Affordable Housing Compliance Best Practices Manual
Transcript of Affordable Housing Compliance Best Practices Manual
A f f o r d a b l e H o u s i n g
C o m p l i a n c e B e s t
P r a c t i c e s M a n u a l
A Leas ing Consul tant ’s Guide to
Compl iance Monitor ing Requirements of
Af fordab le Hous ing Programs
By : J o s é Apon t e , HCCP , NCP - E , SHCM
Reproductions are not permitted without the expressed
written permission of Preferred Compliance Solutions, LLC.
© 2020 Preferred Compliance Solutions, LLC. All Rights Reserved
595 S. 80 E. Suite 415 Logan, Utah 84321
Website: www.preferredcompliance.com
Purpose of this Manual
This manual is intended to be a resource for Preferred Compliance Solutions, LLC. clients
that have been given the responsibility of managing and maintaining compliance.
This manual is a training and reference guide. It is designed to answer the most frequently
asked questions regarding the program procedures, rules, and regulations, as interpreted
and adhered as policy and procedures. It should be a useful resource to on-site
management personnel.
Although state agencies and their contractors monitor program compliance, most times
their compliance requirements invite more lenient procedures than those which are set
forth by the regulations as the most reliable. These also do not take into consideration a
lender or syndicator’s interpretation of compliance, and the owner’s requirement to adhere
to these when more stringent than those set by the state.
Here at Preferred Compliance Solutions, LLC. we believe compliance practices can be
labeled as:
a) Good b) Better c) Best
Policies and procedures in this manual have been set by management for your community
and Preferred Compliance Solutions, LLC. to ensure we protect the owner’s interest with
the BEST compliance program possible.
Property staff must contact management prior to making any exceptions to any of these
policies and/or procedures.
A F F O R D A B L E H O U S I N G C O M P L I A N C E M A N U A L
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C H A P T E R 1 P A G E
Introduction To Compliance
1.0 Introduction to Compliance 1
1.1 How Does This Affect Your Community? 1
1.2 LIHTC Program Organization Chart 2
1.3 Compliance Timetable 3
1.4 Our Policy 4
1.5 Compliance Involvement With Applications 4
1.6 Managing a Tax Credit Property 7
1.7 Key Stages 8
1.8 Basic Requirements 9
1.9 State Audit Timelines (Annual Management
Review) 10
1.10 The Day of the Audit 10
1.11 After the Audit 11
1.12 Common Non-Compliance 12
1.13 Non-Correctible Non-Compliance 12
1.14 Non-optional vs optional Fees 13
1.15 Overcharged Rent 14
1.16 Rent in Units with Rental Assistance 15
C H A P T E R 2 P A G E
Interviewing an Applicant
2.0 Welcome Card 16
2.1 Four Steps to Pre-Qualifying Applicants 16
2.2 The Application 16
2.3 Identification Needed 18
2.4 Household and Family Size 18
2.5 Absentee Spouses 20
2.6 Underage Household Members Not Members
of the Family 21
2.7 Live In Aide 22
2.8 Full Time Student Applicant 23
2.9 HOME and section 8 Student Rule 24
2.10 Student Exemptions: 25
2.11 Demographic Requirements 26
2.12 Demographic Definitions 27
C H A P T E R 3 P A G E
Anticipated Gross Annual Income
3.0 Types of Income That Must be Included in
the Income Calculation 31
3.1 Types of Income That are NOT Included in
the Income Calculation 44
3.2 Whose Income is Counted 48
C H A P T E R 4 P A G E
Verifying and Documenting Income
4.0 Methods of Income Verification 49
4.1 Reviewing Reported Income Verification 49
4.2 Acceptable Income Verification 51
4.3 Acceptable Forms of Income Verification 58
C H A P T E R 5 P A G E
Calculating Total Gross Annual Income
5.0 Calculating Anticipated Gross Income 65
5.1 Hourly Full Time Employment 65
5.2 Weekly Full-Time Employment 66
5.3 Bi-Weekly Full-Time Employment 66
5.4 Bi-Monthly Full-Time Employment 66
5.5 When Calculating Seasonal or Part-Time
Employment 67
5.6 Year-to-Date Calculation 67
5.7 Pay Increase Calculation 68
5.8 Calculating Income from Educational
Assistance 71
5.9 Annual Income Quick Reference Chart 72
C H A P T E R 6 P A G E
Unemployed Applicants & Applicants Receiving
Rental Assistance (i.e. Section 8)
6.0 Unemployed Applicants 73
6.1 Applicants Participating in Rental Assistance
Programs 73
TABLE OF CONTEN TS
A F F O R D A B L E H O U S I N G C O M P L I A N C E M A N U A L
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C H A P T E R 7 P A G E
Included and Excluded Assets
7.0 Assets 76
7.1 Included Assets 76
7.2 Excluded Assets 79
C H A P T E R 8 P A G E
Documenting and Calculating Assets
8.0 Asset verification 81
8.1 Determining the Value of Assets 81
8.2 Checking and Savings Accounts 82
8.3 Real Estate 84
8.4 Rental Income From Real Estate 87
8.5 Sale or Disposition of Real Estate 88
8.6 Disposal of Assets for Less than Fair Market
Value 89
8.7 Documenting CDs, Money Market Accounts
or Treasury Bills 91
8.8 Documenting Stocks or Securities 92
8.9 Documenting Trust Funds 93
8.10 Documenting Bonds 98
8.11 Documenting 401K and retirement accounts99
8.12 Documenting IRAs, Keogh or Other
Retirement Savings Accounts 100
8.13 Annuities 101
C H A P T E R 9 P A G E
Tenant Income Certification
9.0 Tenant Income Certification (TIC) 104
9.1 Line-By-Line Instructions 105
C H A P T E R 1 0 P A G E
Change in Status After Move In
10.0 Changes in Family Size 113
10.1 Family Size Decrease 113
10.2 Family Size Increase 114
10.3 Unit Transfers 115
C H A P T E R 1 1 P A G E
Resident Files
11.0 Resident Files 116
11.1 Correspondance File Set-Up 117
11.2 File Dividers 117
11.3 Compliance File Set-Up 117
11.4 Recommended File Set-Up 118
11.5 Employee Resident File 120
C H A P T E R 1 2 P A G E
Record Keeping
12.0 Reporting Requirements 122
12.1 Program Report 122
12.2 Next available unit and vacant unit rule 123
12.3 Line-By-Line Instructions (Preferred’s NAU
Log) 127
C H A P T E R 1 3 P A G E
Lease Agreement vs. Annual Recertification
13.0 Lease Agreement 130
13.1 Lease Agreement vs. Annual Recertification
(AR) 130
13.2 Annual Recertification (AR) 131
13.3 AR Notice Schedule 132
C H A P T E R 1 4 P A G E
Resident Programs (Tenant Services)
14.0 Resident Programs 134
14.1 Frequency 135
14.2 Record Keeping 135
14.3 Compliance Involvement 136
C H A P T E R 1 5 P A G E
Forms
15.0 Compliance Forms 137
A F F O R D A B L E H O U S I N G C O M P L I A N C E M A N U A L
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C H A P T E R 1 6 P A G E
Maintenance Staff Compliance Policies And
Procedures
16.0 Maintenance Staff And State Audits 138
16.1 Preparing for a Physical Inspection 139
16.2 Major Areas of Focus 142
C H A P T E R 1 7 P A G E
Las políticas y procedimientos de cumplimiento del
personal de mantenimiento
17.0 El personal de mantenimiento y las
auditorias del estado 145
17.1 Preparamiento para una inspección física. 146
17.2 Áreas Principales de Atención 149
C H A P T E R 1 8 P A G E
Acquisition and Rehabilitation
18.0 Acquisition and Rehabilitation 152
18.1 Applicable Fraction 153
18.2 Tracking the Applicable Fraction During the
First Year of the Credit Period 153
18.3 Testing for Purposes of the Next Available
Unit Rule During Rehabilitation 155
INTRODUCTION TO COMPLIANCE
1.0 INTRODUCTION TO COMPLIANCE
In order to know how to comply, one must first understand the meaning of
compliance. Let us look at the definition of compliance. Compliance is the
act of yielding to a wish, request, or demand; acquiescence. In other
words, to do as you are directed, to follow the rules or demands of another.
How Does COMPLIANCE Pertain to Us?
Some of the communities that our company manages participate in federal
income tax credit, and other programs instituted by Congress, to provide
eligible households quality and affordable home living. To ensure the
integrity of the programs, the IRS and HUD have state and local agencies
oversee compliance with their regulations.
1.1 HOW DOES THIS AFFECT YOUR COMMUNITY?
Whenever you have a valuable item such as tax credits and other affordable
housing programs the demand is usually greater than the supply. Whoever
meets and maintains compliance (adheres to the requirements of the IRS, HUD
and the state) may utilize the assistance; whoever does not comply, (ignores
these requirements) will be found to be in NON-COMPLIANCE and could be
eliminated from using the programs. Our business is based on managing
communities that have secured these tax credits. If we do not adhere to the
rules, and are found to be in NON-COMPLIANCE, the community could lose
the assistance, and subsequently we could lose the management. The bright
Chapter
1
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side is, if you follow the guidelines as set forth in this chapter, compliance is
easy!
This chapter outlines the compliance issues relevant to the Low Income
Housing Tax Credit Program (LIHTC), Bonds, and HOME as set forth in Section
42 of the Internal Revenue Code, HUD Handbook 4350.3, and state
Compliance Guidebook. State agencies administer the Programs and conduct
routine audits of the resident files by visiting the communities on a regular
basis. This is to ensure that the community and owners adhere to the program
rules. They also require submission of reports on a regular basis, documenting
the demographics and income of the residents. All of the units at your
community are regulated by the Internal Revenue Service and monitored by
your particular state agency.
1.2 LIHTC PROGRAM ORGANIZATION CHART
OWNERSHIP
PROPERTIES
HOUSING FINANCE AGENCY
MONITORING AGENCY
Can Be Housing Finance Agency Subcontractor
INTERNAL REVENUE SERVICE (IRS)
MANAGEMENT COMPANY
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1.3 COMPLIANCE TIMETABLE
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1.4 OUR POLICY
For your protection, all compliance related correspondence, reports and
questions must be directed to management or Preferred Compliance Solutions
staff. All outgoing reports will be reviewed by this department, prior to
forwarding to a State, local or Federal Agency. On site staff must never
contact State, local or Federal Agencies. Any calls initiated by State, local or
Federal Agencies or their monitoring agents must be forwarded to the
compliance department as well. There are no exceptions to this policy.
1.5 COMPLIANCE INVOLVEMENT WITH APPLICATIONS
Management and/or, when applicable, Preferred Compliance Solutions
MUST review and approve all applications for residency prior to move
in, and recertifications immediately upon completion. At no time
should anyone move-in to your community without written final approval.
Compliance Approval
Immediately after all documentation needed in order to qualify a household
with program requirements have been received, the manager must review
all documents prior to sending for approval. No household should move in
unless written approval (“Final Results”) has been received.
Although, Preferred Compliance Solutions reviews all initial certifications on
the same day these are received, final result/approval might take more
than a day due to corrections needed for the file. Therefore, proactively,
an applicant’s move-in date should be scheduled accordingly (no less than
3 business days from the time sent for review and approval). In order to
review application(s), you must send the following information. Note that
not ensuring all documentation is submitted for review may cause a delay
in receiving a final result:
❖ Compliance Application Coversheet
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❖ Fully Completed Application
❖ Verification(s) of Income and Supporting Documentation
❖ Asset Affidavit and Supporting Documentation
❖ Student Eligibility Affidavit, Student Verification Form and Student
Income Certification (when applicable)
❖ Birth Certificates that show parent’s name for all minors
❖ Clarification Forms & Statements completed (when applicable)
❖ Any other verification of documentation needed to properly qualify
household
Corrections and/or Clarifications Request
Once compliance reviews the documents listed above, when applicable,
they will issue a “Correction Request” that will list any unclear or non-
compliance findings that will need to be corrected and/or clarified by the
community staff.
Once resolved, corrections and/or clarifications must be sent to compliance.
Once received, compliance staff will review these corrections and/or
clarifications and determine if the “Additional Steps Needed” can be issued.
Additional Steps Needed
Once a file is ready for approval, Preferred Compliance will issue an
“Additional Steps Needed” template indicating the certification can be
completed. This will require a signed lease and TIC be sent to compliance
for final review and “Final Approval”.
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Final Approval
Final results will be issued in the form of a “Final Results” template which
will detail if application is approved or denied, with the reason. “Final
Results” will be posted to Preferred Compliance Solutions, LLC NextGen
eFile system. When a correction or result is posted, those able to upload
files to the NextGen eFile system for your property will receive an email
notification. Therefore, it is critical that a current email is listed in their
NextGen eFile account. However, in the absence of a proper email, results
can still be accessed by logging into the NextGen eFile Access system.
It is critical to the eligibility of the household that all corrections
made during the file review process leading to a final result make it
into the final tenant file. Not doing so could cause the unit to be in
non-compliance.
NextGen eFile Access
“NextGen eFile Access” section is a free file sharing solution provided by
Preferred Compliance Solutions, LLC. This solution allows properties the
convenience of uploading applications and corrections that will be reviewed
by compliance professionals. It allows the properties to view the
information before it is submitted, therefore ensuring that all documents
are uploaded. It also gives the properties the immediate confirmation that
documents have been received by our system.
In addition, when using “NextGen eFile Access” your properties are able to
view and print a record of the date and time an application was received
and printed in our office. Because of non-compliance findings, correction
requests and approvals are also uploaded to this section, this also serves as
a solution to our compliance professionals in delivering correction requests
and final results of compliance status.
Best of all it saves everyone time and money, no storage space, no copies
to make, and no boxes with copies of files to ship.
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1.6 MANAGING A TAX CREDIT PROPERTY
NOTE 1.6.1: Remember, if you have more than one program on your property, you
should always use the most restrictive guideline.
To successfully manage a tax credit property, you must always have the
following information on hand. This can be found in the Land Use Restriction
Agreement (LURA) for your property:
❖ The number of units set aside for tax credit compliance
requirements
❖ The applicable maximum income for each family size
❖ The maximum allowable gross rents
❖ The utility allowance for each unit size
❖ Resident services promised on the Land Use Restriction Agreement
(LURA) and/or Extended Use Agreement (EUA)
The following information needs to be posted where all residents and
prospective residents can see it:
❖ Income Limits and Rents
❖ Utility Allowance Chart
❖ Resident Selection Policy
❖ Late Charge Policy
❖ Fair Housing Poster (English and Spanish)
❖ Office Hours
❖ Emergency Phone Numbers
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1.7 KEY STAGES
There are four key stages in the life of a Tax Credit project.
A. DEVELO PMENT PERIOD
The development period for a project begins when commitment of LIHTCs or
other Affordable Housing program(s) are made by the state and lasts until the
owner places the project in service. A building is determined to be “placed in
service” when the first unit is ready for occupancy (certified for occupancy). In
general, the owner must place the project in service before the end of the 2nd
calendar year in which the project receives its LIHTC or other Affordable
Housing program commitment.
B. LEASE-UP PERIOD
The lease-up period starts once a project has been placed in service and lasts
until the owner begins to claim the project’s Tax Credits. Owners can start
claiming a project’s Tax Credits at the end of the tax year following the project
being placed in service.
During this period, owner/managers need to qualify all of the units they will
count as set-aside.
C. COMPLIANCE PERIOD (SEE SECTION 1 .3)
The compliance period begins with the first tax year in which the owner claims
Tax Credits for the project and lasts for 15 consecutive years.
D. EXTENDED USE PERIOD (SEE SECTION 1.3)
Once the 15-year compliance period ends, projects enter the extended use
period. Owners/managers of these projects are required to maintain the
property’s low-income occupancy for an additional 15 years beyond the end of
the compliance period – the remaining life of the extended use agreement for
the project. In some cases longer, for example, most of our communities
require a 50-year extended use period.
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1.8 BASIC REQUIREMENTS
For a unit to be counted as a Tax Credit unit, the following six conditions
must be met:
❖ All units in the same building identification number must be certified
by qualified households.
❖ The resident’s income may not exceed the applicable income limit
for your community (at time of move-in).
❖ The rent paid by the resident plus allowance for resident-paid
utilities may not exceed the maximum allowable rent for that unit.
❖ The physical condition of that unit must meet local health, safety
and building codes.
❖ Management must execute a lease of no less than seven months
with the resident.
❖ Management must list the unit as an eligible unit on reports
submitted to the state or local agencies.
❖ In most states and in mixed used properties, property staff must re-
examine the resident’s eligibility annually and maintain rents at or
below applicable rent limits.
As mentioned before, here at Preferred Compliance Solutions, LLC. we believe
compliance practices can be labeled as:
a) Good b) Better c) Best
Policies and procedures in this manual have been set by management for your
community and Preferred Compliance Solutions to ensure we protect these
basic requirements with the BEST compliance program possible.
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1.9 STATE AUDIT TIMELINES (ANNUAL MANAGEMENT REVIEW)
The State or local agency will write or call your office, management and/or
owner telling them the date they will be doing an on-site audit of your property.
If you receive a letter or a call, please notify the compliance department and
your supervisor immediately. Please note in many instances, notice of an audit
is received only days before the audit.
NOTE 1.9.1: The date of the Audit is set by the State or local agency and is
always changing. There are no set dates.
NOTE 1.9.2: Prior to the date of the audit
❖ Send a notice to all residents advising them of the date of
the audit, and that apartments will be randomly picked for a
physical inspection.
❖ Do a complete inventory of files.
1.10 THE DAY OF THE AUDIT
❖ Have a folder prepared with current copies of
a. Questionnaire (State or their monitoring agency will mail with audit
notification)
b. Copies of your last advertising
c. Last three months Newsletters
d. Rent Roll (printed the day of the audit)
e. Updated copy of Utility Allowance (if using PHA chart, dated within
90 days)
f. Latest Income Limits and Rent Schedule Chart
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g. Updated Next Available Unit Log (Properties with market units only)
h. Updated State’s program compliance reports including summary
pages
i. Copies of resident services sign-in logs and other applicable
information needed to prove that it was provided (when applicable)
❖ Have a quiet area with plenty of workspace for the auditor(s)
❖ Have refreshments on hand (i.e. soda, chips, etc.)
