View Full/Print Version

Chapter XX: Enhanced Subsidies For Housing Voucher Conversion Actions

Effective: March 2006

Introduction

Michigan State Housing Development Authority (MSHDA) provides enhanced vouchers to qualified residents affected by owner or U.S. Department of Housing and Urban Development (HUD) actions resulting in a Housing Conversion action. Housing conversion actions occur in developments where the owner:

  • Elects to prepay the mortgage or voluntarily terminates the mortgage insurance; generally in Section 236 or Section 221(d)(3) developments that have reached their twentieth year; or
  • Elects not to renew, therefore opt-out of; the expiring Section 8 project-based assistance contract; or
  • Receives approval for voluntary termination of a mortgage insurance contract during a specified year; or
  • Fails to comply with the terms of the Housing Assistance Payment (HAP) Contract and HUD takes enforcement actions against the owner; including suspensions and debarments; or
  • Has defaulted on a FHA mortgage. In these cases, HUD may follow property disposition activities, possibly closing down or selling the property.

When conversion actions occur, HUD selects the appropriate Public Housing Agency (PHA) to administer the preservation/opt-out tenant-based rental assistance. HUD first approaches a local PHA to administer the vouchers. In Michigan, if a local PHA does not have the capacity to administer the vouchers, MSHDA will administer the vouchers.

Families residing in eligible opt-out/preservation developments on the date of the owner's prepayment/termination will be offered a subsidy (enhanced voucher) if they meet other eligibility criteria. A family will be required to contribute a minimum amount toward rent.

HUD appropriates the vouchers to make up for the loss of affordable housing units in the community. HUD’s intent is to preserve (vs. displace) housing for affected residents without rewarding them (i.e. minimum rent requirement). At the completion of the conversion, any remaining enhanced vouchers that were not distributed revert to regular Housing Choice Vouchers.

In Michigan, the unused enhanced vouchers, which revert to regular Housing Choice Vouchers (HCV) will be distributed by MSHDA to families on the waiting list for the respective county where the conversion occurred in accordance with MSHDA’s waiting list guidelines or reassigned as deemed administratively appropriate.

Section A: HUD/MSHDA Responsibilities for Enhanced Vouchers

1. HUD Responsibilities

HUD will notify potentially eligible families within affected developments, in writing, of the impending offering of preservation/opt out enhanced voucher subsidies. HUD issues this notice via a letter to all eligible residents upon owner notification to HUD of the intent to prepay the mortgage, terminate the insurance, or opt-out of a contract.

HUD notification must occur:

  1. After the owner’s declaration of intent to prepay/terminate, AND
  2. Upon confirmation that MSHDA will administer the HCV enhanced voucher.

HUD notification contains the following information:

  1. Identification of MSHDA as the administering PHA and instructions on how to contact MSHDA;
  2. A description of the circumstances governing the family’s eligibility for an enhanced voucher (listed in Section B); and
  3. Instructions to contact MSHDA upon receipt of a rent increase letter. If the owner has not yet notified the family of a rent increase, HUD directs the family to contact MSHDA once the owner notifies the family of a rent increase.

After notifying MSHDA of the conversion action and receiving MSHDA’s acceptance to administer the tenant-based assistance, HUD must promptly send MSHDA the following information:

  1. A list of all potentially eligible families,
  2. A copy of the most recent HUD Form 50059 for each family,
  3. A current rent roll and list of contract rent amounts for the development on the date of the prepayment/termination,
  4. A list of the owner’s proposed rents and the effective date of the rent increase for each family, if possible,
  5. A copy of the new mortgage documents, the bill of sale, or other documents verifying the change of ownership when applicable,
  6. Notification of approval of budget authority, and
  7. A copy of the completed ACC documents and transmittal letter.

Note: MSHDA’s assigned Housing Conversion Actions Coordinator (HCAC) must receive all of the above information before allowing MSHDA to proceed on the housing conversion actions.

Go to top ↑
2. MSHDA Responsibilities

After receiving notification of the pending conversion action, the HCAC will send out a Request for Proposals (RFP) to all MSHDA Housing Agents (HA). The HCAC, Resource Specialists (RS) and Regional Managers (RM) will review the RFP’s and make a recommendation to the Director of Existing Housing Programs. Upon approval from the Director, the HCAC will assign the development to the selected HA.

The appropriate RS contacts the development and organizes an informational meeting for tenants. The RS notifies tenants in writing of the date and time of the informational meeting, which will explain the HUD conversion action. This meeting must be attended by assigned RS and assigned HA. The on-site management staff, Owner(s) and HUD are strongly encouraged to attend as well. These meetings allow the development, HUD, MSHDA staff and HA an opportunity to explain the conversion action that has taken place and answer questions. Paperwork submission deadlines for tenants are provided and explained.

The assigned RS in conjunction with the RM is responsible for reviewing the new owner’s proposed rental rates to determine if the rents are reasonable; and if not, negotiate a reasonable rental rate.

The HA is responsible for notifying potentially eligible families about the Housing Conversion Actions voucher offering and providing appropriate paperwork to apply for the voucher. Paperwork to determine eligibility is processed, HQS inspections performed, contract signed in a timely manner, and data is entered in the MSHDA Elite System.

Go to top ↑