chapter 9: Project Operations and Compliance

Overview of key property management tasks after lease-up

Property operations and compliance play a key role in the health, safety, and type of environment residents live in. The property management structure will weigh heavily on the development model, location, resources and capacity, and compliance requirements.

Key property management responsibilities include:

• Security

• Maintenance and repairs

• Budgeting and financials

• Staffing

• Maintaining and utilizing management information systems

• Leasing, tenant selection, and eviction

• Compliance with funding sources, including record keeping for the waitlist, tenants’ applications, and income qualifications; performing and working with third-party inspectors; undergoing audits; performing tenant-income verification certifications; noncompliance and retention provisions; adhering to rent increase restrictions; and accounting for utility allowances.

Once you reach the project operations stage, your key partners could include:

• Program compliance officers

• Affordable housing compliance specialists (may be required by the lender or funding source)

• Rocky Mountain Affordable Housing Managers Association

• Local municipalities

• Funding entities such as CHFA Asset Management, USDA Asset Management, DOH Asset Management

Roles and responsibilities

Property management functions can be handled in-house or contracted out to a contractor or vendor. When they are contracted out, both the owner and manager need clear written policies and procedures that incorporate all tasks to be performed by each party and identify who performs them. The owner must adopt effective policies so the development will be in compliance long-term. Owners should be aware of the affordability period, rents, and tenant-income requirements. Many funders have tools and products to use as a reference to help you keep your policies and procedures in compliance with their requirements. For example, CHFA offers its chfareach program, which provides classes for programs and funding that it administers. Also, USDA has several handbooks that cover property management.

When evaluating whether to contract property management, consider your experience managing similar developments within the same geographic area and whether you have the necessary staff. Established professional property management firms may bring proven resources, connections, and management structures, although these options may be more limited in rural or resort areas. Handling duties in-house, however, may be a more cost-efficient approach and the time commitment will vary by development model. Typically, you will have onsite management for five or more multifamily rental units, while you typically will have offsite management for single family, duplex, triplex, or fourplex rental units. Management for scattered-site units is more cost-efficient offsite. Local municipalities may offer supportive asset management compliance programs that offer training tools and resources. For example, the City of Boulder provides an Asset Management Compliance Program.

Whether you contract or have internal staff manage the property, you will need to set clear expectations of what the day-to-day tasks and responsibilities of the property manager are. The key activities of property management include:

• Collecting rent

• Developing and maintaining updated policies and procedures that are compliant with applicable funding sources or affordable housing program requirements

• Ensuring property compliance with all applicable regulations

• Maintaining tenant files and property records, including following required or recommended file retention periods

• Providing preventative and routine maintenance and repairs

• Providing appropriate tenant and stakeholder communication and customer service

In addition, property managers should execute all of the above functions in a culturally competent way that promotes inclusivity and racial equity and addresses unique resident needs to enhance their quality of life.

Property management

During the property management selection process, examine the management company’s goals and mission. Ideally, the management company you select will have similar goals to your organization. Once you’ve selected a property management company, work to align your goals and mission. If there are any priorities or housing needs that are not part of the property management company’s standard process, give these areas additional focus.

One of your first tasks upon choosing a property management company will be to develop a management agreement. This agreement formalizes specific management and administrative services provided and the fee(s) for those services. The agreement will also detail provisions for termination and conflict resolution.

Also, meet with regulatory agencies to review your lease language and addendums, such as the Violence Against Women Act (VAWA). This is often a requirement if the project is state-funded, but these reviews are helpful regardless. The outcomes should be documented so that you can learn from them and apply those lessons across your portfolio. The asset management teams at CHFA and DOH can help you with questions.

Resident-centered management practices will build strong and transparent relationships between tenants and owners. These practices aim to:

• resolve tenant issues in a timely manner;

• provide strong, quality service while setting appropriate expectations about that service; and

• provide routine and cost-efficient maintenance to maintain high-quality housing.

