Maintaining Unit Mix

Maintaining unit mix to comply with HOME and LIHTC requirements is one of the more complex management functions during the affordability period. Owners/Managers must maintain the proper mix of HOME- and LIHTC-assisted units, as specified in their written agreements with the PJ and the state allocating agency. This requires making income-eligibility determinations annually and keeping track of unit occupancy and rents whenever there is turnover or changes in tenant income.

The steps the owner must take to maintain compliance with unit mix requirements will depend on:

  • The property’s written agreements. Owners of HOME-and LIHTC-assisted properties execute written agreements that state the terms and conditions of funding with the PJ and the state allocating agency, respectively. These written agreements specify the unit mix requirements for each program. The owner/manager must strive to maintain the property in compliance with these unit mix requirements throughout the affordability/compliance period.
  • Whether HOME-assisted units are fixed or floating. HOME units may be fixed or floating, as described in the following section. This gives the owner/manager more or less flexibility in changing unit designations to maintain the required unit mix.
  • The number and types of units in the property (such as HOME-assisted, LIHTC-assisted, HOME-LIHTC, and market rate). The greater the variety of unit types, the more options the owner/manager has to comply with unit mix requirements. For instance, in a property with a mix of HOME, LIHTC, and market rate units, the owner/manager has more choices to maintain or restore unit mix than in a property with only LIHTC units.

PJs must provide detailed instruction to owners/managers on how to ensure that HOME income-eligible tenants occupy HOME-assisted units and are charged the appropriate rents throughout the affordability period. State allocating agencies provide similar direction to LIHTC owners.

HOME Unit Mix Requirements

The HOME written agreement between the PJ and the owner specifies:

  • The number of HOME-assisted units that the owner/manager must maintain throughout the affordability period
  • Which units are initially designated as High HOME Rent units or Low HOME Rent units
  • Whether the HOME units are fixed or floating.

These decisions must be made at the time of project commitment.

Fixed vs. Floating HOME Units

Properties with fixed HOME units have specific units (e.g., Units 101, 102, and 103) that are designated as HOME-assisted. Owners/Managers must maintain these specific units as HOME-assisted throughout the affordability period, consistent with the written agreement.

  • The specific unit’s designation as a HOME-assisted unit does not change during the affordability period. However, the owner/manager may find it necessary to change the unit’s initial income targeting designation (High HOME Rent unit or Low HOME Rent unit) in order to maintain the required mix. If the property is out of compliance because of both a High HOME unit and Low HOME unit, the owner must always restore the number of Low HOME Rent units first.
    • For example, Unit 101 may initially be designated as a Low HOME Rent unit. If the tenant’s income increases and the tenant is no longer very low-income, the owner/manager must designate the next High HOME Rent unit that becomes available as a Low HOME Rent unit in order to restore the required number of Low HOME Rent units. (The following sections discuss over-income tenants, including applicable rents for over-income tenants.)

Properties with floating HOME units do not have specific units that are designated HOME-assisted for the duration of the affordability period. Initially, the PJ designates specific units as HOME-assisted, and as High HOME units and Low HOME units. During the affordability period the owner/manager is required to maintain the total number of HOME-assisted and non-assisted units, and High HOME units and Low HOME units that are originally designated, not the specific units.

  • The HOME-assisted unit designations can change, or “float,” among comparable assisted and non-assisted units in order to maintain the required unit mix, including the number of assisted and non-assisted units and the number of High and Low HOME units.
    • For example, at the time of annual income determination, if the owner/manager finds that the income of a tenant residing in a High HOME Rent unit has increased and the tenant is no longer low-income, then the owner must identify a comparable, non-assisted unit for a low-income tenant, and designate this unit as assisted. (The following sections discuss over-income tenants in more detail, including applicable rents for over-income tenants.)
    • The goal is to maintain the initial (required) number of HOME-assisted units, and the initial (required) mix of High and Low HOME Rent units. The owner can change designations as needed, in order to maintain the required unit mix.
    • For example, if a tenant residing in a Low HOME unit moves out, and there is a comparable non-assisted unit with an existing very low-income tenant, the owner can redesignate the occupied non-assisted unit as a Low HOME unit, and redesignate the vacated unit as non-assisted.
  • When redesignating a non-assisted unit as HOME-assisted, owners/managers must use a non-assisted unit that is comparable to the HOME unit. They may choose (but are not required) to substitute a “greater” non-assisted unit for a “lesser” HOME unit. A “greater” unit is one that might be considered preferable because of larger size, additional bedrooms, or amenities. Owners/Managers are not permitted to substitute a lesser non-assisted unit for a greater HOME unit, unless this restores the original unit mix specified in the written agreement.

