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Do You Have an Obsolete or Nonviable HUD Project? A Relevant Tool is About to Be Renewed -- HUD’s Ability to Transfer Mortgages, Use Agreements, and Subsidy

Congress is poised to fill a pothole they created last October. For owners of physically or economically obsolete projects this authority is an option worth exploring for a creative redevelopment. For residents it might be a path to a brand new and much nicer place to live.

In the rush to end the government shutdown, the October funding bill missed a few points. One was HUD’s explicit “transfer authority” to move a HUD-held or HUD-insured mortgage or a low income use restriction from one site to another. That transfer authority has been in place through appropriations bills for a few years. But it ran out with government funding at the end of FY2013 and wasn’t extended in the continuing resolution. The transfer authority is now poised to be renewed with the upcoming passage of a new appropriations act.

It’s worth noting that there are places where this transfer authority is probably not necessary because HUD already has the legal authority to make some of the transfers that are covered (for instance, project based Section 8 contracts). But the transfer authority makes HUD’s ability here very clear—and extends HUD’s ability into areas where HUD had previously taken the position that such a transfer was not permitted.

This authority only works for obsolete projects, meaning physically obsolete or financially nonviable. And there are other requirements. For qualifying projects in these dire straits, however, this authority might be a lifeline to trading the obsolete project for a new building on a new site—with all the associated benefits for residents. The transfer authority covers HUD-related mortgages and use restrictions and also includes project-based assistance—including IRP, Rent Supp, and other assistance beyond project based Section 8 contracts.

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