❖ Check on auditor(s) periodically to see if they need anything
A representative from management may be present to furnish all
information and answer the Auditor’s questions. This will free you to
work and keep you from getting into a situation in which you may
feel unsure. Be polite but look to the representative for guidance. If
you happen to be in a position that your representative is not present
during the audit, you are to be polite, but ask the Auditor to refer
questions to the representative. The representative is there to take the
pressure off of you and to protect you from any miscommunication.
1.11 AFTER THE AUDIT
After the audit has been completed, you will receive a review letter. This takes
an average of 2 to 4 weeks. When the review letter is received, you will be
informed of the outcome.
Any time you receive a letter from the State or local agency, call
management and send a copy immediately.
Do not answer questions about your audit either in person or by phone if the
State or local agency contacts you. Instead, politely offer to take their name,
phone number, and inform them that someone from management will contact
them as soon as possible. You must immediately contact the compliance
department. We may already have the answer for the caller, and they
may just be confused about whom to call.
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1.12 COMMON NON-COMPLIANCE
a. Units not ready for immediate occupancy – IRS has instructed state
agencies to issue 8823s for vacant units that are not available for
rent because the units are not prepared for immediate occupancy
b. Not complying with the time requirements of forms required by the
monitoring agency
c. Not having the resident file information such as application,
certification and/or lease
d. Health and life safety issues such as smoke detectors
e. Not completing required annual income certifications in a timely
manner
f. Not calculating assets correctly
g. Not calculating income correctly
h. Using incorrect Income Limits – not updating yearly in a timely
manner
i. Not updating Utility Allowance figures annually as required
j. Exceeding Maximum Allowable Rent as a result of using incorrect
AGMI or Utility Allowances
k. Failure to make the next unit available to a Housing Credit qualified
household when an existing HC household’s income exceeds 140%
of the maximum allowable income.
1.13 NON-CORRECTIBLE NON-COMPLIANCE
a. Ineligible household
b. Improper transfers
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c. Ineligible students
d. Not reporting in a timely manner
e. Overcharged rent
1.14 NON-OPTIONAL VS OPTIONAL FEES
Typical non-compliance may involve converting common areas to
commercial property or charging fees for facilities (such as a swimming
pool and clubhouse), the cost of which were included in the Eligible Basis.
Fees may not be charged for common areas that have been included
as part of the Eligible Basis. Prior to charging a fee, property staff
must confirm with management that such fee is allowed under
program regulations.
Units may be residential rental property notwithstanding the fact that
services other than housing are provided. However, any charges to low-
income tenants for services that are not optional generally must be
included in gross rent calculation. A service is optional when the service is
not a condition of occupancy and there is a reasonable alternative.
PET, LAUNDRY ROOM, AND OTHER FEES
Charges for non-optional services such as a washer and/or dryer hookup
fee and built-in/on storage sheds (paid month-to-month or a single
payment) would always be included within gross rent. No separate fees
should be charged for tenant facilities (i.e., pools, parking, recreational
facilities) if the costs of the facilities are included in eligible basis. Assuming
they are optional, charges such as pet fees, laundry room fees, garage, and
storage fees may be charged in addition to the rent; i.e., they are not
included in the rent computation. All required costs or fees, i.e.,
redecorating fees, which are not refundable, are included in the rent
computation and therefore could result in overcharged rent.
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APPLICATION FEE
Unless otherwise approved by the State Agency, application fees may be
charged to cover the actual cost of checking a prospective tenant’s income,
credit history, and landlord references. The fee is limited to recovery of the
actual out-of-pocket costs. No amount may be charged in excess of the
average expected out-of-pocket costs of checking tenant qualifications at
the project. It is also acceptable for the applicant to pay the fee directly to
the third party actually providing the applicant’s rental history.
1.15 OVERCHARGED RENT
Gross rent includes any utility allowance. Tenant rent is the portion of the
Total Tenant Payment the tenant pays each month to the property for rent.
Tenant rent is calculated by subtracting the utility allowance from the Total
Tenant Payment.
Because HUD determines a tenant’s rent on a monthly basis, state
agencies must determine whether the property is in compliance with
the gross rent limits each month of the owner’s current tax year.
The worst noncompliance possible is over charged rent. Once a unit is
determined to have been noncompliant with the rent limits, the unit ceases
to be a low-income unit for the remainder of the owner’s tax year. The unit
is back in compliance on the first day of the next tax year if the rent
charged on a monthly basis does not exceed the limit. An owner cannot
avoid the disallowance of the tax credits by rebating excess rent or fees to
the affected tenants.
EXAMPLE 1.15.0:
The owner of a 100% LIHC building leased all the units to eligible
tenants during 2007, the third year of the credit period. However,
management inadvertently overcharged rent to tenants occupying 3
bedroom apartments. The error impacted 15 out of 75 units. The
owner is a calendar year taxpayer.
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The Applicable Fraction for 2007 is 60/75, which equals 80 percent,
rather than the required 75/75, which is equals to 100 percent.
Therefore, the owner has lost 20 percent credits for the calendar
year. The unit is back in compliance on January 1, 2008 if the owner
correctly limits the rent for all units.
EXAMPLE 1.15.1:
Overcharged Rent Impacted Minimum Set-Aside
The owner leased the rental units in a 100% LIHC building to
eligible tenants by the end of the first year of the credit period.
However, management overcharged rent for all the units and, as a
result, failed to meet the minimum set-aside for the first year of the
credit period.
The building does not qualify for LIHC.
1.16 RENT IN UNITS WITH RENTAL ASSISTANCE
As long as the household is receiving Federal rental assistance, their portion
of the rent, according to the Section 8 calculations, can be more than the
maximum allowable rent applicable to the unit, if permitted by your state
agency. However, USC Title 26 Section 42(g)(2)E states that if their
income rises to a point where it maxes out under Section 8, so that no
rental assistance payment is being received, they are no longer considered
a Section 8 household, and the HC rent restrictions “kick-in” and the
household’s rent would have to be reduced.
EXAMPLE 1.16.1:
At initial certification Sallie is receiving rental assistance. Her tenant
paid portion, as calculated by Section 8, is $695; this exceeds the
maximum allowable rent of $690. As long as she continues to receive
Federal rental assistance, the tenant portion of the rent plus utility
allowance can be more than the maximum allowable rent of $690.
However, if Sallie were to stop receiving Section 8 rental assistance, her
rent must be reduced to applicable limits of $690.
INTERVIEWING AN APPLICANT
2.0 WELCOME CARD
The welcome card is a tool designed by management to determine the
eligibility of prospective applicants. Use this form to assist in the initial
interview with the prospective applicant.
2.1 FOUR STEPS TO PRE-QUALIFYING APPLICANTS
❖ Determine Household Size
❖ Compute Annual Gross Income
❖ Compare Income to Maximum Allowable Income Limits
❖ Verify Income Information
❖ Determine all household members student status (see section 2.8)
2.2 THE APPLICATION
The applicant must always complete the application with the assistance of a
leasing consultant. The application may never be given to anyone to be
completed outside of the leasing office.
It is important that all sections of the application are fully and clearly
completed and signed by all adults. N/A is NOT an acceptable answer to any
question on the application. Answer “No” or “None” instead.
Chapter
2
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Multiple applicants (other than spouse) must fill out separate applications.
The application should include:
❖ The name and correct age of each person who will occupy the unit
(legal name should be given just as it will appear on the Lease and
Tenant Income Certifications).
❖ All sources and amounts of current and anticipated annual income
expected to be earned during the twelve (12) month certification
period (including total assets and asset income).
❖ The signature of the applicant(s) and the date the application was
completed. (You should explain to the applicant that all the
information they provide is considered confidential and will be
handled accordingly.)
❖ Student Status including full and part-time.
When the application reflects anticipated income less than what the income
verified by the employer states (by a difference of $1,000 or more), the
applicant must clarify with a written statement explaining the reason for the
difference. If the applicant anticipates significantly more than what the verified
income reflects (by $1,000 or more), to best document eligibility, applicant
must write a very detailed self-affidavit that includes explanation as to why
there are such large differences. Certification must not be completed until
eligibility has been fully documented.
If an area of the application needs to be revised, the applicant should draw a
single line through the incorrect information and list the correct information
above or beside. All changes must be initialed by the applicant.
“WHITE OUT” may never be used. The use of “White Out” on any document
voids the signed document. It is your company’s policy that there be no white
out allowed at the properties.
It is management’s responsibility to obtain sufficient information on all
applicants at the time of application so that verification forms can be
completed.
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2.3 IDENTIFICATION NEEDED
NOTE 2.3.1: To properly qualify a household, verifications must always include
picture ID, social security card for everyone and birth certificates for all
occupants under 18. In Senior (Elderly) properties, a government
issued ID is required for household members that will qualify the unit as
“Elderly,”
Applicants with no social security card must provide copies of legal work
permit, green card or other legal document permitting them to work in the
United States. Please be sure to check your resident selection criteria to
see if management has alternate requirements.
BIRTH CERTIFICATES
The importance of birth certificates: Eligibility for low-income housing is
based on an income limit, which is based on the number of people in the
household. We need to determine if the occupants, particularly minors, are
members of the household. Although not required by regulation, the best
way to determine this is to request a Vital Statistics birth certificates. When
there is an absent parent there is a possibility that the household receives
child support. (see sections 2.4, 2.5 and 4.3 for additional guidance)
NOTE 2.3.2: The only exception to this is foster children. In this case, the
resident must provide proof of foster parenthood and we do not
count income paid to the resident for foster care (see section 3.1(E)
for additional guidance) when such income is made through the
official foster care agency.
2.4 HOUSEHOLD AND FAMILY SIZE
As a general rule, a “household” consists of all individuals (or tenants)
residing in a unit. To determine the household income limit, all applicable
income standards are adjusted for family size. For LIHTC purposes, all
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occupants of a unit are considered in the determination of family size
except the following:
1. Live-in aides. A person who resides with one or more elderly
persons, near-elderly persons, or persons with disabilities, and who
is determined to be essential to the care and well-being of the
person(s); is not obligated for the support of the person(s); and
would not be living in the unit except to provide the necessary
supportive services. While a relative may be considered to be a live-
in aide/attendant, they must meet the above requirements. The
income of live-in aides is not included in the household’s income.
2. Guests. A visitor temporarily staying in the unit with the consent of
the tenant or another member of the household who has expressed
or implied authority to consent on behalf of the tenant.
INCLUDED IN HOUSEHOLD SIZE
When determining family size for income limits, you must include the following
individuals who are not living in the unit:
1. Children temporarily absent due to placement in a foster home;
2. Children in joint custody arrangements who are present in the
household 50% or more of the time. If disputed, determine which
parent claimed the children as dependents for purposes of filing a
federal income tax return.
3. Children who are away at school but who live with the family during
school recesses;
4. Unborn children of pregnant women (as self-certified by the
woman);
5. Children who are in the process of being adopted;
6. Foster children that are in the legal guardianship or custody of a
State, county, or private adoption or foster care agency, yet are
cared for by foster parents in their own homes under some kind of
foster care arrangement with the custodial agency.
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7. Foster adult is usually an adult with a disability who is unrelated to
the tenant family and who is unable to live alone.
8. Temporarily absent family members who are still considered family
members if approved to live in the unit. For example, the property
may consider a family member who is working in another state on
assignment to be temporarily absent;
9. Family members in the hospital, or a rehabilitation facility, for
periods of limited or fixed duration are considered a family member.
These persons are temporarily absent;
10. Persons permanently confined to a hospital or nursing home. The
family decides if such persons are included when determining family
size for income limits. If the family chooses to include the
permanently confined person as a member of the household,
property staff must include income received by the confined person
in calculating family income.
2.5 ABSENTEE SPOUSES
There are several questions that must be answered when dealing with an
absentee spouse. They are the following:
• Is the absentee spouse a household member?
• Why is the absentee spouse not going to be residing in the apartment?
• For how long is the absentee spouse not going to be residing in the
apartment?
• Is the absentee spouse providing any financial support to the
household?
In the event it is anticipated that the absentee spouse is a household member
and/or will be residing in the unit in the twelve months following the
certification (certification period), his/her income must be documented and
counted towards the maximum allowable income.
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The policy and procedure set is; all applicants 18 years and older, or in the case
of emancipation, must sign an “Affidavit of Estrangement” if their spouse will
not be residing in the unit and will not be counted as a household member.
This is not to be confused with an absent spouse who will be counted as a
household member (i.e., away on military leave, temporarily absent, etc.) and
whose income will be counted.
When the spouse will be absent and is, or will, no longer be a household
member for the twelve months following the certification (certification period),
applicant(s) must:
1. Sign an “Affidavit of Estrangement or Absent Spouse” form.
When it is determined that a spouse will be absent due to not being able to
enter the country, and therefore not anticipated to be a household member in
the twelve months following the certification, he/she is not included in the
certification. The applicant should sign an “Affidavit of Estrangement or Absent
Spouse” form and provide supporting documentation as applicable. Any
income he/she contributes to the household is counted as a recurring gift or
contribution.
2.6 UNDERAGE HOUSEHOLD MEMBERS NOT MEMBERS OF THE FAMILY
In order to be considered a household member, a minor must be shown to live
in the household at least 50% of the time, but is not required to be a “family”
member. Applicants are allowed to decide what constitutes their “family.” For
example, if an applicant wants to include his nephew as part of the “family” or
“household,” it is required that the minor be determined part of the household
by how much time the minor will be in the unit.
At time of application, it might be determined by looking at the birth certificate
(See section 2.3) that a parent or both parents are missing from the household.
If at least one parent is in the unit, it could be assumed the child will be in the
unit at least 50% of the time, unless a divorce decree, child support order, or
other documents placed in the file state otherwise.
In the event that both parents are not part of the household, documentation
that the minor is indeed part of the household must be obtained from an
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independent source (guidance counselor, clergy, social worker, school where
the minor is attending, etc.). Documentation must show at least one adult
household member as guardian for the minor.
NOTE 2.6.1: A letter from either the minor’s parent or legal guardian is NOT
sufficient proof. This policy was set to avoid fraudulent letters in an
effort to increase household size in order to increase applicable income
limits.
2.7 LIVE-IN AIDE
A live-in aide is an individual who resides with one or more elderly persons,
near-elderly persons, or persons with disabilities and who:
1. Is determined to be essential to the care and well-being of the
persons;
2. Is not responsible for the support of the persons; and
3. Would not be living in the unit except to provide the necessary
supportive services (24 CFR 5.403).
While a relative may be considered to be a live-in aide, they shall
meet the above requirements, especially the last. The live-in aide
qualifies for occupancy only when the individual needing supportive
services qualifies and shall not qualify for continued occupancy as a
remaining family member. A spouse can never be a live-in aide.
Verification that the live-in aid is needed, must be obtained from the
person’s physician, psychiatrist or other medical practitioner or health care
provider. The property may not require applicant or tenants to provide
access to confidential medical records or to submit to a physical
examination.
Once established that an individual is a Live-in Aide his or her income is not
included in determining household eligibility.
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2.8 FULL TIME STUDENT APPLICANT
In general, occupants of a unit should not be considered qualified, if
all of the occupants are full-time students, unless they meet certain
exceptions listed in section 2.9. This is the same at time of annual
recertification as it is at time of initial certification.
The IRS has defined full-time students as follow:
Student Definition: Those attending or who will attend an
educational organization for five months
during the calendar year in which the
certification will be effective (months need not
be consecutive).
Educational Organization: One that normally maintains a regular faculty
and curriculum, and normally has an enrolled
body of pupils or students in the attendance
at the place where its educational activities
are regularly carried on. The term
“educational organization” includes
elementary schools, junior and senior high
schools, colleges, universities, and technical,
trade, and mechanical schools. It does not
include on-the-job training courses.
Determining Status: The determination of student status as full or
part-time is based on the criteria used by the
educational institution the student is
attending. Such is documented by the
institution on the “Student Verification” form.
In order to qualify to reside in a low-income unit when the household is
determined to be composed of all full-time students, they must meet one of
the student exemptions listed in section 2.9.
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It must also be noted that in the event a household member is determined
to be a student, full-time or part-time, and the household receives HUD
Section 8 assistance, all income received or anticipated to be received as
educational assistance must be counted in determining the household’s
income eligibility. For additional guidance on this, please see Chapter
3.1(I).
2.9 HOME AND SECTION 8 STUDENT RULE
Effective August 23, 2013 the HOME program adopts the Section 8 Housing
Choice Voucher (HCV) program restrictions on student participation found
at 24 CFR 5.612, which exclude any student that:
1. Is enrolled in a higher education institution
2. Is under age 24
3. Is not a veteran of the U.S. military
4. Is not married
5. Does not have a dependent child(ren)
6. Is not a person with disabilities
7. Is not otherwise individually eligible, or has parents who,
individually or jointly, are not eligible on the basis of income.
All of the above are prohibited from receiving any type of HOME assistance,
including renting HOME-assisted rental units, receiving HOME tenant-based
rental assistance, or otherwise participating in the HOME program
independent of their low- or very low-income families.
What triggers the student rule?
LIHTC/MMRB When ALL household members are students
HOME When ANY member is a student
HOME AND SECTION 8 STUDENT ELIGIBILITY
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A student enrolled in an Institute of Higher Education as defined by the
Higher Education Act of 1965-Amended 1998 will be deemed eligible for
assistance if the student meets all other eligibility requirements, passes
screening criteria and is:
1. Living with parents/guardian or
2. 24 or older or
3. A veteran of the United States armed services or
4. Married or
5. Has a dependent child or
6. Can prove independence of parents including
a. The parents did not claim the student on the most recent tax
return and
b. The student has lived independent of the parents for at least
one year or meets the Department of Education’s definition
of an independent student
c. Can legally sign a lease
7. Is disabled and was receiving assistance as of November 30, 2005
or
8. Has parents who are income eligible for the Section 8 program
2.10 STUDENT EXEMPTIONS:
The following list of exemptions includes those for HOME properties
committed before August 23, 2013. See section 2.9 for a list of those who do
not qualify under the current student rules of the HOME program.
MMRB, LIHTC, SAIL, and HOME properties only:
• At least one household member will be residing in the unit who is NOT a
full-time student.
Must List all such household members on the application: (Part-time
students must include verification from school documenting this
status)
• Applicants are full-time students, married AND file a joint tax return
APPLICANT MUST PROVIDE: A copy of marriage license.
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LIHTC / MMRB / SAIL properties only:
• Applicant is currently receiving assistance under Title IV of the Social
Security Act (i.e., AFDC or TANF)
APPLICANT MUST PROVIDE: A third-party verification of AFDC or
TANF award required
• Applicant is a full-time student that is a single parent and his/her children
are also full-time students and are not dependents on another individual’s
tax return other than a parent of such children.
