Retentions of Public Housing Property

On November 29, 2016, HUD published PIH Notice PIH 2016-20 (HA).  This notice provides disposition instructions for the Public Housing Agency (PHA) Retention of Certain Public Housing Real Property (that is no longer used or was never used for public housing dwelling purposes) Free from Public Housing Use Restrictions in accordance with the requirements of 2 CFR 200.311(c)(1).

Frequently Asked Questions (FAQs)
PIH Notice 2016-20

(1) Question:  Why did HUD issue PIH Notice 2016-20?

Answer:  HUD issued this notice to provide PHAs with another tool for making inventory decisions about certain public housing real property.  HUD recognizes PHAs may have good reasons to retain this public housing real property outside of public housing use restrictions.  Additionally, 2 CFR 200.311(c) states that “When real property is no longer needed for the originally authorized purpose, the non-Federal entity must obtain disposition instructions from the Federal awarding agency or pass-through entity.”

(2) Question:  Can PHAs apply under this notice to retain public housing dwelling units? 

Answer:  No. This notice has limited applicability and applies only to public housing real property that is no longer or was never used for public housing dwelling purposes.  This notice does not apply to public housing dwelling units that are currently under an Annual Contributions Contract (ACC) or are receiving assistance under Section 9 of the 1937 Act. HUD Examples of public housing real property that are eligible for retention under this notice include, but are not limited to: non-dwelling buildings, vacant land, and property that once comprised public housing dwelling units but is now vacant and no longer receiving the benefit of any Section 9 assistance.

(3) Question:  Is this notice providing a new retention tool or were PHAs already able to request this kind of retention outside of this Notice?

Answer:  Prior to the issuance of this notice, PHAs were able to request retentions through 2 CFR 200.311(c)(1) (and previously through 24 CFR 85.31(c)(1)).  However, PHAs were required to request “disposition instructions” from HUD and HUD would provide instructions on a case-by-case basis.  This notice provides clear and consistent “disposition instructions” to PHAs who may be considering a retention request.

(4) Question:  Are there any limits on when a PHA may apply for a retention action under this notice?  For instance, does a PHA need to be pursuing RAD or a Section 18 demolition/disposition action?  Or removing all of its public housing units from its ACC? 

Answer:  No.  All PHAs may apply for retention actions under this notice if a retention meets its local goals and the real property otherwise meets the requirements of the notice (e.g. the property) is no longer needed for the originally authorized purpose).  Often, these retention actions may be in conjunction with another removal action, but that is not required.  For instance, a PHA that has never removed a public housing unit from its ACC may still apply under this notice to retain a parcel of excess land adjoining one of its public housing projects so that it can develop new affordable housing on that parcel outside of public housing program.

(5) Question:  How does this notice relate to public housing program close-out requirements (as more fully described in PIH Notice 2016-23) that apply to PHAs that are removing all of their public housing units from ACC (through RAD, Section 18 demo/dispo or another program)?

Answer:  The ACC dictates that all public housing property will facilitate the PHA’s operation of public housing units. When a PHA removes all of its public housing units from ACC and does not intend to build new public housing units, any remaining non-dwelling public housing property (e.g. administrative buildings, central warehouses, garages, community buildings) no longer supports the public housing units. Accordingly, PHAs are required to remove this property from ACC and DOT public housing restrictions.  One of the available tools for removing this property from public housing restrictions is a retention action under this notice. 

(6) Question:  My PHA has a non-dwelling community building that it is not recorded in IMS/PIC.  It is on a site that does not include units.  The property has a DOT recorded against it and our records indicate that the property was acquired with Section 9 funds.  My PHA would like to operate this building for purposes other than public housing.  Does my PHA need to apply for retention under this notice?

Answer:  Yes.  PHAs are required to ensure that all of their public housing property is uploaded in HUD’s IMS/PIC system and has a valid DOT recorded against it.  Even if a PHA is not in compliance with these requirements, HUD requirements still apply to the use, retention, or disposition of that public housing property.  The PHA must work with its local HUD Office of Public Housing to bring the property into compliance with all applicable IMS/PIC and DOT requirements.

