Regulatory Compliance

The Montgomery County Housing Initiative Fund Program (HIF) provides affordable multifamily housing preservation, rehabilitation, and development financing.  Property owners/managers who have received HIF funding to support income-restricted units must monitor those units to ensure affordability compliance according to stipulations in each regulatory agreement.  The length of the compliance period varies with each agreement.

Property owners/managers must submit an Annual Affordability Compliance Report Form (AAR) to DHCA, which DHCA’s Asset Manager will provide. This report details rent and occupancy information for DHCA to monitor according to the associated regulatory agreement. 

The AAR requires property managers to provide and certify the accuracy of the following information for tenant households occupying HIF-restricted units:

• Correct number of HIF-restricted units,
• Correct unit size (number of bedrooms) and family size,
• Correct split of HIF units based on the AMI limits required for the project,
• Rents compliant with current rent guidelines (updated annually), including:
  • Accurate reporting of the tenant’s contribution,
  • Accurate reporting of the Utility Allowance/Cost for the unit and
  • Accurate reporting of rental subsidy
• Tenant incomes compliant with current guidelines (updated annually) and
• For new tenant households, the completion of demographic information.

Periodically, a tenant may initially certify as income-eligible, and throughout their tenancy, their income may increase over the applicable income limit. If this occurs, the tenant may continue to reside in their unit, and the project will continue to comply with HIF guidelines, provided that the tenant’s income does not exceed 140% of the applicable income limit. Once a tenant’s income exceeds 140% of the applicable income threshold, management and the tenant must agree to one of the following three corrective actions:

1. Moving the over-income tenant to a market-rate unit in the same property
2. “Swapping” a restricted unit with a market rate unit in the same property
3.  Moving the tenant out of the property

DHCA offers virtual and in-person training for property owners/managers who need assistance understanding regulatory agreement requirements.

DHCA maintains tenant files for all HIF-funded properties.  These are updated annually and include:

• a completed initial Tenant Income Certification (the “Income Certification” or “ TIC”) for each tenant household occupying a HIF-restricted unit.  The initial Income Certification should be dated immediately before the initial occupancy of a unit by each income-eligible tenant household.

• an annual Income Recertification (updated TIC). Property managers must make all reasonable efforts to obtain the yearly Income Recertification before the lease’s anniversary date for each HIF-restricted unit.  The Income Recertification allows property managers to determine whether each tenant’s annualized income exceeds the limit for their restricted unit.

DHCA schedules onsite file inspections periodically, but no less than once every three years. During this review, DHCA inspects tenant files, specifically for the lease (Montgomery County Standard lease), TIC, and related backup documentation, as defined in the most recent DHCA HIF Monitoring Requirements MEMO.docx.

DHCA is responsible for reviewing the annual HOME Compliance Reports, also known as desk audits, and conducting tenant file reviews, also known as onsite reviews. DHCA gives owners a summary of all findings while allowing timely corrective and remedial actions to address identified findings.

The owner is responsible for ensuring the property adheres to the rules, regulations, and restrictions specified in the HOME regulations (24 CFR Part 92—Home Investment Partnerships Program), the HOME regulatory agreement, and the HOME Rental Compliance Manual (Compliance in HOME Rental Projects: A Guide for Property Owners (hudexchange.info).

Federal HOME regulations mandate that the property owner/manager maintain a tenant file on each household that occupies a HOME-assisted unit. Each tenant file must contain the following:

• the initial and annual certification for housing
• the tenant’s initial income certification form (TIC)
• all qualifying income, assets, and other eligibility verifications
• signatures of all adult household members and the owner’s representative on the TIC
• the lease with all attachments

 The file must document that the owner/manager has continued to perform the annual recertification after each year of occupancy. The owner must retain the tenant file and all supporting documentation proving eligibility, including the TIC (Tenant Income Certification) and the lease, for each year the household resides in the unit.

Compliance Period For Affordability

All HOME-assisted units must maintain their rent and income restrictions for the compliance period based on the amount of HOME funds invested. The minimum periods will be specified in the recorded regulatory agreement. The below-referenced compliance period for affordability is a minimum requirement, and DHCA may impose longer terms of affordability. The affordability restrictions will remain in force regardless of the transfer in ownership or loan repayment. 

Rehab or Acquisition of existing structures	Affordability Period
Less than $15K  $15K - $40K  $40K or more	Five years  Ten years  15 years
Rehab involving refinancing (any amount)	15 years
New Construction (any amount)	20 years

Compliance Monitoring

DHCA requires the annual monitoring of each HOME-funded project. DHCA will contact the project/property staff to schedule the desk audit (completion of the yearly HOME Compliance report) and schedule the tenant file review after the desk audit. DHCA will review the annual HOME Compliance report to ensure rent and income restrictions compliance. After that, DHCA will review tenant files to determine whether documentation supports the information in tenant certification files and compliance reports.

The owner/property manager may be required to submit additional documentation to DHCA at any time during the review.  Owners/property managers must ensure records are sufficiently maintained so that DHCA can effectively review and determine whether a specific project has met the HOME requirements during the annual compliance audit. Owners/property managers are required to verify household income and composition annually. DHCA considers failing to respond to monitoring requests or providing access to tenant files noncompliant. HOME-funded projects layered with LIHTC must follow the regulations of the most restrictive funding source (see link in LIHTC section). 

The owner/property manager must keep on file documentation that includes the following, as applicable:

• A signed Tenant Income Certification ( TIC) or  (if a project receives project-based section 8 vouchers)

• an initial income verification and subsequent income recertification to demonstrate that each household is, or was, eligible for the HOME program
• a Housing Choice Voucher (HCV) rental subsidy 
• the applicable HOME or LIHTC rent and income limits ( LIHTC-Income-Rent-Limits-2024.pdf (maryland.gov), 
• the utility allowance
• the signed lease 
• the signed  HOME Addendum
• the signed Violence Against Women Act (VAWA) form

Property Inspections

During the affordability period of HOME-funded projects, physical inspections by DHCA’s Code Enforcement Section are required every one to three years to ensure the project/property continues to meet or exceed applicable property standards. Any observed deficiencies of inspectable items require a follow-up inspection to verify the deficiencies were corrected.  If the deficiencies are non-hazardous, corrections can be verified by third-party documentation such as a paid invoice for a work order.  Health and safety deficiencies must be corrected immediately by HUD §92.251. The owner/manager is responsible for ensuring all units are accessible for physical inspections by DHCA’s Code Enforcement Section.

The Federal Community Development Block Grant Program (CDBG) is an annual grant from Montgomery County that supports affordable housing activities such as acquiring and rehabilitating rental and homeownership housing. The program's primary objective is to assist low- and moderate-income people. 

When the funds are committed for multi-family housing, 51% of the units must be occupied by low—or moderate-income households. Unlike HOME, CDBG assistance applies to an entire multi-family project regardless of the amount of the CDBG contribution. Owners/property managers must also document compliance with a National Objective. An Environmental Review must also be undertaken before CDBG funds can be committed.

CDBG projects do not have an affordability period, so no ongoing compliance monitoring is required.  However, some projects do need to meet the change-of-use restrictions (see 24 CFR 570).