If you have questions about program compliance, chances are other property managers do too. Select from the topics below to see what questions your colleagues have asked and how we've answered.
Q: Which income limit should be used to determine the applicability of the Available Unit Rule (AUR)? According to the restrictive covenant, the property has a 50% rent and income restriction. The 40/60 Minimum Set-aside was elected on the IRS Form 8609.
A: A recertifying household's income should be tested against the Minimum Set-aside; therefore, 140% of the current 60% income limit should be used to determine whether the AUR must be applied.
Q: What are some of the most common file findings?
- Income and/or assets listed on the Sworn Income & Asset statement (SIAS), but not listed on the Tenant Income Certification (TIC)
- Management agent not signing and/or dating the TIC or SIAS
- Employment verification is not completely filled out
- Assets not third party verified or the Under $5,000 in Asset Form was used, but not filled out properly
- No move-out information in the file, e.g., date of move-out, final unit inspection, security deposit disposition
- Income listed on the data sheet of the Compliance Tool is different than the income listed on the TIC
- Verifications are not dated by verifying source
- Wite-Out® products are used on the forms
- Incorrect utility allowance
- Verifications are over 120 days old
- Calculations for income and/or assets are not clear
- Not comparing the income and assets from the previous certification to ensure information is still the same or that changes are explained, e.g., job changes, bank changes
- Changes made to either the TIC or the SIAS that are not initialed and dated by BOTH the resident and the management agent
Q: What happens if there is a homeownership question that needs answered?
A: All Ask the Homeownership Expert questions can be directed to Erin Higgins at firstname.lastname@example.org.
Q: Can the tax credit Under $5000 Asset statement be used at properties with HOME funds?
A: The "Under $5K" can be used, but not on units identified as HOME-assisted units. Managers should proceed with caution. If units are "floated," a unit may be out of compliance with the HOME Program if the Under $5K is used on a newly designated, HOME-assisted unit. While the Under $5K can be used at properties with HOME funds, it may be most efficient, and protect the property's funding, by continuing to verify assets.
Q: For properties with both HOME and tax credits, are the inspections conducted separately?
A: No. For properties that have both HTC and HOME funds, the reviews are conducted simultaneously.
Q: Can the verifications from the Enterprise Income Verification (EIV) system from HUD be used for certifying residents for the HTC program?
A: No. The EIV system was created as a proprietary agreement between HUD and the Social Security Administration. The EIV system verifications are only for use for certifications that tie directly to HUD subsidized properties. Use of this information by any other program is strictly prohibited.
Q: How should the income from a reverse mortgage be treated in the income calculation?
A: First, it is important to note that income received that is not in excess of equity is not counted as income (this approach is similar to the way retirement accounts are treated with respect to receipt of contributed dollars). Second, the cash value of the home, as of the date of the certification, must be included in the calculation. If the value cannot be readily determined from the loan documents, an estimate based on the number of payments received to date should be sufficient, provided the manager obtains the market value from the county auditor or another reliable source. Lastly, the manager must address the current status of the home: Is it sitting vacant? Is it being rented? If the home is being rented, any income will have to be addressed.
Q: If fees are charged for third party income or asset verifications, must owners pay the fees or may alternate methods be used?
A: Owners may use the "review of documents method" described in the HUD Handbook 4350.3. Owners may need to obtain additional first party affidavits to fill in the blanks. Documentation from the third party source, or a clarification record, indicating a fee is required for verifying information, should be in the resident file. Note: Some application processing costs, such as the actual costs for credit checks or criminal background checks, may be passed along to an applicant provided the owner is not attempting to recover other administrative costs associated with processing the application.
Q: If someone receives a monthly utility allowance or utility reimbursement check because their portion of the rent is lower than the utility allowance, do we count this amount as income?
A: No. It is excluded from the income calculation. Language in the 24 CFR5.609(c) indicates that such reimbursements that are coming from a HUD program are not counted as income.
Q: May owners include an unborn child when determining the household size?
A: Yes. The expectant mother should self-certify to the pregnancy, as described in Appendix 3 of the HUD Handbook 4350.3. The unborn child must be listed as a household member on the Tenant Income Certification.
Q: Must a manager send a verification request to the Child Support Enforcement Agency (CSEA) when a resident with minor children states that no agreement for child support or alimony exists and no support is being received?
A: No. OHFA's policy is that negative answers on the Sworn Income and Assets Statement are not required to be verified.
Q: When an employment verification indicates a raise with varying amounts (e.g., $.30 - $.50) should the owner use $.30, $.50, or the average of the two?