(7) Question:  My PHA wants to develop some vacant excess public housing property as new affordable low-income housing tax credit (LIHTC) units.  Can my PHA propose to retain property under this notice and then ground lease it to single-asset LIHTC entity (that my PHA controls)?

Answer:  No.  Because the ground lease involves a transfer of property interest to another entity (LIHTC entity) and thus constitutes a disposition under 24 CFR part 970, the PHA must apply for disposition under Section 18 of the 1937 Act and 24 CFR part 970.

(8) Question:  Why is it necessary to obtain environmental clearance for retention applications under 2 CFR 200.311(c)(1)?

Answer:  Because the retention involves a removing the federal use restrictions from the property, HUD requires environmental clearance.

(9) Question:  When will HUD require a PHA to execute and record a new use restriction against a former public housing property as part of a retention approval under 2 CFR 200.311(c)(1)?

Answer: A 30-year use restriction is generally required when HUD approves a PHA’s request for an exception to the compensation requirement of 2 CFR 200.311(c)(1). 

(10) Question:  The notice states that HUD may consider certain factors in determining whether to allow for a shorter use restriction period than 30 years.  Can you elaborate on those factors?

Answer:  HUD may consider the following:

  • Estimated FMV of the public housing real property.  If a property has a low FMV (e.g. less than $5000), and the PHA is requesting that the use restriction only encumber the property for 5 or 10 years (instead of 30), HUD could take into consideration the low value of the property as a factor in granting the shorter use restriction term.  Conversely, HUD would be much less willing to allow for a use restriction term of less than 30-years if the property was worth several million dollars.
  • Amount of time the public housing real property would be required to be under DOT/DORC.  This factor “looks backward”.  For instance, if the PHA has not spent any Capital or Operating Funds at the property for the past 18 years, and there is only 2 years remaining under the DOT/DORC use restriction (until they would expire), HUD may take that into consideration in reviewing a PHA’s request for a use restriction period of less than 30-years.
  • Proposed future use of the property.  This factor “looks forward”.  For instance, if a PHA is proposing to use property as supportive housing for homeless families but the use will only last 15 years because that’s the amount of time required by a state grant (that is providing the supportive service funding), HUD may take this into consideration, along with other factors, in reviewing a PHA’s request for a use restriction period of only 15-years.

(11) Question:   Are there certain sources of funds my PHA cannot use to compensate HUD for the value of the property? 

Answer:  PHAs may use any available non-1937 Act funds, which may, depending on the circumstances, include available program income, Central Office Cost Center (COCC) funds, or other non-restricted funds.

(12) Question:   My PHA has been approached by a major telecommunication company that identified a portion of vacant public housing property as an ideal location to construct a cell tower.  This property is excess to the needs of the adjoining project.  Instead of selling this property to Sprint, my PHA would like to retain the property as a local asset.  If my PHA fully compensates HUD for this property in accordance with this notice and complies with all notice requirements (including environmental clearances), after HUD releases the DOT, are there any limitations or restrictions on the income my PHA may generate from the property?  In other words, could my PHA rent this property to Sprint and keep all rental income as local funds?

Answer:  Yes.  If the PHA fully compensates HUD in accordance with this notice, after HUD releases the DOT based on an approval under this notice, there are no restrictions on the use of the property and/or the income the PHA may generate from that property.

(13) Question:  My PHA has been approached by a day-care provider that wants to rent one of our vacant non-dwelling community building that my PHA no longer uses.  Can I apply to retain the property under this notice and then rent the property out to the day-care provider?

Answer:  It depends.  If the PHA fully compensates HUD in accordance with this notice, after HUD releases the DOT under 2 CFR 200.311(c)(1) there are no restrictions on the use of the property and/or the income the PHA may generate from that property.  Therefore, in this instance, the PHA could rent the property to the day-care provider and retain all rental income as local funds.  However, if the PHA is requesting an exception from the compensation requirement, HUD generally will impose use restrictions.  In this instance, the PHA would need to fully disclose to HUD its plan to rent the property out to the day-care provider (along with any expected rental income) and HUD would take all of this into account in determining whether the proposed future of renting out the property to a day-care provider qualified for an exception to the compensation requirement.