APPLICANT MUST PROVIDE: A signed copy of most recent tax
return
• Applicant is a full-time student that is enrolled in the Job Training
Partnership Act (JTPA) or under similar Federal, State, or local laws.
APPLICANT MUST PROVIDE: A verification of enrollment &
mission statement of the program if not JTPA
• Applicant is a full-time student who previously was under the care and
placement of a foster care program. She/he must be currently
transitioning into independent living.
APPLICANT MUST PROVIDE: Third party verification is the only
acceptable form of verification of foster care.
SAIL properties only:
• Applicant is full-time student participating in an educational or training
program approved by the state (i.e. Soldiers for Scholars)
APPLICANT MUST PROVIDE: A verification of enrollment &
mission statement of the program
NOTE 2.10.1: Remember, if you have more than one program on your
property, you should always use the most restrictive guidelines.
2.11 DEMOGRAPHIC REQUIREMENTS
Demographic requirements (a.k.a. Special Set Aside) are the occupancy
requirements, or restrictions to serve commercial fishing worker, the elderly,
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farmworkers, homeless, and other communities. Set-aside housing for these
groups might have been promised by the developer in order to serve the needs
of these demographic. Regulatory Agreements describes the requirements
when applicable to the property.
2.12 DEMOGRAPHIC DEFINITIONS
Elderly Household In order to be considered an elderly household,
in an 80/20 set-aside property, at least one of
the occupants must be 55 years or older.
Pursuant to the Federal Fair Housing Act, when
the property has an 80/20 set-aside, no more
than 20% of the units can be rented to families,
and at no time, less than 80% of the units must
be rented to the elderly. Other than in a
federally funded property, occupants under the
age of 18 are not required to be allowed.
In order to be considered an elderly household
in a property which has 100% of units set-aside
for the elderly, all household members must be
62 years or older. Other than in a federally
funded property, occupants under the age of 18
are not required to be allowed to live there.
Homeless An individual or family who lacks a fixed,
regular, and adequate nighttime residence or
an individual or family who has a primary
nighttime residence that is:
1. A supervised publicly or privately
operated shelter designed to
provide temporary living
accommodations, including welfare
hotels, congregate shelters, and
transitional housing; or
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2. An institution that provides a
temporary residence for individuals
intended to be institutionalized; or
3. A public or private place not
designed for, or ordinarily used as,
a regular sleeping accommodation
for human beings.
The term does not refer to any individuals
imprisoned or otherwise detained pursuant to
state or Federal law.
Commercial Fishing Household A household of one or more persons wherein
at least one member of the household is a
Commercial Fishing Worker at time of initial
occupancy.
A laborer who is employed on a seasonal,
temporary, or permanent basis in fishing in
saltwater or freshwater and who derived at
least 50% of their income in the immediately
preceding 12 calendar months from such
employment.
The definition includes a person who has
retired as a laborer due to age, disability, or
illness.
1. In order to be considered retired
from commercial fishing work due
to age, a person shall be 50 years
of age or older and shall have been
employed for a minimum of five
(5) years as a fishing worker
immediately preceding retirement.
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2. In order to be considered retired
from commercial fishing work due
to disability or illness, a person
must be:
a. Medically established that
the person is unable to be
employed as a fishing
worker due to such
disability or illness.
Farmworker Household Unless specified in the Regulatory Agreement,
a household of one or more persons wherein
at least one member of the household is a
Farmworker at time of initial occupancy.
A farmworker is any laborer who is employed
on a seasonal, temporary or permanent basis
in the planting, cultivating harvesting or
processing of agricultural or aqua cultural
products, and who has derived at least 50%
of their income in the immediate preceding 12
calendar months from such employment.
The definition includes a person who has
retired as a laborer due to age, disability, or
illness.
1. In order to be considered retired
from farm work due to age, a
person shall be 50 years of age or
older and shall have been
employed for a minimum of five
(5) years as a farmworker
immediately preceding retirement.
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2. In order to be considered retired
from farm work due to disability or
illness, a person must be:
a. Medically established
that the person is
unable to be employed
as a Farmworker due to
such disability or illness.
"Aquaculture" means the cultivation of aquatic
organisms. "Aqua cultural producers" means
those persons engaging in the production of
aqua cultural products are certified.
"Aquaculture products" means the aquatic
organisms and any product derived from
aquatic organisms that are owned and
propagated, grown, or produced under
controlled conditions. Such products do not
include organisms harvested from the wild for
depuration, wet storage, or relay for
purification. Most State’s Statutes require
that any person engaging in aquaculture shall
be certified by the State Department of
Agriculture and Consumer Services.
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ANTICIPATED GROSS ANNUAL INCOME
3.0 TYPES OF INCOME THAT MUST BE INCLUDED IN THE INCOME
CALCULATION
Household income is defined as the gross income (with no adjustments or
deductions) the household anticipates it will receive in the 12-month period
following the effective date of the household’s certification of income. If the
household’s income cannot be determined based on current information
because the household reports little to zero income, or income fluctuates,
income may be determined based on actual income received or earned
within the last twelve months before the determination.
Income includes, but is not limited to, earned and unearned income from
all household members age 18 and older (adults, including foster adults),
unearned income of minor children and foster children under the age of 18,
and income from assets. Emancipated minors, persons under the age of 18
who have entered into a lease under state law, are treated as adults.
Income of Adults and Dependents
Adults
Count the annual earned and unearned income of the head, spouse or co-
head, and other adult members of the family, including foster adults. In
addition, persons under the age of 18 who have entered into a lease under
state law are treated as adults, and their annual income must also be
counted. These persons will be either the head, spouse, or co-head; they
are sometimes referred to as emancipated minors.
Chapter
3
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NOTE 3.0.1: If an emancipated minor is residing with a family as a member other
than the head, spouse, or co-head, the individual would be
considered a dependent and his or her income is not counted.
Dependents
A dependent is a family member who is under 18 years of age, is disabled,
or is a full-time student. The head of the family, spouse, co-head, foster
child, or live-in aide are never dependents. Some income received on
behalf of family dependents is counted and some is not.
Earned income of minors (family members under 18) is not counted.
However, unearned annual income is counted, including that of foster
children.
Because households’ certifications are based on a “snap shot” of the
household’s income at time of initial certification, earned income of minors
that will turn 18 years old during the twelve months following the effective
date of the certification is not required to be counted.
NOTE 3.0.2: Benefits or other unearned income of minors is counted.
Employment Income
Employment income includes (but is not limited to) hourly wages, salaries,
overtime pay, tips, bonuses, and commissions before any payroll
deductions. Payments in lieu of employment income are also included; e.g.,
workers compensation, severance pay, unemployment and disability
compensation. Earned income from employment of children (including
foster children) is excluded.
Any household member that receives tip income or works in a
position/industry that would normally receive tips, must complete a
“Declaration of Tip Income.” The household member’s signature on the
declaration must be witnessed by property management representative.
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Maximum benefits and annualized payments should not be used unless the
source of funds is expected to continue throughout the certification period
or for an indeterminable length of time. For example, if the third party does
not indicate the length of time for which the tenant will be receiving a
certain income, then the income should be annualized. In the event that
the family cannot provide documentation that access to a specific source of
income is for a limited and determinable time period, the benefits should be
considered to be available for an indefinite time period and annualized.
EXAMPLE 3.0.0: Benefits for Indefinite Time Period
John works as a telemarketer for $9.00 an hour, 40 hours a
week. He does not work overtime, has no other source of
income, and is not planning to leave his job. His anticipated
income is computed as:
($9.00/hour) x (40 hours/week) x (52 weeks/year) = $18,720/year
EXAMPLE 3.0.1: Benefits for Definite Time Period
A teacher’s assistant works nine months annually and
receives $1,300 per month. During the summer recess, the
teacher’s assistant works for the Parks and Recreation
Department for $600 a month. The teacher’s assistant’s
anticipated income is computed as:
($1,300 x 9 months) + ($600 x 3 months) = $13,500
If information is available on changes in income expected to occur during
the year, use that information to determine the total anticipated income
from all know sources during the year.
EXAMPLE 3.0.2: Anticipated Changes in Income
In May 2004, an unemployed plumber applies for LIHTC
housing. At that time, the plumber is receiving
unemployment benefits of $250.00 per month and will
qualify for benefits for 4 more months. Documentation that
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such is the case is available. Beginning in October, the
plumber will be employed at $1,000 per month. The
plumber’s anticipated income is computed for the period
from May to September 2004 plus the income for October
2004 through May 2005.
($250.00 x 5 months) + ($1,000 x 7 months) = $8,250
Property staff are expected to make reasonable judgments regarding the
most reliable method for estimating the income a household will receive
during the year. If the tenant’s income cannot be determined using current
information, the property staff may include actual income received or
earned within the 12-month period before the determination of annual
income.
EXAMPLE 3.0.3: Sporadic Employment
Justine is disabled and not always able to work full-time. She
has income from disability insurance and a family trust, and
also works as a typist with a temporary agency when she is
well. Last year she worked nearly six months, but at the time
she applies for an LIHTC apartment, she has more medical
problems and does not know when or how much she will be
able to work.
Because Justine is not working at the time of the certification
and actual income from her sporadic employment as a typist
cannot be reasonably determined, the income earned during
the six-month period in the prior year should be included in
the income certification.
Management staff must make a reasonable judgment. The
prior year’s income should not be used to estimate Justine’s
future income if she can provide sufficient documentation
that her earning capabilities have changed; e.g., her contract
with the temporary agency has been terminated.
Military Income
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Military employment may include (but is not limited to) base and longevity
pay, proficiency pay, sea and foreign duty pay, hazardous duty pay,
subsistence and clothing allowances. All these are includable in income.
Hostile fire pay, however, is excluded from income. Note: a temporarily
absent individual on active military duty must be removed from the family
and his or her income must not be included in the computation of
household income, unless (1) that person is the head of the family, spouse,
or co-head or (2), the spouse or a dependent of the person on active
military duty resides in the unit.
Military Basic Housing Allowance
Military basic housing allowances are also included in income.
Student Income
The treatment of a student’s income is dependent on the age of the
student, the type of income, and the status of the student within the
household. It doesn’t matter whether the student is living with the
household or is away at school.
1. If the full-time student is 18 years of age or older and is the head of
the family, spouse or co-head, all income is included.
2. If the full-time student is 18 years of age or older and a dependent,
only the lesser of actual earned income or $480 is included, along
with unearned income and income from assets. Documentation
that the full-time student is a dependent of a household member
and verification of full-time student status, must be placed in the
file. When such documentation is not available, we must count all
earned incomes.
3. If the full-time student is a minor (under the age of 18), then only
unearned income and income from assets is included. No income
from employment is counted.
The treatment of educational scholarships and grants is discussed later
in this chapter.
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NOTE 3.0.3: The income of full-time students 18 years of age or older who are
members of the household but away at school is counted the same as
the income for other full-time students. The income of minors who are
members of the household but away at school is counted the same as
the income for other minors.
Foster Care Payments
Payment received by the family for the care of foster children or foster adults is
not counted. This rule applies only to payments made through the official
foster care relationships with local welfare agencies.
Adoption Assistance Payment
Adoption assistance payments in excess of $480 per child per year are not
counted.
Income of Temporarily Absent Family Members
You must count all income of family members approved to reside in the
unit, even if some members are temporarily absent, unless the absent
individual is on active military duty.
A temporarily absent individual on active military duty must be removed
from the family, and his or her income must not be counted unless that
person is the head of the family, spouse, or co-head. However, if the
spouse or a dependent of the person on active military duty resides in the
unit, that person’s income must be counted in full, even if the military
member is not the head, or spouse of the head of the family. The income
of the head, spouse, or co-head will be counted even if that person is
temporarily absent for active military duty.
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Examples – Income of Temporarily Absent Family Members
• John Chouse works as an accountant. However, he suffers from a disability that
periodically requires lengthy stays at a rehabilitation center. When he is confined to
the rehabilitation center, he receives disability payments equaling 80% of his usual
income.
During the time he is not in the unit, he will continue to be considered a family
member. Even though he is not currently in the unit, his total disability income will
be counted as part of the family’s annual income. Properties with Section 8 are
required to conduct an interim recertification.
• Mirna Martinez accepts temporary employment in another location and needs a
portion of her income to cover living expenses in the temporary/new location. The
full amount of the income must be included in annual income.
• Charlotte Paul is on active military duty. Her permanent residence is her parents'
assisted unit where her husband and children live. Charlotte is not currently exposed
to hostile fire. Therefore, because her spouse and children are in the assisted unit,
her military pay must be included in annual income. (If her dependents or spouse
were not in the unit, she would not be considered a family member and her income
would not be included in annual income.)
Income of Permanently Confined Family Members
An individual permanently confined to a nursing home or hospital may not
be named as family head, spouse, or co-head but may continue to count as
a family member at the family’s discretion. The family’s decision on
whether or not to include the permanently confined family member as a
family member determines if that person’s income will be counted.
Include If the permanently confined individual is counted as a
family member, his/her income is counted.
Exclude If the permanently confined individual is excluded as a
family member the income is not counted.
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If the family elects to include the permanently confined member, the
individual is listed on the TIC as an adult who is not the head, spouse, or
co-head, even when the permanently confined family member is married to
the person who is or will become the head of the family.
Educational Scholarships or Grants
All forms of student financial assistance (grants, scholarships, educational
entitlements, work study programs, and financial aid packages) are
excluded from annual income but must be included when the household
receives Section 8 assistance. This is true whether the assistance is paid
to the student or directly to the educational institution. This is also true if
the student is part time or full time.
For students receiving Section 8 assistance, all financial assistance a
student receives (1) under the Higher Education Act of 1965, (2) from
private sources, or (3) from an institution of higher education that is in
excess of amounts received for tuition is included in annual income except if
the student is over the age of 23 with dependent children or the student is
living with his or her parents who are receiving Section 8 assistance. See
sections 2.6 and 5.8 for further information.
Alimony or Child Support
Alimony or child support amounts awarded by the court are counted, unless
the applicant certifies that payments are not being made and he or she
provides documentation of having taken all reasonable legal actions to
collect amounts due, including filing with the appropriate courts or agencies
responsible for enforcing payment and provides a current payment history
showing no payments received. See Note 4.3.2 for further guidance in
regard to child support.
Regular Cash Contributions and Gifts
Any regular contributions and gifts from persons not living in the unit must
be counted as income. These sources may include rent and utility
payments paid on behalf of the family and other cash or noncash
contributions provided on a regular basis.
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Examples – Regular Cash Contributions
• The father of a young single parent pays her monthly
utility bills. On average he provides $100 each month.
The $100 per month must be included in the family’s
annual income.
• The daughter of an elderly tenant pays her mother’s
$175 share of rent each month. The $175 value must
be included in the tenant’s annual income.
NOTE 3.0.4: Groceries and/or contributions paid directly to the childcare provider
by persons not living in the unit are excluded from annual income.
NOTE 3.0.5: Temporary, nonrecurring, or sporadic income (including gifts) is not
counted.
Temporary, Nonrecurring, or Sporadic Income
Irregular, nonrecurring monetary gifts, or contribution to resident are not
included in income.
Income from a Business
When calculating annual income, you must include the net income from
the operation of a business or profession, including self-employment
income. Net income is the gross income less business expenses, interest
on loans, and depreciation computed on a straight-line basis. If the net
income from a business is negative, it must be counted as zero income. A
negative amount must not be used to offset other family income.
NOTE 3.0.6: In addition to net income, you must count any salaries or other
amounts distributed to family members from the business, and cash
or assets withdrawn by family members, except when the
withdrawal is a reimbursement of cash or assets invested in the
business.
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NOTE 3.0.7: When calculating net income, you must not deduct principal
payments on loans, interest on loans for business expansion or
capital improvements, other expenses for business expansion, or
outlays for capital improvements.
NOTE 3.0.8: A low-income tenant may use a portion of a low-income unit
exclusively and on a regular basis as a principle place of business,
and claim the associated expenses as tax deductions, as long as the
unit is the tenant’s primary residence. If the tenant is providing
daycare services, the tenant must have applied for (and not have
been rejected), be granted (and still have in effect), or be exempt
from having a license, certification, registration, or approval as a
daycare facility or home under state law.
Periodic Social Security Payments
Count the gross amount, before deductions for Medicare, etc., of periodic
Social Security payments. Include payments received by adults on behalf of
individuals under the age of 18 or by individuals under the age of 18 for
their own support.
Adjustments for Prior Overpayment of Benefits
If an agency is reducing a family's benefits to adjust for a prior
overpayment (e.g., social security, SSI, TANF, or unemployment benefits),
count the amount that is actually provided after the adjustment.
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Example – Adjustment for Prior Overpayment of Benefits
Lee Park’s social security payment of $250 per month is being
reduced by $25 per month for a period of six months to make up
for a prior overpayment. Count his social security income as
$225 per month for the next six months and as $250 per month
for the remaining six months.
Periodic Payments from Long-Term Care Insurance, Pensions,
Annuities, and Disability or Death Benefits
The full amount of periodic payments from annuities, insurance policies,
retirement funds, pensions, and disability or death benefits is included in
annual income. (See subparagraph O below for information on the
withdrawal of cash or assets from an investment.) Payments such as Black
Lung Sick Benefits, Veterans Disability, and Dependent Indemnity
Compensation for the Widow of a Killed in Action Serviceman are examples
of such periodic payments.
NOTE 3.0.9: Withdrawals from retirement savings accounts such as Individual
Retirement Accounts and 401K accounts that are not periodic
payments do not fall in this category and are not counted in annual
income.
Example – Withdrawals from IRAs or 401K Accounts
Isaac Freeman retired recently. He has an IRA account but is not
receiving periodic payments from it because his pension is adequate
for his routine expenses. However, he has withdrawn $2,000 for a
trip with his children. The withdrawal is not a periodic payment and is
not counted as income.
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Long-term Care insurance Payments
If the tenant is receiving long-term care insurance payments, any
payments in excess of $180 per day must be counted toward the gross
annual income.
Federal Government Pension Funds Paid to a Former Spouse
Federal government pension funds paid directly to an applicant’s/tenant’s
former spouse pursuant to the terms of a court decree of divorce,
annulment, or legal separation are not counted as annual income. The
state court has, in the settlement of the parties’ marital assets, determined
the extent to which each party shares in the ownership of the pension.
