Eligibility Unit Eligibility and Applicant Eligibility and Certification Presented by: Heather Staggs
UNIT ELIGIBILITY 23% of the test
17-18 Items
Gross Rent (Maximum Allowable Rent) The Gross Rent is the rent paid by the resident PLUS the utility allowance for any resident paid utilities (except phone and cable)
Gross Rent (Maximum Allowable Rent) Gross rent does not include: ÌPayments under Section 8 or any comparable rental assistance program ÌSupportive service fees paid to the owner ÌAny rental payment to the owner of a unit if the owner pays an equivalent amount to Rural Development under Section 515
Fair Housing ÌAll LIHTC properties must comply with Federal, State and Local Fair Housing Laws ÌIt is illegal to discriminate in the rental or marketing of a property
Fair Housing ÌThe Federal Fair Housing Act, (Title VIII of the Civil Rights Act of 1968) prohibits discrimination on the basis of _____, _____, ________, _____ and __________ ÌThe Fair Housing Amendments Act of 1988 also known as the “Amendments Act” added ________ and ___________as federal protections
Fair Housing Ì To recap the 7 federally protected classes are: ÕColor ÕRace ÕDisability ÕFamilial status ÕNational origin ÕReligion ÕSex/gender
Fair Housing ÌSection 504 ÕAny LIHTC property with any type of additional financing that is ________________ is required to follow Section 504 of the Rehabilitation Act of 1973
Fair Housing Ì Section 504 ÕSome programs are: CDBG funds HOME funds Ø Project Based Section 8 Ø Mod-Rehab Ø HUD RAP or Rent Supplement Ø Section 202/811 Ø Below Market Interest Rate Loans Ø Rural Housing Section 515 Ø HUD 236 Ø HUD 221 (d)3, 221(d)4 and 223(f) loans Ø Ø
Fair Housing ÌSection 504 ÕThe Act states that it is illegal to discriminate against “qualified disabled individuals” Defined as having a physical or mental impairment ÕAlso makes it a requirement to provide reasonable accommodations and pay for reasonable modifications to the unit to enable the person to have equal opportunity to enjoy his or her housing
Fair Housing ÌOwners MUST display Fair Housing Posters 11” X 14” ÌAny property built after March 13, 1991 must contain certain design requirements
Fair Housing ÌExemption from Familial Status for Older persons ÕHUD states that there are 3 exemptions where properties can exclude families with children without violating the Fair Housing Act
Fair Housing ÌThe exemptions are: 1. State and Federal Housing Programs if the Secretary determines that the property is designed and operated for only the elderly
Fair Housing ÌThe exemptions are: 2. 55 and over housing – where at least one person is the household is 55 years of age or older. In order for the property to qualify at least 80% of the units must have on person at least 55 or older
Fair Housing ÌThe exemptions are: 3. 62 and over housing – Housing intended and occupied solely by persons 62 and older (100% of the property)
Fair Housing ÌMarketing of the units ÕShould not contain terms that indicate: race, color, religion, disability national origin, sex or familial status ÕAlways include the Fair Housing Logo ÕStay away from using terms such as exclusive, private, traditional, membershipapproval ÕUse photos in advertising and marketing material that show diverse age, race and social settings
Services and Amenities ÌMandatory services or amenities must be included in the resident’s gross rent (resident paid rent + utility allowance + any non-optional fees) ÌCharges for optional services other than housing do not have to be counted as gross income as long as they are truly optional
Fees for Amenities ÌFees charged for services or amenities are allowed and may be charged in addition to the resident’s gross rent only if: ÕThe amenities or services are not included in the project’s eligible basis ÕThe amenities or services are optional and ÕThere is some type of alternative to using these amenities or services
Allowable Fees ÌRenters insurance fees if included in the gross rent ÌPet deposits ÌPet rent if included in the gross rent ÌSecurity and Community Room deposits as long as they are refundable ÌMonth-to-month fees if included in the gross rent ÌFees to break the lease as long as the resident is moving out of the property
Application Fees ÌApplication fees are allowed as long as the fee charged is the actual out-of-pocket costs incurred by the owner for checking the residents eligibility; such as income, rental history, credit history, and criminal history
Disallowed Fees ÌMandatory Renter’s Insurance Ì Any non-refundable fees such as use of a Community Room ÌAny type of redecoration fees or fees to make a unit rent ready ÌUnit transfer fees ÌUtility transfer fees ÌFees or deposits for companion or service animals ÌAny other fees restricted in the State’s QAP or the property’s LURA
Common Area vs. Commercial Space ÌCommon areas that are available to all residents without a cost can be included in eligible bases ÌCommercial space in a property cannot be included in eligible basis