Over-Income Tenants in HOME Units

When owners/managers recertify a tenant’s income, they may find that a tenant’s income has increased. A tenant is considered over-income in the HOME Program when one of the following occurs:

  • The tenant occupies a High or Low HOME unit and the household income increases over the current HOME low-income limit (80 percent of AMI) for its family size.
  • The tenant occupies a Low HOME unit and the household’s income increases above the current very low-income limit (50 percent of AMI), but is still below the low-income limit for its family size.

When a tenant is over-income, the property is considered temporarily out of compliance with HOME’s occupancy and unit mix requirements. Temporary noncompliance due to an increase in an existing tenant’s income is permissible as long as the owner takes specific steps to restore the correct occupancy and unit mix in the property as soon as possible. These steps are described throughout Section 5.4 of this chapter and vary depending on the type of unit and whether the units are fixed or floating.

After making applicable adjustments to ensure the property has the required HOME unit mix, the owner/manager may also need to adjust the rents of affected tenants:

  • A unit that is designated as a High HOME unit must be rented to low-income tenant at a rent that does not exceed the High HOME rent limit.
  • A unit that is designated as a Low HOME unit must be rented to very low-income tenant at a rent that does not exceed the Low HOME rent limit.
  • During a period of temporary noncompliance, if an over-income tenant (with income over 80 percent of AMI) is residing in a floating HOME-assisted unit, that tenant’s rent must be adjusted to be 30 percent of the household’s adjusted income, or the market rent, whichever is less. If an over-income tenant (with income over 80 percent of AMI) is residing in a fixed HOME-assisted unit, that tenant’s rent must be adjusted to be 30 percent of the household’s adjusted income. This rent adjustment must be made as soon as the tenant’s lease permits.

Owners/Managers may not evict or terminate the tenancy of a household because its income increased.

Making Income Determinations for Replacement Units

When renting any vacant unit— including units that are used for replacement purposes to comply with unit mix requirements--the owner/manager must verify that the tenant is income-eligible for the applicable program(s), prior to renting the unit. Income determination procedures are described in Section 5.4 of this chapter.

LIHTC Unit Mix Requirements

The LIHTC Program also requires that the owner/manager maintain the required LIHTC unit mix, as specified in its agreement with the state credit allocating agency. This agreement specifies how many units are reserved for households with incomes at or below 50 percent of AMI, 60 percent of AMI, or possibly a deeper income targeting mix if the developer has agreed to it. LIHTC unit mix requirements are in effect for the duration of the LIHTC compliance period.

Like HOME, LIHTC requires that as LIHTC units are vacated, the owner/manager must verify that the next tenant is income-eligible. The LIHTC income limit for the new tenant depends on the income targeting requirements in the property’s LIHTC agreement (50 percent of AMI, 60 percent of AMI, or deeper income targeting). Of course, the owner/manager must charge the new tenant the applicable LIHTC rent.

As households residing in LIHTC units become over income, the owner/manager must rent the next available non-LIHTC unit to an income-eligible tenant at the applicable LIHTC income limit in order to maintain the required number of LIHTC units.

  • The LIHTC Program defines "next available unit" as any unit in the same building, as long as the LIHTC-eligible basis square footage is maintained. (This differs from the HOME

Program, which uses the next available comparable unit, based on the number of bedrooms, unit size, and amenities.).7

  • The LIHTC definition of “over-income tenant” differs from the HOME Program, as well. Under LIHTC, an over-income tenant has an annual gross income that exceeds 140 percent of the current income limit for the unit (i.e., over 70 percent of area median income (AMI) for units designated at 50 percent of AMI (50 percent X 140 percent) or over 84 percent of AMI for units designated at 60 percent of AMI (60 percent X140 percent)).

