LIHTC Program Occupancy Rules

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As introduced in Topic 1: LIHTC Basics, to be eligible for the LIHTC Program, projects must meet one of two low-income occupancy requirements:

• Either 20 percent of the units must be reserved for households with initial, qualifying incomes at or below 50 percent AMI, or
  
  
• Forty (40) percent of units must go to households with initial, qualifying incomes at or below 60 percent AMI.

Each LIHTC project will have a LIHTC Use Agreement that specifies the affordability requirements that apply to each building in the property. Typically, the LIHTC Use Agreement will provide for greater affordability, and a larger number of affordable units, than the minimum LIHTC set-aside (40/60 or 20/50).

The LIHTC program requires that each LIHTC-assisted unit be completed and initially occupied, on or before a specified date, by a LIHTC-eligible household with a household income at or below the income limit applicable to that unit. To be able to later prove that the unit complied with this initial "placed in service" requirement, the owner typically retains copies of the documentation of the initial household's income and occupancy in a special archive file for the duration of the LIHTC affordability period.

The two most fundamental LIHTC occupancy requirements relate to household income and maximum rent. Each LIHTC-assisted household's income must be at or below the minimum income (by household size) permitted for that LIHTC unit (depending on the income level targeted for that unit). Each LIHTC-assisted resident must pay a rent that does not exceed the maximum LIHTC rent (including tenant-paid utilities) established for that unit.

Partially LIHTC-assisted projects must also maintain compliance with the LIHTC "Next Available Unit" (NAU) rule. The NAU rule requires that if a LIHTC household becomes over-income, one or more additional units must be leased to LIHTC-eligible households.

The LIHTC program also includes penalties for failure to comply with applicable fair housing laws and regulations. In certain circumstances, LIHTCs can be lost if the owner commits fair housing violations.

Under the LIHTC program, certain households headed by full-time students are not eligible, even though these same households might be eligible for HOME assistance.

Unlike the HOME program, which applies its occupancy requirement to the number of HOME-assisted units in a development, LIHTC program compliance is measured and monitored on a building by building basis.