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June 13 -- The Office of Policy Development and Research, Chief Data Officer, HUD invites comment to OMB by July 17, 2023 regarding the Capital Needs Assessment Electronic Tool (CNA e-Tool). [Comments due 30 days after submission to OMB on June 15, 2023.]

A Capital Needs Assessment is a detailed review of a property's expected capital expenditures over future years. It is needed to appropriately value a project/property, to determine financial sustainability, and to plan for funding of an escrow account to be used for capital repair and replacement needs during the estimate period. It is used by external parties, and HUD for valuation, underwriting, and asset management purposes.

Capital Needs Assessment (CNA), or CNAs, were authorized by Title IV of the Housing and Community Development Act of 1992, as amended by the Multifamily Housing (MFH)  Section 531 of the Department of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1998, P.L.105-65 (approved October 27, 1997), provides for the use of unallocated amounts for contract for interest reduction payments, or any other source, providing capital grant assistance for rehabilitation needs for projects. These rehabilitation needs are estimated through the employment of CNAs and have become institutionalized through inclusion in project applications for funding using the Multifamily Accelerated Processing (MAP) Guide, and as a requirement for projects seeking approval for a Partial Payment of Claim (PPC). As a result, this renewal has been made based on the current number of respondents and current hourly cost estimates.

The CNA e-Tool meets Federal accessibility requirements, including Section 504.  In addition, the Fair Housing Act and the Americans with Disabilities Act.

The Department of Housing and Urban Development (HUD) regulations, at 24 CFR Part 401.450, also authorize this collection. Electronic CNAs are sent to HUD though the CNA e-Tool.  HUD Housing Notice (HN) 2016-18 authorized the mandatory implementation of the CNA e-Tool for nine MFH Programs.

•  The CNA is a description of current and future capital improvements and replacement needs of certain multifamily projects/properties.
•  The CNA is based on a thorough and detailed physical inspection of the project based on an Estimated Useful Life (EUL) Table which can be found in HN 2016-18.
•  The CNA includes a statement of any assistance needed under programs administered by the Department.
•  The CNA is used to establish the need for resources for meeting current and future needs of the project/property.  Such resources are typically covered by the reserve for replacement account. The reserve for replacement account must maintain a balance equal to the identified needs, plus $250 per unit.

The CNA also includes descriptions of modernization needs and activities; descriptions of supportive services needed, and supportive services provided; descriptions of security needs; and descriptions of any personnel needs of the project, including service coordinators and security staff.

In addition, the United States Department of Agriculture (USDA) regulations at 7 CFR Part 3560 also authorize this collection for their future use of the CNA e-Tool. HUD and USDA collaborated to develop a standard format for CNAs to be used across multiple programs, many of which are already using CNAs in one format or another.   

The CNA is a description of current and future capital needs and financial resources of certain multifamily projects/properties. The CNA is based on a thorough and detailed physical inspection based on the EUL Table. The CNA includes a statement of any assistance needed under programs administered by HUD. The information that is being collected is only being used by HUD staff, and is not shared.

To reduce burden on external parties the CNA e-Tool’s functionality was replatformed to the cloud back in 2020 and allowed for the lender originator, lender servicer, Participating Administrative Entity (PAE), Public Housing Agency (PHA), and the Project Rental Assistance Contract (PRAC) owner to initiate a CNA with an assessor within the system. These external parties’ contract with an arms-length entity to prepare a project’s CNA, referred to as the Assessor. The assessor is responsible for preparing the electronic CNA within a web-based application called the CNA e-Tool. The Assessor completes their assessment of the project/property’s capital improvements and collects all necessary data. The Assessor must use the information to estimate repair costs, itemize repairs, identify any immediate health and safety issues, and identify near term and long-term repairs that may be needed after the date of the inspection.   

The CNA e-Tool is a major system application that is compliant with the Federal Information Security Management Act (FISMA).The system has approximately 6,400 registered users (as of February 2023).  The CNA e-Tool is a secure system with an Authority to Operate. To improve security (confidentiality and integrity) all users and their coordinators needed to get a login credential to use the CNA e-Tool as of 2020. When the CNA e-Tool was replatformed to the cloud back in 2020 no changes were done to the database or the data that was collected.   

The lender originator, lender servicer, PAE, and PHA are responsible for quality control of the CNA. These external parties submit the completed CNA information for HUD’s review after the Assessor has completed their portion. Government Staff will review the CNA information to assess the current and future resources required for capital repairs. The information may also be used to determine the amount of any grant assistance that may be available. To date over 4,800 electronic CNAs have been approved within the CNA e-Tool since the system went live back in 2017.

In the future USDA may want to start using the system. There was a Memorandum of Understanding between HUD and USDA that has been signed by Executive Leadership from both departments (but has since expired). In the future USDA would need to finalize an Interagency Agreement (IAA) with HUD for use of the system. Any potential IAA would further stipulate USDA’s fiduciary responsibility to help pay some of the cost incurred for the system by HUD.

Respondents: Assessor firms, lender originator, lender servicer, Participating Administrative Entity (PAE), Public Housing Agency (PHA) for RAD Projects, and the Project Rental Assistance Contract (PRAC) owner.
Estimated Number of Respondents: 2,041.

Capital Needs Assessment Electronic Tool (CNA e-Tool): https://www.hud.gov/program_offices/housing/mfh/cna
HUD submission to OMB: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202305-2502-007 Click IC List for information collection instrument, View Supporting Statement for technical documentation. Submit comments through this webpage.
FRN: https://www.federalregister.gov/d/2023-12530

For AEA members wishing to submit comments, "A Primer on How to Respond to Calls for Comment on Federal Data Collections" is available at https://www.aeaweb.org/content/file?id=5806

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