) which (A) could not fairly have been anticipated or are demanded by a change in local codes or ordinances, and (B) were not listed in the work article ready or approved by the BHA, are subsequently required and approved by the BHA. See 24 C.F.R. § 882.408(d)(i).


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


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


(d) When the real moving payments made by the Owner to briefly relocated Families varies from the expense estimated in the estimation of Contract Rents for the AHAP. See 24 C.F.R. § 882.408(d)(iv).


(e) When necessary to correct mistakes in computation of the base and Contract Rents to abide by the HUD requirements. See 24 C.F.R. § 882.408(d)(v).


Should such situations take place throughout rehabilitation (either a boost or decrease), the BHA will approve any essential modification in work and modification of the work write-up and cost price quote, recalculate the preliminary Contract Rents, and modify the Contract or AHAP, as proper, to show the revised leas. See 24 C.F.R. § 882.408(d)( 2 ).


In recalculating the initial Contract Rents, the BHA should figure out that the resulting Gross Rents do not go beyond the Mod Rehab FMR or the exception rent in result at the time of execution of the AHAP. The FMR or exception rent, as suitable, may just be surpassed when the BHA determines in accordance with the above situations that it will be required for the revised Gross Rent to go beyond the Mod Rehab FMR or exception rent. Should this determination be made, the BHA will not carry out a revised AHAP or Contract for Gross Rents surpassing the FMRs by more than 10 % till it gets HUD Field Office approval. The HUD Field Office may authorize modified Gross Rents which go beyond the FMRs by as much as 20 percent for the circumstances listed above upon correct reason by the BHA of the requirement for the boost. See 24 C.F.R. § 882.408(d)( 3 ).


12.3.1 Further Limits for SRO Units


In authorizing modifications to initial Contract Rents during rehab for SRO Units, the modified preliminary Contract Rents may not reflect a typical per system rehab cost that goes beyond the limitations defined in area 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 preliminary Contract Rent was based upon a loan term much shorter than 10 years, [15], the Contract will offer reduction of the Contract Rent reliable with the lease for the month following completion of the term of the rehab loan. The amount of the reduction will be the regular monthly cost of amortization of the rehab loan. This decrease should result in a brand-new Contract Rent equivalent to the Base Rent plus all subsequent adjustments. 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 increase can not surpass the amount established by increasing 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 fund purchase of the residential or commercial property are subject to a variable rate or are otherwise renegotiable, Contract Rents might be changed in accordance with other procedures as recommended by HUD, and defined in the Contract. However, any such adjusted Contract Rent may still not go beyond the quantity attained by increasing the AAF by the Contract Rents. See 24 C.F.R. § 882.410(a)( 1 ).


To receive a yearly agreement rent adjustment the Owner should ask for the rent increase in writing a minimum of 75 days prior to the anniversary of the HAP contract. The next section explains cases in which further "special adjustments" may 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 changes might be recommended by the BHA for approval by HUD in the following situations:


(a) Increased Ownership/Maintenance Costs - A special change, to the level identified by HUD to show boosts in the real and necessary expenditures of owning and maintaining the Unit which have arised from considerable general increases in real residential or commercial property taxes, evaluations, utility rates, might be recommended 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 modification might likewise be suggested by the BHA for approval by HUD when HUD figures out that a project is located in a community where drug-related criminal activity is typically common, and not specific to a specific job, and the project's operating, upkeep, and capital repair expenses have considerably increased mainly as an outcome of the prevalence of such drug-related activity. HUD may, on a project-by-project basis, supply adjustments to the optimum monthly leas, to a level no higher than 120% of the present gross leas for each Unit size under a HAP contract, to cover the expenses of maintenance, security, capital repairs and reserves needed for the Owner to perform a technique appropriate to HUD for resolving the problem of drug-related criminal activity. Prior to approval of a special change to cover the expense of physical enhancements, HUD will perform an ecological review to the level required by HUD's environmental regulations at 24 C.F.R. § 50, including the applicable related authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).


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


The Owner should submit financial details to the BHA which clearly supports the increase. For Contracts of more than twenty (20) units, the Owner needs to monetary information. See 24. C.F.R. § 882.410(a)( 2 )(iii).


12.5.3 Further Overall Limitation to Rent Adjustments


Rent adjustments made might not lead to material differences between the leas charged for assisted and comparable unassisted Units, as determined by the BHA (and approved by HUD, in the case of changes made pursuant to section 12.8.3). This additional limitation will not forbid distinctions in rents in between assisted and equivalent unassisted Units to the degree that differences existed with respect to the initial Contract Rents, unless the leas have actually been adjusted in accordance with 24 C.F.R. § 882.409 as talked about in section 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 is equal 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 highest of the list below quantities, rounded to the nearby dollar:


( 1) 30 percent (30%) of the Family's month-to-month adjusted income; [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, changed in accordance with the Family's real housing expenses, is particularly designated by such firm to meet the Family's housing expenses, the part of those payments which is so designated;


12.6.3 Tenant Payment to Owner


See section 8.8.4 of the HCVP Administrative Plan.


12.6.4 Limit of BHA duty.


See section 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) goes beyond the amount of the Total Tenant Payment.


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


12.7 Security Deposits


12.7.1 General


An Owner might gather a down payment at the time of the preliminary execution of the Lease. If a Family leaves the Unit, the Owner, based on Massachusetts and regional law, might use the security deposit as reimbursement for any unsettled Tenant Rent or other amount owed for which the Family owes under the Lease (such as damages beyond normal 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 maximum quantity of the deposit will be the higher of one month's TTP or $50. Furthermore, this amount shall not exceed the optimum quantity allowable under Massachusetts or regional law. For Units leased in place, down payment collected prior to the execution of a Contract which are in excess of this maximum amount do not need to be reimbursed up until the Family abandons the Unit subject to the Lease terms. The Family is expected to pay security deposits and utility 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 Family abandons the Unit the Owner shall reimburse the down payment if required to do so under Massachusetts law.


12.7.3 Interest Accrued on Down Payment


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