Non-Transient Occupancy ÌUnits must be offered on a nontransient basis ÌMinimum of a 6-month lease must be executed ÕNo requirement on renewal lease terms
ÌSingle Room Occupancy (SRO) units are exempt from this rule
Model Units ÌAll units must be offered for use by the public ÌIf the property has a model unit it must be made available to rent at anytime by the general public ÕIt is advisable to put the unit in a market-rate unit if the property is a mixed-use property
Manager’s Unit ÌThe 8823 Audit Guide indicates that charging rent for a Manager’s Unit may take away the exempt status of the unit ÌIf an Owner is charging rent for the Manager Unit, the IRS may determine that the unit is not reasonably required by the project ÌSuch a determination would be made based on the Owner not requiring the Manager to occupy the units as a condition of employment
Security Unit ÌRevenue Ruling 2004-82, A-1 states that the property may have a unit for a full time security officer if it is reasonably required by the property because of the level of crime in the area
Residential Rental Unit ÌThis is a rental unit available to the general public and must contain separate living, bathing and cooking spaces
Rental Office ÌIs considered common area space and can be included in Eligible Basis
Important Rules ÌVacant Unit Rule ÌNext Available Unit Rule ÌUnit Transfer Rule
The Vacant Unit Rule ÌVacant Unit Rule- 26 CFR 1.42-5(c)(1)(ix) IRS Revenue Ruling 2004-82 -Q9 ÌWhen a LIHTC unit becomes vacant, management must make all reasonable attempts to rent the LIHTC unit or the next available LIHTC unit of comparable size or smaller to a qualified household before any market rate units can be rented.
The Vacant Unit Rule ÌThe rule also allows any vacant unit previously occupied by a qualified household to count the unit as a qualified tax credit unit through out the term of the vacancy
The Vacant Unit Rule ÌAt the end of the initial Tax Credit year units that are currently vacant but that were previously occupied by qualified households for at least one month can be counted in the calculation to determine the amount of credit the property receives
Next Available Unit Rule (NAU) IRC §42(g)(2)(D)(ii) ÌIf at recertification, a household's income increases above 140% (170% for deep-rent skewed units) of the current AMGI it can still remain a LIHTC unit as long as: ÕThe household was initially qualified and ÕThe unit remains rent restricted
Next Available Unit Rule (NAU) ÌThe household was initially qualified ÌThe unit remains rent restricted and ÌThe next available unit of comparable size or smaller is rented to a qualified household
Next Available Rule Definition ÌThe “next available unit” is any vacant unit, or any unit that is subsequently vacated in the same building, of a comparable or smaller size. Treas. Reg. §1.42-15(c) states that a unit is not available when the unit is no longer available for rent due to contractual arrangements that are binding under local law
NAU Non-Compliance ÌIf the next available unit, same size or smaller, is not rented to a qualified household all over-income
units for which the available unit was a comparable unit in the same building lose their status as LIHTC units and are consequently out of compliance
Non-Compliance as defined in the 8823 Guide Ì“If any comparable or smaller unit that is available or that subsequently becomes available is rented to a nonqualified resident, all over-income units within the same building for which the available unit is comparable or larger lose their status as low-income units. See Treas. Reg. §1.42-15(f)”
Unit Transfers ÌWhen a current qualifying household in a tax credit unit transfers to another unit within the same building, the newly occupied unit adopts the status of the vacated unit and the vacated unit adopts the former status of the newly occupied unit. In other words, the two units swap their status with one another. ÌThe result is the household simply transfers and is not required to be certified as a new move-in
Unit Transfers ÌIf a resident wants to transfer to a unit within the same building the units swap status. Therefore, the newly occupied unit becomes the vacant unit and the vacated unit adopts the former status of the newly occupied unit ÌThe resident does not have to qualify against 140% of the income limit
Unit Transfers to Another Building ÌIf a resident wants to transfer to a unit in a different building the units swap status as long as the household income is less than 140% of the current income limit ÌIf a resident who wanted to transfer has a household income above 140% of the income limit they must not be allowed to transfer between buildings ÌThis is because the Next Available Unit Rule is a building specific rule
APPLICANT AND RESIDENT ELIGIBILITY AND CERTIFICATIONS 40% of the test
30 Items
Whose Income Should You Include?
