On Jan. 6, HUD published a final rule to update, streamline, and authorize new flexibilities in the regulations governing the HOME Investment Partnerships (HOME) Program. As the largest federal block grant for affordable housing, the HOME program is an important tool for addressing the ongoing housing affordability crisis. 

HOME program funds and LIHTCs are often used together to finance affordable rental housing sites. To establish affordable rents in many markets, a site’s rents may not be enough to pay off a conventional mortgage. As a result, the equity raised from tax credits may not be sufficient to provide all of the additional capital required by the site. Often, HOME funds can be used to finance the remaining gap. If you own or manage a site that combines these two sources of funds, you must comply with the requirements of both programs.

The latest rule represents the most significant update to the HOME program since 2013. One change is to allow LIHTC rents to be acceptable for Low HOME units, effectively removing the Low HOME rent cap on LIHTC units. HOME units are considered to be either High HOME units or Low HOME units, and rents could not exceed HUD’s published High or Low HOME rents. Previously, Low HOME rent caps were often lower than LIHTC rents. Allowing LIHTC rents to apply to low HOME units simplifies operations for sites that rely on both funding sources.

In addition to aligning rental limits, the final rule strengthened tenant protections. We’ll go over these expanded protections and highlight HUD’s decision to not extend the notice to evict to 60 days as originally proposed.

HOME Tenancy Addendum Requirement

The final rule introduced the HOME tenancy addendum requirement, which standardizes tenant protections across all HOME-assisted rental housing. The HOME tenancy addendum is a required attachment to all leases for tenants in HOME-assisted rental units. It establishes a uniform set of tenant protections that owners must adhere to, strengthening the rights of tenants and ensuring compliance with HOME program regulations. 

The mandatory tenancy addendum ensures tenants’ rights are explicitly included in their lease agreements. The addendum builds on existing HOME requirements for leases, such as the inclusion of provisions from the Violence Against Women Act (VAWA), by adding more comprehensive protections covering tenant rights. HUD has not yet published the updated HOME lease addendum that incorporates these provisions. 

Tenant Notice Requirements

Under the Final Rule, owners participating in the HOME program must provide clear, detailed written notices to tenants whenever an adverse action is proposed. An adverse action can include a range of decisions that affect tenants, such as lease terminations, non-renewals, rent increases, or charges for tenant-caused damages. By standardizing the process, HUD wants to make sure tenants are given adequate notice and an opportunity to understand and respond to these actions. The new requirements mandate that adverse action notices include:

• A detailed explanation of the reason for the proposed action, such as a lease violation, nonpayment of rent, or other good cause;
• The specific date on which the action will take effect, allowing tenants adequate time to prepare or respond; and
• Information on tenants’ rights to contest or remedy the issue, where applicable.

The final rule preserves the 30-day notice period for lease terminations or non-renewals, as established in the HOME statute. HUD had initially proposed extending the notice period to 60 days to provide tenants with additional time to find alternative housing, but feedback from stakeholders led to the decision to keep the original time frame. In addition, the rule requires that tenants be notified within five business days of any changes in ownership or management of the property. For impending property sales or foreclosures, tenants must be given at least 30 days’ notice, enabling them to prepare for potential disruptions.

Unit Entry, Access to Common Areas

Among the revisions in the final rule are enhanced rules governing an owner’s right to enter a tenant’s unit and tenant access to common areas in HOME-assisted rental housing. 

Unit entry. HUD has established stricter guidelines for when and how owners or their agents may enter a tenant’s unit. These rules are designed to protect tenants’ privacy while allowing staff to perform necessary maintenance, inspections, or emergency repairs. The rule says owners must provide tenants with at least two days’ notice before entering their unit, except in emergencies. This notice must specify the purpose of the entry, ensuring that tenants are fully informed and prepared. For example, if the owner needs to conduct routine maintenance, inspect a unit, or show the property to prospective renters, the reason must be clearly communicated in advance.

In cases of emergencies, such as a fire, flood, or gas leak, property owners are permitted to enter the unit without prior notice. However, if the tenant and all adult household members are absent during such an entry, the owner must leave a written statement in the unit detailing the date, time, and purpose of the entry. 

Use of common areas. The final rule also strengthens tenants’ rights to access and use the common areas in HOME-assisted properties. Common areas, such as community rooms, gyms, pools, play areas, storage spaces, and outdoor facilities foster a sense of community and improve tenants’ quality of life. HUD’s updates make it explicitly clear that owners must provide reasonable access to all common areas for tenants of HOME-assisted units. 

