Note that this Chapter details the rent computations used for Units restored prior to the development of this current draft of the Mod Rehab Administrative Plan that are still operational, along with the lease estimations to be used in the case of the rehabilitation of new SRO Units under 24 C.F.R. part 882, subpart H.

12.1 Calculating Initial Gross Rents

Gross Rent is the total month-to-month expense of housing a Qualified Family and is the sum of the Contract Rent and any energy allowance. See 24 C.F.R. § 882.102.

The initial Gross Rent for any Unit should not go beyond the Mod Rehab FMR [12] appropriate to the Unit on the date that the AHAP is performed. See 24 C.F.R. § 882.408(a). Note that the following exceptions apply:

(a) Exception Rents. With HUD Field Office approval, the BHA might authorize preliminary Gro ¬ ss Rents which go beyond the appropriate Mod Rehab FMRs by as much as 10% for all Units of a provided size in defined areas where HUD has actually figured out that the rents for standard Units ideal for the Existing Housing Program are more than 10% higher than the Existing Housing FMRs. [13] The BHA will send paperwork showing the necessity for such exceptions leas in the area to the HUD Field Office. See 24 C.F.R. § 882.408(a) and (b).

(b) The BHA may approve modifications in the Contract Rent subsequent to execution of the AHAP (see section 5.2) which result in a preliminary Gross Rent which exceeds the Mod Rehab FMR relevant to the Unit by approximately 20%. See 24 C.F.R. § 882.408(a) and (d).

12.1.1 FMR for Structures Containing Four or Fewer SRO Units

If a structure consists of four or less SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as suitable) must be utilized to identify the FMR limitation instead of using the separate FMR for each SRO Unit. To figure out the FMR limitation for each SRO Unit, the FMR for the structure must be apportioned equally to each SRO Unit. See 24 C.F.R. § 882.805(d)( 3 ).

12.1.2 FMR Limits for Efficiency Units

The gross rent for performance Units may be no greater than for SRO units (i.e., 75 % of the 0-bedroom Mod Rehab Fair Market Rent). See 24 C.F.R. § 882.805(d)( 4 ).

12.2 Calculating Initial Contract Rents

The preliminary Contract Rent and Base Rent for each Unit will be computed in accordance with HUD requirements. See 24 C.F.R. § 882.408(c). The amounts might be figured out in accordance with the following techniques:

(a) Initial Contract Rent: The preliminary Contract Rent is equivalent to the base lease plus the monthly cost of a rehab loan however not more than the optimum stated at the end of this area. See 24 C.F.R. § 882.408(c)( 2 ).

(b) Base Rent: The base rent need to be determined utilizing the rent charged for the Unit or the approximated expenses to the Owner of owning, managing and maintaining the fixed up unit. See 24 C.F.R. § 882.408(c)( 2 ).

(c) Monthly Cost of a Rehab Loan: The regular monthly cost of a rehab loan need to be computed utilizing:

1. The real rates of interest on the portion of the rehab costs obtained by the Owner;

2. The HUD-FHA optimum rates of interest for multifamily housing (or another rate recommended by HUD) for rehabilitation expenses paid by the Owner out of non-borrowed funds; and

3. At least a 15-year loan term, except that if the overall amount of rehabilitation is less than $15,000, the actual loan term will be used for the part of the rehabilitation costs obtained by the Owner. (HUD Field Offices might license loan terms which vary from the above in accordance with HUD requirements).

If determining the regular monthly expense of a rehab loan for SRO Units, describe area 12.3.1 of this Administrative Plan.

The preliminary Contract Rent might in no event go beyond: the Mod Rehab FMR or exception rent applicable to the Unit on the date that the AHAP is performed, minus any appropriate allowance for utilities and other services attributable to the Unit. See 24 C.F.R. § § 882.408(a) and (c)( 1 ).

Contract Rents for SRO Units will not include the costs of offering encouraging services, transportation, furniture, or other non-housing expenses, as figured out by HUD. See 24 C.F.R. § 882.805(d)( 4 ).

12.2.1 Calculating Monthly Cost of a Rehab Loan for SRO Units

In identifying the month-to-month cost of a rehab loan for SRO Units, a loan term of at least ten years (rather of 15 years) might be used. The exception for utilizing the actual loan term if the overall quantity of the rehabilitation is less than $15,000 continues to apply. See 24 C.F.R. § 882.805(d)( 1 )(i).