That portion of the pension that is ordered by the court (and authorized by
the Office of Personnel Management (OPM)), to be paid to the
applicant’s/tenant’s former spouse is no longer an asset of the
applicant/tenant and therefore is not counted as income. However, any
pension funds authorized by OPM, pursuant to a court order, to be paid to
the former spouse of a Federal government employee is counted as income
for a tenant/applicant receiving such funds.
Income from Training Programs
Amounts received under HUD-funded training programs are excluded from
annual income.
Incremental earnings and benefits received by any family member due to
participation in qualifying state or local employment training programs are
excluded. Income from training programs not affiliated with a local
government, and income from the training of a family member resident to
serve on the management staff, is also excluded.
Excluded income must be received under employment training programs with
clearly defined goals and objectives and for a specific, limited-time period. The
initial enrollment must not exceed one year, although income earned during
extensions for additional specific time periods may also be eligible for exclusion.
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Training income may be excluded only for the period during which the family
member participates in the employment training program.
Exclusions include stipends, wages, transportation or child care payments (if
made directly to the child care organization), or reimbursements.
Income received as compensation for employment is excluded only if the
employment is a component of a job training program. Once training is
completed, the employment income becomes income that is counted.
Amounts received during the training period from sources that are unrelated to
the job training program, such as welfare benefits, social security payments, or
other employment, are not excluded.
Resident Service Stipends
Resident service stipends are generally modest amounts of money received
by residents for performing services such as hall monitoring, fire patrol,
lawn maintenance, and resident management.
Include If the resident stipend exceeds $200 per
month, you must include the entire amount in
annual income. This includes but it is not
limited to full or partial concessions on rent,
washer/dryer, cable, or others.
Exclude If the resident stipend is $200 or less per
month, you must exclude the resident
services stipend from annual income. This
excludes full or partial concessions on rent,
washer/dryer, cable, or others that are giving
to a household member as part of
compensation for employment, whether part
or full-time. Such are always counted as
income.
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Withdrawal of Cash or Assets from an Investment
The withdrawal of cash or assets from an investment received as periodic
payments should be counted as income. Lump sum receipts from pension
and retirement funds are counted as assets. If benefits are received
through periodic payments, do not count any remaining amounts in the
account as an asset. See Section 7 for guidance on calculating income
from an asset.
Lump Sum Payments
Generally, lump sum amounts received by a family, such as inheritances,
insurance settlements, or proceeds from the sale of property are considered
assets, not income.
When social security or SSI benefit income is paid in a lump sum as a result
of deferred periodic payments these are considered assets, not income.
Settlement payments from claim disputes over welfare, unemployment, or
similar benefits may be counted as assets. Lump sum payments caused by
delays in processing periodic payments for unemployment or welfare
assistance are included as an asset at time of the certification following the
receipt of such lump sum.
NOTE 3.0.10: Lottery winnings paid in one payment are treated as assets. Lottery
winnings paid in periodic payments must be counted as income.
3.1 TYPES OF INCOME THAT ARE NOT INCLUDED IN THE INCOME
CALCULATION
A. Employment income of members of the household that are under 18,
including foster children. Head of household and spouse may never be
considered minors. (Unearned incomes, such as social security payments
received on behalf of minors, must be included as income.)
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B. Resident service stipends not exceeding $200 per month received by a
resident for performing a service for the property, on a part-time basis,
that enhances the quality of life in the housing development. If the stipend
exceeds $200 per month, the entire amount is included in annual income.
Such services may include, but are not limited to, floor patrol, hall
monitoring, lawn maintenance, and resident initiative coordination. No
resident may receive more than one such stipend during the same period.
This excludes full or partial concessions on rent, washer/dryer, cable, or
others that are giving to a household member as part of compensation for
employment, whether part or full-time. Such are always counted as
income.
C. Earnings in excess of $480 for each full-time student, 18 years or older that
is not a head or co-head of household or spouse.
D. Loans regardless of how the money is used. Loans are not counted as
income because loans are required to be repaid. (Special note: repayments
of a loan to an applicant/tenant are considered income.)
E. Income associated with persons who live in the unit but are not household
members. For example, income from live-in attendants.
F. The principal portion of the payment received on mortgage or deeds of
trust.
G. Hazardous duty pay to a family member serving in the Armed Forces who
is exposed to hostile fire.
H. Temporary, non-recurring or sporadic income (including gifts).
I. Payments received under training programs funded by HUD
(Comprehensive Improvement Assistance Program).
J. Adoption assistance payments in excess of $480 per adopted child per year.
K. Reparation payments paid by a foreign government pursuant to claims filed
under the laws of that government by persons who were persecuted during
the Nazi era. Examples include payments by German and Japanese
governments for atrocities committed during the Nazi era.
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L. Home care payments paid by the State Agency to families that have
developmentally disabled children or adult family members living in the
home.
M. Deferred periodic payments of SSI and Social Security benefits that are
received in lump sum.
N. Recurring monetary contributions that are paid directly to a childcare
provider by persons not living in the unit. HUD interprets the regulations to
mean that child care expenses that are reimbursed are not included as
annual income.
O. The value of any childcare provided or arranger (or any amount received as
payment for such care or reimbursement for costs incurred for such care)
under the Child Care and Development Block Grant Act of 1990 (CCDBGA)
(42 U.S.C. 9858q). Participating families may either pay a reduced amount
based on a sliding fee scale or they may receive a certificate for child care
services.
NOTE 3.1.1: This exclusion does not apply to amounts received by childcare provider
for services paid through the CCDBGA.
P. Other forms of income excluded by federal statutes are:
a) The value of the allotment made under Food Stamp Act of 1977.
b) Payment received under Domestic Volunteer Services Act of 1973
(employment through VISTA, Retired Senior Volunteer Program, Foster
Grandparents Program, youthful offender incarceration alternatives,
senior companions).
c) Payments, rebates, or credit received under Federal Low-Income Home
Energy Assistance Programs, includes any winter differentials given to
elderly persons.
d) Payment under programs funded in whole or in part under the Job
Training Partnership Act (employment and training programs for Native
Americans, migrant and seasonal farm workers, Job Corps, veterans’
employment programs, state job training programs, career intern
programs).
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e) Only when not receiving section 8 assistance, the full amount of student
financial assistance paid either directly to the student or to the
educational institution. This includes scholarships, grants, fellowships,
and any other kind of student financial assistance. It does not matter
what the assistance is actually used for.
f) Interest of individual Indians in trust or restricted lands, and the first
$2,000 per year of income received by individual Indians that derived
from trusts or restricted lands (25 U.S.C. 1408).
g) Payments received under the Alaskan Native Claims Settlement Act (43
U.S.C. 1626(c)).
h) Payments from certain sub marginal U.S. land held in trust for certain
Indian tribes.
i) Payments from disposal of funds of Grand River Bank of Ottawa
Indians.
j) The first $2,000 of per capita shares received from judgments awarded
by the Indian Claims Commission of the Court of Claims, or from funds
the Secretary of Interior holds in trust for an Indian Tribe.
k) Payments received after January 1, 1989, from the Agent Orange
Settlement Fund or any other fund established pursuant to the
settlement in the In Re: Agent Orange product liability litigation, M.D.L.
No. 381 (E.D.N.Y.).
l) Payment received under Title V of the Older Americans Act (Green
Thumb, Senior Aides, Older American Community Service Employment
Program).
Q. Income from employer due to reimbursable expenses
R. Grants or other amounts received specifically for;
a) Medical expenses
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b) Set aside for use under a Plan to Attain Self Sufficiency (PASS) and
excluded for purposes of Supplemental Security Income (SSI) eligibility,
and
NOTE 3.1.2: A PASS permits a person with disabilities who is receiving SSI, and who
is also receiving other income, to set aside a portion of the other income
in order to achieve a work-related goal.
c) Out-of-pocket expenses for participation in publicly assisted programs
and only to allow participation in these programs. These expenses
include special equipment, clothing, transportation, childcare, etc.
3.2 WHOSE INCOME IS COUNTED
HOUSEHOLD MEMBER Employment
Income
Other Income (Including
Income from Assets)
Head YES YES
Spouse YES YES
Co-Head YES YES
Child (under 18) who is Head, Co-Head, or
Spouse YES YES
Dependent Children NO YES
Full-Time Students, 18 years old and older, who
are not Head of Household, Co-Head, or Spouse $480 ONLY YES
Full-Time Students, 18 years old and older, who
are Head of Household, Co-Head, or Spouse YES YES
Foster Child NO YES
Foster Adult YES YES
Live-In Attendant NO NO
Income of a Spouse not living in the apartment. (Unless Divorced or Legally separated). If no
legal document is available, tenant must provide a statement (See 2.4).
VERIFYING AND DOCUMENTING
INCOME
4.0 METHODS OF INCOME VERIFICATION
To properly determine the household qualification status, 3rd party
verification of income must be obtained.
VERIFICATION TRANSMITTAL AND RECEIPT
Acceptable income verifications vary from state to state.
Requests for income verification must be sent by management directly to the
source, not through the applicant.
The applicant may never “hand deliver” a verification of employment.
Facsimile verifications are acceptable.
4.1 REVIEWING REPORTED INCOME VERIFICATION
Any significant differences between the amounts given on the application
and the amounts reported on third party verifications must be clarified.
This is done by having the applicant sign a self-affidavit. If the applicant's
email address is listed on the application, it can be used to obtain a self
affidavit from the applicant via email. When the amount listed on the
application is more than $1,000 higher than the amount reported on third
party verification, this could raise questions at time of an audit. To best
document eligibility, applicant must write a very detailed self-affidavit that
Chapter
4
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includes explanation as to why there are such large differences.
Certification must not be completed until eligibility has been fully
documented.
WHEN REVIEWING A VERIFICATION OF INCOME
❖ All Income and Asset Verifications must be signed and dated within
120 days prior to move-in or recertification.
❖ Employment Verification letters completed on company letterhead
are not acceptable forms of income verification.
❖ Completed verifications of income should NOT contain any
alterations of figures or the use of “White Out.”
❖ When third party verification is unclear, it can be verbally clarified
directly with the source (see Clarifying vs. Verifying.) The
information must be documented using Clarification Form and
include the following:
1. Clarification date
2. The name and title of the person with whom you spoke
3. Phone number of the person with whom you spoke
4. Reason for the call
5. What they said
6. Your signature
7. Your title
CLARIFYING VS. VERIFYING
Because it is our policy that clarification statements may be used only to
clarify information and not to verify information, it is important to
understand the difference between clarifying vs. verifying.
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Verifying
As mentioned above, there will be times when third party verification is
incomplete. When this happens, it is compliance best practice that a
new verification be requested, because additional information needed to
calculate the income will have to be verified. In an effort to
demonstrate due diligence, this information must come directly from
the source. For example, when the employer gives an anticipated date
of pay increase, but does not state the amount to be received. Without
this information the income cannot be properly calculated, and it will
require that the information be provided by the employer in order to
calculate anticipated annual income.
When an income verification has been received through a good
third party source (fax or mail) and that verification includes an
email address for the employer, the email can now be used to
verify any incomplete information on the verification form. This is
true even if the email address listed is not a company issued email
(i.e. Yahoo, Gmail, etc.).
Clarifying
When unclear third party verification is received and all that is needed is
a clarification of the information furnished, as mentioned above, this
can be completed using a clarification form. For example, when the
employer gives a total annual gross income but fails to state that the
information was including, but not limited to tips, bonuses, overtime,
commissions, and pay increases, for the next twelve months a
clarification statement would be sufficient, because annual gross income
was already provided.
4.2 ACCEPTABLE INCOME VERIFICATION
NOTE 4.2.1: When household’s income is within $500 of the maximum
allowable income limit, it is compliance best practice to
request the most recent 4-6 paystubs from the applicants.
We would then calculate the 4-6 pay stubs and the YTD
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income and ensure this income does not put the total
household’s income higher than the allowable limit.
a) Internet Verifications of Income
Verifications printed from the internet are considered third-party
verification. If the applicant or resident has an employer or other
source that makes income information available on the internet,
property staff may print out the most recent available information from
a computer on-site. This type of verification must be printed by office
staff and never hand carried by the applicant or resident. Print out
must include:
1. Sufficient information to calculate anticipated gross annual
income, including all possible income sources
2. Date of verification
3. Reliable source name and address
4. Applicant name, social security number, and hire date
5. Internet address and header or footer that identifies the
company issuing the statement
b) The Work Number or Similar
Verifications obtained by 1-800, 1-900, 1-888 numbers like “The Work
Number” can be used, provided all necessary information is included. If
the source requires payment for the verification, this cost should not be
paid by the applicant. The following information must be included on
the statement:
1. Sufficient information to calculate anticipated gross annual
income (a minimum of 4 pay histories for new hires, 4-6
pay histories for all others)
2. Date of verification
3. Source’s name and address (i.e., employer’s name)
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4. Applicant name, social security number, and hire date
5. Sufficient information to identify the company issuing the
statement
When using employment verifications similar to the one provided by
“The Work Number” you will be required to calculate income using all
information provided. For example, you will have to calculate Year-to-
Date income, average pay based on pay history, etc. Highest of all
calculations must be used when determining eligibility. Average
number of hours is not required to be calculated, other than when these
are shown on the verification.
c) Offer Letters
Employment offer letters are an acceptable verification of income as
long as the start date is after the effective date of the certification.
Once employed, one of the other acceptable types of verification must
be requested. Please note also, offer letters must address all income
information required to properly calculate anticipated annual income
(i.e., over-time, shift differential, tips, bonuses, commissions, pay-
increases, etc.).
d) Employment Verification Form
This Form must be sent directly to the employer’s HR or Payroll
Department and must never be hand carried by the applicant or
resident. As noted below, there are requirements on how the form
must be sent and received from the employer.
It is never a reliable source, when employer comes to the property
to complete the Employment Verification in person. In such cases,
it is compliance best practice they be instructed to either fax, email,
or mail the letter to your property. In the event that your company
has a policy of allowing employers to complete the form at the
property, we strongly recommend a copy of the employer's ID be
obtained along with a current copy of the Company's Business
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License. All properties must have management approval before
accepting verifications of employment completed at the property.
Sending the Form
The following is equally applicable to any other verification that will be
sent in the same manner.
e-mail once completed it would have to be scanned and
attached to an email. The email address of the
individual must be a company issued email, including
the name of the individual, or department. Therefore,
Yahoo, Gmail, or similar type of accounts are not a
reliable source. A copy of the sent email must be kept in
the file to prove that request was sent by email and not
handled by the applicant.
Mail a copy of the form with the required information
completed must be kept in the file. Stamp or make
notation that the original was sent in the mail. In an
effort to demonstrate due diligence, a self-addressed
envelope should not be included with the request. A
copy of the envelope used to send the form must be
retained in the file.
Fax if faxed to the employer, it is required that a copy of the
fax coversheet, fax transmission receipt and the
completed request form be kept in the file.
Prior to sending the request, you must complete the following
information:
1. Request Date
2. Employee Name
3. Employee last four of SS#
4. Company Name
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5. Employer’s Address
6. HR Contact Name
7. Phone Number / Fax #
8. E-Mail Address
In addition, applicant or resident must complete and sign the section
titled “Employee Consent” prior to sending the request.
Verifications not fully completed will be unacceptable and file will be
considered in non-compliance.
Receiving the Form
The following is equally applicable to any other verification that will be
received in the same manner.
e-mail a copy of the e-mail must be kept in the file with the
form. The email address of the individual where it
comes from must be a company issued email, including
the name of the individual, or department. Preferably it
will be of the individual who completed the form,
otherwise it will have to be clarified and documented
why he/she did not e-mail the completed form. Yahoo,
Gmail, or similar type of accounts are not a reliable
source of verification.
Mail original envelope including the post mark from the
US Postal Service in which the verification was
received, and the completed form must be kept in the
file.
Fax fax transmission must show employer’s fax number
and employer’s name, as listed on the form and
“Application for Residency.” In the event, the fax
transmission does not show the company name and fax
number from where it comes from, or it is not the same
as the one shown on the verification as the employer
fax, the verification will be acceptable only if it includes
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the official company fax cover sheet. Management
should always continue to make reasonable efforts to
receive the original verification of income and place in
the file including the envelope in which it was received.
When the form is received via fax, all pages of the
fax transmission must be kept in the file. For
example, if a fax strip says page 1/3, all 3 pages
must be kept even if they do not contain any
relevant information.
d) HUD Form 50058
HUD Form 50058, or equivalent, for households possessing a Section 8
Voucher issued by a public housing agency may be used as verification
of household income, if permitted by your state agency. This
verification must also be sent directly from the source and may not be
hand carried by the applicant.
e) Documents Provided by the Applicant
The preferred method of verifying income is always through third
parties. Only when (A) third party contacts are considered impossible,
(B) the source does not respond, (C) third party charges a fee, or (D)
no third party is available, property staff can then request documents
provided by the applicant (i.e., pay stubs).
Consider the Following:
Property staff must consider the following when using tenant-
provided documentation:
1. Is the document current? Documentation may be
inaccurate if it is not recent. Therefore, properties
must ensure that each of the pay stubs are dated
within 120 days prior to the anticipated move in date
for initial certifications. For annual recertifications, the
most current pay stub must be dated within 120 days
of the recertification effective date. The pay date on
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the pay stub will be used to determine the age of the
stub.
2. Is the documentation complete? Properties may
not accept paystubs to document employment
income unless the applicant or tenant provides the
most recent four to six consecutive pay stubs to
illustrate variations in hours worked. A minimum of
four pay stubs are required for new hires. These
must show employee name, company name, pay
period and frequency dates, and provide sufficient
information to fully calculate income. Actual
paychecks or copies of paychecks should never be
used to document income because deductions are not
shown on the paycheck.
3. Is the document an unaltered original? The
greatest shortcoming of tenant-provided documents
as a verification source is their susceptibility to
undetectable change through the use of high-quality
copying equipment. Documents with original
signatures and those that prove to be original are the
most reliable. Photocopied documents generally
cannot be assumed to be reliable and therefore must
never be used when such is what provided by the
applicant.
In short, original and unaltered paystubs may be used to project or
estimate annual income and document employment income
provided that tenant provides most recent four to six consecutive
pay stubs.
Using Check-Stubs (a.k.a Paystubs)
See “Consider the Following” above.
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File must always include no less than the last four to six (4-6)
consecutive stubs. Note that it says THE LAST, and CONSECTUIVE.
All others will be considered noncompliant.
