BROADCAST EMAIL – Regulatory Update
On August 26th, Rural Development (RD) published Procedural Notice (PN) 567 announcing final management fees for Fiscal Year (FY) 2023.
This year, RD has used HUD’s FY 2022 Income Limits as the base management fee, versus their Operating Cost Adjustment Factors (OCAF), which have been used since FY 2015. To view the chart listing your state’s FY 2023 management fee adjustment, visit pages 54-55 of Attachment 3-F, Chapter 3 of HB-2-3560. In most instances, properties will see a much needed and higher increase than in years’ past (7-11%, based on recent conversations with RD).
A small group of CARH members began working several months ago on efforts aimed at increasing the management fees due to the soaring costs associated with managing properties. The group, comprised of Management Committee co-chairs Joan Franken and Matt Melnick, as well as CARH members Robert Bender, Pam Borton, Kevin Flynn, Dianne Hunt, Babbie Jaco, and Patrick Patterson, had urged RD to increase fees, due to the high rate of inflation and the residual effects of change in operations due to the coronavirus pandemic. This group will continue to work on the best mechanism for determining management fees in the future. The PN includes allowable add-on fees of $5.00 per unit per month. CARH has advocated for add-on fees since 2014 and RD began making them available beginning with the FY 2021 budgets. See section 3.8 B.2 (page 16) of the PN for the list of add-on fees. Of particular interest to many CARH members is the $5.00 add-on fee for properties where there are multiple subsidies (i.e., reporting requirements in addition to and separate from Low-Income Housing Tax Credits or project-based Section-8).
For those properties wanting to claim the add-on fee for “management of properties in a remote location,” beginning with the proposed budgets for FY 2023, RD has provided a definition of “remote location” as those properties located within the USDA Economic Research Service (ERS) Level 4 Frontier & Remote (FAR) Area codes. Please note that the following states/territories do not have areas that meet the Level 4 FAR definition: Connecticut, Delaware, Indiana, Massachusetts, New Jersey, Ohio, Puerto Rico, Rhode Island, South Carolina, and the Virgin Islands. Properties in Alaska or Hawaii that are authorized to take the “off-road” management fee are not eligible to claim an additional add-on fee for remote location. Reasonable justification must be submitted to the Multi-Family Housing servicing specialist for review. Justifications could include extensive travel time, difficulty obtaining services or retaining staff, or required unique means of travel (4-wheel drive, ferry, etc.).
CARH will continue our discussions with RD regarding any future concerns regarding management fees. Please contact the CARH national office at carh@carh.org or 703-837-9001 should you have questions or concerns.
For other news and information affecting the affordable rural housing industry, please visit the Newsroom on CARH’s website, www.carh.org.