Tenant Income Eligibility

The HOME and LIHTC Programs restrict occupancy to income-eligible tenants throughout the affordability period. On an annual basis, HUD issues income limits for both programs, although these limits are calculated differently for the two programs, are issued separately, and take effect at different times.

The PJ must provide instruction to property owners on the owner’s responsibility to comply with the income requirements. Owners/Managers of rental housing must determine the occupant’s income-eligibility on an annual basis in accordance with these limits and verify that the tenant household has an annual gross income that is at or below the applicable and current income limit for the type of unit it occupies (High HOME Rent, Low HOME Rent, LIHTC, or both HOME and LIHTC). In the event that a tenant’s income has increased over the current income limit for the applicable program, depending on the type of unit the tenant occupies, the owner/manager must take certain steps to restore compliance in the building.

The steps to restore compliance are described throughout this chapter. The income limits are discussed in detail in Chapter 4 and apply throughout the affordability period.

Annual Income Recertification

Each year, the property manager of a HOME-LIHTC property must be sure that the tenants of assisted units do not have incomes that exceed the current income limits. This process is called income recertification. The income recertification requirements for HOME and LIHTC are slightly different.

HOME Annual Income Recertification

The HOME Program requires the property manager to recertify each tenant household’s income on an annual basis throughout the affordability period. Initially, and every sixth year during the affordability period, the property manager must use source documentation to verify the household’s income. In alternate years, the PJ can choose one of the following three methods for the owner to use:

  • Source documentation
  • Self-certification
  • Written statement from the administrator of another government program under which the family receives benefits and that examines the annual gross income of the family each year.

LIHTC Annual Income Recertification

Generally, LIHTC requires owners/managers of LIHTC properties to reexamine the annual income of a household residing in a tax credit unit on an annual basis as well. However, these reexaminations of income must be performed with third-party source documentation each year.

Under Internal Revenue Code (IRC) §42(d)(3)(A) and IRC §42(g)(4), owners of 100 percent low-income projects are no longer required to complete annual income recertifications. State agencies, however, have authority to impose additional requirements upon LIHTC projects and may require income recertifications after completing the initial income certification at the time the household moves into the low-income unit.

Annual Income Recertification for Occupant of a HOME- and LIHTC-Assisted Unit

The property manager must ensure that the occupant of any unit that carries both the HOME- and LIHTC-assisted designation has an annual gross income that meets the income limits of both programs. This would be the lesser of the two income limits. See Chapter 4 for a discussion of the applicable income limits.

In addition, the property manager must use the most restrictive process of the two programs to determine the tenant household’s income eligibility. This means that:

  • For units that are designated as both HOME- and LIHTC-assisted, the manager must examine third-party source documentation of tenant incomes to verify tenant income-eligibility, unless one of the following is true:
  • There is an LIHTC waiver in a project with 100 percent tax credit units.
  • There are no new residents that exceed the LIHTC income limits.
  • For HOME- and LIHTC-assisted units where third-party source documentation is not required by LIHTC, the PJ can determine what type of documentation is required for income recertification. However, source documentation is required every sixth year during the HOME affordability period.

Over-Income Tenants

When conducting the annual income recertification, if the property manager determines that a tenant’s income has increased above the income limits for the applicable program, it must take certain steps to restore compliance in the property.

  • For a unit that is HOME-assisted only, the tenant is considered over-income when its income exceeds the HUD-published income limit for the unit. That is, a tenant that occupies a High HOME Rent unit becomes over-income when the household’s income exceeds 80 percent of AMI. A tenant that occupies a Low HOME Rent unit becomes over-income when the household’s income exceeds 50 percent of AMI. When a tenant is over-income, the owner/manager must adjust the rent. These adjustments are explained in more detail in Section 5.5, below.
  • For a unit that is LIHTC-assisted only, the tenant is considered over-income only when the household’s income increases to above 140 percent of the current qualifying income limit for the unit. LIHTC rules require the rent to remain restricted until that unit is replaced.
  • For a unit that is both HOME- and LIHTC-assisted, the HOME Program (at 24 CFR 92.252(i)(2)) states that the tenant pays the rent governed by the LIHTC program. This means that the tenant’s rent is not increased under the HOME over-income rules, but that the rent is restricted to the LIHTC rent until the LIHTC unit is replaced.

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