When using stubs, at least four full pay stubs will be required for
applicants that are "new hires" that have not been employed enough
time to have receive 6 pay checks. Please note that the first pay stub
should not be utilized for the calculations if the applicant did not work
the full pay period. Management should complete two calculation sheets
for the file. One showing the calculations for all pays stubs and a second
showing the calculations using just the full pay stubs. A clarification
should be added to the file explaining that to be conservative,
management has chosen to complete a second calculation sheet using
just the full pay stubs as these are a more accurate reflection of true full
pay. The hire date must be properly documented using one of the
suggestions mentioned below.
Other requirements:
1. When calculating income using stubs, it is required that
two different calculations be completed (see chapter 5)
and remember that not using the proper hire date may
result in miscalculation of the year to date (YTD)
income.
2. The use of stubs will require you complete a YTD
income, and therefore you must have the hire date.
This you can get from, Employment ID, hire letter,
insurance card, anything that was issued by the
employer and shows the hire date.
NOTE 4.2.2: Gross income shown on pay stubs will not always be the total gross
income. Any pretax deductions will not be included in this amount
(i.e. Retirement, Health Insurance, 401k, etc.).
4.3 ACCEPTABLE FORMS OF INCOME VERIFICATION
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Management must approve all other forms of employment verification not
listed below.
INCOME FROM EMPLOY MENT
See section 4.2
INCOME FROM A BUSINESS OR SELF-EMPLOYMENT
Income from a Business and income from Self Employment are not the same,
but normally documented the same.
Acceptable documentation for income from self-employment is as follows:
1. The applicant’s statement (Self Employed Declaration) of anticipated
NET income for the next twelve (12) months, and one of the
following;
a) an entire signed copy of the most recent year’s Federal Tax Return
including Profit/Loss Statement, must include 1040/1040A and IRS
Schedule C, E, or others as applicable. In the absence of a signed
copy, an official IRS income tax return transcript will be the only
acceptable documentation, or;
b) Financial Statement of Net Income completed by an accountant,
audited or un-audited financial statement(s), current Profit & Loss
statement, detailed payment history, contracts, or other supporting
documentation.
*Note that the absence of tax return requires that the Self Employed
Declaration be notarized and a Clarification Form must be completed by
property staff explaining why tax returns are not available.
Acceptable documentation for income from a business is as follows:
1. The applicant’s statement (Self Employed Declaration) of
anticipated NET income for the next twelve (12) months, and;
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a) an entire signed copy of the most recent year’s Federal
Tax Return including Profit/Loss Statement, must
include 1040/1040A and IRS Schedule C, E, or others
as applicable. In the absence of a signed copy, an
official IRS income tax return transcript will be the only
acceptable documentation, or;
b) Financial Statement of Net Income completed by an
accountant, (audited or un-audited). Including the
accountant’s calculation of straight-line depreciation
expense. Such statement must be sent to the property
directly from the third party.
At time of Initial Certification
The following procedure is not applicable at time of annual recertification
because tenant would be expected to have filed a tax return. The only
exemption will be if the business or self-employment commenced after initial
certification and such exemption is approved by compliance.
On or before March 14 for income from a business, and April 14 for self-
employment income:
In the absence of a from above, the only other acceptable
documentation will be a Financial Statement of Net Income from Self
Employment, or from a Business as applicable. Such statement will
need to be completed by an accountant.
After March 14 for income from a business, and after April 14 for self-
employment income:
The prior will only be acceptable if applicant provides a copy of filed IRS
Form 7004 “Application for Automatic Extension of Time to File Certain
Business Income Tax, Information, and Other Returns” or Form 4868
“Application for Automatic Extension of Time to File U.S. Individual
Income Tax Return”;
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There is very little guidance on what is and what is not sufficient from an
accountant, as it must include a Profit/Loss Statement. Therefore, we have
created the form “Accountant Financial Statement of Net Income” which will
have to be completed by an accountant. When applicable, an accountant may
include additional supportive information, but must always fully complete the
form. Such information must come directly from the accountant and never
hand carried by the applicant.
Fully completed “Accountant Financial Statement of Net Income” must
include the name, address, phone number, Preparer Tax Identification
Number (PTIN) or Social Security Number (SSN) all others will not be
acceptable statements.
INCOME FROM UNEMPLOYMENT
The household member must sign an Unemployed Declaration, and provide
a) Benefit award letter from the agency (must be dated within 120
days) providing the benefit, including frequency of payment.
NOTE 4.3.1: When calculating income from unemployment, weekly benefit
amount is annualized.
INCOME FROM CHILD SUPPORT AND/OR ALIMONY
1. Non-Court Ordered Child Support
The applicant’s statement of child support (Child Support
Declaration). Separate affidavits are required when the
children have different parents or the birth certificate only
shows one parent. A notarized statement from the absent
parent stating the amount paid and the frequency of payment
is also required. If the absent parent refuses to provide a
statement, the applicant must complete a Child Support
Payment Declaration thus listing the amounts received.
2. Court Order Child Support
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a) The applicant’s statement of child support (Child Support
Declaration). Separate affidavits are required when the children
have different parents or the birth certificate only shows one parent,
and one of the following:
1. A copy of the court order and if more than one year old
proof of current payments received, or,
2. A statement from Child Support Enforcement office
showing court ordered amount and proof of current
payments received, or
3. A statement from the County Court Clerk showing court
ordered amount and proof of current payments received,
or;
4. A copy of a separation or settlement agreement or a
divorce decree stating court ordered amount and proof of
current payments received.
Proof of current payment received must reflect at least the last six
months history. When calculating average, we will use all history
shown, but never more than last 12 months.
NOTE 4.3.2: If the applicant has a court order for child support and/or alimony but
does not receive payments, income must be counted when determining
eligibility unless the applicant provides verification (i.e., motion for
contempt, letter from attorney, etc.) of efforts made to receive such
income and provide third party documentation showing that no
payments have been received.
Properties will come across files where applicants, although not
receiving the full amount awarded, are receiving a portion, and such
is being paid directly to the “agencies responsible for enforcing
payments”. When dealing with this scenario it could be assumed
that the “agencies responsible for enforcing payments” are not only
collecting payments, but also doing so because the applicant “has
taken all reasonable legal actions to collect amounts due, including
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filing with” their agency, and as a result portions of the amounts
due are or have recently been received.
Therefore, when applicants have been awarded child support and
receive the full or a portion of the amounts awarded by way of the
agency responsible for enforcing payment, we would be ok counting
only the portion received by annualizing it after calculating an
average for the period of time documented and never using over 12
months of history.
The above is not to be confused with someone who has not received
payments or someone who receives sporadic payments that are not
made directly to agencies responsible for enforcing such. In both of
these cases, “income can be excluded from annual income only
when applicants have made reasonable efforts to collect amounts
due, including filing with courts or agencies responsible for enforcing
payments” and such has been documented in the file as has been
traditionally done.
NOTE 4.3.3 When no documentation of child support, divorce, or separation is
available, either because there was no marriage or for another
reason, property staff may require the family to sign a certification
stating the amount of child support received. However, this is
strictly to be an exception and never the rule. Recurring use of the
following procedure could be considered non-compliance.
INCOME FROM AFDC AND TANF
a) A benefit verification letter from the agency providing the benefits to
the resident stating the gross amount to be received monthly (this
letter must be less than 120 days old), or
b) A printout from the agency providing the benefits stating the gross
amount to be received monthly.
NOTE 4.3.4: An Annual award letter is not an acceptable form of verification of
AFDC or TANF.
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INCOME FROM SOCIAL SECURIT Y BENEFITS,
SUPPLEMENTAL SECUR ITY INCOME ( SSI) AND
DISABILITY
a) A benefit printout from the agency providing the benefits, or;
b) An award or benefit notification letter of Disability Income, no older
than 120 days
c) An annual award or benefit notification letter of Social Security
Benefits
Verifications of income from the Social Security Administration can be
requested online at www.ssa.gov
NOTE 4.3.5: Verified amounts must be gross. If net is indicated, the
applicant/resident should visit ssa.gov to obtain a statement showing
the gross benefit amount.
VETERANS, CIVI L SERVICE, PENSION, WORKMEN’S
COMPENSATION, STUDENT BENEFI TS
a) A benefit statement completed by the agency providing the benefits, or;
b) An award or benefit notification letter prepared and signed by the
authorizing agency.
RECURRING CONTRIBUTIONS AND GIFTS
A notarized “Recurring Contributions and Gifts” form signed by the
Applicant/Resident, and the person providing the contribution and/or gift. Note
that it is the signature of the person providing the contribution and/or gift that
must be notarized. If a notarized "Recurring Contributions and Gifts" form is
impossible to obtain, the applicant/resident can complete a "Verification of Self
Declared Income" form. Note that on the form, the applicant/resident must
indicate a valid reason as to why a third party notarized statement cannot be
provided.
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CALCULATING TOTAL GROSS ANNUAL INCOME
5.0 CALCULATING ANTICIPATED GROSS INCOME
Income should be calculated according to the applicant’s payroll schedule (i.e.,
weekly, bi-weekly, monthly, etc. To calculate gross annual anticipated income,
use methods listed in this chapter):
NOTE 5.0.1: All income calculations must be shown on a calculation sheet. Note that
some state agencies require a calculator tape in addition to a calculation
sheet.
NOTE 5.0.2: When household’s income is within $500 of the maximum allowable
income limit, it is compliance best practice to request the last 4-6
current paystubs from the applicants. We would then calculate the pay
stub income and YTD income and ensure this income does not cause
the total household’s income to exceed the allowable limit.
5.1 HOURLY FULL TIME EMPLOYMENT
Multiply hourly gross wages by the number of anticipated hours per week and
then multiply result by number of weeks anticipated for the next 12 months.
EXAMPLE 5.1.1:
$5.75/hour anticipated at 40 hours/week for 52 weeks (12 months)
$5.75 x 40 = $230/week
$230 x 52 weeks = $11,960 Gross Annual Income
Chapter
5
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5.2 WEEKLY FULL-TIME EMPLOYMENT
Multiply average weekly gross wages by the number of times anticipated to be
received within the next 12 months.
EXAMPLE 5.2.1:
$200/week, as anticipated for 52 weeks (12 months)
$200/week x 52 weeks = $10,400 Gross Annual Income
5.3 BI-WEEKLY FULL-TIME EMPLOYMENT
Multiply average bi-weekly gross wages by the number of times anticipated to
be received within the next 12 months.
EXAMPLE 5 .3 .1:
$800 every 2 weeks (Anticipated for the next 12 months)
$800 x 26 (26 bi-weekly periods in one year) = $20,800 annual
income
5.4 BI-MONTHLY FULL-TIME EMPLOYMENT
Multiply average bi-monthly gross wages by the number of times
anticipated to be received within the next 12 months.
EXAMPLE 5 .4 .1:
$900 twice per month anticipated for the next 12 months
$900 x 24 (24 bi-monthly periods in one year) = $21,600 annual
income
NOTE 5.4.2: When an employer gives a low and high figure, (example: between
$10,000 and $12,000), always use higher figure.
NOTE 5.4.3: When the employer states several figures (hourly, weekly, monthly,
and/or annually), calculate the income for all figures and use the
highest amount.
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NOTE 5.4.4: When an employer shows the number of hours and adds additional
information such as “+ overtime,” or “# of hours +,” a verification
statement must be completed.
5.5 WHEN CALCULATING SEASONAL OR PART-TIME EMPLOYMENT
When calculating seasonal or part-time employment, follow the same
guidelines for calculating full-time employment. Even though the number
of hours per week, or weeks per year may be different, the methods of
calculating are the same. Number of weeks worked per year must be
verified directly with the employer. However, all applicants/tenants
with seasonal employment must sign a self affidavit explaining what
they do during the off-season (i.e. collect unemployment benefits, work a
second job, etc.) and all other income earned during such off-season must be
documented and counted as part of the household income at time of
certification.
5.6 YEAR-TO-DATE (YTD) CALCULATION
Verify the hire date and employment status, and then divide the YTD gross
income by the number of weeks worked in the current year (even if they get
paid bi-weekly or any other way, you will use a weekly average). When
counting weeks you count backwards from the latest pay-stub’s period ending
date, (e.g. If the latest period ending date was on a Tuesday, you will count
backwards every Tuesday until the first Tuesday of employment within the
current year). Then you will divide the current total YTD income by the number
of weeks paid to date, this will be the average gross income per week. Then
take the average gross income per week and multiply it by 52 weeks.
EXAMPLE 5.6.1:
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January 2003 February 2003 March 2003
Su Mo Tu We Th Fr Sa
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31
Su Mo Tu We Th Fr Sa
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28
Su Mo Tu We Th Fr Sa
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31
With March 26th being ground zero, and because it falls on a Wed, the 19th
becomes week one when counting. We would count every Wed…i.e., 12th, 5th,
Feb 26th, 19th, and so on until whichever comes first; the hire date if in the
current year or January 1st of the current year. In this example YTD income is
divided by 12 weeks.
Y-T-D gross income as of 03/26/03 = $8,200
Household member’s hire date 11/02/00.
$8,200 / 12 weeks worked = $683.33 average gross income per week
$683.33 x 52 weeks per year = $35,533.16 total annual gross income
5.7 PAY INCREASE CALCULATION
Verify the effective date and amount/percentage of increase the employee will
be receiving. In an effort to demonstrate compliance due diligence note (1)
that in the event the employer is unable to anticipate the effective date, but has
stated that an increase is anticipated, you will have to use the hire date
anniversary as the anticipated date of increase. Remember that you must get
the 3rd party verification of hire date (i.e., Employment ID, hire letter, insurance
card, anything that was issued by the employer and shows the hire date). Also
note that (2) in the event that the employer is not willing or is unable to
anticipate the amount of increase, but has anticipated that the employee will
receive an increase, you must do one of the following:
When incomplete:
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a) Contact the employer by mail, electronic transmission, or by phone,
and have them provide the missing information. Email is always the
fastest and most reliable method when the employer included such
on the signature portion of the form they already completed.
Therefore, the "Preferred" method.
When "Unknown":
a) Contact the employer by mail, electronic transmission, or by phone,
and have them provide the missing information. Email is always the
fastest and most reliable method when the employer included such
on the signature portion of the form they already completed.
Therefore, the "Preferred" method.
b) In the event additional efforts to verify the information results in the
employer's continual statement that such is "unknown", please
document and include such efforts in the file as an effort to further
support due diligence if the file is ever audited or future
certifications indicate the applicant did receive a pay increase.
c) Because the income increase is unverifiable, and truly unknown,
never would in this case a 3% cost of living increase be added to
the income calculation.
Note the above is not to be confused with those times when an employer
answers, "Yes" a pay increase is anticipated, and states the date and/or
amount are/is "Unknown". When the employer has indicated that an
increase is anticipated, but refuses to provide an amount for the increase,
management should include a 3% cost of living increase. Efforts to verify
the increase amount with the employer should be documented in the file
and a clarification added explaining that since the employer confirmed an
increase will be paid, but the amount is unclear, management will include a
3% increase to be conservative.
Please note that we do this in an effort to demonstrate due diligence. It is
compliance best practice not to ignore the fact that the employer
anticipated a pay increase, as all anticipated income must be included when
determining household’s eligibility.
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EXAMPLE 5.7.1:
January 2003 February 2003 March 2003
Su Mo Tu We Th Fr Sa
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31
Su Mo Tu We Th Fr Sa
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28
Su Mo Tu We Th Fr Sa
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31
With March 26th having been determined to be the anticipated effective date of
increase and January 24th the date the employer signed the verification of
income, you will assume March 26th is ground zero, and because it falls on a
Wed, the 19th becomes week one when counting. We would count every
Wed…i.e., 12th, 5th, Feb 26th, 19th, and so on until January 29th …because the
24th is on a Friday you will not count to the 22nd.
• Anticipated Date of Increase = March 26th
• Letter Signed by employer = January 24th
From the calendar above we determined that this employee will work:
• Total Weeks Before Increase = 8
• Total Weeks in the Year = 52 – 8 = 44
When calculating, you will calculate income without increase for eight (8) weeks
and income after increase for 44 weeks of the anticipated 12 months.
• Anticipated Increase = 2%
• Hourly Rate = $10.00
• Total Weekly Regular Hours = 40
• Hourly Overtime Rate = $15.00
• Total Weekly Overtime Hours = 5
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Calculating Income Before Increase
Regular Before Increase 10 x 40 x 8 = $3,200.00
Overtime Before Increase $15 x 5 x 8 = $ 600.00
Total $3,800.00
Calculating Income After Increase
Regular After Increase $10 x 2% x 40 x 44 = $17,952.00
Over Time After Increase $15 x 2% x 5 x 44 = $ 3,366.00
Total $21,318.00
Total Income Including Anticipate Pay Increase $25,118.00
5.8 CALCULATING INCOME FROM EDUCATIONAL ASSISTANCE
Every student that is part time or full time over the age of 18 must fill out a
Student Income Declaration when the household receives Section 8
assistance. This income is not counted and the form is not completed when
the household does not receive Section 8 assistance. There are two
exemptions that the resident can meet so that educational assistance can be
excluded as income:
1. If the applicant is 24 years or older with a dependent child (show birth
certificate as proof), or
2. If the applicant is 23 years or younger living with a parent or legal
guardian (must show birth certificate as proof).
If the applicant does not meet either exemption and receives financial aid in
excess of tuition, then we must obtain the following information from them:
a. Documentation showing financial aid/loans that are received by
the applicant and one of the following;
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b. Tuition statement from the school showing total current
semester tuition and a clarification from the applicant/resident
confirming how many semesters they will attend over the next
12 months.
c. A clarification from the applicant/resident stating how many
credit hours they plan to take over the next 12 months and a
printout from the school showing the cost of 1 credit hour
without fees.
Calculation for Student income
All financial aid = $6,000 ( $3,000 per semester and they will be attending 2
semesters in 12 months)
Loans = $1,500 per semester = $3,000 for next 12 months
Tuition = $100 per credit without fees and they will be attending 18 hours in 12
months = $1,800
$6,000 - $3,000 - $1,800 = $1,200
We would add this to the income because the students will be receiving this
from the school. If the amount is negative, then we add nothing to the
income. However, if the income is negative please have the applicant clarify
how they will be paying that difference.
5.9 ANNUAL INCOME QUICK REFERENCE CHART
1. Hourly = Multiply hourly wages by 2,080 hours (if 40 hours/week)
2. Weekly = 52 weekly periods in one year
3. Every other week = 26 bi-weekly periods in one year
4. Twice per month = 24 bi-monthly periods in one year
5. Once per month = 12 monthly periods in one year
All overtime pay, tips, bonuses, commissions, and merit raises anticipated over the
next twelve months must be added to these calculations.
