Affordable Housing Horror Story: The Return of the MOR
The Return of the MOR: No, that is not the title of an old horror movie, but many in the affordable housing industry are horrified at what this means. Rest assured—in this article, we’ll provide the background information and tips you need to be prepared for a Management Occupancy Review, or an MOR.
The History of the MOR
The US Department of Housing and Urban Development (HUD) is responsible for the oversight of the Housing Assistance Payments Contract (HAP Contract) that is used to provide rental subsidies to project-based Section 8 properties. HUD began outsourcing the administration of these contracts through a competitive award process in 1999. Annual Contribution Contracts (ACCs) were entered into between HUD and Performance-Based Contract Administrators (PBCAs). Part of the PBCA’s responsibility under the ACC is to perform Management and Occupancy Reviews (MORs). In 2011, HUD decided to re-bid the ACCs and awarded new contracts. PHAs in 42 states protested the awarding of the new contracts and filed protests and lawsuits challenging the ACC awards in those states. In response to those protests and lawsuits, HUD suspended the authority of the PBCAs in the 42 states to conduct MORs by withdrawing the ACCs in those states.
As a result, MORs have not been conducted in those jurisdictions since 2011. In some cases, more than five years have passed since an inspection was done. Through a series of suits and countersuits that made its way all the way to the US Supreme Court, HUD was found to have improperly awarded the ACC contracts in those 42 states. HUD, as a result, agreed to new ACCs with the original PBCAs in those states with an effective date of 4/15/16. HUD, for its part, does not agree with the findings of the courts. However, the agency will again be re-bidding the work in the next year or so.
Implications for the Affordable Housing Industry
So what does this mean to you? It means that your PBCA will finally be returning to your properties to conduct an MOR. The new contract allows for the PBCA to conduct MORs on up to 100% of the properties in its portfolio. The PBCA will decide which properties will be inspected and when.
Are you horrified at the prospect of an inspection at your property? If you are like the majority of properties in the country, you shouldn’t be. Most properties are well-managed and will not encounter the wrath of HUD or the PBCA. That doesn’t mean you shouldn’t be prepared for the review. In fact, you should always be prepared as though the PBCA is going to come to your property this week. You should be prepared for that “pop quiz”. The good news is that the pop quiz is open book. MORs are performed using HUD Form 9834, which is titled “Management Review for Multifamily Housing Projects”. HUD updated this form on May 17, 2016 and it is this document that the PBCA fills out to determine compliance. By reviewing that document and answering the questions in it, you will be prepared, at least from a paperwork standpoint, when the PBCA comes to your property.
How to Prepare for an MOR
As you are preparing for your MOR, you should also review the previous inspection to make sure that you have resolved the findings from the previous review. That will be one of the first things the Contract Administrator will do – review the previous MOR findings. You should also consider establishing a file system based on Form 9834, and have the documents and information ready for the reviewer’s visit. Use Form 9834 as a checklist and make sure you can answer all of the questions and can provide all of the information. Do not, under any circumstances, wait until the day of the inspection to look for information for which you know they are going to ask. Again, you know what information they are going to require. It is all on Form 9834.
You can use Addendum A from Form 9834, which is what the auditor will use during the MOR, as a checklist for the review of your files. Audit a sampling of your files (or review all of them, if possible) to ensure that they will pass the test during the MOR. Make sure you review the other addendums in Form 9834, especially Addendum B as it relates to accessibility. There continues to be a lack of understanding in our industry about what accessibility regulations apply to affordable housing, as those regulations apply to properties based on the age of the property and whether or not there is government assistance.
If you prepare well in advance for the return of the MOR at your property, you will find your review experience to be more like a romantic comedy than a horror film. Okay, maybe the romantic comedy example is a bit of a stretch, but you get the point.