Texas Department of Housing & Community Affairs - Building Homes and Strengthening Communities
 

Compliance: Frequently Asked Questions (FAQs)

2nd Edition - HOME Program Question and Answer Guide (PDF)

HOME Program Contact List - Contact information for TDHCA HOME eligible applicants (municipalities; nonprofit and for profit entities; and public housing agencies).

Compliance Monitoring Newsletters: Compliance Monitoring Policies and Procedures and other information important to TDHCA funded multifamily properties. Newsletters are provided in PDF format.

Select from the following list of frequently asked questions:

General (go to section)

Eligibility (go to section)

Compliance Monitoring Physical Inspections (go to section)


General

Q. Why does the Fair Housing Choice Disclosure Notice have to be executed by the household no more than 30 days and no less than three days prior to the effective date of the lease?
A. TDHCA, as Texas’ lead affordable housing agency, is committed to fair housing choice. Everyone has the right to choose where they want to live whether they are buying, selling, or renting a home. The three day period, which is set out in an adopted rule, is intended to provide the prospective household the opportunity and ample time to consider their housing options. However, the Department has received feedback that, at times, households wants to move in the same day they apply. Therefore, the Department may recommend to the Board an amendment to this aspect of the rule at some point in the future. (Top)

Q. If I forget to have the household sign the Fair Housing Choice Disclosure Notice, what is the date of noncompliance?
A. The noncompliance date will be the date the household occupies the unit. (Top)

Q. If I forget to have the household sign the Fair Housing Choice Disclosure Notice, what is the corrective action?
A. If a household did not sign the Fair Housing Disclosure Form and moved in, at this time, the Department does not believe that a corrective action is available. The Department may recommend to the Board amendments to the Compliance Monitoring rules to clarify this issue and potentially amend the points associated with this event of noncompliance. (Top)


Eligibility

Q. Can an applicant complete an electronic application?
A. The intent of an application is to allow an applicant to disclose how many members in the household, student status and all sources of income and assets so that onsite staff knows what to verify to establish eligibility. The application must be completed by the applicant. Many owners are looking into having applications completed electronically. An electronic application can be used; however, it is important, as with any type of application, that onsite staff cannot alter the form once completed by the applicant. It will be the owner’s responsibility to maintain documentation to evidence that the process is secure and that at no point during the process can staff change the application. (Top)

Q. How do I calculate the annual income of an applicant/resident?
A.
Our housing programs use the rules for calculating annual income set-forth in Chapter 5 of the HUD Handbook 4350.3: Occupancy Requirements of Subsidized Multifamily Housing Programs. To obtain a copy of the Handbook, contact HUDCLIPS on the web http://www.hudclips.org or by phone 1-800-767-7468. (Top)

Q. How do I calculate the cash value of an asset?
A.
The cash value of an asset is the market value minus reasonable costs that would be incurred in selling or converting the asset to cash. The reasonable costs that may be deducted include: (1) penalties for withdrawing funds before maturity, (2) broker/legal fees assessed to sell or convert the asset to cash, (3) settlement costs for real estate transaction, and (4) loans on the asset. (Top)

Q. How do I know if an asset was disposed of for less than market value?
A.
Screen the applicant/resident for assets disposed of for at least $1000 less than market value. (Top)

Q. Can a live-in aid be a relative?
A.
A live-in aid is a person who lives with an elderly, disabled or handicapped individual(s) and is essential to that individual’s care and well-being, not obligated for the individual’s support and would not be living in the unit except to provide the support services. A relative may be considered a live-in aid if the individual meets all of the above requirements, especially the last. (Top)

Q. Is child support counted as income?
A.
Child support payments must be included when determining household eligibility. If a household does not receive the court ordered child support that they are entitled to, the amount must still be included, unless two requirements are met: 1) The household certifies that the support is not being received. AND 2) The household provides documentation that reasonable efforts to collect the support have been made, including filing with courts or agencies responsible for enforcing payments. (Top)

Q. May I use check stubs as income verification?
A.
Yes. Remember that you must use a consistent method for annualizing income from check stubs. (Top)

Q. How do I verify self-employment income if the resident/applicant only recently entered self-employment?
A.
As a case of last resort, the resident/applicant may complete a self-affidavit estimating income for the upcoming twelve months. (Top)

