Policies Moderate Rehabilitation Program Administrative Plan Ch 3: Property Eligibility, Owner Participation

Chapter 3:Property Eligibility, Owner Participation

3.1.Eligible Properties

Housing is suitable for the Program if it requires an expenditure of at least $3,000 per Unit, including its prorated share of work to be accomplished on common areas or systems, to upgrade to Decent, Safe and Sanitary Condition[1] to comply with the Housing Quality Standards (“HQS”)[2] or other standards approved by the United States Department of Housing and Urban Development (“HUD”), from a condition below these standards (improvements being of a modest nature and other than routine maintenance). See 24 C.F.R. § 882.802.
 

Existing structures of various types may be appropriate for this program, including single-family houses, multi-family structures and group homes. See 24 C.F.R. § 882.803.
 

To be eligible, the housing must be located in an area in which there is a significant demand for such Units as determined by the HUD Field Office; and the BHA and the unit of general local government in which the property is located must approve of such Units being utilized for such purpose. See 24 C.F.R. § 882.401(b)(4).
 

3.1.1 Single-sex Facilities

Single-sex facilities may be rehabilitated for SRO housing, provided that the BHA determines that due to the physical limitations or configuration of the facility, considerations of personal privacy require that the facility (or parts of the facility) be available only to members of a single sex. See 24 C.F.R. § 882.803(a)(6).  This determination shall only be made in accordance with applicable State law.
 

3.2 Ineligible Properties

The following properties may not be eligible for assistance under the Program.  To determine whether or not a property is eligible it may depend on whether is is McKinney-Vento SRO.  See 24 C.F.R. §§ 882.401(b) and 882.803(a) for further detail and authority on property eligibility.
 

(1)          Nursing homes and related facilities such as intermediate care or board and care homes; Units within the grounds of penal, reformatory, medical, mental and similar public or private institutions, and facilities providing continual psychiatric, medical or nursing services;

(2)          Housing owned by the Commonwealth or unit of general local government

(3)          High rise elevator projects for families with children, unless HUD determines there is no practical alternative[3];

(4)          Housing that is receiving Federal funding for rental assistance or operating costs under other HUD programs;

(5)          Housing located in the Coastal Barrier Resources System designated under the Coastal Barriers Resources Act.

(6)          Any Unit occupied by an Owner.
 

3.3 Site Standards

The site for the proposed rehabilitation must be adequate in size, exposure, and contour to accommodate the number and type of Units proposed; adequate utilities and streets must be available to service the site. The existence of a private disposal system and private sanitary water supply for the site, approved in accordance with local law, may be considered adequate utilities. See 24 C.F.R. § 882.803(b)(2)(i).
 

In accordance with 24 C.F.R. § 882.803(b)(2)(ii), the site must be suitable from the standpoint of facilitating and furthering full compliance with the applicable provisions of: Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d-2000d-4); Title VIII of the Civil Rights Act of 1968 (42 U.S.C. § 3601-19); E.O. 11063 (as amended by E.O. 12259; 3 C.F.R., 1959-1963 Comp. p. 652 and 3 C.F.R., 1980 Comp., p. 307); and HUD regulations issued pursuant thereto.
 

The site must also be accessible to social, recreational, educational, commercial, and health facilities, and other appropriate municipal facilities and services. See 24 C.F.R. § 882.803(b)(2)(iii).
 

3.4 Additional Requirements and Standards

3.4.1 General Federal Requirements and the ADA

Participation in the Mod Rehab Program requires compliance with the Federal requirements set forth in 24 C.F.R. § 5.105, and with the Americans with Disabilities Act (42 U.S.C. § 12101 et seq.)
 

3.4.2 Units for the Disabled

If an Owner is proposing to accomplish at least $3,000 per Unit of rehabilitation by including work to make the Unit(s) accessible to a Disabled Person occupying the Unit(s) or expected to occupy the Unit(s), the BHA may approve such Units not to exceed 5% of the Units under its Program, provided that accessible Units are necessary to meet the requirements of 24 C.F.R. § 8. The rehabilitation must make the Unit(s), as well as access and egress to the Unit(s), barrier-free with respect to the disability of the individual in residence or expected to be in residence. See 24 C.F.R. § 882.805(c)(1).
 

