Rent affordability for some period of time is required by both LIHTC and HOME Programs. Throughout the affordability period, both HOME and LIHTC require that assisted unit rents comply with the respective program rent limits. Chapter 2 provides a detailed discussion on program rent limits and how they apply to HOME-LIHTC projects, including how they are calculated for each program. The guidelines offered in Chapter 2 apply throughout the affordability period, as do the rent requirements of each program.
HOME Rent Limits
HOME rent limits are updated every year by HUD. HUD calculates and issues the HOME rent limits along with the HOME income limits early in the year (approximately March). The rent limits go into effect 30 days after they are posted on the HOME website at http://www.hud.gov/homeprogram/.
The calculations that are used to compute the High and Low HOME rent limits are explained in Chapter 2. PJs should be sure to notify all property managers of the new income and rent limits when they become effective.
LIHTC Rent Limits
HUD issues the income limits applicable to the LIHTC Program annually. State allocating agencies compute the rent limits from the HUD-issued income limits and notify the tax credit project owners.
Rent Limits in HOME and LIHTC Units
- Establishing rents. Each time the rent limits are updated, the property manager must determine the maximum rents that can be charged for each program. This is done in the same way that the rents are initially determined (discussed in Chapter 2) and the new rent limits apply in the same way:
- The High HOME rent limits (minus tenant-paid utilities) apply to High HOME Rent units; the Low HOME rent limits (minus tenant-paid utilities) apply to Low HOME Rent units.
- The LIHTC rent limits (minus tenant-paid utilities) apply to the LIHTC-assisted only units.
- The lesser of the two program rents (minus their respective utility allowances for tenant-paid utilities) applies to the HOME- and LIHTC-assisted units.
Keep in mind that tenant-based rental assistance is treated differently by the two programs. HOME is more restrictive, limiting the total rent – including tenant contribution and housing assistance payment – to the HOME rent limit. LIHTC limits tenant contributions, and does not restrict the housing assistance payment portion of total rent.
- Rent increases. Under both programs, property owners can raise rents up to the new rent limits (minus any tenant-paid utilities) that apply to the unit. Rent adjustments for occupied units are subject to the terms of the tenant’s lease.
- Under HOME, PJs must approve all rent increases in HOME-assisted units, in accordance with an approval process prescribed by the PJ and documented in the written agreement between the PJ and the owner.
- PJs should note that the calculation of LIHTC rent limits, which is explained in Chapter 2, is slightly different than the HOME rent limits, and that they take effect at different times of year. PJs should remind owners and managers of this difference each year, so that adjustments permitted by new LIHTC rent limits do not violate the HOME requirements.
- Rent decreases. The rent limits for either of these programs might decrease, depending on area market conditions or increasing utility costs. Both programs offer some financial protection to owners to ensure that rents do not drop below the rent limits established early in the project.
- The HOME Program does not require the owner to decrease rents below the HOME rent limits that were in effect at the time of project commitment.
- Similarly, LIHTC establishes a floor rent which keeps the applicable LIHTC rent limits from dropping below the rent limits that were in effect on the date the initial LIHTC allocation was made to the project.
Practically speaking, this is useful in the first few years of the project, although as the project ages and rent limits slowly increase, these floor rents are less likely to be a factor.
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