Q. How do I obtain a utility allowance schedule?
A.
The Public Housing Authority (PHA) serving the area where your property is located or the local utility provider can provide a utility allowance. Consult the compliance monitoring rules Section 60.109 (on the Secretary of State Web site) to determine which source is right for your property. A listing of Public Housing Authorities in Texas is also available from the Housing Resource Center. Please visit the Utility Allowance page for addition information. (Top)

Q. How do I determine the cash vale of a whole or universal life insurance policy?
A. The cash value is the surrender value of the policy. This information is available in the policy or from the insurance company. (Top)


Compliance Monitoring Physical Inspections

Q. What is a UPCS inspection?
A. The Uniform Physical Condition Standard (UPCS) inspection protocol was developed by the U.S. Department of Housing and Urban Development’s (HUD) Real Estate Assessment Center (REAC) to ensure that housing is “decent, safe, sanitary and in good repair”. REAC conducts approximately 20,000 annual inspections of rental housing that is owned, insured or subsidized by HUD using the UPCS inspection protocol. Visit our listing of related Web sites regarding the inspection process. (Top)

Q. Why does the Texas Department of Housing and Community Affairs use UPCS?
A.
The Internal Revenue Service requires housing agencies to use local health, safety, and building codes or the UPCS to assess the physical condition of Housing Tax Credit developments. In Texas, building codes can vary from city to city and many areas do not have code enforcement at all. To ensure a uniform inspection standard is used state wide, the Department has adopted the UPCS for all programs we administer. (Top)

Q. Who performs the inspections?
A. The Department’s Compliance Monitoring Physical Inspections (CMPI) staff will be conducting most of the inspections scheduled. The CMPI staff will perform a range of inspections including UPCS onsite assessments, construction inspections and reviews, and verification of construction and rehabilitation standards of single family structures financed through the HOME program. CMPI staff also supervises and evaluates inspections of our contractors and field inspectors.

Inspectors from On-site Insight and The Inspection Group (Department Contractors) are HUD certified with broad experience in conducting UPCS inspections. Many inspectors live in Texas and all are under the supervision of the contractor’s staff. Each contracted inspection firm was selected through a competitive bidding process.

Additionally, in certain circumstances, the Department’s Compliance Monitor(s) performing an onsite file review will conduct the physical inspection for a development. (Top)

Q. Who are On-site Insight and The Inspection Group?
A.
On-site Insight is a subsidiary of RECAP Real Estate Advisors, a multidisciplinary consulting firm specializing in asset management, physical inspections and capital needs assessments of multifamily, institutional and commercial real estate.

The Inspection Group was founded in 1998 with the objective of providing various building inspection related services. They have inspected over 100,000 units for more than 185 customers. All inspectors have been certified by HUD/REAC. The Inspection Group, Inc., has been putting to use its experience of performing thousands of HUD REAC protocol inspections nationwide, UPCS training, REAC report reviews and score appeals; advising in preparation for REAC inspections; installing new UPCS inspection systems, including software. (Top)

Q. How does the UPCS differ from individual city and/or HUD Housing Quality Standard inspections made at my development?
A.
UPCS is generally more detailed and thorough than HQS and most city inspections. The UPCS is designed to be more objective than the HQS protocol. UPCS follows Federal requirements at 24CFR 5.703 and addresses a multitude of inspectable items in five major areas: Site, building exteriors, building systems, common areas and dwelling units, . The Dictionary of Deficiency Definitions (see website listing) is a 325 page listing of each inspectable item with a description of the factors that dictate the level of deficiency. HQS does not address the number of inspectable items that the UPCS include and is not as objective when identifying deficiencies. (Top)

Q. How does the inspector know what to look for?
A.
Inspectors have been professionally trained to identify deficiencies based on the UPCS. Additionally, the UPCS inspection is software based. The inspector will generally have a laptop or hand held computer with the UPCS software. The software lists the various inspection items by the five inspectable areas in detail. The inspector notes deficiencies found and assigns a severity level to each deficiency noted during the inspection. (Top)

Q. When will the Physical Inspection be performed?
A.
Usually within 60 days of the Department's on site review. In some cases, such as in rural areas, the delay may be longer. (Top)

Q. What should I expect when the physical inspection is scheduled?
A.
The inspector should provide adequate notice to the on site manager and staff to allow them to send a notice to the tenants that their unit may be selected for inspection. When the inspector arrives he or she will have a list of the units to be inspected; the site manager will be asked to pull the keys for the units listed. It is recommended that keys for a few extra units be pulled in case a unit on the list cannot be entered. A development staff member is required to accompany the inspector at all times and must enter each dwelling unit with the inspector. The inspector will look at each building on the development and at each unit on the list. (Top)