3.4.3 Labor Standards When Rehabilitating Nine or More Units

In accordance with 24 C.F.R. § 882.804(b), the following requirements for labor standards will apply for an Agreement to Enter Into a Housing Assistance Payments Contract (“AHAP”) covering nine or more Units:
 

(1)          Not less than the wages prevailing in the locality, as determined by the Secretary of Labor under the Davis-Bacon Act (40 U.S.C. §§ 276a-276a5), must be paid to all laborers and mechanics employed in the development of the project, other than volunteers under the conditions set out in 24 C.F.R.  part 70;

(2)          The employment of laborers and mechanics is subject to the provisions of the Contract Work Hours and Safety Standards Act (40 U.S.C. §§ 327-333); and

(3)          The BHA will comply with all related rules, regulations, and requirements as must all Owners, contractors, and subcontractors.
 

3.4.4 Environmental Standards

The environmental review requirements of 24 C.F.R. § 58, implementing the National Environmental Policy Act and related environmental laws and authorities, apply to the Mod Rehab Program. See 24 C.F.R. § 882.804(c).
 

3.5 Collecting Proposals

3.5.1 Request for Proposals

Owner Proposals (“Proposals”) will be publicly solicited through a Request for Proposals (“RFP”). The RFP will note that permanent displacement of Tenants will not be permitted except in cases where intra-project relocation is necessary.[4] The RFP and subsequent selection of proposals will be performed in accordance with relevant State and federal procurement laws.
 

BHA staff will conduct a pre-proposal conference explaining the Program, the Owner’s rights and responsibilities, and the procedures for submitting, ranking, and selecting proposals. At the conference, the BHA will provide information about financing available from local lending institutions and any low interest loans available from the City of Boston’s Department of Neighborhood Development (“DND”). The deadline for submitting Proposals will be 45 days after the conference.
 

The RFP will require that the Owner include the following information in his Proposal:
 

(1)          Owner’s name, address, and telephone number;

(2)          Location, number, type, and bedroom size of Unit(s) to be rehabilitated, whether Units are currently vacant or occupied, the date of original construction (if known), the number of handicapped accessible Units, and the which Units have special features;

(3)          Rents received during the past 18 months, broken down by unit;

(4)          Family characteristics of present Tenants in Units proposed for subsidy;

(5)          A certification that the proposed rehabilitation will not cause permanent displacement of present Tenants;

(6)          Whether the Owner anticipates temporary Tenant relocation, the anticipated length of any such relocation, and the Owner’s agreement to assume the costs of the relocation;

(7)          A certification that no Tenant has been forced to move without cause during the past 12 months;

(8)          A summary of the Owner’s prior participation in HUD, BHA, and/or City of Boston programs (if applicable);

(9)          A statement of the Owner’s plans for managing and maintaining the Unit(s) (i e., who will perform management functions);

(10)        A statement of previous management experience of the Owner or management agency;

(11)        The Owner’s plan for financing the rehabilitation;

(12)        Number of occupied Units proposed to be assisted, broken down by Unit size;

(13)        An acknowledgment of applicability of Davis-Bacon Act requirements to projects with 9 or more assisted Units when required; and

(14)        A general description of the rehabilitation work accompanied by a rough estimate of the cost of each work item.
 

3.5.2 Review and Preliminary Screening of Proposals

Once the deadline for proposal submission has passed, the BHA and any other appropriate agencies will convene to review and rank each Proposal. A proposal may be rejected for one on or more of the following non-exhaustive list of reasons:
 

(1)          It is substantially incomplete;

(2)          Overcrowded Units will be assisted and/or there will not be enough suitably-sized Units after rehabilitation to accommodate present Tenants (the BHA will not allow permanent relocation except within the development);

(3)          Present rents are at or above the Mod Rehab Program Fair Market Rents (“FMRs”);

(4)          The proposed project is infeasible;

(5)          An Owner is delinquent on tax, water, or sewer charges, or any other payments due the City of Boston that could result in a lien or otherwise endanger the long-term viability of the proposed project.  However, the proposed project may be considered if the Owner has entered into an agreement with the appropriate agency for the repayment of same or can show that the delinquent amount is being appealed through the appropriate legal process;

(6)          The title to the property is in dispute or undetermined (evidence of site control is mandatory);

(7)          Room sizes in project Units do not meet the standards of 105 C.M.R. § 410.400.  If the Owner proposes to subsidize efficiency Units, the size of a Unit will be determined based upon post-rehabilitation Unit layout. If the building code requires a higher room size standard, such standard shall apply;

(8)          If the Owner is unable to demonstrate an ability to initiate the rehabilitation within 120 days of conditional commitment of subsidy from the BHA; or

(9)          If reports from such agencies as the BHA, Inspectional Services Department, DND, HUD, etc. indicate that the Owner has a poor track record with them. These reports may include, but not be limited to, the Owner’s history of code violations, responses to notifications of substandard conditions, and financial management issues.  See also 24 C.F.R. Part 24 regarding debarment and suspension of an owner due to issues of non-compliance with HUD rules and regulations.
 