In addition, the expense of the rehab that might be included for the function of determining the quantity of the preliminary Contract Rent for any Unit should not go beyond the lower of:

(a) The forecasted expense of rehabilitation; or

(b) The per system cost constraint that is established by Federal Register notification, plus the expense of the fire and security enhancements required by 24 CFR § 882.605(b)( 4 ). [14]

Note that HUD might, however, increase this latter per unit restriction by an amount it determines is affordable and needed to accommodate special local conditions, such as high building and construction expenses or strict fire or building regulations. For further requirements see 24 C.F.R. § § 882.805(d)( 1 )(i)(B) and (d)( 1 )(ii)

12.3 Changes in the Initial Contract Rents During Rehabilitation

In accordance with 24 C.F.R. § 882.408(d), the initial Contract Rent as determined under section 12.2 will be the Contract Rents on the reliable date of the Contract, other than under the following scenarios:

(a) When, throughout rehab, work products (including considerable and required style modifications) which (A) might not fairly have been expected or are required by a modification in local codes or ordinances, and (B) were not listed in the work review ready or authorized by the BHA, are subsequently needed and authorized by the BHA. See 24 C.F.R. § 882.408(d)(i).

(b) When the real expense of the rehabilitation performed is less than that approximated in the estimation of Contract Rents for the AHAP or the actual qualified expenses are more than approximated due to unpredicted aspects beyond the Owner's control (e.g., strikes, weather delays or unanticipated hold-ups triggered by regional governments). See 24 C.F.R. § 882.408(d)(ii).

(c) When the BHA (or HUD) approves changes in funding. See 24 C.F.R. § 882.408(d)(iii).

(d) When the real moving payments made by the Owner to momentarily moved Families varies from the cost estimated in the calculation of Contract Rents for the AHAP. See 24 C.F.R. § 882.408(d)(iv).

(e) When essential to right mistakes in calculation of the base and Contract Rents to comply with the HUD requirements. See 24 C.F.R. § 882.408(d)(v).

Should such circumstances happen throughout rehabilitation (either a boost or decline), the BHA will authorize any necessary change in work and change of the work article and expense price quote, recalculate the initial Contract Rents, and modify the Contract or AHAP, as appropriate, to reflect the modified leas. See 24 C.F.R. § 882.408(d)( 2 ).

In recalculating the preliminary Contract Rents, the BHA needs to identify that the resulting Gross Rents do not surpass the Mod Rehab FMR or the exception lease in impact at the time of execution of the AHAP. The FMR or exception lease, as proper, may just be gone beyond when the BHA identifies in accordance with the above circumstances that it will be essential for the revised Gross Rent to surpass the Mod Rehab FMR or exception lease. Should this determination be made, the BHA will not carry out a revised AHAP or Contract for Gross Rents going beyond the FMRs by more than 10 % up until it gets HUD Field Office approval. The HUD Field Office might authorize revised Gross Rents which go beyond the FMRs by up to 20 percent for the situations noted above upon appropriate validation by the BHA of the necessity for the increase. See 24 C.F.R. § 882.408(d)( 3 ).

12.3.1 Further Limits for SRO Units

In approving changes to preliminary Contract Rents throughout rehab for SRO Units, the revised preliminary Contract Rents might not show a typical per unit rehab cost that goes beyond the constraints defined in section 12.2.1 of this Administrative Plan. See 24 C.F.R. § 882.805(d)( 2 ).

12.4 Contract Rents at End of Rehabilitation Loan Term

For a Contract in which the preliminary Contract Rent was based upon a loan term shorter than 10 years, [15], the Contract will offer reduction of the Contract Rent reliable with the rent for the month following completion of the regard to the rehab loan. The amount of the decrease will be the month-to-month expense of amortization of the rehabilitation loan. This decrease must result in a brand-new Contract Rent equal to the Base Rent plus all subsequent modifications. See 24 C.F.R. § 882.807(e).

12.5 Rent Increases

12.5.1 AAF Limits to Annual Contract Rent Adjustments

The quantity of any rent increase can not surpass the amount developed by increasing HUD's Annual Adjustment Factor ("AAF") [16] by the Base Rents. See 24 C.F.R. § 882.410(a)( 1 ).

If the quantities obtained to finance the rehab costs or to fund purchase of the residential or commercial property undergo a variable rate or are otherwise renegotiable, Contract Rents might be adjusted in accordance with other treatments as recommended by HUD, and specified in the Contract. However, any such adjusted Contract Rent might still not exceed the quantity achieved by multiplying the AAF by the Contract Rents. See 24 C.F.R. § 882.410(a)( 1 ).

To receive an annual contract lease change the Owner need to ask for the rent increase in writing at least 75 days prior to the anniversary of the HAP agreement. The next section describes cases in which further "unique modifications" might be made with HUD approval. See 24 C.F.R. § 882.410(a)( 2 ).

12.5.2 Special Rent Adjustments Subject to HUD Approval

Special rent changes might be advised by the BHA for approval by HUD in the following scenarios:

(a) Increased Ownership/Maintenance Costs - A special adjustment, to the degree determined by HUD to show boosts in the actual and required expenses of owning and preserving the Unit which have resulted from considerable general boosts in real residential or commercial property taxes, evaluations, utility rates, might be recommended by the BHA for approval by HUD. See 24 C.F.R. § 882.410(a)( 2 )(i).