You or your property management company will establish tenant-selection and eligibility policies and procedures. Based on your mission and funding sources, you will set priorities or preferences on applicants that will be eligible or rank higher in preference for your development. Similarly, you will establish ongoing occupancy requirements that follow any local, state, or federal funding regulations. You will create a lease agreement that may include the following sections:

• Landlord and tenant rights and responsibilities

• Rent or deed restrictions

• Eligibility and occupancy guidelines

• Tenant-selection process

You will also need formal processes for handling grievances and evictions equitably. Property management may offer alternative options that avoid triggering the eviction process. Clearly communicate these alternative options and the eviction process with tenants. Repayment agreements or plans are one alternative that can be proposed. Governor Polis has instructed the Department of Local Affairs (DOLA), Department of Labor and Employment (CDLE), and Department of Regulatory Agencies (DORA) to work with property owners and landlords to create model repayment agreements that allow tenants additional time to repay rent. Landlords and tenants may use DOLA’s Model Repayment Agreement to agree on a plan for repaying outstanding rent or other contractual amounts in the future. Mediation can also provide alternative solutions to conflict. For example, Boulder offers a Community Mediation and Resolution Center that brings together rental assistance, legal services, and mediation services.

The property management team should follow culturally relevant property management practices, such as establishing a commitment to inclusiveness that recognizes the value in diversity. Examples include ensuring residents have translated materials with culturally and linguistically appropriate content, providing translation assistance, and prioritizing bilingual staff and staff with experience serving special populations.

Utilizing trauma-informed property management practices is also important. Trauma can be triggered by environmental factors, such as a pandemic or natural disaster, or by the experience of systemic oppression. If left unaddressed, these experiences can impede resident, community, and property success. Property management and owners can strengthen their approach to trauma-informed practices by partnering with organizations that provide trauma-related services.

For an example in designing trauma-resilient communities, see the work of nonprofit Preservation of Affordable Housing (POAH).

Financial and asset management

Financial management includes developing an annual budget, maintaining operating and emergency reserves, and maintaining accountability for finances. Asset management includes activities that maintain and enhance a property over its lifetime.

In order to monitor and report on finances, develop an operating budget to identify ongoing expenses and assess risk of operating expense shortfalls. In the planning stages of the process, you made operating budget estimates. You will incorporate and adjust those estimates to form your budget and determine the revenue generation needed to cover expenses. Once the property is operating, you will need to monitor the development’s operating expenses on a regular basis and adjust when necessary. Management should strike a balance between returns from property (cash flow), mission of property (services being provided), and scale of property (service model possibilities for project).[22]

Rent collection is one of the key resources to fund operating expenses. An analysis of your pro forma can assist in gauging the impact this revenue source will bring. Management must monitor the rent collection rate on a regular basis and the lease agreement should establish guidelines for the rent collection process. Suggested practices for rent collection include:

• Having a grace period prior to charging a late fee can reduce turnover rates and help set realistic expectations with tenants. Ensure you establish a timeline that meets Colorado law.

• Promoting alternative payment options for tenants, including in-person, mail-in, or drop-off

• Allowing bank or credit card payments[23]

In order to sustain long-term viability of your development, you will be required by certain funders to have operating and replacement reserves to cover unexpected losses over the year. CHFA requires minimum operating reserves equal to at least six months of projected annual operating expenses and six months of debt service payments. CHFA requires replacement reserves to equal $250 per unit annually for developments serving older adults and $300 per unit annually for developments serving families. Those amounts increase by $50 per unit per annum for acquisition/rehab projects. Be sure to check requirements of any funders who have supported your project to ensure ongoing compliance.

In addition, having an existing portfolio of successful properties could provide emergency funding to cover the initial losses or shortfalls from a new development.

Compliance

Compliance encompasses how your development is meeting agreed-upon funding-source restrictions and requirements. See Chapter 7: Financial Feasibility, for discussion of restrictions and requirements associated with funding.

Completing tenant-income qualifications and monitoring rent levels are part of ensuring your development stays in compliance. Developers that use additional funding sources (local, state, and federal) may have income-qualification requirements tied to the ongoing occupancy qualification of tenants. Property management should have a dedicated staff member who is focused on income eligibility and qualifications. This staff member should maintain the minimum set-aside of required affordable units, process tenant income and asset verifications, monitor rent levels and increases for compliance with the rent restrictions, and develop a report format that keeps all compliance information consistently updated.