7 Reminder: 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.

  • Unlike HOME, under the LIHTC Program, once a tenant is determined to be over-income, the owner/manager cannot adjust its rent until after it designates a replacement unit and the unit is rented to an income-eligible tenant at the applicable LIHTC rent. Then, the over-income tenant’s unit is redesignated as a non-assisted unit. Once the unit is non-assisted, the owner/manager may charge any rent it chooses, likely to be the market rent.

Note, in properties that have 100 percent LIHTC units, there are no available “non-LIHTC units” that can be redesignated for replacement purposes when a tenant becomes over-income. Since the owner/manager cannot increase the rents above the LIHTC rent limits until a replacement unit is designated, this means that the owner/manager cannot adjust the rent of an over-income tenant in this situation. Compliance can only be restored when the tenant moves out and the unit is rented to an income-eligible tenant.

Timing of Rent Adjustments

Under both the HOME and LIHTC Programs, without exception, rent adjustments can only be made when the tenant’s lease permits. At the time of lease renewal, owners/managers should double-check the type of unit the tenant is in (High or Low HOME, LIHTC-HOME, etc.) and verify that the correct rent is being charged for that unit type.

In most situations where there is an over-income tenant, owners/managers cannot adjust rents until there is a replacement unit that restores the unit mix. The only exception to this is when an over-income tenant whose income is above 80 percent of AMI resides in a HOME-only unit, the rent must be adjusted as soon as the lease permits, regardless of the status of a replacement unit. As described below, if the unit is an LIHTC-HOME unit, the LIHTC rents apply.

If the income of a household in an LIHTC-only unit rises to more than 140 percent of the then-qualifying income for that unit, and there are non-LIHTC units at the property, the property manager must lease the next non-LIHTC unit to a household with qualifying income. Only after that next available unit has been rented to an LIHTC-qualified household, may the unit with the over-income household be converted to market rent, subject to the terms of the lease. Additionally, once the next available unit has been rented to an LIHTC-qualified household, the over-income household is no longer counted towards the property’s LIHTC set-aside, and is no longer considered an LIHTC household. Accordingly, the owner may choose not to renew the lease to the household which has been replaced by a qualifying LIHTC household, provided doing so is allowed by local and state laws.

Maintaining the Unit Mix in HOME-LIHTC Projects

Maintaining the unit mix in HOME-LIHTC projects can be challenging. To simplify the rules around unit mix in HOME-LIHTC properties, the HOME Program adopts some LIHTC rules in HOME-LIHTC units. These are reviewed in the sections below.

Maintaining the Unit Mix When a HOME-LIHTC Unit Is Vacated

Generally, when a tenant vacates a HOME-LIHTC unit and the property is in compliance with the unit mix requirements (that is, there are no over-income tenants in any of the assisted units), the owner/manager complies with the unit mix requirements by maintaining the unit’s HOME-LIHTC designation(s) and renting the unit to a tenant that meets the income and rent limits of both programs, as they apply to that specific unit (High or Low HOME unit; 50 percent or 60 percent of AMI, or other LIHTC applicable income limit).

Defining “Over-Income Tenant” and “Over-Income Unit”

An “over-income tenant” is defined differently for HOME and LIHTC.

For HOME, an “over-income tenant” is either one of the following:

  • A tenant whose annual gross household income exceeds the current HOME income limit (80 percent of AMI) for its family size
  • A tenant that occupies a Low HOME unit and whose annual gross household income exceeds the current very low-income limit (50 percent of AMI), but is still below the low-income limit, for its family size.

For LIHTC, an over-income tenant is a tenant whose annual gross household income exceeds 140 percent of the current income limit for the unit, for its family size. For units designated for households with incomes at 50 percent of AMI, the household becomes over-income if its income exceeds 70 percent of AMI (50 percent X 140 percent). For units designated for households with incomes at 60 percent of AMI, the household becomes over-income if its income exceeds 84 percent of AMI.

An “over-income unit,” for the purposes of this guidebook, is a unit that is occupied by an over-income tenant.

