Solving the Riddle

1
Solving the Riddle

• Monitoring Managing Properties with LIHTC
  HOME

2
HOME Program

• High of LIHTC properties have HOME Funding
• Many LIHTC allocating agencies are also HOME PJs

3
Income Limit Reminder

• Low income limit 80 of AMI
• Very low income limit 50 of AMI
• Extremely low income limit 30 of AMI

4
HOME Income Limits

• Projects with 5 or more HOME units must rent 20
  of the HOME units to very low income families
• Theoretically, remaining HOME units can be rented
  to low income families

5
HOME Income Limits contd

• HOME PJs have income targeting requirements
• 90 of families in HOME assisted rental housing
  or TBRA must have income below 60 of AMI
• Terms in property regulatory agreements reflect
  this requirement

6
Common HOME Occupancy Requirements

• 50 of HOME units _at_ 50 of AMI and 50 of HOME
  Units _at_ 60 of AMI
• 100 of HOME units at 50 of AMI

7
Low HOME Units

• Rented to families with income no greater than
  50 of AMI
• Low HOME rent rules apply

8
High HOME Units

• Rented to families with income levels higher than
  50 of AMI as allowed by the HOME regulatory
  agreement
• Most common high HOME income limit is 60 of AMI
• High HOME rent rules apply

9
Tax Credit Income Limits

• Properties with
• 20 _at_ 50 minimum set aside, use 50 of AMI (very
  low income limit)
• 40 _at_ 60 minimum set aside, use 60 of AMI (very
  low Income limit x 1.2)

10
Tax Credit Income Limits contd

• Deep rent skew units 15 of low income units
  rented to families at or below 40 of AMI
• Use 40 of AMI (very low income limit x .8)

11
Mixing HOME and Credits

• To be eligible for HOME/tax credit unit, family
  must qualify at lowest applicable income limit
  for the unit

12
HOME/Tax Credit Income Limits

• LIHTC Home Qualifying
• 60 60 60 of AMI
• 60 50 50 of AMI
• 50 60 50 of AMI
• 50 50 50 of AMI
• 40 50 40 of AMI

13
4 Ways to Mix HOME with Credits

• Grant of HOME funds
• Market rate HOME loan
• Below market rate HOME loan with 4 credits
• Below market rate HOME loan with 9 credits

14
40 _at_ 50 Rule

• To receive 9 credits with a below market rate
  HOME loan, the owner must rent 40 of the units
  in every HOME assisted building to very low
  income families
• Otherwise property has 4 credits

15
Verifications

• LIHTC program requires 3rd party verifications or
  documentation why 3rd party verification was not
  possible
• HOME less strenuous requirements
• Must follow more strenuous LIHTC requirements

16
Assets not Exceeding 5,000

• LIHTC program allows households with no more than
  5,000 in assets to self certify income from
  their assets
• HOME program does not allow applicants to self
  certify the income from their assets

17
Forms

• No required forms for HOME or LIHTC programs from
  the federal level
• LIHTC HFA HOME PJ may have required forms

18
Fair Housing Section 504

• Fair housing applies to LIHTC and HOME programs
• Section 504 applies to HOME program
• LIHTC/HOME property must meet Section 504
  requirements and fair housing law

19
Section 504 and HOME

• When HOME units are fixed, Section 504 applies
  only to HOME units
• When HOME units float, Section 504 applies to the
  entire property
• Most owners apply Section 504 to entire property

20
HOME Program Maximum Allowable Rent

• High HOME rent is the lesser of
• Section 8 Fair Market Rent (FMR)
• 30 of adjusted income for family with income no
  greater than 65 of AMI

21
HOME Max Rent contd

• Low HOME rent is either
• 30 of annual income for household with income no
  more than 50 of AMI
• 30 of the adjusted income for household
  occupying the unit

22
40 _at_ 50 Rule

• IRS says owners may charge rent levels allowed by
  the propertys minimum set aside for the units
  that meet the requirements of the 40 _at_ 50 rule
• PJ may limit rents charged to low HOME levels in
  propertys HOME regulatory agreement

23
Tax Credit Maximum Rent

• Max rent is 30 of the income limit for family
  size imputed for each unit size
• Impute 1 person for efficiencies and studios
• Impute 1.5 persons per bedroom for other unit
  sizes
• Example

24
Example

• 20 _at_ 50 set aside
• 1 bedroom unit with 45 UA
• 1 person 50 of AMI 16,700
• 2 person 50 of AMI 18,100
• (16,700 18,100)/2
• 34,800/2 17,400 very low income limit for 1.5
  persons contd

25
Example contd

• 17,400 x 30 5,220
• 5,220/12 435 gross rent
• 435 - 45 390 tenant rent
• Always round down when dividing by 12 months

26
Max Rent in LIHTC/HOME Unit

• In a HOME/tax credit unit, the tenant pays no
  more than the lesser of the maximum allowed by
  the LIHTC and HOME programs.

