HUD recently published Housing Notice H 2012-14 which requires property owners that receive Housing Assistance Payments (HAP) to offset monthly subsidies with funds from their Residual Receipts account. The new policy outlines the obligations and duties of owners and the responsibilities of HUD Field staff in processing and monitoring the use of residual receipts. This has always been an allowable use of Residual Receipt accounts but until the current federal budget challenges HUD has never chosen to enforce this right. This subject was addressed in detail at NH&RA recent 2012 Summer Institute, July 25-28 in Edgartown, Massachusetts. It was observed that owners of impacted properties should consult their documents and accounting professionals as to the tax implications of the implementation of this policy.
Notice H 2012-14 allows owners to retain an initial reserve balance up to $250 per unit to be used for project purposes to the extent to which Residual Receipts are available, also known as the “retained balance”. According to HUD, the Residual Receipt balance in excess of $250 per unit must be applied on a monthly basis to offset the HAP contract and must continue until the Residual Receipt account reaches the retained balance level. At the end of the project’s fiscal year, all surplus cash remaining after payment of any permissible distributions must be deposited into the project’s Residual Receipts account, and the process begins again.
The notice also includes specific new submission / processing instructions and tracking requirements, for residual authorizations and HAP offsets for both project owners and HUD Field staff. Notice H 2012-14 applies to all Section 8 contracts generally known as “new regulation” contracts and to projects subject to both a Section 202 Direct Loan and a new regulation Section 8 HAP contract. This new policy becomes effective for vouchers submitted 60 days after issuance, or October 1, 2012.
Click here to read Housing Notice H 2012-14.