Who counts as a Household Member? ÌAll individuals living in the unit except: ÕLive-in Aides ÕFoster children ÕFoster adults ÕGuests
Who counts as a Household Member? Count the following people that may not be living in the household at the time of move-in or recertification: ÕChildren temporarily absent do to placement in a foster home ÕChildren in a joint custody arrangement living in the unit at least 50% or more of the time Õ Children who are away at school but return home on break
Who counts as a Household Member? Count the following people that may not be living in the household at the time of move-in or recertification: ÕUnborn children of pregnant women (only obtain a self-affidavit from the woman) ÕChildren who are in the process of being adopted
Who counts as a Household Member? Count the following people that may not be living in the household at the time of move-in or recertification: ÕTemporarily absent family members ØThe
family determines who is temporarily absent
ÕFamily members who are in the hospital or a rehab facility for either limited or fixed amount of time
Who counts as a Household Member? Count the following people that may not be living in the household at the time of move-in or recertification: ÕPersons permanently confined to a hospital or nursing home ØFamily ØPerson
decides if they are counted cannot be head, co-head or
spouse include their income
ØMust
Who counts as a Household Member? Count the following people that may not be living in the household at the time of move-in or recertification: ÕActive military household members if head co-head or spouse ÕOr if they are not head co-head or spouse they must have left a dependent child or spouse in the unit
Calculating Income ÌThe IRS says to use the same rules for calculating income as for Section 8 households ÌThese rules can be found in HUD’s Occupancy Handbook 4350.3 Rev1
Definition-Annual Income
Annual Income is the __________ income a family __________ it will receive in the 12– month period _______________________ of the certification of income
Anticipating Income ÌThe owner must use ________________________________ The owner calculates projected annual income by annualizing current income. ÌIncome that may not last for a full 12months such as unemployment compensation should be calculated assuming current circumstances will last a full 12-months
What is Included in Annual Income Ì Gross earned income of wages, salaries, overtime, commissions, fees, tips, bonuses and potential raises Ì The gross amount before deductions of Medicare, etc. of Social Security payments (when rounding, always round up) Ì Interest, dividends and other income from net family assets
What’s included in annual income… ÌAll amounts, monetary or not, that go to or are received on behalf of the family head, spouse or co-head (even if the family member is temporarily absent), or any other family member; Or ÌAll amounts anticipated to be received from a source outside the family during the 12-month period following the certification or annual recertification effective date
What is Included in Annual Income Ì Alimony and child support Ì Any regular contributions and gifts from persons not living in the unit. These sources may include: Õ Rent
Õ Utility payments paid on behalf of the family Õ Other cash or non-cash contributions provided on a regular basis.
