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There are many complications for developers and property managers when responding to changing, unclear or restrictive compliance. According to a recent Affordable Housing Finance article, the hyper-local nature of workforce affordable housing is one of them.
Workforce housing meets the needs of people who make too much income to qualify for traditionally defined affordable housing. Although qualifications vary across cities and states, individuals can typically qualify for workforce housing if their income is 60-120% of area median income.
This variation in standards is the challenge. Because there isn’t a national standard for workforce affordable housing programs, compliance is generally dictated at the state or local level.
For example, a city may see the need for affordable, downtown workforce housing for medical practitioners who otherwise would have to drive from outer-ring suburbs to get to work. Developers who offer affordable workforce housing have an instant population of tenants supported by national recruitment efforts at area hospitals and clinics.
In another city, workforce housing is necessitated by accelerated job growth but limited and expensive housing stock. Companies need on-site employees, but the employees have no affordable place to live.
As you can see, these programs are designed for a hyper-local need, which complicates standardization at the national level.
Therefore, developers of workforce affordable housing will be challenged to understand compliance unless they work with a team that guides them through the rules, regulations and reporting requirements.
These are additional compliance challenges affecting future affordable housing development and management.
AI implementation
As property management agencies test out AI tools and agents for leasing and documentation workflow with tenants, there isn’t a clear standard for controls that will avoid complications such as fair housing violations or data privacy issues.
When adopting AI or automation into your leasing or accounting processes, discuss risk management and compliance challenges with your team. If you lack the necessary expertise in-house, then seek guidance through your trusted advisors.
HOTMA and inconsistent compliance
The Housing Opportunity Through Modernization Act, known as HOTMA, set new rules for calculating tenant income and assets. It revised rules for interim recertifications, signature requirements and ways that landlords, for example, can verify eligibility for affordable housing through other federal benefit programs.
With any new federal or state legislation like this, property management companies must sort through the process of full implementation. HOTMA, for example, was enacted in 2016, but HUD recently extended the implementation deadline again to January 1, 2026. Over a full decade, inconsistent documentation and processes from property to property can create confusion for managers and tenants.
With some uncertainty around proper HOTMA compliance and shifting deadlines for other compliance matters, continue to watch for federal and state updates for your portfolio. Consult with your legal and accounting advisors to interpret current requirements.
Data transparency
A clear compliance strategy is becoming a competitive advantage for owners, developers and property managers. Deeper investor due diligence and compliance-based queries by finance partners are making it harder to complete deals without it.
For example, finance partners want to see clean files and clear documentation at the site level. They are asking about things like income verification error rates at existing portfolio properties as well as certification timeliness and new policy implementation.
With staffing shortages and the training required for AI-enabled software, owners and property managers are looking for solutions to keep pace and build a sustainable affordable housing compliance strategy.
What is an affordable housing compliance strategy?
An affordable housing compliance strategy ensures that compliance is part of the dealmaking and operational process through:
- A regulatory and reporting structure for each affordable housing deal
- Centralized data for ease of controls and reporting
- Documented implementation, disclosures and discretionary measures
- Ongoing staff training at the site level to manage compliance properly
If you would like to implement a more robust affordable housing compliance strategy, talk to the CAS+ team at LvHJ Our deep knowledge of affordable housing audits and accounting informs our firm’s nonprofit accounting consulting every day. We are here to answer your questions.
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