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Sec 236 (e)(2) Decoupling BBRI

This type of Budget Budget-Based Rent Increase (BBRI) Proposals applies Only to projects refinanced under Section 236 (e)(2)Decoupling of Interest Reduction Payments (IRP).

It also applies to multifamily projects currently receiving IRP pursuant to Section 236, including all projects with mortgages insured or held by HUD and all State Agency non-insured projects.  It does not apply to any former Section 236 project owned by HUD or sold by HUD from the HUD-owned inventory.

This also applicable to Section 236 Basic and Market rent computations during the term of the Decoupling Use Agreement and allowable distributions during the term of the Agreement for IRP. 

By statute, IRP assistance is paid to mortgagees on behalf of mortgagors to assist in the debt service payments of the project.  IRP are not and may not be paid directly to project Owners.  The Department must ensure that IRP assistance is paid for projects that provide habitable, low-income housing; therefore, an acceptable public agency must provide the regulatory oversight of these projects.  If there is no acceptable agency, then HUD will perform this function.

In a Decoupling transaction, the Section 236 mortgage may be prepaid and the IRP subsidy will continue and may be used for debt service.  Nonetheless, the original Section 236 requirements must be maintained for the establishment of Basic and Market Rent schedules, occupancy and habitability standards, income limits, financial reporting requirements and payment of any Excess Income to HUD.  The Owner must demonstrate to HUD how the project will be financially feasible under the continued Section 236 regime.

Projects must maintain the requirements of the Section 236 program after the completion of the Decoupling.  Basic and Market Rent are mandatory rent payment standards for Section 236 units in Decoupling transactions.  The Section 236 rents and the Section 8 rents may be different because of the differences in calculating rent increases for Basic Rents (which are based on a budget-based rent increase methodology only) and rent increase policies and procedures for Section 8 rent adjustments.  The tenant may pay a rent below the Basic Rent only if a subsidy is paid on the tenant’s behalf that ensures the Owner’s receipt of the approved basic rent (minimum acceptable rent level).  An Owner may provide such a subsidy, or the subsidy may be provided from Section 8 rental assistance, or other rental assistance such as Rent Supplement or Rental Assistance Payments (RAP).  Overall, a combination of the Basic Rent and Section 8 rent must be sufficient to operate the project and pay debt service for the project with the assistance of the IRP subsidy (with the exception of projects that have an existing Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA) or Emergency Low-Income Housing Preservation Act (ELIPHA) Use Agreement.  These projects must continue to comply with the requirements outlined in these Agreements).

Any insured, non-insured or HUD-held Section 236 project is eligible for consideration under the Decoupling program.  Preservation Projects (processed under the Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA) and Emergency Low-Income Housing Preservation Act (ELIHPA) programs) may only participate provided there is no rent increase required or caused by the Decoupling transaction.  Rent setting requirements and procedures for these properties are enumerated under a Plan of Action.

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Date Updated: 12/02/2017 04:34:53 AM