What is Included in Annual Income (cont.) Ì Full amount of annuities, insurance policies, retirement funds, pensions, disability and death benefits Ì Payments in lieu of earnings (unemployment, disability) Ì Public assistance Note: This list are some of the common types of annual income. This is not a complete list, refer to the HUD Handbook 4350.3 Chapter 5 for the complete list.
Business Income Ì Salaries paid from the business to any adult family members Ì Cash or assets withdrawn by any family member Ì Net income from the business: Deduct Interest payments on loans Business expenses Straight line depreciation
Don’t deduct Principal payments on loans Expenses of business expansion Expenses for capital improvements
Alimony and Child Support ÌIf an applicant or re-certifying resident is in a position where they should be or are receiving alimony or child support, management must: ØObtain a copy of the divorce decree or separation agreement that shows the amount ordered; and Ø Calculate the amount actually being received
Child Support If the resident indicates that they are not receiving child support they can sign a sworn self-affidavit
Alimony and Child Support ÌThe self-affidavit should include: ÕIf the resident will be seeking, or expects to be receiving child support within the next 12 months ÕThe resident must certify that they will inform the landlord immediately if there are any changes in the status of the child support income Note: The State Agency may decide not to permit an owner to rely on a resident’s signed, sworn statement if a reasonable person would conclude that the resident’s income is higher than what they represented
Calculating Annual Income Income should always be annualized using the applicants or resident’s current circumstances, unless verification forms indicate that a change will occur. The following methods are to be used when determining annual income:
Hourly wages
_______________________
Weekly wages
_______________________
Bi-weekly wages
_______________________
Semi-monthly amount
_______________________
Monthly amount
_______________________
Annual wages ___________________________________
Earned vs. Unearned Income ÌEarned income is what you receive when you work for someone who pays you or you own your own business. ÌUnearned income is all other income
Earned Income ÌWages, salaries, tips, and other taxable employee pay ÌUnion strike benefits ÌLong-term disability benefits received prior to minimum retirement age ÌNet earnings from self-employment
Unearned Income ÌPay received for work while an inmate in a penal institution ÌInterest and dividends ÌRetirement Income ÌSocial Security ÌUnemployment benefits ÌAlimony ÌChild Support
Example 1 – Calculating Annual Income Isabella applies for residency at your property. She lists hourly wages and her employer verifies an hourly rate of $11.50 per hour, 40 hours per week. The employer also verifies the wages as a monthly amount of $1,520. Annual hours: 40 per week x 52 weeks = 2,080 hours Hourly calculation: $11.50 x 2,080 hours = $23,920 Monthly calculation: $1,904 x 12 months = $22,848
For Tax Credit purposes which amount would you use to determine eligibility?
Example 1 – Calculating Annual Income
$__________
How to Calculate Income ÌRules of calculation can be found in the HUD Handbook 4350.3 REV 1 ÌBasic formula is: _______________ + __________________ = ______________________
Additional Calculation Rules ÌEmployment Income ÕAlways calculate anticipated pay increases ÕInclude from the certification date forward ÕCarefully review the verification to ensure all questions were answered and that all information was taken it account including overtime tips and bonuses
Additional Calculation Rules ÌSelf-Employment ÕCount salaries paid to anyone one in the household ÕCount net income of the business ÕUse IRS Form 1040 with Schedule C, E or F to verify income
Additional Calculation Rules ÌSocial Security ÕAlways count the gross amount of Social Security ________________deductions of Medicare ÕIf Social Security is collecting overpayment of benefits from the resident, only count the amount of the Social Security payment left after the overpayment is deducted
Additional Calculation Rules ÌUnemployment ÕCount for the full 12-months covered by the certification ÕIf the verifications says the resident will receive benefits for 20 weeks you must use 52 weeks in calculating the income
Additional Calculation Rules ÌAlimony and Child Support ÕIf there is a court order count the full amount in the court order unless the resident sings a notarized self affidavit that the amounts are not being received
Additional Calculation Rules ÌSection 8 Student Rule ÕFollow if you have project based Section 8 at our property ÕFollow procedures in the State Agency Compliance Manual
Additional Calculation Rules ÌWork Study ÕInclude all income from Work Study for the Head, Co-head or Spouse ÕCalculate for the full year not just the semester
Example 2 – Calculating Annual Income Stephanie applies for residency at your property, she anticipates moving in by March 1st. She lists hourly wages of $12.50 per hour, 40 hours per week. Her employer verifies an hourly rate of $12.50 an hour. The employer also verifies a raise to $13.00 per hour, effective May 1st. Calculate Sheila’s anticipated annual income. March 1st through April 30th = 8 weeks and 4 days, or 352 hours
Example 2 – Calculating Annual Income (cont.)