3.5.3 Rejection of Proposals

An owner whose proposals are rejected for one or more the aforementioned reasons will be notified of the specific reason(s) for rejection. The notice will specify that the Owner may request, within ten (10) days, a conference with the BHA, during which the reason(s) for the rejection will be explained and the Owner will be given an opportunity to dispute the rejection. The decision remains at the discretion of the BHA after consultation with DND.
 

3.5.4 Accepted Proposals

All Proposals not rejected will be scheduled for Unit inspection and a Preliminary Feasibility Analysis.
 

3.5.5 Initial Inspection

The DND will inspect the Units for all proposals selected for further processing. They will request that the Owner and Tenant(s) be present during the inspection and encourage them to suggest needed repairs. The BHA, in consultation with the DND, will make the final decision regarding what repairs will be required.
 

The DND will record the results of the inspection and sign off on an inspection form prepared for the Mod Rehab Program. The form will detail the deficiencies which must be corrected to bring the proposed unit(s) into compliance with the HQS. The DND will also determine whether any major building system or component is in danger of failing.
 

3.5.6 Preliminary Feasibility Analysis and Energy Conserving Improvements

The DND will perform a Preliminary Feasibility Analysis to determine the feasibility of the Proposal. The BHA shall review the Preliminary Feasibility Analysis and shall have final right to approve or deny based on the Analysis. The DND will:
 

(1)          Estimate the required amount and terms of conventional rehabilitation financing using data provided by local banks or included in the Owner’s proposal;

(2)          Determine a monthly amortization amount for the loan;

(3)          Establish a Base Rent using the rent and expense data in the proposal;

(4)          Calculate the Contract Rent and Gross Rent for the Unit(s) using HUD’s formulas[5];

(5)          Ascertain whether Tenants will be temporarily relocated;

(6)          Calculate the Owner-supplied utilities in accordance with the BHA Utility Chart; and

(7)          Compare the estimated Gross Rent(s) with the “Fair Market Rent” Limits and determine feasibility.

(8)          Gather preliminary eligibility information from tenants including but not limited to annual income information. 

(9)        In reviewing the Proposal, the BHA will also determine whether cost-effective energy conserving improvements can be added. See 24 C.F.R. § 882.805(c)(6)(i)(B).
 

3.6 Ranking, Grading and Selection of Proposals

To be ranked and graded a proposal must meet the following minimum threshold selection criteria:  (a) compliance with the RFP; and (b) the proposed financing is reasonably attainable. A proposal with a favorable Preliminary Feasibility Analysis which meets the above mentioned minimum threshold selection criteria will be graded and ranked against other proposals according to the following criteria and point scores:
 

(1)        The number and extent of major State Sanitary Code violations addressed by rehabilitation work subsidized under the Mod Rehab Program. Those proposals addressing the most numerous and serious substandard conditions and/or need for energy improvements will be ranked higher in the selection process. (Maximum of 25 Points)

(2)        Rehabilitation of “key” structures. Those proposals having a higher beneficial impact to a particular neighborhood, street, or block by the rehabilitation of a particular key building shall be ranked higher. (Maximum of 25 Points)

(3)        Prior rehabilitation experience. The Owner should document experience in the performance of similar rehabilitation projects. Those Owners with extensive housing rehabilitation experience will be ranked higher. (Maximum of 20 Points)

(4)        The dollar amount of rehabilitation to be accomplished. Those proposals realistically promising to deliver more work per subsidy dollar (a higher rehab/rent ratio) will be ranked higher. (Maximum of 18 Points)

(5)        Imminent Financing. Those proposals whose Owners document firm financing commitments or whose proposals demonstrate a better chance/ability of obtaining financing will be ranked higher. (Maximum of 12 Points)

(6)        Services Provided.  Those proposals that provide a high level of services in accordance with the request for proposal will be ranked higher. The experience and track record of providing services will be considered in the ranking of this category.  (Maximum 25 Points)
 

Details on the actual scoring system used in connection with each of the above-listed criteria will be provided to interested Owners at the pre-proposal conference.
 

After the completion of the ranking, all proposals will be reviewed by the BHA and the DND. Based upon the information presented, final selections will be made and the DND and BHA will notify all Owners.
 

