Meeting your site’s minimum set-aside is the most important goal you have as a tax credit manager. If you meet the set-aside, the owner of your site will be entitled to claim its tax credits. If you don’t meet the set-aside, your site won’t qualify for the tax credit program, which means the owner won’t be able to claim any of the credits it was allocated.
Your residents are entitled to a utility allowance if they are responsible for payment for their gas, electric, water, sewer, or trash service. A unit is out of compliance if you are not crediting the resident with a utility allowance, and the amount you charge them for rent exceeds the tenant rent calculated when subtracting the correct utility allowance from the maximum allowable rent.
If you already manage tax credit sites, you may be asked to help manage the conversion of an existing site to tax credit housing. If so, there are two key challenges you’re likely to face. First, you’ve got to certify the income and eligibility of existing residents to make sure they’ll qualify once the site becomes tax credit housing. Second, you’ll need to ensure that any site rehabilitation work goes smoothly. Many conversions involve significant physical rehabilitation, which may occur while residents continue to occupy the site.
Funds from HUD’s HOME program and LIHTCs are often used together to finance affordable rental housing sites. To establish affordable rents in many markets, a site’s rents may not be enough to pay off a conventional mortgage. As a result, the equity raised from tax credits may not be sufficient to provide all of the additional capital required by the site. Often, HOME funds can be used to finance the remaining gap.
All too often, tax credit owners lose money because they make mistakes in withholding residents’ security deposits. It’s easy to overlook basic rules when you’re mired in the details of complying with security deposit laws. To help you avoid these mistakes at your tax credit site, we’ve compiled the five most common ones and given you cases to illustrate them.
Households that temporarily need to live elsewhere may decide to sublet their units while they’re gone. Or as Internet-based apartment-sharing services such as Airbnb have become more popular, households may seek to rent out their unit to strangers for short stays to supplement their income. Although many owners and managers of conventional sites allow this practice, letting low-income households sublet units at a tax credit site could lead to noncompliance.
For many owners already operating on thin margins, aggressive tax assessors may be their biggest concern since property taxes are likely to be their sites’ single largest expense. If you believe that your property taxes are too high because the local tax assessor has overvalued your tax credit site, you may want to challenge your site’s tax assessment.
Tax credit sites are required to abide by the nondiscrimination provisions of the federal Fair Housing Act (FHA) and their state or local fair housing laws. It's imperative that site owners and managers know the rules. The IRS has stated that a finding of discrimination by the Justice Department or HUD could result in the loss (or recapture) of tax credits.
Deep rent-skewing is an attractive option for sites in cities where market-rate rents are high. If you manage or are about to manage a site in such a city, your site’s owner may have decided that it was more economically feasible to make your site “deep rent-skewed.” The owner may have decided to obtain this designation to garner support needed to finance and build the site, or the owner may have wanted to develop a mixed-income site with market-rate units equipped with high rent-garnering amenities.
Every manager’s worst nightmare is a violent crime against a resident at his tax credit site. And compounding the tragedy of the crime is the risk of liability. You could be held liable for the crime if you knew your residents were at risk of that type of crime. In legal terms, the crime would be “foreseeable” and you'd failed to take reasonable steps to prevent it from happening for you to be liable, says security and liability consultant Jon Groussman.