Maintaining the Mix when a Tenant Is Over-Income

When a tenant in a HOME-LIHTC unit becomes over-income, the owner/manager must take two steps to comply with the occupancy and unit mix requirements of both the HOME and LIHTC Programs:

  • Fix the Mix. The owner/manager must restore the unit mix specified in the property’s HOME and LIHTC agreements, as soon as possible. This is done using the same processes described for each program individually -- by renting vacant units and/or making unit redesignations -- but the owner/manager must be sure to comply with both programs. The specific actions vary, depending on the type of property (fixed or floating HOME units; and the number/percentage of LIHTC, HOME, and market rate units). These actions are described for different scenarios in detail below and illustrated in Exhibits 5-3, 5-4, and 5-5.
  • Fix the Rents. When a tenant becomes over-income, and/or when unit designations change (e.g., from High HOME to Low HOME units, or from HOME-assisted to non-assisted), the owner/manager must adjust the rents to remain in compliance with rent requirements for each type of unit. The requirements related to making rent adjustments to comply with both programs are described for different scenarios below and illustrated in Exhibits 5-3, 5-4, and 5-5.

Using three common scenarios, the flowcharts in Exhibits 5-3, 5-4, and 5-5 illustrate how to maintain the unit mix and occupancy requirements of both the HOME and LIHTC Programs when a tenant in an LIHTC-HOME unit goes over income, as follows:

  • Exhibit 5-3: The property has fixed HOME units and 100 percent LIHTC units.
  • Exhibit 5-4: The property has floating HOME units, and 100 percent LIHTC units.
  • Exhibit 5-5: The property has floating HOME units, and a mix of HOME, LIHTC, LIHTC-HOME, and market rate units.

In each scenario the decision process starts with two questions:

  • Does the over-income tenant reside in an LIHTC-High HOME unit or an LIHTC-Low HOME unit? This determines which type of unit (High or Low HOME) must be replaced to fix the mix.
  • If the over-income tenant is in an LIHTC-Low HOME rent unit, is the tenant’s income over 80 percent of AMI, or between 50 and 80 percent of AMI? This determines if the over-income unit can be redesignated as a High HOME unit, or if the tenant is no longer income-eligible for any HOME unit.

Depending on the answers to these questions, the owner/manager takes slightly different steps to (1) Fix the Mix and (2) Fix the Rents, to restore compliance.

Defining Comparable Units

“Replacement units” must meet certain criteria in each program:

HOME units may only be replaced by units that are comparable in terms of size (square footage), number of bedrooms, and amenities. A HOME unit can be replaced with a unit that is “greater” (typically more preferred in terms of size, number of bedrooms, and amenities), but it cannot be replaced with one that is lesser.

LIHTC units may only be replaced by units in the same building with equivalent LIHTC-eligible basis square footage.

Maintaining the Unit Mix in LIHTC-HOME Properties When HOME Units Are Fixed and the Property Is 100 Percent LIHTC

Exhibit 5-3 illustrates the course of action when a tenant’s income goes over income in a property where the HOME units are fixed and the property is 100 percent LIHTC. This is the most straightforward scenario because the owner/manager manages the unit mix with a relatively small inventory of units (only those that are HOME-assisted). Since all of the units are LIHTC, the owner/manager cannot take any action to restore LIHTC compliance until the over-income tenant moves out.