Q. Can deficiencies be repaired while the inspector is on site?
A.
Yes. The inspector will allow reasonable correction of Exigent and Fire Safety Hazards (commonly known as EH&S) during the inspection--for example, if a tenant has disabled a smoke detector, site staff may repair or replace the smoke detector while the inspector is in the unit if time allows. The deficiency will be recorded and noted as corrected. There is usually not sufficient time for more extensive corrections during an inspection. (Top)

Q. What deficiencies are commonly seen?
A .
Exigent and Fire Safety deficiencies most commonly cited are missing covers or plates in electrical boxes that expose live wires and blocked egress (furniture blocking windows in bedrooms). Other issues reported are entrance door seals damaged, bathroom basin problems (usually stoppers or pop-ups not working or missing), missing splash blocks at gutter downspouts, and damaged or torn refrigerator door gaskets. (Top)

Q. How is the inspection score for the Development, as reported on the cover of the Physical Assessment Report, calculated?
A.
A combination of many factors is used by the software to calculate the final score. A complete discussion is on the HUD website listed in the useful websites. (Top)

Q. How is the Report scored to determine if a State finding under the Issues of Noncompliance System will be issued?
A.
Scoring is defined in the Department’s Compliance Rules at 10 Texas Administrative Code (TAC) §60.116.

Under the Department’s noncompliance scoring system, inspection deficiencies may result in Major Violation and/or a Pattern of Minor Violation.

Two factors that may result in a Major Violation finding:

  • Any UNCORRECTED deficiencies reported on the Exigent and Fire Safety Hazards Observed form and/or any EH&S deficiencies not reported corrected within the 72 hour time limit.
  • An overall inspection score of less than 70 (69 or less) is reported.

A pattern of Minor Violations finding will be assessed:

  • The overall inspection score is between 70 and 89.

A score of 90 or above will be recorded as an administrative finding only.

Findings of both Major and Minor Violations will be assessed if deficiencies reported meet the criteria for both. (Top)

Q. How does the Department's noncompliance score affect my development?
A.
The total score of a property may affect future funding requests by the owner and can result in administrative penalties described in 10 TAC Subchapter C. (Top)

Q. If I have deficiencies reported on the Exigent and Fire Safety Hazards Observed form, what is the next step?
A.
The inspector will complete a Notification of Exigent and Fire Safety Hazards Observed form at the conclusion of the inspection with a copy presented to the owner’s onsite representative. Development staff must correct the deficiency in 24 hours and notify the Department of the correction within 72 hours (3 work days) of notice. A Certification of Correction Form will be left on site to report corrections and is included in the Forms section of the PMC Web site. Submission of the Certification of Correction may be by fax or email and should be addressed to the Department’s inspector or as directed on the Certification of Correction Form.

(Top)

Q. How do I receive the inspection report and what should I do?
A.
A letter to the owner contact listed in the Compliance Monitoring and Tracking System (CMTS) will be mailed with a copy of the report. A copy of the letter and the List of Deficiencies section of the report is mailed to the onsite staff and to the management company listed in CMTS. The letter will state whether or not the physical inspection resulted in any findings, the ending date of the corrective action period, and information on how to report corrections. Remember, all deficiencies must be corrected. (Top)

Q. For a tax credit development, if all deficiencies reported are corrected, will a finding still be reported to the IRS on Form 8823?
A.
At the conclusion of the corrective action period, the Department will issue Forms 8823 for each building with a deficiency. The IRS requires all deficiencies to be reported, whether or not corrected (see the IRS 8823 Guide). The finding on the IRS Form 8823 is: “Violation(s) of the UPCS or local inspection standards”. If all deficiencies reported for a particular building are reported corrected during the corrective action period, the Form 8823 will be marked “out of compliance” and “noncompliance corrected”. If not all deficiencies are corrected the Form 8823 will be submitted as “out of compliance”. When documentation of corrections is received for buildings reported out of compliance, additional Forms 8823 will be sent to the IRS reporting the correction(s). (Top)

Q. What does the IRS do when noncompliance is reported?
A.
The Department has no information as to how the IRS will treat the report of noncompliance once received. (Top)