Solving the Riddle

1
Solving the Riddle

• Monitoring Managing Properties with Section 8

2
What Do We Mean by Section 8

• What we think of when hearing Section 8 can
  depend on our background and experience in
  affordable housing
• There are 3 types of Section 8 interacting with
  the LIHTC Program

3
Types of Section 8

• Housing Choice Voucher (HCV)
• Project Based Voucher (PBV)
• Project Based Contract (PBS8)

4
Housing Choice Voucher Program

• Replaced the Section 8 certificate and Section 8
  voucher programs
• Still often referred to as the Section 8 voucher
  program

5
HCV Program contd

• Provides tenant based rental subsidy
• Household applies for a HCV at a public housing
  authority (PHA) administering a HCV program
• A HCV is portable useable anywhere in the
  country

6
HCV Program contd

• Nobody on the HCV program is automatically
  LIHTC-eligible
• HCV program uses income limits that differ from
  the LIHTC program
• HCV program has a different rule for determining
  student eligibility

7
HCV Program Income Limits

• Income limit for the HCV program is 50 of AMI
• But, a household may receive some types of
  vouchers without qualifying at 50 of AMI

8
Types of Vouchers

• Households may receive vouchers referred to as
  enhanced vouchers, sticky vouchers or
  preservation vouchers when an owner
• Opts out of a project-based Section 8 contract
• Decouples a Section 236 property
• Prepays a Section 236 or Section 221(d)(3)
  mortgage
• Closes a public housing project

9
Types of Vouchers Income Limits contd

• Households may qualify for enhanced, sticky, or
  preservation vouchers with an income as high as
• 80 of AMI
• 95 of AMI in properties for the elderly/disabled
  
• 95 of AMI in HUD-designated low-vacancy areas

10
Students in the HCV Program

• No assistance shall be provided under Section 8
  of the US Housing Act of 1937 to any individual
  who
• Is enrolled as a student at an institution of
  higher education under Section 1002 of the Higher
  Education Act of 1965
• Is not yet 24 years of age
• Is not a veteran of the US military
• Is unmarried contd

11
Students with an HCV contd

• Does not have a dependent child and
• Is not otherwise eligible, or has parents who,
  individually or jointly, are not eligible to
  receive assistance on the basis of income through
  the Section 8 program.

12
Students with an HCV contd

• A student under 24 years old may be determined
  eligible, regardless of the parents income,
  after confirming all of the following
• The individual is of legal contract age under
  state law
• The individual has established a separate
  residence from their parent or legal guardian for
  at least one year or meets the Department of
  Educations definition of an independent student

13
Students with an HCV contd

• The individual is not claimed as a dependent by a
  parent or legal guardian
• The individual provides a certification of the
  amount of financial assistance provided by their
  parents even if the amount is 0.

14
Students with an HCV contd

• A single, full time student may qualify for the
  HCV program
• It is almost impossible for a single, full time
  student to qualify for the LIHTC program

15
HCV and Maximum Rent

• PHA approves a reasonable market rent for a unit
  with a HCV
• Rent may exceed the maximum allowable LIHTC rent
• Tenant contribution may exceed the maximum
  allowable LIHTC rent

16
HCV and Maximum Rent contd

• An owner may collect total revenue exceeding the
  LIHTC maximum rent if
• Resident receives at least 1 in assistance
• Owner lowers the rent to the LIHTC maximum if the
  resident goes off the voucher program for any
  reason

17
Tenant Income Certifications

• PHA staff process the initial certifications and
  recertifications for the HCV program
• The PHA completes a a HUD-50058 for the household
• HUD-50058 is usually not acceptable as a LIHTC
  TIC because the household members do not sign it

18
Tenant Income Certifications contd

• LIHTC HFA may allow an owner to obtain income
  info from the PHA to certify a household tax
  credit eligible
• Owner must still verify a households eligibility
  under the LIHTC full time student rule as
  required by the HFA
• HFA probably requires residents on the voucher
  program to sign their TIC

