|
Inevitably, a household's income will change from year to year. When a household's income increases substantially, they may be considered "over-income" tenants.
Defining Over-Income Tenants
The definition of an over-income tenant differs under the two programs:
- Under the HOME program, tenants are considered over-income if their income rises above the applicable Low or High HOME income limit.
- LIHTC rules define over-income as having income above 140 percent of the applicable income limit (i.e., the income limit under which the tenant originally qualified - typically either the 50 percent or 60 percent limit).
Rules for Treatment of Over-Income Tenants
Although both programs permit the tenant to remain in the unit, the LIHTC program continues to restrict the rent until the unit is replaced, while HOME permits the rent to be raised to 30 percent of the tenant's adjusted income (up to local market rent in floating units). To resolve this conflict, HOME rules state that when funds from both programs are used on the same unit, the LIHTC rules should be followed.
In general, however, if a tenant in a partially-assisted project is over-income, there is a risk that the LIHTC will be lost, and/or that HOME funds will have to be repaid. In order to avoid this consequence, owners have to comply with LIHTC and/or HOME rules for maintaining compliance when a tenant goes over income.
The Impact of Over-Income Tenants on Ongoing Occupancy Requirements
If a household's current annual income exceeds the eligibility limit, the unit continues to qualify as a HOME and/or housing tax credit unit as long as the owner fills the next available unit with an eligible household. However, this requirement applies only to projects that are not 100 percent LIHTC or 100 percent HOME. For 100 percent LIHTC projects and 100 percent HOME projects, there are no negative consequences if a household goes over-income.
|
REMEMBER
The applicable fraction is used to establish a building's qualified basis (for calculation of tax credits). The applicable fraction is the lesser of the percentage of units or the percentage of square footage occupied by eligible households. At no time can a building's applicable fraction drop below the first-year level.
|
- The HOME program defines "next available unit" as the next unit of similar or larger size.
- The LIHTC program, however, defines "next available unit" as any unit in the same building that is of comparable or smaller size.
For more information on the Next Available Unit Rule and other housing tax credit issues, visit the Tax Credit Library.
|