$ ________
Excluded from Income ÌIncome from employment of children (including foster children) under the age of 18 years ÌPayments received for the care of foster children or foster adults (usually persons with disabilities unrelated to the tenant family who are unable to live alone) ÌLump-sum additions to family assets, such as inheritances, Lottery winnings, insurance payments
Excluded from Income ÌIncome of a live-in aide ÌThe full amount of student financial assistance paid directly to the student or to the educational institution ÌThe special pay to a family member serving in the Armed Forces who is exposed to hostile fire
Excluded from Income Ì Temporary, nonrecurring, or sporadic income (including gifts) ÌEarnings in excess of $480 for each full-time student 18 years old or older (excluding the head of household or spouse) ÌAdoption assistance payments in excess of $480 per adopted child
Excluded from Income Ì ____________ periodic amounts from SSI and Social Security or Veteran's benefits that are received in a lump sum amount or in prospective monthly amounts ÌFood Stamps
What is Included in Assets ÌCash held in savings and checking accounts, safe deposit boxes ÌRevocable Trusts ÌStocks, Bonds, Certificates of Deposit, Money Market Accounts ÌRetirement and Pension Funds ÌAnnuities
What is Excluded from Assets ÌNecessary personal property (cars, televisions, computers, etc.) ÌTerm life insurance policies when there is no cash value ÌAssets that are not effectively owned by the applicant ÌAssets that are not accessible to the applicant and provide no income to the applicant
Assets Under $5,000
Determining the Value of Assets ÌWhen determining the value of assets, always use the current cash value ÌWhen determining the cash value of certain assets, you may deduct: ÕPenalties for withdrawal before maturity ÕBroker and/or legal fees ÕReal estate transaction settlement costs ÕLoans on the asset
Example - Asset Value An applicant owns a house with a market value of $250,000 The outstanding loan on this house is $184,000 The estimated broker’s fee/real estate closing costs are $15,000
The actual cash value of the house is: $_________
Example - Asset Value Market Value = Less Outstanding Loan Less Closing Costs Actual Cash Value
$ $ $__________ $ __________
Asset Valuation Guidelines Ì Checking Account:
Use past 6 months average
Ì Savings Account: Ì Equity in Rental Property: Ì IRA or Keogh Accounts:
Use current balance Convert to and use cash value If not withdrawing-use cash value if withdrawing-use 6 mo. avg. bal. While employed-use the amount that can be withdrawn w/o retiring or terminating employment. At retirement-add lump sum amounts to net family assets or add periodic amounts to annual income
Ì Retirement Accounts:
Ì Jointly Owned Assets: Ì Rental Income:
Usually 50% - 50%, prorate according to % of ownership. Annualize the actual monthly income, less reasonable expenses for utilities, repairs, advertising and loan payments
Assets Disposed of for Less than Fair Market Value This rule applies to family assets AND business assets (1) An applicant or resident must declare whether an asset has been disposed of for less than fair market value at each certification or recertification (2) Owners must count assets disposed of for less than fair market value during the two years preceding certification or recertification
Assets Disposed of for Less than Fair Market Value ÌAssets disposed of for less than fair market value are counted as assets if the cash value of the disposed asset exceeds the gross amount the family received by more than $1,000 Ì ______________________________________________
ÌIn such cases owners must include the whole difference between the cash value of the asset and the amount received ÌAssets disposed of for less than fair market value as a result of foreclosure, bankruptcy, divorce or separation are NOT counted
Example Jack applies for a unit at San Melia Apartments. He states that his checking account balance recently was as high as $15,000 but he just spent it all on an amazing trip to Cozumel and a brand new flat screen TV Did Jack dispose of the $15,000 for less than fair market value?