19
Project Based Voucher Program

• PBV program is part of a PHAs HCV program
• PHA may elect to use as much as 20 of its HCV
  budget for a PBV program

20
PBV Program contd

• PHA may not provide a PBV for more than 25 of
  the units in a building except in properties for
  the elderly and disabled or in sites providing
  supportive services
• PBV units are fixed

21
PBV Tenant Eligibility

• General income limit is 50of AMI
• Some PBVs may utilize alternative income limits
• PBV program follows the rule governing student
  eligibility for the HCV program

22
PBV and Maximum Rent

• In Oct 2005, HUD issued a rule limiting the rent
  a PHA could subsidize through a PBV at a LIHTC
  property
• From November 2005 until May 2007, PHAs could not
  subsidize a rent exceeding the LIHTC maximum rent

23
PBV Maximum Rent contd

• In 2007, HUD issued a proposed rule in May and a
  final rule in November lifting the restriction on
  rents for a PBV at a LIHTC property
• PHAs now follow standard practice for the HCV
  program to approve reasonable market rents for
  units covered by a PBV at a LIHTC property
• Owners with PBVs established between Nov 2005
  May 2007 should ask their PHA to redetermine the
  rents for their PBV units

24
TICs in the PBV Program

• Even though the subsidy is project based, PHA
  staff process the initial certifications and
  recertifications for the PBV program
• The PHA completes a HUD-50058 for each household
• HUD-50058 usually not acceptable as a LIHTC TIC
  because the household members do not sign it

25
PBV Residents Who Move

• So long as they give proper notice, a resident
  who moves from a PBV unit receives a HVC to use
  at a new unit
• The PHA approves a new resident for the PBV unit
• The owner is responsible for ensuring the
  household is LIHTC-eligible

26
Project Based Section 8

• Owner has a contract with HUD to provide project
  based rental subsidy for all or some of a
  propertys residents
• HUD governs the occupancy for PBS8 properties
  through the 4350.3 handbook
• Owner reports on use of the subsidy through a HUD
  field office or contract administrator (CA)

27
4350.3 Handbook

• LIHTC program uses 2 chapters from the same
  handbook used by PBS8
• Chapter 3 tells LIHTC owners how to establish a
  familys size for selecting the income limit to
  determine their eligibility
• Chapter 5 tells LIHTC owners how to calculate and
  verify a households annual income to determine
  their eligibility

28
PBS8 Program contd

• HUD signed the majority of PBS8 contracts between
  1976 and 1982
• Contracts were signed throughout the 1980s for
  Section 202/8 properties for elderly/disabled
  households
• Initial HAP contracts began expiring in 1996
• Owners now renew contracts, usually for terms
  ranging from one to five years
• When owners opt out of the program, their
  residents may qualify for a HCV

29
PBS8 Program Income Limits

• Income limit for a project based Section 8
  contract is based on when the owner signed the
  original HAP contract
• If the original HAP contract was signed before
  10/1/81, the owner uses the low income limit (80
  of AMI)
• If the original HAP contract was signed on or
  after 10/1/81, the owner uses the very low income
  limit (50 of AMI)

30
PBS8 Income Targeting

• An owner must demonstrate to HUD that 40 of the
  households that begin to receive Section 8
  subsidy in a year have income at or below 30 of
  AMI

31
Students in PBS8

• The project based Section 8 program follows the
  same rule to determine student eligibility as the
  HCV program.
• Owners have been implementing this rule since
  December 2005

32
Maximum Allowable Rent

• Owners must process rent increases through a HUD
  field office or a CA
• Owners may be able to increase their rents
  annually

33
Maximum Rents contd

• An owner with project based S8 requests a rent
  increase through one of three methods
• Through the application of the annual adjustment
  factor (AAF)
• Through the application of the operating cost
  adjustment factor (OCAF)
• By submitting a budget based rent increase to HUD
  or their CA