A: The higher amount should generally be used. If, through clarification from the employer, it is determined that only a $.30 increase is actually anticipated and any other amount is based on performance, use $.30 when calculating anticipated income. HUD Handbook 4350.3 states that current circumstances should be used for project income.
Q: How should a large lump sum payment $25,000.00 for back SSI be treated? The payment was received by the applicant in April. The applicant wants to move in July 1.
A: Lump sums are generally counted as assets and not as income. In this situation, the SSI lump sum should be counted as an asset. Chapter 5 of the HUD 4350.3 outlines how to treat such payments.
Q: When a resident's assets total less than $5,000, must a property use the Under $5,000 Asset Certification form?
A: No. A property is not required to use the Under $5,000 Asset Certification form when a resident's total assets are less than $5,000. The property may elect to verify assets through a third party. However, if a property chooses to use the Under $5,000 Asset Certification, the OHFA form posted on the OHFA web site must be used. Please keep in mind though, if the property has project-based rental assistance either through HUD or RD or if the property was financed with tax-exempt bonds, all assets must be third-party verified and this form cannot be used.
Q: If a resident/applicant is receiving regular periodic payments from an annuity or pension, how should the balance in the account be treated?
A: The periodic payment should be counted as income. An imputed calculation of income based on the balance of the account is not necessary. See Change 2 to the HUD Handbook 4350.3 for additional information.
Q: A resident/applicant is receiving student financial assistance. What should or should not be included as income? For which residents is such assistance included in the income calculation?
A: Financial aid in the form of a loan should not be counted as income. Beyond loans, financial aid in excess of tuition should be counted as income, unless the student is over age 23 with a dependent child, or the student is living with a parent(s) who is receiving Section 8 assistance. For example, a 28 year old full-time student that has dependents but is not receiving any assistance from Section 8 has financial aid that is a larger amount than their tuition. This income would not be counted since the family is not receiving any assistance through Section 8 (either tenant-based or project-based).
Q: A resident/applicant owns a house they are renting out. How is income calculated?
A: Rental property will require two calculations. First, the value of the asset will need to be determined. This can be determined based on a verification obtained from a real estate agent, or by gathering information about the property from the respective county auditor web site. Any costs associated with converting the asset into cash may be deducted from the Fair Market Value to determine the cash value. Examples of these costs may be outstanding mortgages, realtor commissions and/or closing costs. If the property is being rented, the rental income should be counted as income generated from the asset. There are costs associated with maintaining a rental property that can be deducted from the rental income received. These costs include, but are not limited to, mortgage interest, property taxes and repair costs. OHFA suggests asking the resident/applicant for a copy of Schedule C or Schedule E from their latest tax return. This will show the amount of income they reported to the IRS for tax purposes.
Q: Can a Supplemental Security Income (SSI) (disability benefits) verification be more than 120 days old when used to verify income?
A: SSI benefits verifications must be no older than 120 days, since benefits can change as the household's situation changes; for example, if there are earnings from employment.
Q: What options does an owner have when a resident refuses to complete an income recertification?
A: An owner may pursue the remedies outlined in the lease. Owners should carefully consider program requirements when preparing a lease to ensure all resident and owner responsibilities are appropriately addressed. The Section 42 Lease addendum located on the OHFA web site contains language addressing the household's need to recertify in order to uphold their lease.
Q: Does OHFA recommend retaining all Housing Tax Credit files for the full compliance period? Is it okay to store files off site? Can files be stored digitally?
A: Proper recordkeeping is critical to ensuring a Housing Tax Credit property can continue to remain in compliance. Owners have some business decisions to make regarding how long files are retained after the end of the compliance period. In addition, the owner must decide how the files will be stored. In general, it is advisable to retain all files for the entire compliance period. After the compliance period, at a minimum, all first year files should be retained for the extended use period or six years, whichever is greater. Project files may be retained at a location other than the project, but all files must be available to the IRS and OHFA for review. Thus, choosing a safe and accessible location is important. To save space, and for enhanced security, files can be stored in a digital format. IRS Revenue Procedure 98-25 outlines IRS requirements for digital storage. A copy of the Revenue Procedure can be found on OHFA's web site.
Q: When completing recertifications for residents with month-to-month leases, what kind of documentation should be in the file regarding rent increases?
A: OHFA does not have a specific requirement. The owner should be sure to abide by any applicable Ohio landlord-tenant laws.
Q: Why is a household required to sign a tax credit Tenant Income Certification (TIC) if each adult member has also completed and signed a Sworn Income and Asset Statement (SIAS)?
