CHAPTER 1 LIHTC PROPERTY MANAGEMENT

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1 Contents CHAPTER 1 LIHTC PROPERTY MANAGEMENT Overview Importance of a Good Property Manager Minimum Set-Asides Documentation Proper Tenant File Retention Techniques Important Time Periods Resyndicated Properties Eviction or Termination of Tenancy 33 CHAPTER 2 INCOME 37 Introduction Income Restrictions Income Limits Area Median Gross Income (AMGI) Income Limits Multifamily Tax Subsidy Projects (MTSP) Income Limits National Nonmetropolitan Median Income (NNMI) Income Limits How Income Limits are Calculated Income Limits Rural Properties Income limits Combining USDA and LIHTC Rent Limits Income Limits Household Size Determining Tenant Income Determining Tenant Income Income Inclusions Determining Tenant Income Income Exclusions Determining Tenant Income Verification of Income and Assets Determining Tenant Income DOMA Determining Tenant Income Assets Inclusions Determining Tenant Income Assets Exclusions Determining Tenant Income Income from Assets Determining Tenant Income Asset Verification Less Than $5, Income Certifications Completing the Income Certification Initial Income Certification Retroactive Income Recertifications 79 xi

2 2.22 Income Recertification Change in Income Next-Available-Unit Rule Income Recertifications Change in Household Size Income Certification Recertification Waiver 100 Percent Affordable Properties 83 CHAPTER 3 RENT 85 Introduction Rent Restrictions Rent Limits Pre Maximum Rent Sales Tax in Rent Mandatory Renters Insurance in Rent Other Fees in Rent Section 8 and Other Rental Assistance Payments Supportive Services Fees for Optional Assisted Living Services Utilities Utility Allowance Utility Allowance Buildings Assisted by Rural Housing Service Utility Allowance Buildings with RHS-Assisted Tenants Utility Allowance Buildings Regulated by HUD Utility Allowance Non-HUD/RHS Regulated Buildings Utility Allowance Non-HUD/RHS Regulated Buildings PHA Utility Allowance Utility Allowance Non-HUD/RHS Regulated Buildings Utility Company Estimate Utility Allowance Non-HUD/RHS Regulated Buildings Agency Estimate Utility Allowance Non-HUD/RHS Regulated Buildings HUD Utility Schedule Model Utility Allowance Non-HUD/RHS Regulated Buildings Energy Consumption Model Utility Allowance Non-HUD/RHS Regulated Buildings Determining the Right Utility Allowance Utility Allowance Updating Utility Allowance Submetering Rent Floor 101 CHAPTER 4 LOW-INCOME HOUSING TAX CREDIT BUILDINGS 102 Introduction Next-Available-Unit Rule Next-Available-Unit Rule Units Occupied Before First Year of Credit Period 103 xii

3 4.03 Next-Available-Unit Rule Different Bedroom Sizes Next-Available-Unit Rule Same Bedroom Sizes Next-Available-Unit Rule Procedures for Compliance Vacant-Unit Rule Suitable for Occupancy Students Additional Guidance on Full-Time Student Rule PLR Non-Transient Occupancy Unit Transfers Multiple Building Selection How to Answer Form 8609 Question 8B Unit Transfers Within a Building Unit Transfers Between Buildings Unit Transfers Between Buildings Certifications Unit Transfers Between Buildings First Year Of the Compliance Period Unit Transfers Between Buildings If Property is 100 Percent Affordable Unit Transfers Acquisition/Rehabilitation Model Units Manager s Unit Community Service Facility Common Area Common Area Inclusion of Vehicles in Eligible Basis Community Service Facility vs. Common Area Acquisition/Rehabilitation Issues 122 CHAPTER 5 MANAGEMENT TOOLS TO COMPLY WITH LIHTC REQUIREMENTS 130 Introduction Reports Occupancy Status Report Annual Report Annual Owner Certification Form 8609 and Schedule A Information Drafting a Rental Agreement Tenant s Representation to the Owner Owner Representations to the Tenant Compliance Items to Monitor Carefully 137 xiii

4 5.10 Move-in Last Day of the Month General Public Deep Rent Skewing Set-Aside Critical Documents for LIHTC Property Managers Rent & Income Calculator 143 APPENDIX A 152 Internal Revenue Code Section Internal Revenue Code 42. Low-income housing credit 153 APPENDIX B 189 Treasury Regulations Monitoring compliance with low-income housing credit requirements. 190 (a) Compliance monitoring requirement 190 (b) Recordkeeping and record retention provisions 190 (c) Certification and review provisions 191 (d) Inspection provision 195 (e) Notification-of-noncompliance provision 195 (f) Delegation of Authority 196 (g) Liability. 197 (h) Effective date For use by the general public. 198 (a) General rule. 198 (b) Limitations. 198 (c) Treatment of units not for use by the general public Utility allowances Provision of services. 203 (a) General rule. 203 (b) Services that are optional Available unit rule. 204 (a) Definitions. 204 (b) General section 42(g)(2)(D)(i) rule. 205 (c) Exception. 205 (d) Effect of current resident moving within building. 205 (e) Available unit rule applies separately to each building in a project. 206 (f) Result of noncompliance with available unit rule. 206 xiv