34
Maximum Rents contd

• If the HUD approved rent is more than the maximum
  LIHTC rent, the owner may collect the HUD
  approved rent so long as the resident receives at
  least 1 in rental assistance
• If the resident is paying the market rent,
  usually the HUD approved contract rent, without
  assistance, they may not pay more than the LIHTC
  maximum rent

35
Existing Residents

• Existing residents do not grandfather into the
  LIHTC program
• The owner must complete initial certifications
  for the LIHTC program
• Complete the initial TICs based on when the owner
  plans to begin the credit period.
• Look to Chapter 4 of the Audit Guide for guidance
  for acquisition/rehab properties

36
Acquisition/Rehab Properties

• The IRS has said that the tax credits for an
  ac/rehab property are placed in service on the
  date of acquisition
• If the owner completes the rehab the year of
  acquisition, the owner can start generating
  credits at acquisition
• The IRS gives the owner 120 days after
  acquisition to complete the initial TICs
• Example

37
Acquisition/Rehab Example

• Owner acquires property on 4/1/07
• Completes rehab on 11/15/07
• Owner certifies all the existing residents
  eligible by 7/31/07
• The units generate credits 4/07

38
Ac/Rehab Properties contd

• If an owner completes the rehab a year following
  acquisition, the building can begin to generate
  credits in January of the year the owner finishes
  the rehab

39
Acquisition/Rehab Example

• Owner acquires building on 4/1/07
• Completes rehab 6/1/08
• Units occupied by residents the owner certifies
  eligible can begin to generate credits in January
  2008
• contd

40
Ac/Rehab Example contd

• An initial TIC the owner completes within 120
  days of the start of the credit period is
  considered fresh and initiates the credits for
  the unit
• During January 2008, the owner must test the
  income of a household initially certified
  eligible more than 120 days before the start of
  the credit period
• Testing requires the owner to ask the resident to
  sign a statement certifying to any changes in
  their income since signing their initial TIC, and
  to provide a copy of a pay stub, bank statement,
  etc It does not require 3rd party verifications
  or a full annual recertification

41
Existing Residents contd

• Existing residents do not automatically qualify
  for the LIHTC program but they cannot be
  displaced for being ineligible
• Residents are protected by the HUD model lease
• A unit will not generate a tax while occupied by
  an ineligible resident

42
Tenant Income Certifications

• The owner is responsible for processing all
  initial certifications and annual
  recertifications
• Under specific circumstances, an owner must
  process an interim recertification for a resident
• Processing an interim recertification does not
  change the need for the owner to process an
  annual recertification effective the residents
  anniversary date

43
PBS8 Annual Recertifications

• An owner must recertify a resident effective the
  first day of the month the resident moved into
  the unit
• For example, if a resident moves in anytime
  during September, the owner must complete their
  annual recertification effective September 1
• Ask your LIHTC HFA about marrying your LIHTC
  recert schedule to your HUD recert schedule

44
Annual Recertifications contd

• An owner of a 100 LIHTC property may apply for a
  waiver from completing annual recertifications
• Must continue to do recerts to comply with PBS8
  requirements

45
Forms

• The owner completes a HUD 50059 form for every
  initial certification and recertification
• The household certifies the income and other
  family information by signing the 59
• Ask your HFA about using the 59 as the LIHTC TIC

46
Monitoring Reporting

• Every 3 years LIHTC HFA must
• Review 20 of tenant files
• Inspect 20 of the units and common areas

47
Monitoring Reporting contd

• HUD or a CA must complete annual management
  reviews for properties with project based Section
  8
• REAC physical inspections are completed based on
  the score the site received at previous
  inspections

48
Owner Reporting

• Owners must submit an annual certification of
  compliance for the LIHTC program
• For project based Section 8, owners must
• Submit initial certifications and
  recertifications electronically through TRACS
• Submit an annual audit completed by a CPA

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Questions???

• Quadel Consulting Corporation
• 1200 G Street, NW Suite 700
• Washington, DC 20005
• 1- 866-640-1019
• www.quadel.com
• Liz Bramlet
• liz_at_lizbramletconsulting.com