(b) Drug-related Criminal Activity Prevalent - Subject to appropriations, a special modification might also be recommended by the BHA for approval by HUD when HUD identifies that a task is situated in a community where drug-related criminal activity is typically common, and not specific to a specific project, and the task's operating, upkeep, and capital repair expenses have significantly increased mostly as a result of the prevalence of such drug-related activity. HUD might, on a project-by-project basis, provide modifications to the optimum month-to-month leas, to a level no greater than 120% of the present gross rents for each Unit size under a HAP contract, to cover the expenses of upkeep, security, capital repair work and reserves needed for the Owner to bring out a strategy appropriate to HUD for attending to the problem of drug-related criminal activity. Prior to approval of an unique change to cover the expense of physical improvements, HUD will carry out an environmental evaluation to the extent required by HUD's environmental policies at 24 C.F.R. § 50, including the relevant related authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).

The aforementioned special lease adjustments will only be approved if and to the degree the Owner clearly demonstrates that these general increases have actually caused increases in the Owner's operating expenses which are not adequately compensated for by yearly modifications. See 24 C.F.R. § 882.410(a)( 2 )(ii).

The Owner must send monetary info to the BHA which clearly supports the boost. For Contracts of more than twenty (20) systems, the Owner needs to send audited monetary information. See 24. C.F.R. § 882.410(a)( 2 )(iii).

12.5.3 Further Overall Limitation to Rent Adjustments

Rent modifications made might not result in material differences in between the leas charged for assisted and equivalent unassisted Units, as figured out by the BHA (and authorized by HUD, in the case of changes made pursuant to area 12.8.3). This more constraint will not restrict distinctions in rents between assisted and similar unassisted Units to the level that distinctions existed with respect to the preliminary Contract Rents, unless the leas have actually been adjusted in accordance with 24 C.F.R. § 882.409 as discussed in section 12.5 of this Administrative Plan. See 24 C.F.R. § 882.410(b).

12.6 Tenant Share of Rent

12.6.1 Determination of Tenant Rent

Tenant Rent is the amount payable regular monthly by the Family to the Owner and is equal to the Total Tenant Payment minus any Utility Allowance. See 24 C.F.R. § 5.634(a).

12.6.2 Total Tenant Payment

In accordance with 24 C.F.R. § 5.628, the Total Tenant Payment will be the greatest of the list below quantities, rounded to the nearby dollar:

( 1) 30 percent (30%) of the Family's monthly adjusted earnings; [17];

( 2) 10 percent (10%) of the Family's monthly income;

( 3) If the Family is getting payments for welfare help from a public company and a part of those payments, changed in accordance with the Family's actual housing costs, is specifically designated by such firm to fulfill the Family's housing expenses, the portion of those payments which is so designated;

12.6.3 Tenant Payment to Owner

See area 8.8.4 of the HCVP Administrative Plan.

12.6.4 Limit of BHA duty.

See area 8.8.5 of the HCVP Administrative Plan.

12.6.5 Utility Reimbursement

In accordance with 24 C.F.R. § 5.632(b)( 1 ), the BHA will pay an Energy Reimbursement if the Utility Allowance (for tenant-paid energies) surpasses the amount of the Total Tenant Payment.

The BHA shall pay the Utility Reimbursement straight to the Family.

12.7 Down payment

12.7.1 General

An Owner may gather a down payment at the time of the preliminary execution of the Lease. If a Household abandons the Unit, the Owner, based on Massachusetts and local law, might use the down payment as reimbursement for any unpaid Tenant Rent or other amount owed for which the Family owes under the Lease (such as damages beyond regular wear and tear). See 24 C.F.R. § 882.414(a) and (b).

Down payment limits and treatments utilized by the BHA follow M.G.L. ch. 186, § 15(b)(i)(iii) and HUD memoranda.

The maximum quantity of the deposit will be the greater of one month's TTP or $50. Furthermore, this quantity shall not go beyond the maximum amount allowed under Massachusetts or local law. For Units rented in location, security deposits gathered prior to the execution of a Contract which remain in excess of this maximum quantity do not need to be refunded till the Family vacates the Unit subject to the Lease terms. The Family is anticipated to pay security deposits and energy deposits from its resources and/or other public or personal sources. See 24 C.F.R. § 882.414(a).

12.7.2 Owner's Obligation to Refund

If a Household leaves the Unit the Owner will refund the down payment if needed to do so under Massachusetts law.

12.7.3 Interest Accrued on Down Payment

The Owner will comply with all Massachusetts and local laws concerning interest payments due Tenants on security deposits. Owners shall take any owed interest payments into consideration when computing reimbursements for unsettled rent or refunds to Families. See 24 C.F.R. § 882.414(c).