Audit 37857

Finding 2022-001: Tenant Selection Plan is in Conflict with Section 202 Eligibility Requirements. Criteria: The Project was originally established under Section 202 of the Housing Act of 1959, which requires such projects to serve exclusively elderly and disabled residents. For Housing projects established under Section 202 between 1965 and 1974, elderly is defined as single people aged 62 or more or households the head of which (or the spouse) is aged 62 or more. Ten percent of the units in a Section 202 project may be reserved for people with disabilities. Title VI, Subtitle D of the Housing and Community Development Act of 1992 (Title VI-D) authorizes owners to establish a preference for elderly families in certain Section 8 assisted properties that were designed primarily for occupancy by elderly families if certain requirements are met. Thirty units of the Project are subsidized under a Section 8 contract. Further, the Flexible Subsidy Loan agreement requires that the Project continues to be operated in accordance with the provisions of Section 202 of the Housing Act of 1959 throughout the duration of the contract. Condition: During our review of the tenant census provided as of April 2022, we noted that 21 tenants out of the total tenant census of 156 are between the ages of 55 and 61. Cause: The property manager has currently implemented a tenant selection plan for individuals aged 55 and older. While Section 8 assisted properties may be marketed towards elderly individuals and in certain circumstances, may admit near-elderly individuals and other populations, so long as they meet the requirements of the Housing and Community Development Act of 1992, the Project?s Flexible Subsidy agreement requires the original requirements of Section 202 be maintained until the contract expires or the original Section 202 Direct Loan is paid in full. The Direct Loan under Section 202 and the Flexible Subsidy Loan mature in January 2023. Effect: The current tenant selection plan implemented for the project is not reflective of Section 202 requirements. Eligibility requirements for Section 202 programs are not currently implemented. Recommendation: We recommend that the Project seek approval from HUD for waiving the elderly restriction and resolve any conflicts of eligibility requirements between Section 202, Section 8 and the Flexible Subsidy loan program. In accordance with Chapter 3, part 61 of the HUD manual 4350.3 REV-1 ( HUD Occupancy Handbook), projects may request to waive the elderly restriction due to market conditions and/or to maintain the economic soundness of the project. In such cases, HUD approval is required before the restriction can be waived and the waiting list opened to nonelderly persons. We recommend the tenant selection plan be updated in accordance with HUD?s written determination of eligibility requirements for the project. Management?s response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Finding 2022-001: Tenant Selection Plan is in Conflict with Section 202 Eligibility Requirements. Criteria: The Project was originally established under Section 202 of the Housing Act of 1959, which requires such projects to serve exclusively elderly and disabled residents. For Housing projects established under Section 202 between 1965 and 1974, elderly is defined as single people aged 62 or more or households the head of which (or the spouse) is aged 62 or more. Ten percent of the units in a Section 202 project may be reserved for people with disabilities. Title VI, Subtitle D of the Housing and Community Development Act of 1992 (Title VI-D) authorizes owners to establish a preference for elderly families in certain Section 8 assisted properties that were designed primarily for occupancy by elderly families if certain requirements are met. Thirty units of the Project are subsidized under a Section 8 contract. Further, the Flexible Subsidy Loan agreement requires that the Project continues to be operated in accordance with the provisions of Section 202 of the Housing Act of 1959 throughout the duration of the contract. Condition: During our review of the tenant census provided as of April 2022, we noted that 21 tenants out of the total tenant census of 156 are between the ages of 55 and 61. Cause: The property manager has currently implemented a tenant selection plan for individuals aged 55 and older. While Section 8 assisted properties may be marketed towards elderly individuals and in certain circumstances, may admit near-elderly individuals and other populations, so long as they meet the requirements of the Housing and Community Development Act of 1992, the Project?s Flexible Subsidy agreement requires the original requirements of Section 202 be maintained until the contract expires or the original Section 202 Direct Loan is paid in full. The Direct Loan under Section 202 and the Flexible Subsidy Loan mature in January 2023. Effect: The current tenant selection plan implemented for the project is not reflective of Section 202 requirements. Eligibility requirements for Section 202 programs are not currently implemented. Recommendation: We recommend that the Project seek approval from HUD for waiving the elderly restriction and resolve any conflicts of eligibility requirements between Section 202, Section 8 and the Flexible Subsidy loan program. In accordance with Chapter 3, part 61 of the HUD manual 4350.3 REV-1 ( HUD Occupancy Handbook), projects may request to waive the elderly restriction due to market conditions and/or to maintain the economic soundness of the project. In such cases, HUD approval is required before the restriction can be waived and the waiting list opened to nonelderly persons. We recommend the tenant selection plan be updated in accordance with HUD?s written determination of eligibility requirements for the project. Management?s response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.