3.7 Notification of Owners

The DND and BHA will send an Owner a “Notice of Selection” informing them of whether they have been selected for Final Feasibility Analysis. If selected, the Owner will be informed of the tentative number of Units to be assisted. The Owners will be notified that they should request all tenants residing in Units tentatively selected for participation in the Program to contact the BHA to submit an application. Notices to Owners whose proposals have been selected for processing will state that they have thirty (30) days to complete the Final Feasibility Analysis.
 

Owners whose proposals are rejected will be notified of the reasons for the rejection and of their right to appeal the rejection.  The time limit for appeal shall be set forth in the notice and shall depend on the urgency of the particular project.  Owners whose proposals are viable but not selected for processing will be notified that their proposals are being held and that they will be notified should their proposal be selected for future processing.  At the discretion of the BHA, an Owner may need to update their proposal or re-apply in order to be selected for future processing.
 

3.8 Selection of Units and Tenant Eligibility

Designated BHA staff will interview residents of approved Units using the HCVP procedures as described in Chapter 5 of the HCVP Administrative Plan.  Eligibility will be determined in accordance with Chapter 9 of this Administrative Plan, and Eligible Families will be briefed as to their rights and responsibilities under the Mod Rehab Program. See 24 C.F.R. §§ 882.514 and 882.805(c)(2).
 

In the case of a determination of ineligibility, the ineligible Tenant will be notified in writing and informed of the right to request a hearing within twenty (20) days to dispute the determination. The BHA will not enter into a HAP Contract for any Unit occupied by an ineligible Family, meaning that a determination of Tenant ineligibility could lead to a reduction in the number of units assisted at a Property. The BHA will reconsider the rejection if the Tenant provides information disproving the determination of ineligibility. If the determination is upheld, the Owner will be informed of the adjustment in the number of Units to be assisted.
 

3.9 Preliminary Work Write-up and Cost Estimate

After the DND and the BHA inspects the Unit(s), performs the Preliminary Feasibility Analysis, and determines the number of Units to be assisted, DND and BHA staff will meet with the Owner to discuss the work that needs to be accomplished. See 24 C.F.R. § 882.805(c)(3). DND and BHA will also inform the Owner of the proposed Base and Contract Rent(s). If the Owner contends that the Base Rent is too low to permit adequate maintenance and management of the rehabilitated unit, he will be required to submit additional data to the DND and BHA. This data will be analyzed using HUD-supplied standards of average management and maintenance expenses. If the submitted data supports an adjustment to the Gross Rent, a new determination of feasibility will be made. See Chapter 12 for a more thorough discussion of the determination of rents.
 

If the Owner agrees with the DND’s and BHA’s assessment as to the work that must be accomplished, then the Owner and DND in conjunction with BHA will complete a “Preliminary Work Write-Up and Cost Estimate.” The write-up will serve as the basis for the cost estimate for the accomplishment of all specified items. The write-up will detail each required repair and its cost as well as describe how any deficiencies eligible for amortization through the Contract Rents are to be corrected including minimum acceptable levels of workmanship and materials. See 24 C.F.R. § 882.805(c)(3). To assist with the process, Owners will be provided with the following information:
 

(1)          A copy of the list of deficiencies and description of work required and its estimated cost;

(2)          A sample work write-up and cost estimate;

(3)          A list of approved contractors[6];

(4)          Davis-Bacon Act wage rates for the area, if Owner proposes to renovate nine or more Units for assistance; and

(5)          Information about available financing.
 

Since actual preparation of the work write-ups and cost estimates will be the responsibility of the DND and the Owner, the initial meeting between the Owner and the DND will be important. The DND will explain each form and answer the Owner’s questions.  The meeting will allow DND to gauge the Owner’s ability to meet the responsibilities and thus to plan what assistance might be needed.
 

The DND will be available to assist the Owner in preparing cost estimates and work write-ups, and will review the completed documents for consistency with the findings of the initial inspection. Owners with proposals covering nine or more assisted Units will receive special assistance since federal labor standards and provisions will apply to such proposals.
 

Although DND performs a large function under this section, the BHA has final accountability and control regarding the Work Write up and Cost Estimate.
 

3.10 Selection of Contractors

3.10.1 List of Approved Contractors

Although Owners will not be required to select To help Owners select a contractor, a list of approved contractors, including minority contractors, will be developed, derived from the DND’s list of approved contractors and responses to advertising for contractors. To be listed, contractors must:
 

(1)        Be licensed, where applicable under State Law;

(2)        Have personal liability and worker’s compensation insurance; and

(3)        Provide both professional and credit references. Professional reference checks will determine such factors as the timeliness of the contractor’s performance, the cost to complete the project, and quality of the contractor’s workmanship.
 

