HUD Releases Disposition Guidance

On November 30, HUD released Notice PIH 2016-20 titled “2 CFR 200.311(c)(1) Disposition Instructions for the Public Housing Agency (PHA) Retention of Certain Public Housing Real Property (that is no longer used or was never used for public housing dwelling purposes) Free from Public Housing Use Restrictions.” The Notice includes “disposition instructions” and applies when a PHA proposes to retain ownership of certain public housing real property in order to use it for purposes outside of the public housing program.

The Notice includes examples of public housing real property that are eligible for retention after disposition and describes compensation requirements. For PHAs undergoing disposition, PHAs are required to compensate HUD with HUD’s percentage of the original purchase (and costs of any improvements and modernization) of the public housing real property to the Fair Market Value (FMV). Because public housing real property has been generally funded exclusively with public housing funds, the percentage of participation costs are typically 100% of the FMV of the public housing real property.

The Notice also discusses potential exceptions to compensation requirements to HUD. PHAs can receive exceptions if the retention of the property includes the development of rental housing or home ownership that will be operated as affordable housing or if the retention of the property is for a use that benefits or supports the services of low-income families.  HUD will not accept a retention application unless all information is provided within Form HUD-52860 Addendum-G. HUD may require a use restriction or other arrangement of public record if HUD grants an exception to the requirement to compensate HUD at the release of the Declaration of Trust (DOT) or the Declaration of Restrictive Covenants (DORC). Typically, use restrictions are for not less than 30 years. If the PHA is unable to use the retained property for its intended use as reported in Form HUD-52860 Addemdun-G, the PHA is required to compensate HUD for the property.

The Notice states that a PHA is required to continue to meet all applicable ACC obligations and public housing regulatory requirements until HUD releases the DOT or DORC.

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