  • Fix the Mix. Because the HOME units are fixed, the owner/manager cannot replace the over-income unit with a non-assisted unit. One of three scenarios is possible:
    • The over-income tenant resides in an LIHTC-High HOME unit. Presuming that all the necessary Low HOME units in the property are compliant, the over-income unit remains designated as an LIHTC-High HOME unit. The owner/manager cannot restore the unit mix until the tenant moves out; the property is considered temporarily out of compliance until that time.
    • The over-income tenant resides in an LIHTC-Low HOME unit and its income goes above 80 percent of AMI. The owner/manager redesignates the next available LIHTC-High HOME unit as an LIHTC-Low HOME unit, and rents it to a very low-income household. This is because the owner must restore compliance to the Low HOME units before the High HOME units. Once an LIHTC-Low HOME unit has been designated, then, the owner/manager redesignates the over-income unit as an LIHTC-High HOME unit. Since the occupant has an income that exceeds the low-income limit, the property continues to be temporarily out of compliance until the over-income tenant moves out.
    • The over-income tenant resides in an LIHTC-Low HOME unit and its income goes above the HOME very low-income limit (50 percent of AMI), but does not exceed the HOME low-income limit (80 percent of AMI). The owner/manager redesignates the next available LIHTC-High HOME unit as an LIHTC-Low HOME unit, and rents it to a very low-income household. The tenant must be income-eligible under both HOME and LIHTC. Then, the owner/manager redesignates the over-income unit as an LIHTC-High HOME unit. If there are no other noncompliant units, this step restores the unit mix and the property is compliant.
  • Fix the Rents. When unit designations change as a result of steps taken to fix the mix (described above), the owner/manager may need to adjust the rents to ensure that each unit has a compliant rent. Rents can be adjusted only when the tenant’s lease permits.
    • In an LIHTC-Low HOME unit, the rent may not exceed the lesser of the Low HOME rent or the LIHTC rent. If a rent adjustment is needed, it can only be made after a replacement unit is designated. The HOME rule that requires raising the rent to 30 percent of the tenant’s adjusted monthly income does not apply.
    • In an LIHTC-High HOME unit, the rent may not exceed the lesser of the High HOME rent or the LIHTC rent. If a rent adjustment is needed, it can only be made after a replacement unit is designated. The HOME rule that requires raising the rent to 30 percent of the tenant’s adjusted monthly income does not apply.
    • While the property is temporarily out of compliance, when an over-income (above 80 percent of AMI) tenant occupies an LIHTC-HOME unit, the rent may not exceed the maximum LIHTC rent for the unit type. (The HOME Program adopts the LIHTC rents in this situation.) If a rent adjustment is needed, it must be made as soon as the tenant’s lease permits.

Exhibit 5-3: Addressing Over-Income Tenants in HOME-LIHTC Units When HOME Units Are Fixed

Exhibit 5-3: Addressing Over-Income Tenants in HOME-LIHTC Units When HOME Units Are Fixed

Maintaining the Unit Mix in LIHTC-HOME Properties when HOME Units Are Floating and the Property is 100 Percent LIHTC

Exhibit 5-4 illustrates the course of action when a tenant’s income goes over income in a property that has floating HOME units, and 100 percent of the units are LIHTC. This situation is a little more complicated than the one illustrated in Exhibit 5-3 because the owner/manager has all of the comparable units in the property at its disposal to manage the unit mix. These represent a mix of LIHTC-HOME units and LIHTC-only units (which are treated as non-assisted, for purposes of the HOME Program).

  • Fix the Mix. When HOME units float, and a tenant in a HOME unit becomes over-income, the owner/manager can draw from any comparable unit in the property (in this instance, all of which are LIHTC units) to replace the HOME unit and restore HOME compliance. Since all of the units are LIHTC, the owner/manager cannot take any actions to restore LIHTC compliance until the over-income tenant moves out. There are several possible scenarios:
    • The tenant of an LIHTC-High HOME unit becomes over-income. To restore the unit mix, the owner/manager can either:
      • Redesignate the next available comparable LIHTC-only (non-HOME-assisted) unit as an LIHTC-High HOME unit.
      • Identify a comparable LIHTC-only unit that is occupied by a low-income (HOME income-eligible) tenant and redesignate it as an LIHTC-High HOME unit.

      In both cases, once the replacement occurs, the owner/manager redesignates the over-income unit as an LIHTC-only unit.