UNEMPLOYED APPLICANTS & APPLICANTS RECEIVING
RENTAL ASSISTANCE (I.E. SECTION 8)
6.0 UNEMPLOYED APPLICANTS
An “Unemployed Declaration” form must be completed by all applicants
claiming to be unemployed but claiming some other source of income. The
form includes a section where all other sources of income must be shown.
This income must be documented and included.
If an applicant is currently unemployed and claiming zero (0) income;
he/she must sign only a “Certification of Zero Income” form and provide an
explanation of how they anticipate supporting themselves for the next
twelve months. If claiming “Zero Income”, applicants would not need an
“Unemployment Affidavit” as well, unless required by the state. As a note,
the HOME program does require both an Unemployed Declaration and a
Certification of Zero Income to be completed, when applicable.
6.1 APPLICANTS PARTICIPATING IN RENTAL ASSISTANCE PROGRAMS
(SEE NOTE BELOW RE: THIS SECTION)
As part of the unique “Affordable Housing Program” of your property, it is
required that all households have a total annual income of at least their annual
rent (annual rent = monthly rent x 12).
When dealing with households receiving rental assistance, in most cases their
portion of the rent cannot be verified until inspection of the unit and/or final
approval is received from the agency providing the support (i.e. Housing
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Authority). By this time, it is too late to verify whether or not the household
makes at least their portion of the rent. In some cases, they do not, and then
the unit is in non-compliance, which could cause an issuance of a “Form 8823.”
To avoid this we recommend, at managers’ discretion, doing the following
for all applicants receiving rental assistance:
Provide verification of participation in a rental assistance program, (i.e.
Section 8 Voucher), and
a. Prior to application approval or move-in provide evidence of
the amount the Housing Authority will assist with, or
b. Prior to application approval or move-in provide evidence of
their portion of the rent, or
c. Prior to application approval or move-in provide 3rd party
verification of income that anticipates a total monthly income
equal to or more than the monthly applicable rent for the
size unit application is made for, or
d. Meet all requirements just like any other applicant not
receiving Section 8 assistance, pay for the full amount of the
rent until the Housing Authority contract is received. Note
that the amount the tenant paid in rent must be credited from
the beginning date of the HAP contract.
In the event that none of the above requirements can be met, the application
approval may be issued with condition that a lease agreement is signed and the
move in date be scheduled for 10 business days after approval. This will allow
time for the agency providing the assistance to inspect the unit and calculate
tenant’s portion of the rent. In addition, we recommend that on the front page
of the lease or a lease addendum be signed with the following stipulation must
be added:
“In the event that written verification of tenant’s portion of the rent is
not received by the commencement date of this lease agreement, move
in date will be postponed until such verification is received and
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household monthly income is equal to or greater than their anticipated
monthly portion of the rent.”
Many are not aware that tenant’s portion of the rent is calculated immediately
after unit inspection and written verification may be obtained by calling the
caseworker assigned to the applicant by the agency. Note that it is not the
contract (i.e. HAP Contract) that you will be requesting, for this takes longer,
but it is written or verbal verification of the anticipated tenant’s portion of the
rent.
In the event that their monthly portion of the rent is more than their monthly
income, we recommend move in date be postponed until third (3rd) party
verification of income that is equal to or more than their monthly portion of the
rent is received and approved by management.
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INCLUDED AND EXCLUDED ASSETS
7.0 ASSETS
Assets are items of value, such as money held in checking and savings
accounts, certificates of deposit, stocks, bonds, IRA accounts, and real
estate.
It is the income derived from the assets, or the earning power, that must
be included as part of the household’s anticipated gross annual income.
When computing asset income, you must ask three questions:
1. What is the asset worth as cash? (Cash Value)
2. What amount of income from the asset can be anticipated for
the next 12 months?
3. Is the combined cash value of the household’s assets worth
$5,000 or more?
NOTE 7.0.1: Assets of all household occupants regardless of age must be
included in the total asset value (this includes minor children).
7.1 INCLUDED ASSETS
a. Cash held in savings and checking accounts, safety deposit boxes,
homes, direct deposit accounts, etc. This includes cash on hand.
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b. Trusts - include the principal value of any trust available to the
household. Do not include irrevocable trusts or trusts that no family
member can control. An example of an irrevocable trust is a trust fund
established for a son or daughter, prior to the parent’s death. The
benefactor receives only the interest from the trust during their lifetime
and cannot withdraw the principal.
c. Equity in real estate or other capital investments – includes current
market value, less any unpaid balance, or any loan secured by the
property and any reasonable costs that would be incurred in selling the
asset (prepayment penalties, legal or broker fees).
d. Stocks, bonds, treasury bills, certificates of deposit, money
market funds.
e. Individual Retirement Savings Accounts, (IRA’s) and Keogh
Accounts – IRA, Keogh, and similar retirement savings accounts are
counted as assets, even though withdrawal would result in a penalty,
*unless benefits are being received through periodic payments.*
f. 401K Retirement and Pension Funds
1. For persons under 59 ½ years old and with a 401k account that
is held by their current employer, include only amounts the
family can withdraw without retiring or terminating
employment. Count the whole amount less any penalties or
transaction costs. Accessibility to the account can be certified
using a “401k Account Declaration.”
2. For persons over 59 ½ years old and with a 401k account that is
held by their current employer, include only amounts the family
can withdraw without retiring or terminating employment. Count
the whole amount less any penalties or transaction costs.
Accessibility to the account must be third party verified using an
“Investment Account 401 IRA Other Verification.”
3. For persons who are not currently employed OR the 401k
account is not held by their current employer, the 401k account
must be included as an asset.
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g. Lump sum receipts – include inheritances, capital gains, one-time
lottery winnings, and settlements on insurance and other claims.
h. Personal Property Held as an Investment - such as gems, jewelry,
coin collections, antique cars, paintings, vacation rentals, etc.
i. Cash Value of Life Insurance Polices Available to the Individual
Before Death (e.g., the surrender value of a whole life policy or a
universal life policy.) It would not include a value for term insurance,
which has no cash value to the individual before death.
j. Assets Owned by More than One Person should be prorated according
to the percentage of ownership.
k. A Mortgage or Deed of Trust Held by a Member of the Household –
payments on these types of assets are often received as one combined
payment of principle and interest with the interest portion counted as
income from the asset, not the loan payment portion.
l. Assets Disposed of for Less than Fair Market Value - When the fair
market value of the disposed asset exceeds the gross amount that the
family has received by more than $1,000, then you must include as
assets the difference between the cash value and the amount received.
If the difference is less than $1000, do not count it.
m. Cash Apps – The Cash App is a peer-to-peer
payments service by Square, Zelle, Venmo, etc. Individuals can send and
receive payments using a credit or debit card on the Cash App, available
for free. Users can also add money to their account on the Cash App and
use the funds via a free Cash Card or debit card.
NOTE 7.1.2: DO NOT consider assets disposed of for less than fair market value
as a result of:
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a. Foreclosure when final
b. Bankruptcy when final
c. Divorce or separation settlement
(You must show proof that this has happened. If the home is in the process of
foreclosure, we must still count it as an asset.)
NOTE 7.1.3: DO consider:
a. Assets put into trust.
b. Business assets disposed of for less than fair market value.
Business assets are excluded from the net household assets
only while they are part of an active business.
c. Assets owned by more than one person – prorate the value
of the asset according to the percentage of ownership.
7.2 EXCLUDED ASSETS
a. Necessary personal Property – such as automobiles, furniture,
clothing, etc.
b. Vehicles especially equipped for the handicapped
c. Interest in Indian Trust Land
d. Term Life Insurance Policies where there is no cash value
e. Equity in a cooperative unit in which the family lives
f. Assets that are part of an active business – (This exception does not
include rental of properties that are held as investments and not a main
occupation.)
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g. Assets held in the applicant’s name but are actually owned by
someone else, such as:
1. Assets and any earned income that is accrued to the benefit of
someone else.
2. A situation wherein another person is responsible for income taxes
incurred on income from the assets.
3. If the applicant is responsible for dispersing someone else’s money,
such as in the case of having Power of Attorney, but the money is of
no benefit to him/her.
h. Assets that are not effectively owned by the applicant. Assets are
not effectively owned when they are held in an individual’s name, but the
asset and any income they earn accrue to the benefit of someone else who
is not a member of the family, and that other person is responsible for the
income taxes incurred on income generated by the assets.
NOTE 7.2.1: In order for these assets to be excluded 3rd party verification
is required and management must approve application prior
to excluding asset
DOCUMENTING AND CALCULATING ASSETS
8.0 ASSET VERIFICATION
Assets must be verified prior to move-in or recertification. Most programs
do not require verification of assets with a value of less than $5000. All
properties federally funded (i.e. HOME, MMRB) are required to document all
assets and income from such assets, no matter the value or income
earned.
Verifications must be from a 3rd party source and dated within 120 days
prior to the move-in or recertification date. Asset verifications must be
kept in the permanent file.
8.1 DETERMINING THE VALUE OF ASSETS
The income from all household assets must be totaled and shown on the
“Declaration of Assets” and Tenant Income Certification. However, some states
require the use of an “Under $5,000 Asset Certification”. When this is the case,
properties would not use the “Declaration of Assets”.
The types of assets included in the anticipated gross annual income calculation
are shown below with examples for calculating their income:
When computing the value of assets, applicants must use the cash value of the
assets (the amount the applicant(s) would receive if the assets were converted
to cash). Expenses that may be deducted from the cash value include:
1. Penalties for withdrawing funds before maturity;
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2. Broker/legal fees assessed to sell or convert the asset to
cash; and/or
3. Settlement costs for real estate transactions (see real Estate
Ownership).
NOTE 8.1.1: All value of assets and income from assets must show on the
Asset Affidavit. In addition, all income calculations from
such assets must be completed on an Asset Worksheet or
Asset Calculation Sheet.
8.2 CHECKING AND SAVINGS ACCOUNTS
Checking Accounts
When working with checking accounts, the 6 month average balance is
used. This is because the checking account is considered a fluctuating
account. When verifying the average balance with the banking institution,
you must verify the average for the past 6 months. When a banking
institution provides an average that is less than or more than 6 months,
unless permitted by your state agency, further verification of the true 6
month average must be obtained. If the banking institution will not provide
additional information, the applicant/tenant must provide 6 current
consecutive bank statements for management to calculate the 6 month
average.
New Checking Accounts
If the checking account is a new account, the current balance of the
account can be used. However, the date the account was opened must
also be verified and included in the file.
Savings and Direct Express Accounts
When working with savings, direct deposit and “Direct Express” accounts,
the current balance is used as this is considered a more stable account.
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“Direct Express” accounts are for recipients of social security benefits that
do not have other types of bank accounts. Anyone that receives social
security benefits must have a bank account in order to receive direct
deposit of such benefits. When an applicant states they receive social
security benefits and does not have a checking or savings account, she/he
would have a “Direct Express” account. Current balance in this account
must show on the Declaration of Assets.
Income from Checking and/or Savings Accounts
You must obtain the appropriate balance on both types of accounts and
determine if any interest rate applies. Once these numbers are
determined, you must multiply the account balance by the applicable
annual interest rate to determine the actual asset income.
Documentation Needed
Acceptable forms of verifications are lettered, in order by preference,
as described below.
a. Statement from the institution showing applicable balance
(average balance for past six month for checking
accounts and current balance on saving accounts) and
the applicable percentage interest rate for each account
must also be verified in order to calculate income earned.
However, remember that percentage interest rate may
change each month in some accounts. In the event that
they do, the current interest rate will be used for the
calculations; or
b. Verification of Assets form completed by the bank. This
verification must be sent to the bank by fax or mail, and it
must be received from the bank by fax or mail. Applicants
should not handle the verification unless it includes the
bank’s official seal after completion, in which case the form
can be hand carried to the property (when permitted by your
state agency).
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c. Copies of applicant’s/tenant’s bank statement(s) if applicable
interest rates are reflected. Most recent consecutive six
months for checking and most recent for savings. All pages
of all statements are needed. Since bank statements provide
more information than the previous suggestions, please
review the statement in full to ensure deposits and charges
correspond with information provided by household and do
not affect household’s eligibility with program requirements.
When calculating the 6 month average, management should
use any amounts reflected. For any months reflecting a
negative ending balance, the negative figure will be used
when calculating the average.
Calculating income from checking and saving accounts
1. CASH
Multiply the actual balance on the savings and the average balance (past 6
months) of the checking account by the interest rate and show on appropriate
blanks on the Asset Affidavit.
EXAMPLE 8.2.1:
Cash – Savings
$1,000 held in a savings account with a 4% interest rate (See 8.2 (a)
Documentation Needed)
$1,000 x 4% = $40.00 income from the asset
Cash – Checking
$800 (average six month balance in checking account) at 1.5% interest
(See 8.2 (a) Documentation Needed)
$800 x 1.5% = $12.00 income from the asset
8.3 REAL ESTATE
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If the applicant owns real estate, the cash value or equity of the real estate
must be determined. This is achieved by deducting the current mortgage
balance and possible expenses incurred from the current market value, should
the house be sold. Once determined, you must figure what amount of income
could be derived from this equity and add it to the applicant’s income. This
must be done whether the applicant plans to sell or not. All amounts must be
supported with third party verification. These amounts must be shown on the
Asset Affidavit and all calculations be shown on the Asset Worksheet or Asset
Calculation Sheet.
In order to properly calculate household’s total value of assets, it is important to
verify the status of the real estate (i.e. rented, vacant, held as investment, etc.)
Therefore, all applicants/residents that own real estate must sign an “Real
Estate Status Declaration.”
Documentation Needed
a. Property Appraisal or latest Tax Assessment (must show fair market
value)
b. Verification from a Title Company in the area that the property is
located, of average closing costs and other fees
c. Current mortgage balance
Calculating the cash value of a real estate
EXAMPLE 8.3.1:
$60,000 current market value of the asset (see 8.3 (a)
Documentation Needed for explanation)
less $ 4,200 closing cost and other fees (estimated @ 8% in the
area the asset is in. Obtained by calling a Title company
in the area the asset is located and documented using a
clarification statement)
less $ 34,000 current mortgage balance
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(Obtained from the mortgage company.)
$21,800 CASH VALUE OF THE REAL ESTATE (see Notes below)
NOTE 8.3.1: When an applicant owns a real estate with another individual, and
that individual will not be counted as a household member, the cash
value of the real estate will be divided and only the portion owned
by the applicant is counted as an asset.
NOTE 8.3.2: When an applicant owns a real estate but it is not occupying such, it
must be determined if it is vacant held as an investment, occupied
by someone else, or in foreclosure, but the foreclosure is not final.
This is done by having the applicant sign a Real Estate Status
Declaration. Below you will find guidance on what to do in all
scenarios.
Vacant Inform applicant that if the real estate is sold,
rented, or occupied by someone else prior to the
effective date of the initial certification it could
affect their eligibility. They must notify you
immediately if this were to happen. You will have
to redo the asset portion of the eligibility process.
Occupied In the event that the real estate is occupied by
someone else, it must be determined if that
someone else is paying rent or the mortgage
payment directly to the bank. Both are considered
rental income and you will have to follow steps in
Section 8.4. If the person occupying the unit is the
ex-spouse or estranged spouse of the applicant,
and she/he is paying the mortgage, and also has
ownership to the home, we would not count any
portion as rental income to the applicant.
Foreclosure When a foreclosure is not final, we must take into
consideration that it could stop at any given time,
and the applicant will remain owning real estate.
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Therefore, unless the applicant is able to provide
final court proceedings or final foreclosure
documents, the real estate will have to be counted
as an asset owned and steps shown above in
section 8.3 will have to be followed.
8.4 RENTAL INCOME FROM REAL ESTATE
Rental income from real estate owned by the applicant/resident, less the
annual operating expenses is considered income.
If someone is occupying the real estate and he/she is paying the mortgage
company directly, the value of such mortgage payments must be counted
as income; except if it is the ex-spouse or estranged spouse who is residing
and making such payments (see Note 8.4.1).
To figure actual income, take the yearly rental income less any expenses
(i.e., taxes, insurance, maintenance costs, utilities included in rent, and
mortgage interest.) This can be determined by the applicant/resident
providing a signed copy of Schedule E (IRS Form 1040) of the most
recently filed tax return and adding line 20 (Depreciation) to line 26
(Income) of the Form. This must be done because depreciation is
required to be included as part of the rental income. This can also be
determined by reviewing the current mortgage statement for the
property. A mortgage statement will typically reflect the following
expenses: taxes, insurance, and mortgage interest.
Verification must be included and documented in the applicant’s/resident’s
file. For documentation purposes only, this amount will be shown on the
Declaration of Assets. If the actual income amount is zero or less, enter
zero on the “Income From Rental” Column. However, on the TIC rental
income is shown on the “Other” income section and not in the income
from asset section.
Documentation Needed
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Acceptable forms of verifications are lettered in order by preference, as
described below.
a. Current copy of lease agreement, and
b. Signed copy of Schedule E IRS (Form 1040) of the most
recently filed tax return, or
c. Proof of operating expenses (i.e., Taxes, Insurance,
Maintenance cost, utilities included in rent, and mortgage
interest, etc.)
Calculating income from real estate
EXAMPLE 8.4.1:
$4,000 rental income for the next 12 months
(applicant/resident must provide copy of lease
agreement)
less $3,000 total expenses for rental unit (Obtained from line 24
+ line 20 of IRS Schedule E OR the current mortgage
statement)
$1,000 ACTUAL INCOME FROM ASSET
NOTE 8.4.1: In the event that the person occupying the unit is the ex-spouse or
estranged spouse of the applicant and she/he is paying the
mortgage, and also has ownership to the home, we would not count
any percentage as income.
NOTE 8.4.2: Rental income is shown on the “Other” income section of the TIC
and not in the income from asset section.
8.5 SALE OR DISPOSITION OF REAL ESTATE
If the Application indicates that the applicants have owned any real estate
in the 2 years prior to the Certification (IC, IR, or AR) date, or are in the
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process of selling community property, acceptable documentation (as
shown in section 8.6 & 8.7) must be obtained prior to move-in.
Assets owned at time of application but sold prior to move-in must be
counted as an asset disposed of. The Application, Asset Affidavit and all
other applicable documentation must be updated to reflect that the asset
was disposed of. Remember that not doing this at time of initial
certification will reflect non-compliance at time of the annual recertification.