5 (g) Relationship to tax-exempt bond provisions. 206 (h) Examples Qualified contracts 208 APPENDIX C 215 Legislative History General Explanation Legislative History General Explanation APPENDIX D 223 Changes and Excerpts from HUD Handbook Rev. 1 Chg 1...(8/2004) Rev. 1 Chg 2...(6/2007) Rev. 1 Chg 3...(6/2009) Rev. 1 Chg 4...(8/2013) 246 Excerpts From HUD Handbook Rev. 1 Chg Chapter 2. Section 2: Nondiscrimination Requirements Under the Fair Housing Act 265 Chapter 3: Section 6E: Income Limits 300 Chapter 3: Section 26: Verification of Eligibility Factors: Key Requirements 306 Chapter 3: Section 27: Verification of Eligibility Factors: Verification of Family Composition 307 Chapter 4. Waiting List And Tenant Selection 308 Chapter 5. Section 1: Determining Annual Income 364 Chapter 5. Section 3: Verification 396 Exhibit 5-1: Income Inclusions and Exclusions 409 Exhibit 5-2: Assets 414 Appendix 3: Acceptable Forms of Verifcation 418 Appendix 6: Verification And Consent Guidance And Sample Formats 440 Appendix 6-A: Guidance for Development of Individual Consent Forms 441 Appendix 6- B: Verification of Disability Instructions to Owners and Sample Formats 445 Appendix 6-C: Guidance About Types of Information to Request When Verifying Eligibility and Income 447 APPENDIX E 458 Audit Technique Guide IRC Section 42 Low-Income Housing Credit 458 APPENDIX F 812 NCSHA Standardized Compliance Reports, Forms and Certifications 812 xv

6 NCSHA Recommended Practices in Compliance Monitoring 813 Owner s certificate of Continuing Program Compliance 820 Tenant Income certificate 823 Employment Verification 828 Student Verification 829 Certification of Zero Income 830 Under $5,000 Asset certification 831 APPENDIX G 832 Allowances for Utilities and Other Services 832 APPENDIX H 841 Public Housing Authority Income Verification 841 APPENDIX I CFR 5.703: HUD Housing Standards 843 APPENDIX J 846 Index of Authoritative Sources 846 APPENDIX K 851 Selected IRS Guidance 851 Gross Rent Floor (IRS Revenue Procedure 94-57) 852 Unit Vacancy Rule - Reasonable Attempts to Rent (Chief Counsel Advice ) 855 Decrease in Area Median Gross Income (IRS Revenue Ruling 94-57) 857 Assets Documentation (IRS Revenue Procedure 94-65) 861 Fees for Meals (Private Letter Ruling ) 863 Fees for Optional Services (Private Letter Ruling ) 865 Optional Fee Charged for Access and Use of Garage (Private Letter Ruling ) 868 Community Service Facility (IRS Revenue Rulings ) 872 Utility Allowance Requirements (IRS Notice 89-6) 875 Utilities Paid by Tenant of Submetered Rent-Restricted Unit (IRS Notice ) 878 Termination of a Building s Extended Use Period (Chief Counsel Advice ) 881 Manager s Unit (IRS Revenue Ruling 92-61) 883 Answers to 12 Questions (IRS Revenue Ruling 91-38) 886 Answers to 12 Questions about Low-Income Housing Credit xvi

7 (IRS Revenue Ruling ) 903 Community Building s Extended Use Period (Chief Counsel Advice ) 919 Acq/Rehab of a Residential Rental Property (Private Letter Ruling ) 923 Memorandum of Understanding Between IRS, HUD, and DOJ 930 IRS Section 42 Buildings Damage by Casualty Events (Chief Counsel Advice ) 933 Temporary Shelter for Individuals Displaced by Hurricane Sandy (IRS Notice ) 936 Tax-Exempt Housing Bonds (Section 142(d)) 940 Form 8823 Exhibits and Instructions 945 Form 8609 Exhibits and Instructions 946 APPENDIX L 947 Property Compliance for Tax-Exempt Bond Projects 947 APPENDIX M 954 State Property Compliance Contacts 955 Territory Property Compliance Contacts 959 Glossary 960 Index 991 xvii