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Business Model
Business Model
CHA plans to use Section 8(bb) of the United States Housing Act of 1937 to not only increase the amount of available affordable housing, but also improve the quality of affordable housing by providing a Class A product
What is Section 8(bb)?
- Section 8(bb) provides HUD with a tool for preserving budget authority for project-based rental assistance (PBRA) under Section 8. Under Section 8(bb), if a PBRA Housing Assistance Payments (HAP) contract is terminated or expires and is not renewed, HUD is authorized to transfer any remaining budget authority to either a new or an existing PBRA HAP contract to provide assistance to eligible families, including those receiving project-based assistance at the time of the contract termination, under terms and conditions prescribed by HUD.
- To execute an 8(bb) transfer, HUD’s current policy is that the owner of the transferring property (Owner A) must identify the property to which the budget authority will be transferred. The owner of the project to which the budget authority is transferred (Owner B) must agree to accept the budget authority.
Owner A / Property A – HUD REMAINING BUDGET AUTHORITY –
Owner B / Property B
Property A, for example, may have 50 units, while Property B may have 250 units. Depending on the size of the budget authority being transferred to Property B, CHA will be able to add all, or a portion, of the units in Property B to the affordable housing pool, increasing the quantity and improving the overall quality of the affordable housing pool.
Conditions for Approval of Section 8(bb) Transfers:
- Transferring Owner and Contract Administrator must mutually agree to terminate the contract early and transfer all or part of the budget authority.
- Receiving property must have satisfactory MOR and REAC scores or have a HUD-approved plan in place to correct any deficiencies.
- The receiving property must be in a neighborhood with less than 30 percent concentrated poverty.
- The receiving property must meet environmental review requirements and FHEO site and neighborhood standards.
- Tenant notification and mandatory tenant meeting at the transferring property.
Highlights of Section 8(bb):
- Owners can use the approval letter as a conditional commitment for new construction or substantial and moderate rehabilitation.
- The budget authority cannot be transferred until the units it will assist exist (e.g. a certificate of occupancy has been issued).
- New standards for the location of Property B that help facilitate the transfer of budget authority to neighborhoods that are improving or improved.
- Clarifies that budget authority can be transferred to properties without an existing Section 8 contract.
- Tenant Protection Vouchers (TPV) are available for those tenants that do not wish to relocate with the budget authority.
- Greater flexibility on HUD REAC Physical Inspection scores, HUD On-Site Management & Occupancy Review (MOR) scores, etc. to allow for recapitalization deals.
- Clarified tenant notification requirements and the expectations of Owners A and Owner B and the Multifamily field staff.
- Conversion of Workforce Housing into Affordable Housing
- Immediate Benefits to all Stakeholders: Converting workforce housing into affordable housing will have immediate profound benefits for individual families, communities, HUD and a broad range of social service agencies.
- Increased Access to Affordable Housing: Will immediately increase the supply of housing that is affordable to lower-income individuals and families, helping to address housing shortages and reduce the cost burden on vulnerable populations.
- Maintain Diversity: Will prevent the displacement of lower-income residents in rapidly gentrifying neighborhoods, stabilize communities and maintaining socioeconomic diversity.
- Affordable Housing Stability: Provide greater housing stability for low-income individuals and families, reducing the risk of homelessness and housing insecurity. Placing low-income families in a community with working professionals can improve their overall economic security and quality of life which will lead to better outcomes.
- Social Inclusion: Converting Workforce to Affordable housing helps create more inclusive communities by providing a mix of income levels in a neighborhood, fostering social integration and reducing income segregation.
- Government Savings: Cost savings in terms of reduced spending on maintenance, repairs and upgrades to a very dated affordable housing inventory. Additional cost savings related to emergency services, public healthcare, and other social services when more individuals have access to affordable housing.