A: There are several reasons the TIC is required. First, the Internal Revenue Code requires the owner of a tax credit community to obtain from residents a Tenant Income Certification. The SIAS is simply an information gathering tool. Second, the TIC must be prepared and signed because the income calculation is made after the resident manager has third-party verified the income and assets of the household. Unfortunately, owners and managers cannot rely solely upon the information disclosed by the resident to determine income. While executing the TIC requires another visit to the management office by the resident, it is a critical step in the affordable housing process that cannot be avoided.
Q: When may another person sign for a resident; for example, when an adult member of the household is incapacitated or cannot otherwise sign?
A: Only when the individual executing documents on behalf of a resident has a general power of attorney may that person sign for another. A medical power of attorney is not sufficient.
Q: Must both the resident(s) and manager sign the Sworn Income and Asset Statement (SIAS) on the same day?
A: Yes. The SIAS must be completed on-site and signed by all parties on the same day.
Q: Must a monthly income amount be listed on page 1 and/or the cash value of an asset listed on page 2 of the SIAS?
A: Yes. Any question that is answered with a "yes" must be completed fully.
Q: The SIAS and/or TIC must be corrected. What is the best method?
A: If corrections must be made, place a line through the incorrect information, and then add the correct information. In "lining" through information, it should be done in such a way that the incorrect information is still visible. Do not use correction fluid. Both the resident and manager should initial and date the change to indicate both parties were aware of the change.
Q: Should the unit number be on the Under $5,000 Asset Certification and on page 1 of the Sworn Income and Asset Statement?
A: Yes. If the unit number is not known until the time of move-in, it can be added at the time the TIC and lease are signed.
Q: Is the HTC Lease Addendum required at all properties?
A: This lease addendum should be used at all properties except those with project-based rental assistance through either HUD or RD. Any resident that receives rental assistance through either of these programs should NOT be signing a HTC Lease Addendum.
Q: Do OHFA and Rural Development still operate under a memorandum of understanding regarding the monitoring of Housing Tax Credit projects with Rural Development financing?
A: Yes. To the greatest extent possible, OHFA uses Rural Development inspections to meet its monitoring obligations. The Agency does reserve the right to conduct inspections of Housing Tax Credit properties with Rural Development financing as necessary.
Q: Should Rural Development 538 properties use the Rural Development utility allowance?
A: The owner should contact its lender to determine which allowance is appropriate. The owner should be sure to take into account the requirements of other funding sources when determining the appropriate utility allowance. OHFA will accept the Rural Development utility allowance.
Q: Should 538 properties use the HTC Addendum for Communities with Federal Assistance?
A: The Rural Development 538 Program provides a loan guarantee. Unless the property is assisted by other federal subsidies, properties financed using the 538 Program should be able to use the standard HTC Lease Addendum.
Q: Is the owner/manager permitted to establish a minimum income for Section 8 applicants?
A: A Housing Tax Credit community may establish a minimum income provided:
- No applicant is rejected simply because they possess a Section 8 voucher; and
- The minimum income limit is applied to all applicant households and is clearly outlined in the property's
resident selection plan.
Q: Do the Section 8 rules regarding student income apply to all Housing Tax Credit households, or only those households holding a Section 8 Housing Choice Voucher?
A: The rules for calculating student income under the Section 8 Program apply to all Housing Tax Credit households, regardless of other programs the household may be using, including a Section 8 Housing Choice Voucher.
Q: If a resident receives a Section 8 voucher one month after move-in, should this be reflected on the TIC in any way?
A: No. The TIC does not have to be modified when a household receives a voucher as the voucher is not considered a source of income or an asset. The data sheet of the compliance tool, however, should be updated with this information.
Q: When a subsidized property receives a gross rent change for our property that is retroactive, do the TICs that are affected by this gross rent change need to be altered?
A: When a TIC is signed, it is a snapshot of what was true at that time; income, assets, rent, UA, etc. So the only time it would be altered would be in the case of correcting 'bad' information, e.g., if the wrong UA was mistakenly used at the time the TIC was signed or if there was an income calculation error. Since the TTP and UA that used was true at the time of the certification, there is no need to go back to alter that TTP or UA. It would be helpful to craft a clarification record for the files explaining that the gross rent changed and when it was received and that it was retroactive to XX date. This would help to explain why the TIC amounts might not be the same as the rent schedule.
In addition, the compliance tool will need to be updated to reflect the new TTP (if applicable) and the date of the change and the change in the UA if needed.