Example Cont. _______! The asset _______ disposed of but _____ for less than fair market value so the money is ______ counted towards the total household income calculation.
Example Doris applies for a unit at Sierra Canyon Apartments. She discloses that she has just sold her home to her daughter for $10,000. The home was valued at $172,199 and had no loans secured against it. Broker fees and settlement costs are estimated at $10,333. Ì What is the cash value of the asset? Ì What is the amount disposed of for less than fair market value?
Example Discussion $
Market Value
- $
Fees
$
Cash Value
-$
Sales price to daughter
$___________
Asset disposed of for less than fair market value
Example Discussion The amount of $____________ is counted as the resident’s asset for two years from the certification or recertification date. The $__________received from the daughter may currently be in a savings account or other asset. The $__________ will be counted as an asset if the applicant has not spent the money and the money appears in an account.
Imputed Income from Assets ÌIf the total value of all assets is greater than $5,000, use the greater of: 1)The actual income from assets, or 2)The imputed income using the passbook interest rate (currently 2%)
Imputed Income - Example Ì Patrick has verified annual wages of $10,000. His savings account has a current balance of $60,000, and earns 3% interest per year. His checking account has a six-month average balance of $1,500 and is non-interest bearing. Patrick owns stocks worth $500,000 which provide him with approximately $15,000 of dividends per year, which Patrick reinvests back into the stocks. Ì Calculate Patrick’s Total Household Income.
Imputed Income – Example (cont.) 12. Names of all Household Members
13. Wages or Salaries as Verified
14. Other Income as Verified
15. Household Assets as Verified
a. Type
b. Asset Value
TOTALS: 16. a. Income from Assets
______ $
16. b. Total Imputed Income from Assets: If total value is more than $5,000.00, multiply by ___% (current passbook savings rate as determined by HUD) $ 16. c. Total Income from Assets (enter the greater of 16. a. or 16. b).
$
17.
$
Total Annual Household Income (13 + 14 + 16. c.)
c. Income from Assets
_______
STUDENTS
Tax Credit Student Rule ÌUnits occupied entirely by full-time students do not qualify for tax credits ÌRegardless of their work status full or part-time ÌFull-time student is defined as a student determined to be full-time by the applicable school for at least… …five months in a calendar year ÌThe college or university (educational institution) deems what is considered full-time student
Tax Credit Student Rule ÌThe regulations define an educational institution as a: ÕSchool that maintains a regular faculty ÕEstablished curriculum ÕOrganized body of students in attendance ÌCorrespondence courses are not considered full time ÌSchool-aged children (grades K-12) are considered full time students
Tax Credit Student Rule 1. Student receives assistance under Title IV of the Social Security Act – TANF (Temporary Assistance to Needy Families)
Tax Credit Student Rule 2. Student enrolled in a job training program receiving assistance under the Workforce Investment Act (formally the Job Training Partnership Act) or under similar federal, state, or local laws
Tax Credit Student Rule 3. Single parent with child(ren), and the parent is not a dependent of another individual, and the child(ren) are not dependents of another individual other than their parents
Tax Credit Student Rule 4. Students that are married and file a joint tax return
Tax Credit Student Rule 5. An individual who was previously under the care and placement of the State agency (Foster Care)
Housing Reform Act of 2008 – Sec 3004(c)
Heather Staggs
[email protected] 303.593.0305