3.10.2 Rehabilitation by Owner

Owners who propose to accomplish all or part of the rehabilitation themselves must obtain advance approval from the BHA and must also meet the requirements set forth in Section 3.10.2 above.
 

3.10.3 Bid Award Procedures

Owners, including those doing some of the work themselves, will be required to seek at least three bids for completion of the approved rehabilitation work items. The DND will assist in soliciting bids if necessary or if the Owner requests.  Bids may be requested orally, but contractors must submit written bids, accurately describing the work to be performed and the cost of each item.
 

The DND and BHA will examine all bids before an AHAP is executed. Owners will be expected to select the lowest responsible bidder, though they will be given latitude to select the best proposal even if it is not the lowest bid. The BHA will investigate the possibility that an identity of interest may be present between the Owner and selected contractor. In all cases, the Owner must sign an “Identity of Interest” certification form.
 

3.11 Financing

3.11.1 Sources of Financing

Any type of public or private financing may be utilized to finance rehabilitation with the exception of the rehabilitation loan program under Section 312 of the Housing Act of 1964. See 24 C.F.R. § 882.405(a). This restriction does not apply to the McKinney Vento funded SRO units.
 

Owners will be informed about their financing options. The BHA will provide clear and precise information to the lending community and to Owners in preparing documents required by lending institutions.
 

3.11.2 Use of AHAP or Contract as Security for Financing

In accordance with 24 C.F.R. § 882.405(b), an Owner may pledge, or offer as security for any loan or obligation, an AHAP or Contract entered into pursuant to the Mod Rehab Program, provided that:
 

(1)        Such security is in connection with a Unit(s) rehabilitated pursuant to the Mod Rehab Program; and

(2)        The terms of the financing or any refinancing must be approved by the BHA in accordance with standards provided by HUD. Any pledge of the AHAP or Contract, or payments there under, will be limited to the amounts payable under the Contract in accordance with its terms.
 

3.12 Final Feasibility Analysis

To complete the final feasibility analysis, the DND and BHA will work with the Owner to review the detailed work write-ups and cost estimates and contractor bids, and calculate the proposed Contract Rents
 

Based on this analysis, the DND and BHA will make a final determination whether the Owner’s proposal is feasible. For proposals not found feasible, DND and BHA will determine the proposal could be feasible if work items were modified and/or the contractor’s price was reduced. If that is possible, the Owner will be given the opportunity to make changes to bring the proposal within approvable rent limits.
 

Owners whose proposals are not feasible will be notified in the same manner as if the initial proposal had been rejected as described in section 2.7 of this Administrative Plan. Owners whose proposals are feasible will be notified and advised that, subject to the securing of financing, the BHA will execute an AHAP with them. The letter will indicate that the BHA is available to assist the Owner in requesting and obtaining financing.  See also section 3.11.1
 

3.13 Additional Responsibilities Prior to Contract Execution

In conjunction with the Final Feasibility Analysis and prior to contract Execution, the BHA will also:
 

(1)          After the financing and a contractor are obtained, determine whether the costs can be covered by initial Contract Rents; and, if a structure contains more than 50 units to be assisted, submit the Base Rent and Contract Rent calculations to the appropriate HUD field office for review and approval in sufficient time for execution of the AHAP in a timely manner. See 24 C.F.R. § 882.805(c)(6)(iii).

(2)          Require Owner to obtain and submit to BHA firm commitments to provide necessary supportive services. See 24 C.F.R. § 882.805(c)(6)(iv).

(3)          Require owner to obtain and submit to BHA firm commitments for other resources to be provided. See 24 C.F.R. § 882.805(c)(6)(v).

(4)          Determine that the $3,000 minimum amount of work requirement is met. See 24 C.F.R. § 882.805(c)(6)(vi).

(5)          If the BHA determines that any structure proposed in its application is infeasible, or the BHA proposes to select a different structure for any other reason, submit information for the proposed alternative structure to HUD for review and approval. HUD will rate the proposed structure in accordance with procedures in the applicable notice of funding availability. The BHA may not proceed with processing for the proposed structure or execute an AHAP until HUD notifies the BHA that HUD has approved the proposed alternative structure and that all requirements have been met. See 24 C.F.R. § 882.805(c)(6)(x).