Casualty Loss / Natural Disaster

If a PHA's property sustains substantial destruction due to a casualty loss or natural disaster (e.g., fire, tornado, hurricane, flooding), the PHA may need to submit an after the fact Section 18 application to ensure HUD records are accurate. A PHA may also need to submit a Section 18 demolition and/or disposition application in conjunction with demolishing, restoring, rebuilding, or repositioning Public Housing property damaged by casualty loss or natural disaster. The SAC application is subject to all Section 18 application requirements when submitting documentation to HUD, with the exceptions of Resident Consultation; Board Resolution; local government consultation, letter of support from local government, and FHEO review are not required in the event of an accidental loss.

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Physical Obsolescence

To evidence physical obsolescence for the demolition or disposition of a project, PHAs must show that the necessary modification and/or rehabilitation to a project is not cost-effective. HUD uses a percent threshold compared to the HUD Total Development Cost (TDC) Limits. The HUD TDC unit estimates are released annually. See the guidance below.
 

Seller/Promissory Note

Transactions with a Seller/Promissory Note (typically in tax credit deals) are seen as a below FMV transaction by the SAC. The SAC sees this as a below FMV transaction because the seller note is typically subject to cash flow and may not be paid back in full to the PHA by the acquiring entity. The PHA may consider this a FMV transaction for the purposes of their tax credit underwriting, as the PHA would receive a seller's note that is the appraised “FMV of the property”.

Resident Relocation

The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (URA) does not apply to Section 18 actions. However, Section 18 of the Act and 24 CFR Part 970 contain similar, but distinct, requirements for the relocation of residents. 104(d) of the Housing and Community Development Act of 1974 applicable, the notice requirements at 24 CFR 970.21(e) apply. Such notice must also explain to the tenant the assistance available under section 104(d) (which includes offering the choice of assistance calculated at section 104(d) or URA levels). See Appendix 33 of HUD Handbook 1378.

Proceeds

PHAs may realize proceeds when they sell, transfer, ground lease or otherwise dispose of public housing property. PHAs retain flexibility to determine the use of proceeds, provided the use is consistent with the 1937 Act which requires that proceeds be used for the provision of low-income housing or to benefit the residents of the public housing agency; or leveraging amounts for securing commercial enterprises, onsite in public housing projects of the PHA appropriate to serve the needs of the residents.  A PHA’s use of proceeds is subject to HUD (SAC) approval pursuant to 24 CFR part 970.19. See PIH Notice 2020-23 for allowable use of proceeds.

• Proceeds Training Video
• PIH Notice 2020-23 (Use of Proceeds under Section 18 Disposition or Section 22 Voluntary Conversion)
• Memo: Proceeds for SAC Letter Disposition Approvals

PIC Reporting

In accordance with 24 CFR 970.35 and SAC's approval letter, PHAs must ensure the Public Housing property is in “Removed from Inventory” (“RMI”) status in IMS/PIC within 7 days of making the final payment to the demolition contractor (demolition) or execution of sales or lease contract (disposition).

Specific instructions are as follows:

1.  Select the "Development Number", then select "Add Transaction”;
2. Select the appropriate "Application (DDA) Number" from the drop-down menu;
3. In the "Action/Closing Date" box, enter the removal (demolition) date If the properties in a DDA application were demolished/disposed of (phased) on multiple dates, a separate transaction is needed for each action date;
4. Use “Remove Residential Inventory by Building” section, select the appropriate building(s) available in the "Complete Buildings Available" box and transfer them to the "Proposed Buildings" box;
5. Save the information using the "Save" button. The status of this information is then displayed as "Draft”;
6. PHA supervisory staff submits the information to the PHA Executive Director, or the designated final reviewer at PHA, using the Submission sub tab. The status becomes "Submitted for Review”;
7. PHA Executive Director or designee uses the Review sub tab to reject the transaction, which places it in a "Rejected" status, or approves, which places it in a "Submitted for Approval" status;
8. The Field Office reviews the request, and once the Field Office approves it, the status of the units in IMS/PIC permanently changes to RMI.