NOTE 8.5.1: Be sure to document the file to flag management to carry forward
the appropriate portion on any recertification within 24 months after
disposal of such an asset.
8.6 DISPOSAL OF ASSETS FOR LESS THAN FAIR MARKET VALUE
Any asset disposed of (given away) or sold within the 24 months prior to
the effective date of Move-in/Income Certification must be considered in
determining household income. Assets are generally real estate. In order
to calculate and verify the correct amounts, you will obtain documentation
showing what the asset was worth, what the asset was sold for, and any
costs that were incurred in the sale or transaction.
NOTE 8.6.1: If an asset was disposed of before move-in, it must be carried for 24
months from the date of disposal. In some cases, this would
require a portion of the income to be counted on the first
recertification.
We require the applicant to supply the appraisal or tax assessor’s statement
(see section 8.6 (b) Documentation Needed) showing the “Fair Market
Value” and the closing/settlement statement of said property showing the
amount for which the asset was disposed/sold. If the asset was disposed
for $1,000 or greater BELOW Fair Market Value, this is considered an asset.
Anytime an asset was disposed and proceeds were received at time of
disposal, household must provide documentation of where the earned
money is (i.e. checking account, saving account, already spent, etc.). Do
not include assets disposed of as a result of foreclosure, divorce,
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bankruptcy, or separation settlement. Proof of these exceptions
must be obtained for the permanent file.
NOTE 8.6.2: Quit Claim Deeds are not an acceptable form of verification of
asset disposed.
NOTE 8.6.3: Be sure to document the file to flag management to carry forward
the appropriate portion on any recertification within 24 months after
disposal of such an asset.
The correct procedure when assets are disposed of for more than Fair
Market Value within 24 months prior to the effective date of the income
certification is as follows:
The applicant must complete a self affidavit stating what was done with the
proceeds from the sale of the home. The applicant may have used the
profit to buy a car, pay for college for his/her family member, pay medical
bills, etc. Nevertheless, in all cases, the file should reflect what happened
to the money.
Documentation Needed:
All documentation listed must be included in order to properly calculate the cash
value of the assets and income from such assets.
a. Signed Copy of Closing Settlement
b. Signed Copy of Property Appraisal or latest Tax Assessment
(must show fair market value)
Calculating assets disposed of for less than fair market value
For step-by-step calculation instructions, see section A of the Asset Worksheet.
EXAMPLE 8.6.1
The Fair Market Value of the Asset $87,500
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Minus the gross amount received $85,000
Add to Total Assets $ 2,500 Less Than Fair Market Value
The $2,500 is considered an asset, and must be shown on the Asset
Affidavit
8.7 DOCUMENTING CDS, MONEY MARKET ACCOUNTS OR TREASURY
BILLS
When working with CDs, money market accounts or treasury bills, you
must determine the cash value of the asset as these assets often have
penalties for early withdrawal of the money. The banking institution
holding these accounts will be able to provide the information needed. You
must also obtain the current annual interest rate on the account. The
banking institution holding these accounts will also be able to provide this
information. It is important to understand that the current interest rate
should be verified, as it is impossible to project what the interest rate will
be over the next 12 months.
Documentation Needed
All documentation listed must be included in order to properly calculate the cash
value of the assets and income from such assets.
a. Statement from the institution showing the current balance & interest
rate
b. Statement from the institution showing fees or penalties for early
withdrawal
Calculating income and cash value of CDs, Money Market Accounts and
Treasury Bills
EXAMPLE 8.7.1:
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a. Calculating Income from the Asset
$3,780 - current value of CD with an interest rate of 2.5%
$3,780 x 2.5% = $94.20 income from asset (must show on
Asset Affidavit)
b. Calculating Cash (Net) Value of the Asset
$3,780 - current value of the CD with a $200 early withdrawal penalty
$3,780 - $200 = $3,580 Net Value of the Asset (show on Asset
Affidavit)
NOTE 8.7.1: Income from the asset should be calculated from the Current Value
of the asset BEFORE subtracting any penalties for early withdrawal.
This is because income from the asset is being earned from the
current value.
8.8 DOCUMENTING STOCKS OR SECURITIES
Value of the Assets
When working with stocks or securities, it is important to determine the
amount of stocks currently held by the applicant/resident. These are often
called “shares.” Again, 1) it is important to verify the number of shares
currently held, as it is impossible to determine the number of shares that
may be held over the next 12 months. 2) The next step is to determine
the current amount each share is worth or the price per share. Again, the
current price per share is determined, as there is no way to determine
the value of the share over the next 12 months. 3) Once both of these
items have been verified, the number of shares is multiplied by the price
per share to determine the value of the asset. 4) It should then be
determined if there are any penalties for converting the shares to cash,
such as broker’s fees or commissions. 5) If such expenses are verified, the
expenses are deducted from the value of the asset to arrive at the cash
value of the stock.
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Actual Asset Income
To determine the actual asset income derived from the stock or security, 6)
you must verify the dividends earned per share. Again, it is important to
understand that the current percentage yield dividend per share is
verified, as it is impossible to predict the future of the stock’s dividends.
Note that you should not ignore the dividends even if the amount is
automatically rolled back into the principle portion of the stock. This is a
conscious choice by the stockholder and is still income that the stock is
earning. 7) Once the percentage yield dividend per share is determined,
the total gross value of the shares is multiplied by the percentage yield
dividend to calculate the actual income derived from the stock or security.
Calculating Stocks or Securities
To determine Values follow steps 1 to 5 above
To determine Incomes follow steps 6 to 7 above
EXAMPLE 8.8.1:
100 shares @ $34.50 price per share = $3,450 total gross value of the asset
$3,450 gross value less withdrawal penalties = Net Value (cash value)
$3,450 (gross value) @ 6.58% yield dividend = $227.01 total income
8.9 DOCUMENTING TRUST FUNDS
Explanation of Trusts
A trust is a legal arrangement generally regulated by state law in which one
party (the creator or grantor) transfers property to a second party (the
trustee) who holds the property for the benefit of one or more third parties
(the beneficiaries). A trust can contain cash or other liquid assets or real or
personal property that could be turned into cash. Generally, the assets are
invested for the benefit of the beneficiaries.
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Trusts may be revocable or non-revocable. A revocable trust is a trust that
the creator of the trust may amend or end (revoke). When there is a
revocable trust, the creator has access to the funds in the trust account.
When the creator sets up a non-revocable trust, the creator has no access
to the funds in the account.
The beneficiary frequently will be unable to touch any of the trust funds
until a specified date or event (e.g., the beneficiary’s 21st birthday or the
grantor’s death). In some instances, the beneficiary may receive the
regular investment income from the trust but not be able to withdraw any
of the principal.
The beneficiary and the grantor may be members of the same family. A
parent or grandparent may have placed funds in trust to a child. If the
trust is revocable, the funds may be accessible to the parent or
grandparent but not to the child.
How to treat trusts
The basis for determining how to treat trusts relies on information about who
has access to either the principal in the account or the income from the
account.
Revocable Trusts
If any member of the tenant family has the right to withdraw the funds in
the account, the trust is considered to be an asset and is treated as any
other asset. The cash value of the trust (the amount the family member
would receive if he or she withdrew all that could be withdrawn) is added
to total net assets. The actual income received is added to actual income
from assets.
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Non-revocable Trusts
If no family member has access to either the principal or income of the
trust at the current time, the trust is not included in the calculation of
income from assets or in annual income.
If only the income (and none of the principal) from the trust is currently
available to a family member, the income is counted in annual income, but
the trust is not included in the calculation of income from assets.
Non-revocable trust as an asset disposed of for less than fair market
value.
If a tenant sets up a non-revocable trust for the benefit of another person
while residing in assisted housing, the trust is considered an asset disposed
of for less than fair market value.
If the trust has been set up so income from the trust is regularly
reinvested in the trust and is not paid back to the creator, the
trust is calculated as any other asset disposed of for less than
fair market value for two years and not taken into consideration
thereafter.
Example – Non-revocable Trust As an
Example – A Trust Accessible to Family Members
Assez Charaf lives alone. He has placed $20,000 in trust to his
grandson to be available to the grandson upon the death of Assez.
The trust is revocable, that is, Assez has control of the principal
and interest in the account and can amend the trust or remove
the funds at any time. In calculating Assez’s income, property
staff will add the $20,000 to Assez’s net family assets and the
actual income received on the trust to actual income from assets.
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Asset Disposed of for Less Than Fair Market Value
Sarah Gordy placed $100,000 in a non-revocable
trust for her grandson. Last year, the trust
produced $8,000, which was reinvested into the
trust.
The trust is treated as an asset disposed of for less
than fair market value for two years. (See
paragraph 5.7 G.6.) No actual income from the
trust is included in Sarah’s annual income, but the
value of the asset when it was given away,
$100,000, is included in net family assets for two
years from the date the trust was established.
− Non-revocable trust distributing income. When a tenant places
an asset in a non-revocable trust but continues to receive
income from the trust, the income is added to annual income
and the trust is counted as an asset disposed of for less than
market value for two years. Following the two-year period, the
property staff will count only the actual income distributed from
the trust to the tenant.
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Example – Non-revocable Trust Distributing Income to the
Creator/Tenant
Reggie Bouchard has established a non-revocable trust in the
amount of $35,000 that no one in the tenant family controls.
Income from the trust is paid to Reggie. Last year, he
received $3,500.
The property staff will count Reggie’s actual anticipated
income from the trust in next year’s annual income.
Because the asset was disposed of for less than fair market
value (see paragraph 5.7 G.6), the value of the asset given
away, $35,000, is counted as an asset disposed of for less
than fair market value for two years.
Payment of principal from a trust.
The beneficiary of a trust may receive funds from the trust in different
ways. A beneficiary may receive the full value of a trust at one time. In
that instance the funds would be considered a lump sum receipt and would
be treated as an asset. A trust set up to provide support for a person with
disabilities may pay only income from the trust on a periodic basis.
Occasionally, however, a beneficiary may be given a portion of the trust
principal on a periodic basis. When the principal is paid out on a periodic
basis, those payments are considered regular income or gifts and are
counted in annual income.
Example – Payment of Principal Amounts from a Trust
Jared Leland receives funds from a non-revocable trust
established by his parents for his support. Last year he
received $18,000 from the trust. The attorney managing
the trust reported that $3,500 of the funds distributed was
interest income and $14,500 was from principal. Jared
receives a payment of $1,500 each month (an amount that
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includes both principal and interest from the trust).
The property staff will count the entire $18,000 Jared
received as annual income.
Special needs trusts
A special needs trust is a trust that may be created under some state laws,
often by family members for disabled persons who are not able to make
financial decisions for themselves. Generally, the assets within the trust are not
accessible to the beneficiary.
Not Counted as Income If the beneficiary does not have access
to income from the trust, then it is not
counted as part of income.
Counted as Income If income from the trust is paid to the
beneficiary regularly, those payments
are counted as income.
Example – Special Needs Trust
Daryl Rockland is a 55-year-old person with
disabilities, living with his elderly parents. The parents
have established a special-needs trust to provide
income for their son after they are gone. The trust is
not revocable; neither the parents nor the son
currently has access to the principal or interest. In
calculating the income of the Rockland’s, the property
staff will disregard the trust.
8.10 DOCUMENTING BONDS
When working with bonds, you must determine the number of bonds of
each type that are held. There are three types of bonds: Series H, Series E
and Series EE. There are numerous denominational values of bonds.
Therefore, you must 1) determine the type of bond and the face value of
the bond first. For example, the applicant/resident may hold a Series EE
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bond with a face value of $50. You must also 2) determine the issuing
date of each bond as the value of the bond increases the longer it is held.
3) Once this information is obtained, you must work with a source that has
bond value information. This information can be obtained from a bank or
financial institution or a broker. 4) You need to obtain the cash value of
the bond and the current interest rate. As with many other types of
assets, a penalty is assessed if the bonds are cashed in before they mature.
The financial institution will be able to give us the penalty information and
the current interest rate. 5) Once this is determined, multiply the cash
value of the bond by the current interest rate to calculate the actual asset
income.
NOTE 8.10.1: If you are unable to get the information from a bank or
financial institution, you may get it by calling the toll-free
number, 800-USBONDS or 800-872-6637. This number will
give you a recorded message that contains limited
information. Therefore, always try to get it from a bank
first. If additional information, is needed you can write to
Savings Bonds, Parkersburg, WV 26106-1328 to obtain the
information.
8.11 DOCUMENTING 401K AND RETIREMENT ACCOUNTS
Some retirement accounts are given to the applicant/resident as part of an
employee benefit package such as a 401K program. In this case, the
retirement account may not be accessible to the applicant/resident unless
the applicant/resident retires or quits employment. You must determine
and document the accessibility of the account. If there is no accessibility or
it is only accessible if the person retires, the amount is not counted. If a
portion of the account is accessible, even if withdrawal will result in a
penalty, the accessible portion is used to calculate the actual asset income.
If the applicant/resident only has limited access to the account and must
return any portion used, it should be considered a loan and therefore, not
counted as an asset. However, the file must be documented to support
that only such portion is accessible. The following policy should be followed
when determining whether or not to include a 401k account as an asset:
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• For persons under 59 ½ years old and with a 401k account that is
held by their current employer, include only amounts the family can
withdraw without retiring or terminating employment. Count the
whole amount less any penalties or transaction costs. Accessibility
to the account can be certified using a “401k Account Declaration.”
• For persons over 59 ½ years old and with a 401k account that is
held by their current employer, include only amounts the family can
withdraw without retiring or terminating employment. Count the
whole amount less any penalties or transaction costs. Accessibility
to the account must be third party verified using an “Investment
Account 401 IRA Other Verification.”
• For persons who are not currently employed OR the 401k account is
not held by their current employer, the 401k account must be
included as an asset.
When determining asset income from a 401k account, capital gains are
excluded. Capital gains are commonly reflected on a 401k account
statement as a “personal rate of return.” This percentage amount noted as
a personal rate of return or gain on investment should not be included as
asset income. Only true interest and/or dividends will be included as asset
income.
Include in annual income any retirement benefits received through periodic
payments. *Do not count any remaining amounts in the account as an
asset.
EXAMPLE 8.11.1:
Jed Dozier’s 401K account balance is $35,000. He is able to
terminate his participation in the retirement plan without quitting his
job, but if he did so he would lose a part of his employer’s
contribution and would pay a penalty fee. The total cash he could
withdraw, $18,000, is the amount that is counted as an asset.
8.12 DOCUMENTING IRAS, KEOGH OR OTHER RETIREMENT SAVINGS
ACCOUNTS
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Retirement savings accounts must be counted toward the total household
income if periodic payments are being received. However, if the money is
held in a lump sum, it is an asset and the asset income must be
determined.
Money held in a retirement savings account, such as an IRA or Keogh
account, is verified by 1) determining the current value of the account, 2)
the penalties or expenses for converting the asset to cash, 3) and the
applicable interest rate or dividends earned.
When determining asset income from IRAs, Keogh or other retirement
savings accounts, capital gains are excluded. Capital gains are commonly
reflected on an account statement as a “personal rate of return.” This
percentage amount noted as a personal rate of return or gain on
investment should not be included as asset income. Only true interest
and/or dividends will be included as asset income.
Calculating IRAs, Keogh or other Retirement Savings Accounts
EXAMPLE 8.12.1:
$3,780 cash value of an IRA account with an interest rate of 2.5%
$3,780 x 2.5% = $94.20 income from asset
8.13 ANNUITIES
Annuity Facts and Terms
An annuity is a contract sold by an insurance company designed to provide
payments, usually to a retired person, at specified intervals. Fixed
annuities guarantee a certain payment amount, while variable annuities do
not, but have the potential for greater returns.
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− A hybrid annuity (also called a combination annuity) combines the
features of a fixed annuity and a variable annuity.
− A deferred annuity is an annuity that delays income payments until the
holder chooses to receive them. An immediate annuity is one that
begins payments immediately upon purchase.
− A life annuity continues to pay out as long as the owner is alive. A
single-life annuity provides income benefits for only one person. A joint
life annuity is issued on two individuals, and payments continue in
whole or in part as long as either individual is alive.
Generally, a person who holds an annuity from which he or she is not yet
receiving payments will also be earning income. In most instances, a fixed
annuity will be earning interest at a specified fixed rate similar to interest
earned by a CD. A variable annuity will earn (or lose) based on market
fluctuations, as in a mutual fund.
Most annuities charge surrender or withdrawal fees. In addition, early
withdrawal usually results in tax penalties.
Depending on the type of annuity and the current status of the annuity, the
property staff will need to ask different questions of the verification source,
which will normally be the applicant or tenant’s insurance broker.
Income after the holder begins receiving payments.
When verifying an annuity, property staff should ask the verification source
whether the holder of the annuity has the right to withdraw the balance of
the annuity. For annuities without this right, the annuity is not treated as
an asset.
Generally, when the holder has begun receiving annuity payments, the
holder can no longer convert it to a lump sum of cash. In this situation, the
holder will receive regular payments from the annuity that will be treated
as regular income, and no calculations of income from assets will be made.
Calculations when an annuity is considered an asset
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When an applicant or tenant has the option of withdrawing the balance in
an annuity, the annuity will be treated like any other asset. **It will be
necessary to determine the cash value of the annuity in addition to
determining the actual income earned.
In most instances, an annuity from which payments have not yet been
made is earning income on the balance in the annuity. A fixed annuity will
earn income at a fixed rate in the same manner that a CD earns income. A
variable annuity will earn (or lose) based on current market conditions, as
with a mutual fund.
The property staff will need to verify with the insurance agent or other
appropriate source:
− The right of the holder to withdraw the balance (even if penalties are
involved).
− The basis on which the annuity may be expected to grow during the
coming year.
− The surrender or early withdrawal penalty fee.
− The tax rate and the tax penalty that would apply if the family withdrew
the annuity.
The cash value will be the full value of the annuity, less the surrender (or
withdrawal) penalty, and less any taxes and tax penalties that would be
due.
The actual income is the balance in the annuity times the percentage
(either fixed or variable) at which the annuity is expected to grow over the
coming year. (This money will be reinvested into the annuity, but it is still
considered actual income.)
The imputed income from the asset is calculated only after the cash value
of all family assets has been determined. Imputed income from assets is
calculated on the total cash value of all family assets.
TENANT INCOME CERTIFICATION
9.0 TENANT INCOME CERTIFICATION (TIC)
After all income and asset information has been verified and
calculated, the Tenant Income Certification must be completed for all
apartments prior to move-in or at time of recertification.