Importantly, property owners are prohibited from implementing discriminatory practices that restrict tenants of HOME-assisted units from using these facilities while allowing unrestricted access for other residents. For instance, an owner cannot establish separate rules that exclude HOME-assisted tenants from a gym or pool available to market-rate tenants.

The rule also emphasizes the need for equitable access to amenities such as elevators, rooftop gardens, and storage spaces. Any attempts to segregate or deny access to these areas based on a tenant’s participation in the HOME program are strictly prohibited.

Physical Condition of Unit, Site

The final rule covers tenant protections related to the physical condition of units in HOME-assisted rental housing. These changes are intended to ensure that tenants live in safe, sanitary, and well-maintained homes while holding owners accountable for addressing deficiencies promptly.

Unit standards. The final rule mandates that owners maintain HOME-assisted units and sites in compliance with federal property standards and applicable local housing codes. Units must be safe, sanitary, and in good repair throughout the period of affordability. This requirement applies to both the physical condition of individual units and the overall site, including common areas and outdoor spaces.

Owners must provide tenants with clear timelines for completing routine maintenance and repairs, ensuring that tenants are informed about when issues will be addressed. The rule also prohibits owners from charging tenants for normal wear and tear, limiting tenants’ financial responsibility to damages caused by negligence, recklessness, or intentional acts.

Relocation for life-threatening conditions. One significant protection introduced in the final rule is the requirement to relocate tenants if life-threatening deficiencies in their unit or the site cannot be resolved immediately. For example, if a tenant’s unit is affected by issues such as severe structural damage, flooding, or exposure to hazardous materials, the owner must provide alternative accommodations.

Tenants must be relocated to a housing unit or lodging that is decent, safe, sanitary, and in good repair until the deficiencies are resolved. The relocation must be at no additional cost to the tenant, ensuring that tenants are not financially burdened by temporary housing needs. HUD anticipates that this relocation requirement will primarily apply in situations where repairs cannot be completed on the same day the deficiency is identified. 

Legal Recourse, Anti-Retaliation Protections

The Final Rule explicitly grants tenants in HOME-assisted rental housing the right to organize and participate in tenant associations. Owners are prohibited from retaliating against tenants for exercising their rights, such as reporting unsafe conditions, requesting repairs, or organizing tenant associations. And tenants have the right to contest adverse actions and seek legal remedies without fear of harassment or eviction.

Right to organize. This right mirrors those already established in other HUD programs, including Multifamily Housing programs. This protection ensures that tenants can:

• Convene meetings in common areas without interference from owners or managers;
• Distribute literature and information relevant to tenant concerns; and
• Advocate collectively for improvements in housing conditions, property management practices, or tenant services.

HUD notes that tenant organizations are particularly valuable in larger projects, where individual tenants may feel overwhelmed or unsupported in addressing property-wide concerns.

Prohibitions against retaliation. The final rule’s anti-retaliation provisions protect tenants who choose to organize or participate in tenant associations, report unsafe or inadequate housing conditions, or request enforcement of lease provisions. The rule defines retaliation broadly to include any adverse action taken by a property owner or manager in response to a tenant exercising their rights. This could involve actions such as constructive eviction, which is a way to recover a unit outside of lawful eviction processes by reducing or discontinuing services to the tenant, such as maintenance or utilities. Other retaliatory actions include harassing tenants or their lawful guests or unreasonably interfering with a tenant’s comfort, safety, or enjoyment of their unit.

Security Deposit Requirements

Another area of tenant protection in the final rule involves security deposits. Security deposits must now be fully refundable and cannot exceed two months’ rent. The rule also explicitly prohibits the use of surety bonds or security deposit insurance as a substitute for traditional security deposits. While such alternatives have been marketed as flexible solutions, HUD has determined that they could create financial risks and complexities for low-income tenants, such as ongoing premiums or hidden fees.

To further protect tenants, the final rule requires owners to provide detailed, itemized lists of any charges deducted from a tenant’s security deposit. Owner must promptly refund the remaining balance of the deposit after deductions have been made, and the rule also clarifies that tenants cannot be charged for normal wear and tear or for damage not caused by their negligence, recklessness, or intentional acts.