Local, state, and federal governments publish annual income limits that are useful for determining income-qualifying households. The following are examples of income limits.

• Affordable Housing Rent Standards, City of Longmont, CO

• CHFA Rent and Income Limits

• HUD Income Limits

• Housing Colorado Property Management & Compliance

Colorado passed Source of Income antidiscrimination legislation in 2020. Landlords may not discriminate against the source of a tenant’s income to pay rent, including Housing Choice Vouchers, when considering a potential tenant’s qualifications.

Another element of compliance is maintaining appropriate physical inspection standards based on your funding source. Your maintenance programming should incorporate all physical compliance standards from your funder, such as Uniform Physical Condition Standards (UPCS), to ensure compliance during any necessary third-party physical inspections. See Maintenance in Chapter 9: Project Operations and Compliance for more information. You may also want to engage with a third-party inspector specializing in pre-inspections, who inspects your development using the funder-required scoring system to elevate and resolve issues of noncompliance prior to your scored inspection.

Noncompliance may lead to financial ramifications, such as lender parties seeking compensation according to the terms of the initial funding source.

Resident services

Resident services can provide residents a healthier and higher quality of life. Work with housing stakeholders and future residents to understand residents’ goals and interests to identify services. Consider your target population to prioritize those services.

Services might include:

• after-school care and/or childcare;

• education;

• health and wellness (health clinics, nutrition classes, case management);

• access to financial services and education;

• community involvement, leadership, and empowerment; and

• transportation.

In order to effectively provide services, thoroughly planning and budgeting those services is key. Depending on what types of services you and your stakeholders prioritize, consider what approach to take in providing those services, such as providing them internally or partnering with one or more service providers. Service providers offer in-depth expertise that can be necessary to support target populations and develop service models that help optimize impact. Once you determine your approach, determine the optimal number of core resident services staff, plan for adequate space if services will be provided onsite, and develop long-term service operating plans and budgets. Costs for services should be included into your operating budget. If your approach requires funding, you may need to plan and execute a fundraising strategy.

Once you are ready to implement that strategy, you will finalize service plans, hire and train staff or engage service partners, and implement services. You will then establish communication policies and procedures with property management. At the initial stages of implementing your service programming, you may want to create systems to track participation, progress, and successful outcomes in addition to setting numeric targets for measuring resident and property-performance success. This will help you review outcomes for program management and stakeholder reporting, including funders. Finally, assess your programs and decide whether to change or adjust your offerings.[25]

Internet access has become a common, essential need in many cases. Developments provide an opportunity to address the digital divide and broadband gap through services such as digital literacy trainings, device access, and hard-wired or Wifi internet connectivity access. Many Internet Service Providers (ISPs) offer special low-cost internet service plans, such as Comcast Internet Essentials. Other partners in these efforts may include schools, PHAs, and municipalities. The broadband gap has been found to be higher in rural areas because of less availability and limited-service providers.[26] The State of Colorado has provided funding to increase broadband access to rural communities through a grant program.

Transportation services help connect the development to the larger community and provide access to jobs and community amenities. You may want to develop a strategic partnership with local public transit to increase tenants’ access to transportation services. If transit-oriented development (TOD) funds were utilized, there may be additional opportunities for partnership development. For example, the Denver Mile High Connects Transit Ambassador program expands residents’ knowledge and use of public transit.[27] For communities serving older adults or persons with disabilities, ADA-accessible services such as Access-a-Ride are often free and could be another partnership opportunity. For example, the Roaring Fork Transit Authority (RFTA) and the City of Glenwood Springs provide complementary paratransit service for passengers with disabilities who reside within three-fourths of a mile of the “Ride Glenwood” or “The Circulator” fixed-route bus service in Glenwood Springs and Carbondale.

Community spaces, including outdoor spaces, build a sense of community among residents. Community spaces can serve multiple needs and are more than a meeting area; they can bring health, environmental, and social benefits. Community spaces host residential services such as financial workshops, education programs, and community empowerment programming. Community spaces do require additional consideration in the budget, site planning, and ongoing maintenance.