The U.S. Department of Housing and Urban Development (HUD) recently published a new notice pertaining to the applicability of Davis-Bacon labor requirements to housing considered to be “existing” housing under the project-based voucher (PBV) program. The notice supplements HUD's June 25, 2014, final rule that amended the PBV regulations (Final Rule) as well as December 23, 2014, guidance pertaining to enforcement and applicability of Davis-Bacon under the Rental Assistance Demonstration (RAD) program.
Applicability of Davis-Bacon Requirements
Davis-Bacon and related laws generally require the payment of federally-determined prevailing wages for projects constructed with federal funds. The applicability of Davis-Bacon to specific projects depends on a range of factors, including the federal program and types of units being constructed.
Prior HUD requirements exempted existing PBV units from paying Davis-Bacon wages, and occasionally projects would use the classification of existing housing to avoid payment of prevailing wages. The Final Rule eliminated this exemption but has caused confusion because the scope of its applicability was unclear. For example, sometimes existing housing requires routine or minimal rehabilitation, and it was unclear whether Davis-Bacon applied to those situations.
The notice clarifies that Davis-Bacon requirements apply to existing PBV units when the nature of any work to be performed either before the execution of the Housing Assistance Payment (HAP) contract or within 18 months after execution constitutes project "development." The PBV program defines "development" as construction or rehabilitation of PBV housing after the selection date for a proposal. The scope and timing of the "development" work are important to determining whether Davis-Bacon requirements apply to existing housing under the PBV program.
“Scope” refers to specific activities being conducted. Remodeling work that alters the nature or type of housing units, reconstruction, or substantial improvements in the quality or kind of original equipment and materials constitutes "development." Further, any "development" initiated on existing units within 18 months after the effective date of the HAP contract on projects with nine or more units assisted under a PBV HAP contract triggers Davis-Bacon requirements.
RAD Program
The notice also clarifies the applicability of Davis-Bacon requirements under the second component of the RAD program. Under RAD’s second component, Rent Supplement, Rental Assistance Payment, and Section 8 Moderate Rehabilitation properties may convert tenant protection vouchers to PBVs. The final RAD PIH Notice (PIH -2012-32 (HA)) specifically provides that conversions under the first component of RAD trigger Davis-Bacon requirements but does not address the second component. The most recent notice clarifies that rehabilitation of existing projects as part of a RAD conversion to a PBV HAP contract constitute "development" and trigger Davis-Bacon requirements.
HUD's December 2014 notice explains that it will enforce Davis-Bacon requirements for conversions under RAD's second component that qualify as “existing housing” under the PBV program only under any of the following circumstances: (a) the RAD application made explicit mention of the Davis-Bacon Act, (b) the project was approved by HUD on or after June 25, 2014, or (c) the project was approved by HUD prior to December 31, 2014, and involved low-income housing tax credits that will expire on or after December 31, 2014. Ballard Spahr's Housing Group previously discussed the December 2014 notice in a blog post.
Addendum to Existing HAP Contract
Existing housing under the PBV program does not require an Agreement to Enter a Housing Assistance Payment contract. However, "development" of existing housing, as described above, may trigger Davis-Bacon requirements. As such, the most recent notice requires an addendum to the HAP contract that reflects the applicability of Davis-Bacon requirements for the "development" of existing PBV housing.
For more information on the RAD program, please see HUD's latest guidance.