27
Housing Choice Vouchers

• May collect total revenue exceeding the LIHTC
  maximum rent if
• Resident receives at least 1 in assistance
• Owner lowers the rent to the LIHTC maximum if the
  resident goes off the voucher program for any
  reason
• Example

28
Example

• Tax Credit Gross Rent 850
• Tax Credit Tenant Rent 780
• Market Rent 925
• Tenant Contribution 500
• HAP Payment 425

29
Vouchers and HOME

• May not collect additional revenue for HOME units
  with housing voucher participants
• Total revenue may not exceed maximum HOME rent
• Example

30
Example

• Tax Credit Gross Rent 850
• Tax Credit Tenant Rent 780
• High HOME Unit w/ 70 UA
• High HOME Rent 750
• 750 - 70 680 tenant rent
• contd

31
Example contd

• Resident is voucher participant
• Resident contribution 400
• HAP payment 280
• Owner may not collect the higher tax credit rent
  or a market rent

32
Project Based Vouchers

• PHA administering a project based voucher
• May subsidize a rent higher than the LIHTC
  maximum at a tax credit property
• May not subsidize more than the HOME rent for the
  HOME units at a HOME property

33
Project Based Section 8 Contract

• May collect more than the HOME rent if
• The owner has a federal or state project based
  rental assistance contract
• The owner uses the very low income limit to
  qualify households for the Section 8 units
• The household contribution does not exceed 30 of
  their adjusted income

34
Rent Increases

• When the HOME PJ and the LIHTC HFA issue new
  rents, an owner must verify s/he is charging the
  lower of the two rents for the new year.
• Example

35
Example

• Yr 1 Tax 670 HOME 665
• Yr 2 Tax 675 HOME 680
• Yr 3 Tax 690 HOME 685

36
LIHTC Compliance Period

• LIHTC properties
• Have an initial compliance period lasting 15
  years
• Have an extended use period lasting at least 15
  additional years
• Have a total compliance period of no less than 30
  years

37
HOME Period of Affordability

• 5 years 15,000/HOME unit
• 10 years 40,000/HOME unit
• 15 years 40,000/HOME unit or refinancing
  existing property
• 20 years new construction

38
Annual Recertifications

• LIHTC owners must recertify annually, do 3rd
  party verifications and use 140 rule
• HOME owners can rely on resident statements for
  recertifications but every 6th year must get
  source documents
• Use more restrictive LIHTC requirements for
  blended property

39
Annual Recertifications contd

• An owner of a 100 LIHTC property may apply for a
  waiver from completing annual recertifications
• Must continue to do recerts to comply with HOME
  requirements

40
Fixed Floating Units the Available Unit Rule

• HOME units may be fixed or floating as required
  by the regulatory agreement
• Fixed units remain the same for the entire period
  of affordability
• Floating units may float to units comparable to
  original HOME units as listed in the regulatory
  agreement

41
Fixed Floating contd

• If low HOME tenants income very low income
  limit but high HOME unit.
• Must meet available unit rule to meet the
  requirements of the HOME regulatory agreement.
• May not charge more than tax credit rent if tax
  credit unit

42
Fixed Floating contd

• Must maintain of low HOME units required in the
  regulatory agreement
• Fixed Units Rent next available HOME unit to
  low HOME tenant
• Floating Units Rent next available comparable
  unit to low HOME tenant

43
Fixed Floating contd

• HOME tenants income increases low income
  limit, pays lesser of rent permitted by law, 30
  of adjusted income or comparable market rent.
• If tax credit tenant, owner may not charge more
  than the maximum LIHTC rent
• Example

44
Example

• HOME/tax credit unit
• HOME Rent 500
• Tax Credit Rent 600
• Market Rent 800
• Maximum Rent 500
• Contd

45
Example contd

• Tenants income 80 of median
• 30 of adjusted income 680
• Maximum Rent 600
• Owner wants unit to continue to generate a tax
  credit

46
Tax Credit Transfer Rule

• Resident may transfer within a building and
  remain eligible
• Resident may transfer to another building at the
  same property if their income is not more than
  140 of their current income limit
• Must manage transfers to maintain balance of
  low/high HOME tenants

47
Monitoring Reporting

• Every 3 years LIHTC HFA must
• Review 20 of tenant files
• Inspect 20 of the units and common areas

48
Monitoring Reporting contd

• HOME PJs must
• Inspect every 3 years for 1-4 total units (HOME
  non-HOME units)
• Inspect every 2 years for 5-25 total units (HOME
  non-HOME units)
• Inspect every year for more than 25 total units
  (HOME non-HOME units)

49
Owner Reporting

• LIHTC and HOME programs require annual owner
  reports
• Owners needs info from LIHTC HFA and HOME PJ on
  form and manner of reporting required

50
Questions???

• Quadel Consulting Corporation
• 1200 G Street, NW Suite 700
• Washington, DC 20005
• 1- 866-640-1019
• www.quadel.com
• Liz Bramlet
• liz_at_lizbramletconsulting.com