    • The income of a tenant in an LIHTC-Low HOME unit exceeds the low-income limit. To restore the unit mix, the owner/manager can:
      • Use a comparable LIHTC-only unit for replacement—this can be either the next available LIHTC-only (non-HOME-assisted) unit, or an LIHTC-only unit that is occupied by a very low-income tenant. Redesignate the LIHTC-only replacement unit as an LIHTC-Low HOME unit. Once the replacement occurs, redesignate the over-income unit as LIHTC-only.
    • The income of a tenant in an LIHTC-Low HOME unit increases above the HOME very income-limit (50 percent of AMI), but is still less than the HOME low-income limit (80 percent of AMI). The owner/manager can:
      • Use a comparable LIHTC-High HOME unit for replacement—this can be either the next available comparable LIHTC-High HOME or an LIHTC-High HOME unit that is occupied by a very low-income tenant. Redesignate the LIHTC-High HOME replacement unit as an LIHTC-Low HOME unit. Once the replacement occurs, redesignate the over-income unit as an LIHTC-High HOME unit.
      • Use a comparable LIHTC-only unit for replacement—this can be either the next available LIHTC-only unit or an LIHTC-only unit that is occupied by a very low-income tenant. Redesignate the LIHTC-only replacement unit as an LIHTC-Low HOME unit. Once the replacement occurs, redesignate the over-income unit as an LIHTC-only unit.
    • Fix the Rents. When unit designations change, as described above, the owner/manager adjusts the rents to ensure that each unit has a compliant rent. Rents can be adjusted only when the tenant’s lease permits.
      • In an LIHTC-Low HOME unit, the rent may not exceed the lesser of the Low HOME rent or the LIHTC rent. The rent is adjusted after the replacement unit is identified.
      • In an LIHTC-High HOME unit, the rent may not exceed the lesser of the High HOME rent or the LIHTC rent. The rent is adjusted after the replacement unit is identified.
      • In an LIHTC-only unit, the LIHTC rents apply.
      • While the property is temporarily out of compliance because an over-income tenant occupies an LIHTC-HOME unit, the rent may not exceed the maximum LIHTC rent for the unit type. (The HOME Program has adopted the LIHTC rents in this situation.) If a rent adjustment is needed, it must be done as soon as the tenant’s lease permits.

Exhibit 5-4: Addressing Over-Income Tenants in HOME-LIHTC Units When HOME Units are Floating and the Property is 100% LIHTC

Exhibit 5-4: Addressing Over-Income Tenants in HOME-LIHTC Units When HOME Units are Floating and the Property is 100% LIHTC

Maintaining the Unit Mix in LIHTC-HOME Properties when HOME Units Are Floating and the Property Has a Mix of LIHTC and Market Rate Units

Exhibit 5-5 illustrates the course of action when a tenant becomes over-income in a property that has a mix of HOME-only, LIHTC-only, LIHTC-HOME, and market rate units. This last scenario is one of the most complex property management situations because the owner/manager has the most options for maintaining and restoring HOME compliance with unit mix requirements.

  • Fix the Mix. As in the scenario above (Exhibit 5-4), when a tenant in an LIHTC-HOME unit becomes over-income, the owner/manager can draw from any other available and comparable units in the property to “replace” it. The following situations are possible:
    • The tenant of an LIHTC-High HOME unit becomes over income for both HOME and LIHTC (under both program definitions of over-income). The owner/manager can do one of the following:
      • Use a comparable market rate unit for replacement—this can be either the next available market rate unit or a market rate unit that is occupied by a low-income tenant. Redesignate the market rate replacement unit as an LIHTC-High HOME unit and rent it to a tenant that is income-eligible for both programs. Once the replacement occurs, redesignate the over-income unit as a market rate unit, with no HOME or LIHTC restrictions. This restores compliance with both programs.
      • Use a comparable LIHTC-only unit for replacement—this can be either the next available LIHTC-only unit or an LIHTC-only unit that is occupied by a low-income tenant. Redesignate the LIHTC-only replacement unit as an LIHTC-High HOME unit. Once the replacement occurs, redesignate the over-income unit as an LIHTC-only unit. This restores compliance with HOME only; the unit continues to be out of compliance under LIHTC because the over-income tenant resides in an LIHTC unit.
    • The tenant of an LIHTC-Low HOME unit becomes over income for both HOME and LIHTC (under both program definitions of over-income), and the tenant’s income exceeds 80 percent of AMI. Assuming the tenant is over-income for both programs, the owner/manager can:
      • Use a comparable market rate unit for replacement—this can be either the next available market rate unit or a market rate unit that is occupied by a very low-income tenant (and meets the income requirements of both programs). Redesignate the market rate replacement unit as an LIHTC-Low HOME unit. Once the replacement occurs, redesignate the over-income unit as a market rate unit.
      • Use a comparable LIHTC-only unit for replacement—this can either be the next available LIHTC-only unit, or an LIHTC-only unit that is occupied by a very low-income tenant. Redesignate the LIHTC-only replacement unit as an LIHTC-Low HOME unit. Once the replacement occurs, redesignate the over-income unit as an LIHTC-only unit. This restores compliance with HOME, but since the over-income tenant now resides in an LIHTC-only unit, it does not restore LIHTC compliance.

