Example - Using HOME and LIHTC Funds Together

Information by State  Print version   In This Section Complying with Occupancy Requirements   HOME Program Occupancy Rules   LIHTC Program Occupancy Rules   Using HOME and LIHTC Funds Together

The occupancy requirements that apply when HOME and LIHTC funds are combined depend on the way HOME funds are used in a LIHTC project. Topic 3: Using LIHTC with HOME Funds outlined four ways to combine the two funding sources. When HOME funds are included as grants, below market interest rate loans with 4 percent tax credits, or as market interest rate loans, the following general requirements apply:

General Occupancy Requirement for HOME and LIHTC Projects

To meet the minimum occupancy standards for both the HOME and LIHTC Programs, projects must reserve at least 20 percent of their HOME-assisted and tax credit funded units for households with incomes at or below 50 percent AMI. For the remaining units, if they are both HOME and tax credit funded, they must follow the more restrictive occupancy requirements of the LIHTC program and go to households that are either 50 percent or 60 percent below AMI, depending on the rate selected. If the remaining units only receive HOME assistance, they can initially serve households at or below 80 percent of AMI. However, they may need to serve households at or below 60 percent AMI to satisfy the HOME Program Rule.

Consider the following example: Highland Park is a 120 unit property. All 120 units are assisted under the LIHTC program and must maintain affordability at 60 percent of AMI. In addition, 80 units are assisted under HOME (16 units at Low HOME affordability, and 64 units at High HOME affordability). In order to comply with both HOME and LIHTC, the occupancy requirements affect Highland Park as follows:

Highland Park Development

Unit Funding Sources	Occupancy Requirements	Units	Percent AMI Served
LIHTC and HOME = 80 units	At least 20% of the total units (80x.20 = 16 units) must be occupied by households that initially qualified at 50% AMI.	16	below 50%
	The remaining 64 units can be initially occupied by households earning less than 60% of AMI and still receive the housing tax credit.	64	below 60%
LIHTC only = 40 units	To receive the credit, these units must also initially be occupied by households at or below 60% AMI.	40	below 60%

If the Highland Park Development changed its funding sources so that all 120 units received HOME Program funding, but only 80 units were tax credit eligible (also at the 40/60 election), the occupancy requirements would be slightly altered:

Highland Park Development

Unit Funding Sources	Occupancy Requirements	Units	Percent AMI Served
LIHTC and HOME = 80 units	At least 20% of the total units (80x.20 = 16 units) must serve 50% AMI.	16	below 50%
	The remaining 80% (80 x .80 = 64 units) can serve up to 60% AMI and still receive the housing tax credit.	64	below 60%
HOME only = 40 units	At least 20% of the units must be occupied by households that initially qualified at 50% AMI.	8	below 50%
	The remaining 80% must be leased to households at or below 80% of AMI.	32	below 80%

Occupancy Requirements for Below-Market Interest Rate HOME Loans

In order to qualify for the maximum housing tax credit of 9 percent when HOME funds are provided at a below-market interest rate, owners must meet a higher occupancy standard than either the HOME or LIHTC Programs would normally require:

• At least 40 percent of the total units must be targeted for households with incomes at or below 50 percent AMI.
  
  
• The remaining housing tax credit units (if any) must go to households with incomes at or below the applicable tax credit limit, generally 60 percent of AMI.

In other words, meeting a higher occupancy standard is the key that allows developers to use HOME funds as a below market loan AND retain the 9 percent tax credits. It's up to the developer to determine whether the project would be better off with or without the greater affordability, but generally, accepting the greater affordability and retaining the 9 percent credit is a better option (financially).