Q: Is a single adult over age 24, with a Section 8 Housing Choice Voucher, eligible for a Housing Tax Credit unit?
A: Units composed entirely of full-time students, regardless of the age of the students, must meet one of the exceptions to the student rule outlined in Section 42.
Q: When considering student eligibility, can an unborn child help to qualify a unit?
A: Yes. The expectant mother should self-certify to the pregnancy, as described in Appendix 3 of the HUD Handbook 4350.3. The unborn child must be listed as a household member on the Tenant Income Certification.
Q: Is an adult pursuing a General Equivalency Diploma (GED) considered a full-time student for purposes of the Housing Tax Credit student rule?
A: No. An adult pursuing a GED is not considered a full-time student.
Q: Is an elderly resident who is taking college courses in pursuit of an undergraduate or graduate degree considered a full-time student?
A: The resident is a full-time student if the student is considered a full-time student by the college or university.
Q: Where a resident is a part-time student at the time she enters into a lease agreement, three months later becomes a full-time student, properly notifies management of the change in status, management and resident engage in discussions of student status as pertains to tenancy, four to five months later management informs the resident she must vacate unit because of full-time student status, and two months after receiving such notice, the resident cures by the fact that she is no longer a student, can management allow the resident to remain in the property under the HTC rules? If management allows the resident to remain after curing, what consequences, if any, are there for the owner/management?
A: The change in the resident's student status should cure the non-compliance, thus allowing the resident to remain in the unit. The implication for the owner is that credits should not be claimed for the period, beyond the first five months, when the resident was a full-time student. Requesting that the resident vacate the unit would not protect the credits in this situation.
Q: Does the student rule exception for single-parent households with children apply to a woman who is pregnant but has no other children in her household?
A: This is not an unusual situation. Generally, OHFA interprets the exception in the rule to apply to residents who are pregnant. Therefore, this household would not be considered a household composed of full-time students.
Q: Is receipt of a TANF-based benefit sufficient to meet the student rule exception?
A: Yes. Receipt of a TANF-based benefit is sufficient to meet the student rule exception.
Q: What are some of the most common physical inspection findings?
- Loose toilet bases
- Grease around burners on the stove
- Ground Fault Circuit Interrupters (GFCIs) not installed correctly or not functional
- Loose handrails (both interior and exterior)
- Light bulbs missing from stairwells and/or basements
- Torn/broken window blinds
- Junk cars
- Open breaker slots or missing covers on electrical panels
- Basements used as bedrooms
- Missing window screens
- Smoke detectors with missing or chirping batteries
Q: Does OHFA require initial move-in inspections to be signed and dated by management and the resident?
A: Yes. This is necessary to protect all parties to the lease.
Q: Does OHFA require the owner to inspect units annually? Does the inspection form have to be signed and dated by the resident and management?
A: Because the owner must annually certify as to the habitability of the buildings, annual unit inspections are required. The resident is not required to sign any documentation confirming the inspection was completed.
Q: Now that we can transfer households between buildings, how do we handle the process?
A: The income of the household that is requesting the transfer should be tested against the current income limit to ensure that the Available Unit Rule is not violated. A full recertification is not necessary. We suggest that the household self-certify as to their income and student status. The OHFA Sworn Income and Asset Statement can be used to gather this information. Completing a third-party verified certification is only necessary if the property is a mixed-use property (meaning it has both HTC units and market-rate units). Households whose income is over 140% of the maximum income limit for the property should not be transferred to another building in a mixed-use property unless a market-rate unit is available. If the household is seeking a transfer due to circumstance such as needing an accessible unit or to correct an under-housed/over-housed situation, the owner should contact OHFA to discuss available options. In 100% HTC properties, households whose income is above the 140% can be transferred between buildings as needed according to guidance provided by the IRS.
Q: How should unit transfers be reflected on the Tenant Income Certification (TIC)? What date is used for the initial move-in date and what date is used for the certification date?
A: The TIC can be modified to reflect the new unit number or address. The move-in date is the date that the household was initially qualified for the property. The certification date will remain the date the household was last certified.
Q: What impact does the recertification waiver have on unit transfers?
A: Per the IRS 8823 Guide, the manager should verify the household's income does not exceed 140% of the applicable income limit. The verification can be conducted by interview and clarification record, or the household can be asked to complete a Sworn Income and Asset Statement or other similar document.
Q: Does OHFA issue utility allowances for every county in the state?
A: No. OHFA only approves utility allowances on a project by project basis, or as described in the OHFA utility allowance guidelines established in December 2008.
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