      When a Tenant is Over-Income for HOME, but not for LIHTC

      In some circumstances, a tenant in a HOME-LIHTC unit may go over income for the HOME Program, but not for LIHTC. This is because over-income is defined differently for each program. (For example, in an LIHTC unit reserved for a household with an income at or below 60 percent of AMI, the household becomes over-income when its income exceeds 84 percent of AMI (60 percent X 140 percent)). When this happens, the owner/manager may need to find a replacement unit for the HOME unit, but not the LIHTC unit. This may result in two assisted units. The owner/manager redesignates (1) the unit with the HOME-over-income tenant as an LIHTC-only unit, and (2) a non-assisted unit as a HOME-only unit.

    • The income of a tenant residing in an LIHTC-LowHOME unit exceeds 50 percent of AMI but is less than 80 percent of AMI. In this situation, it is likely that the tenant is over income for the HOME Program, but not necessarily for the LIHTC Program (due to the different income limits and definitions of over-income for each program). The owner/manager can:
      • Use a comparable LIHTC-High HOME unit for replacement—this can be either the next available LIHTC-High HOME unit or an LIHTC-High HOME unit that is occupied by a very low-income tenant. Redesignate the LIHTC-High HOME replacement unit as an LIHTC-Low HOME unit. Once the replacement occurs, redesignate the over-income unit as an LIHTC-High HOME unit.
      • Use a High HOME-only unit for replacement—this can be either the next available High HOME-only unit or a High HOME-only unit that is occupied by a very low-income tenant. Redesignate the High HOME-only replacement unit as a Low HOME-only unit. Once the replacement occurs, redesignate the over-income unit as an LIHTC-High HOME unit.(In other words, swap only the HOME designation, not the LIHTC designation.)
      • Use a comparable LIHTC-only unit for replacement—this can be either the next available LIHTC-only unit, or an LIHTC-only unit that is occupied by a very low-income tenant. Redesignate the LIHTC-only replacement unit as an LIHTC-Low HOME unit. Once the replacement occurs, redesignate the over-income unit as an LIHTC-only unit.

    Note, since the over-income tenant is low-income, and continues to be eligible for the HOME Program, the unit cannot be replaced by a market rate unit.

  • Fix the Rents. When unit designations change, as described above, adjust the rents to ensure that each unit has a compliant rent. Rents can only be adjusted when the tenant’s lease permits.

    • In an LIHTC-Low HOME unit, the rent may not exceed the lesser of the Low HOME rent or the LIHTC rent. If a rent adjustment is needed, it can only be done after a replacement unit is designated.
    • In an LIHTC-High HOME unit, the rent my not exceed the lesser of the High HOME rent or the LIHTC rent. If a rent adjustment is needed, it can only be done after a replacement unit is designated.
    • In an LIHTC-only unit, LIHTC rents apply. If a rent adjustment is needed, it can only be done after a replacement unit is designated. If the tenant is over-income (under LIHTC definition), the next available market rate unit must be rented to an income-eligible household at no more than the applicable LIHTC income limit. The rent for the unit with the over-income tenant may increase to market rate after the replacement unit is designated.
    • While the property is temporarily out of compliance (until the unit with the over-income tenant is replaced), because an over-income tenant (above the low-income limit) occupies an LIHTC-HOME unit, the rent cannot exceed the LIHTC rent. (The HOME Program adopts the LIHTC rents in this situation.) If a rent adjustment is needed, it must be done as soon as the tenant’s lease permits.
    • In a market rate unit, rents are no longer regulated and can be adjusted without restriction. Typically, these rents will be set at market rates.

Exhibit 5-5: Addressing Over-Income Tenants in HOME-LIHTC Units When HOME Units Are Floating and the Property is Mixed (Market and LIHTC)



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