Compliance is King
By: Josh Brown
In affordable housing, compliance is king. It is potentially one of the most important factor developers, management agents, and lenders must take into consideration when they are putting a deal together. There are many opportunities for failures or oversights to occur, which may lead to an issue of noncompliance. Some of those noncompliance issues can have significant and irreversible impacts on a project, while some can be corrected easily or with a little bit of coordination and effort.
Some compliance obligations are consistent regardless of the type of project, while others are unique depending on the deal structure or project makeup. With the scarcity of resources in the affordable housing world today, teams are required to leverage many different sources of funds to put the necessary financing together to make a deal a reality. Combining various sources of hard and soft financing that each come with their own compliance obligations creates complexity and presents challenges to the development team during the initial design and financing stage, but also long term during the 20 or 30+ year affordability period.
Teams must know what units hold what restrictions and be able to navigate the often-conflicting obligations and document files accordingly with the decisions that are made in determining qualifying eligibility. While at a state housing finance agency (HFA) I often observed break downs in communication between a project’s development team and the team tasked with management functions, such as qualifying units and ensuring tenant eligibility determinations. In some cases, this led to some scrambling and coordination to get special approvals from the monitoring agencies, redesignate units, emergency training, and technical assistance to keep the project on track. The management team needs to have a complete understanding of what the development team committed to in exchange for the various funding sources. Often the management team can be caught off guard, not knowing that a source of funding was in a project and had units committed to it in a set aside and had to revisit files to ensure the tenants that were selected or already placed are eligible.
Specialized knowledge is required to understand these different compliance obligations and to know what questions to ask during development to make sure the full picture. Affordable housing is a specialized industry and there is a finite number of qualified people that understand these rules and how to see the whole picture to ensure that all pieces of the puzzle are covered. For example, just because someone has been a site manager in a section 8 property for several years does not mean they understand LIHTC, HOME, NHTF, or various state programs that are now being used much more in conjunction with other more traditional financing models due to the need for additional sources of funds. It also does not mean they understand how to manage compliance during initial lease up of a new project or during a rehab.
It can be very costly to internally employ staff or to retain staff with the necessary knowledge and skills to oversee these compliance obligations effectively. A solution can be to find a third party who has collected the necessary talent in one place and can offer that service to a wide range of different teams to help them maintain compliance. Being able to electronically accept, review, and provide determinations on tenant files regarding eligibility with a quick turnaround can largely determine whether or not a project deadline will be met. Also, having skilled personnel capable of helping the development navigate through unique issues, as they often pop up, is helpful in keeping a project on track. Coming from an HFA and working with multiple partners to put deals together, I have an extensive understanding of how to tackle compliance questions. We have created a group here at E&A Team to offer this needed service. Our team of Compliance Analysts will help you meet these obligations and navigate the complex issues. This dedicated team stays up to date on changes in the various program regulations and E&A also has certified trainers who provide training and certifications on these issues as well.
Contact E&A Team today to discuss how we can help you with your compliance needs.
Joshua Brown has accumulated years of professional experiences and skills within the Fair Housing and Accessibility industry, including file reviews, plan reviews, and training. He served as the Senior Manager of Asset Management for his former employer and is now in the position of Director of Strategic Initiatives at E&A Team, where he coordinates some of E&A’s largest client contracts and strategizes new ideas and investigates potential areas of expansion.