A unit may not be counted as a low-income unit unless the household has
signed the lease and physically moved into the unit.
The Tenant Income Certification Form:
❖ is a legal document, which must be executed on or before the move-in
or recertification date.
❖ cannot be signed more than 5 days prior to the resident moving in,
and never after.
❖ must never be executed without obtaining ALL income/asset
verification at Move-in and recertification. A resident should NEVER
sign a TIC that has not been completed.
❖ must be signed by all adults 18 years of age or older including all
emancipated minors who will be residing in the apartment. All
occupants of the apartment must be shown on the Lease and TIC
and all occupants must sign page 1 of the TIC beside the same # as
they are shown in Part II.
Chapter
9
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❖ must be signed by all adults (as above) and management
representative on the same date.
❖ is a legal document. The use of “white out” on any legal document
automatically voids the document.
Correction to the TIC
When making corrections on the certification, draw one line through the
incorrect information and insert the correct information above or below the
incorrect information. Corrections made on page 1 of the certification must
be initialed and dated by the applicant(s) and management’s agent.
Corrections made on page 2 of the certification must be initialed and dated
by management’s agent.
9.1 LINE-BY-LINE INSTRUCTIONS
This following instructions are for the National Council of State Housing Agencies
(NCSHA) best practices tenant income certification which is most commonly used
by the different state agencies. Please contact our office if your State Agency uses
a different TIC. This form is to be completed by the owner or an authorized
representative.
Part I - Development Data:
Check the appropriate box for certification type:
Initial Certification Move-in
Recertification First anniversary or annual recertification
Other If Other, designate the type of the certification (i.e., a unit
transfer or other state-required certification).
Enter the full date (month/day/year) for the following:
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Effective Date Enter effective date of certification. For newly-constructed
developments the Initial Certification shall be the move-in
date. For the first anniversary and subsequent annual
recertification, this shall be no later than one year from
effective date of the previous certification.
Note: The effective date must be entered in order for the
Age as of Effective Date to calculate in Part II – Household
Composition.
Move-in Date Enter the date the household has or will take occupancy of
the unit.
Property Name Enter the name of the development.
County Enter the county in which the building is located.
BIN # If the development is a Housing Credit development, enter
the Building Identification Number (BIN) assigned to the
building (from IRS Form 8609). Leave blank if the
development is not a Housing Credit Development or the
development is a Housing Credit Development but the BIN #
has not yet been assigned.
Address Enter the address of the building.
Unit Number Enter the unit number.
# Bedrooms Enter the number of bedrooms in the unit.
Part II - Household Composition
Enter the information for Part II – Household Composition for all occupants of the
unit:
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Relationship to State each occupant’s relationship to the head of household
Head of Household according to one of the following coded definitions:
H - Head of Household S - Spouse
A - Adult co-tenant O - Other family member
C - Child U - Unborn Child
L - Live-in caretaker F - Foster child(ren)/adult(s)
N - None of the above
There must be only one Head of Household; there shall be
only one spouse; list the same person as Head on
subsequent Recertifications as long as that person is a
member of the household. An unborn child appears on the
TIC only if its presence is necessary to qualify the household.
Date of Birth Enter the full date of birth (month/day/year) of the
applicable household member.
Age as of The age that the occupant will be on the date that the
current Effective Date certification is effective. The age of an
unborn child or a child who will not yet have reached the
first birthday on the date that the current certification is
effective shall be considered zero.
Note: This is a formulated field. The Effective Date must
be entered in the TIC Heading in order for the age to
calculate.
Full Time Student Enter Y for Yes or N for No to indicate if the applicable
(Y or N) household member is or will be a full time student. See
section 2.8 for full-time student definition.
If there are more than 7occupants, use an additional sheet of paper to list the
remaining household members and attach it to the certification.
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Part III - Annual Income
Enter the information for Part III – Annual Income:
See HUD Handbook 4350.3 for complete instructions on verifying and calculating
income, including acceptable forms of verification.
From third party verification forms obtained from each income source, enter the
gross amount anticipated to be received for the twelve months from the effective
date of the (re)certification. Complete a separate line for each income-earning
member. List the respective household member number from Part II.
Column (A) Exact amount of the annualized gross wages, salaries, tips,
commissions, bonuses, and other income from employment;
distributed profits and/or net income from a business.
Column (B) Exact amount of annualized Social Security, Supplemental Security
Income, pensions, military retirement, etc., payments.
Column (C) Exact amount of annualized income received from public assistance
(i.e., TANF, general assistance, disability, etc.).
Column (D) Exact amount of annualized alimony, child support, and
unemployment benefit payments, or any other income regularly
received by the household.
Column (E) Exact amount of the sum of columns (A) through (D), above.
Part IV - Income from Assets
Enter the information for Part IV – Income from Assets:
See HUD Handbook 4350.3 for complete instructions on verifying and calculating
income from assets, including acceptable forms of verification.
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From the third party verification forms obtained from each asset source, list the
gross amount anticipated to be received during the twelve months from the
effective date of the certification. List the respective household member number
from Part II and complete a separate line for each member.
Enter for each household member:
Column (F) List the type of asset (i.e., checking account, savings account, etc.)
Column (G) Select the asset ownership status for each asset/asset type entered
on the TIC:
C - Household currently owns or holds the asset, or
I - Household disposed of the asset for less than fair market value
within two years prior to the effective date of certification.
Column (H) Enter the cash value of the respective asset.
Column (I) Enter the anticipated annual income from the asset (i.e., savings
account balance multiplied by the annual interest rate).
TOTALS Add the total of Column (H) and Column (I), respectively.
If the total in Column (H) is greater than $5,000 you must do an imputed
calculation of asset income. Enter the Total Cash Value, multiply by the current
passbook rate and enter the amount in (J), Imputed Income.
Column (K) Enter the greater of the total in Column (I) or (J).
(L) Total Annual Household Income From all Sources Add (E) and (K) and
enter the total
HOUSEHOLD CERTIFICATION AND SIGNATURES
After all verifications of income and/or assets have been received and calculated,
each household member age 18 or older must sign and date the Tenant Income
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Certification. For move-in, it is recommended that the Tenant Income Certification
be signed no earlier than 5 days prior to the effective date of the certification.
Part V- Determination of Income Eligibility
Total Annual Household Income Enter the number from item (L)
from all sources
Current Income Limit per Family Enter the Current Maximum Move-in Income
Size Limit for the household size.
Household income at move-in Fill this in for recertifications, only. Enter the
Household size at move-in move-in certification. On the adjacent line,
enter the number of household members from
the move-in certification.
Household meets Income Check the appropriate box for the income
Restriction at restriction that the household meets according
to what is required by the set-asides(s) for
the project.
Current Income Limit x 140% For recertifications only. Multiply the Current
Maximum Move-in Income Limit by 140% and
enter the total. Below, indicate whether the
household income exceeds that total. If the
Gross Annual Income at recertification is
greater than 140% of the current income
limit, then the available unit rule must be
followed.
Part VI- Rent
Tenant paid Rent Enter the amount the tenant pays toward rent
(not including rent assistance payments such
as Section 8)
Rent Assistance Enter the amount of rent assistance, if any.
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Utility Allowance Enter the utility allowance. If the owner pays
all utilities, enter zero.
Other non-optional charges Enter the amount of non-optional charges,
such as mandatory garage rent, storage
lockers, charges for services provided by the
development, etc.
Gross Rent for Unit Enter the total of Tenant Paid Rent plus Utility
Allowance and other non-optional charges.
Maximum Rent Limit for this unit Enter the maximum allowable gross rent for
the unit.
Unit Meets Rent Restriction at Check the appropriate rent restriction that the
unit meets according to what is required by
the set-asides(s) for the project.
Part VII - Student Status
If all household members are full time* students, check “yes”. If at least one
household member is not a full time student, check “no”.
If “yes” is checked, the appropriate exemption must be listed in the box to the
right. If none of the exemptions apply, the household is ineligible to rent the unit.
*Full time is determined by the school the student attends.
Part VIII – Program Type
Mark the program(s) for which this household’s unit will be counted toward the
Property’s occupancy requirements. Under each program marked, indicate the
household’s income status as established by this certification/recertification. If the
property does not participate in the HOME, Tax-Exempt, AHDP or other housing
program, leave those sections blank.
Tax Credit Mark the appropriate box indicating the household’s designation. If
the property does not have an occupancy requirements in addition
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to those required by Section 42, mark the box that corresponds to
the property’s minimum set aside. Upon re-certification, if the
household’s income exceeds 140% of the income limitation
imposed by Section 42, mark “OI”.
HOME If the property participates in the HOME program and the unit this
household will occupy will count towards the HOME program set
asides, mark the appropriate box indicating the household’s
designation.
Tax Exempt If the property participates in the Tax Exempt Bond program, mark
the appropriate box indicating the household’s designation.
AHDP If the property participates in the AHDP program, and this
household’s unit will count towards the set aside requirements,
select the appropriate box to indicate if the household is a VLI, LI,
or OI (at re-certification) household.
Other If the property participates in any other affordable housing
program, complete the information as appropriate.
SIGNATURE OF OWNER/REPRESENTATIVE
It is the responsibility of the owner’s representative to sign and date this document
immediately following execution by the household members.
The responsibility of documenting and determining eligibility (including completing
and signing the Tenant Income Certification form) and ensuring such
documentation is kept in the resident file is extremely important and should be
conducted by someone well trained in program compliance.
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CHANGE IN STATUS AFTER MOVE IN
10.0 CHANGES IN FAMILY SIZE
Changes in the size of an existing household after the initial tenant income
certification must also be addressed.
10.1 FAMILY SIZE DECREASE
An original household member must be part of the household at all
times.
Original Household No Longer Occupied Unit
A household may continue to add or delete members as long as at least
one member of the original household continues to live in the unit. Once all
the original tenants have moved out of the unit, the remaining tenants
must be certified as a new income-qualified household unless:
1. For mixed-used properties, the newly created household was
income qualified, or the remaining tenants were independently
income qualified at the time they moved into the unit.
2. If all units in the building are 100% LIHTC, and the remaining
tenants were independently income qualified at the time they
moved into the unit.
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NOTE 10.1.1: If 1 or 2 above are not applicable, the remaining household’s
eligibility must be determined based on circumstances and
income limits at the time the original household member
moved out. If they do not qualify, they will have to move-
out as soon as possible or the unit will be noncompliant.
EXAMPLE 10.1.1: Remaining Tenant Must be Income Qualified
Michael, an income-qualified individual, moved into a two
bedroom LIHTC unit in a mixed-used project on May 20,
2006. Jason joined the household in October of 2007. At
that time, Jason’s income was below the limit for a one
person household. In January of 2008, Michael moved out.
It is not necessary for Jason to be certified as a new tenant.
However, if Jason’s income exceeded the income limit for a
one-person household in October 2007, then Jason must be
certified as an income-qualified tenant when Michael moves
out.
10.2 FAMILY SIZE INCREASE
After move-in, the number of occupants in a household may change;
thus, the income of the household may be affected.
Changes in household size are permissible provided they could not
reasonably be anticipated at the time of the application, move-in, and
execution of the Tenant Income Certification and are handled differently
depending on the programs on a property. Any changes in household size
are a question of “intent” at the time of the certification. It is the
responsibility of the Leasing Staff to assess the “intent” of the
applicant and document the file accordingly.
Properties with Home and MMRB
If during an Initial Certification (IC), another person wishes to join the
household, a new TIC must be completed and will only be approved if
household qualifies as an eligible household for income limit purposes.
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Interim Certifications (IR) are no longer required to report changes in
household income or status with regard to roommate drops. Additions to
the household must still be reported with an Interim Certification (IR). All
changes should be reflected at time of Annual Recertification (AR).
Properties with LIHTC only
If during an initial certification (IC), another person wishes to join the
household, a new TIC must be completed and will only be approved if
household qualifies as an eligible household. This is not limited to just the
income qualifications, but all other screening requirements as well.
However, if application for increase in household’s size is made 31 days (or
following your state agencies requirements if more stringent) after effective
date of the IC, approval may be issued as long as current procedure for
adding a resident are followed, and it is clear that there was no intent for
future household change at time of IC. For example, if a household
member got married 31 days after move-in, it would have to be
documented that there was no intent for this change at time of IC.
Mixed-Used Properties (Conventional (Market) and LIHTC)
For mixed-use projects, the new tenant’s income is added to the income
disclosed on the existing household’s most recent tenant income
certification. The household continues to be income-qualified, and the
income of the new member is taken into consideration with the income of
the existing household for purposes of the Available Unit Rule.
10.3 UNIT TRANSFERS
Unit transfers are governed by the different affordable housing programs at
your property. Improperly transferring a unit could result in a loss of
credits.
Therefore, in order to ensure compliance with your property’s applicable
affordable housing program all unit transfers, regardless of program, must
be approved by management and/or Preferred Compliance Solutions before
physically making the transfer.
RESIDENT FILES
11.0 RESIDENT FILES
Your property’s program regulations require that the resident’s files
be maintained for a period of time. Our policy and procedure for
setting-up and storing files is as follow:
Original File (FOF)
The original file (the file for the first household that certified the unit as an
eligible unit) has to be kept forever (until the end of time). It is very
important that we keep these files in a safe place at all times. Including
but not limited to storing in a fireproof file cabinet.
The file folder for your original file should be a different color than the file
folder used for each occupant following the original.
Once you have established a FOF file, it must be sent to management.
Once the original resident moves out, the FOF file must be placed into a
fireproof cabinet designated for ALL move-out first occupant files.
Other Resident Files
The file folder for occupants following the original occupant must be a
different color than the original occupant’s file (FOF). Once you place all
documents in the file, it must be placed into a filing cabinet on-site in a safe
location.
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Once the “other resident” moves out and move-out procedures have been
completed by manager, gather all documentation including a copy of the
deposit disposition and all other information in the maintenance file.
Maintenance file must be stored in a safe location for future reference.
11.1 CORRESPONDANCE FILE SET-UP
In addition to the resident (compliance file) you should also have a File that
will include the following:
❖ Resident Correspondence
❖ Full Copy of the Credit Report(s)
❖ Welcome Card
❖ Pre-qualifying information
❖ Resident Correspondence
❖ Resident Notices
❖ Unit Information
❖ Maintenance Requests
❖ Applicant’s compliance approval sheet
11.2 FILE DIVIDERS
In order to distinguish the initial certification of a household from the
annual recertifications it is required that a color paper be use as a divider
and be placed in the file on top of each certification. Color paper must be
placed on top of each side of the file folder of each initial certification.
Different color paper than what is used at time of initial certification must
be used for annual recertfications. Same color patterns should be followed
on the lease, and other side and sections of the file folder.
11.3 COMPLIANCE FILE SET-UP
Resident file should be arranged so that information is easy to locate. The
following page shows recommended order in which resident files can be set
up for ease in auditing and locating information.
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11.5 EMPLOYEE RESIDENT FILE
Management must screen, review, and approve all employees wanting to move
into one of our communities; this applies to those who will be moving into an
Exempt/Non-Certified unit as well as Certified units.
Exempt/Non-Certified Employee Unit
In order for a unit to be considered an Exempt/Non-Certified Employee Unit, it
must be pre-approved by the State Agency. Requests can only, and must, be
made by management prior to the person moving in. In order for management
to request pre-approval on a Courtesy Officer unit, copies of a police grid for the
last six (6) months and job description must be sent to compliance.
Always remember, that approval comes from the State Agency and it cannot be
requested and received in one or two days, it normally takes a week. Therefore,
requests must be made at least five working days before anticipated move in
date.
Management will notify manager of unit approval. Only after receiving this
notification, he/she will allow the employee’s move-in. Reports will have to be
updated to show unit as Exempt (EM).
Employee Certified Unit
In order for an employee unit to be considered an employee certified unit, the
household must meet all credit, criminal, minimum and maximum income
guidelines. Please note that these employees are considered applicants and per
Fair Housing Law cannot be treated any differently than a regular applicant. The
employee applicant’s household must complete an application, sign all applicable
addendums or affidavits, and provide verifications of income and identifications
just like any other applicant.
Taking and Processing Employee Applicant Household’s Application
As mentioned in Chapter 2.2 all household members must be listed on the
application(s), and all applicants 18 years and older must sign. In order to keep
the privacy of the employee applicant’s household, the manager must take and
process the application.
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Requesting Verification of Income
As mentioned in Chapter 3.0, all of the household’s income and assets must be
verified and documented using 3rd party verification. Property must receive all
applicable employment verification forms prior to sending application for
approval. All rent concessions must be included as household’s income and
documented in the verification of income form completed by the employer.
Files submitted where information is missing will not be reviewed.
Final Approval
Employee applicants must not move in, unless approved by management.
If the application is approved, the manager only, will then fully complete a
Tenant Income Certification (TIC) using instructions found in Chapter 9.1.
Employee Resident Files
The original file SHOULD remain in a locked drawer under the manager’s
supervision.
Employee Certified Unit Annual Recertification
Just like at time of move-in when getting close to time for AR, this household
cannot be treated any differently than any other household. Notices must be
sent and AR fully completed no later than the first of the month that the
household was initially certified.
All household members, as applicable, must also complete the AR application,
addendums, and affidavits. In addition, income must be verified using
verification of income form completed by the employer’s HR Department for
the employee and documented for all other household members as required per
Chapter 4.0. All rent concessions must be included as household’s income and
documented in the verification of income form completed by the employer.
RECORD KEEPING
12.0 REPORTING REQUIREMENTS
As mentioned in section 1.1, your community is required to prove
compliance with program requirements at all times. The state and its
monitoring agencies have designed numerous reports that show the
occupancy of your property, as well as that each household residing at your
community is qualified. These reports may also be required by the owners,
syndicators and/or investors depending upon your individual property.
Reports are completed/reviewed by the compliance staff. The compliance
staff will notify property staff of corrections needed in order to complete the
report and will send to agencies once all requested corrections have been
completed.
NOTE 12.0.1: All properties must send their rent roll at the beginning of every
month so that we can check to make sure all move-ins and
recertification’s are being approved by management. If we find any
files that were not approved, then a report will be sent to your
regional.
12.1 PROGRAM REPORT
This report is required by all Florida properties that have any Housing
Credit units in their community. It is required that the activity during the
report period be reported by including a copy of the Tenant Income
Certification (TIC).
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Reports are completed/reviewed by the compliance staff. If the report is
completed by the Preferred’s compliance staff, property staff must send
copies of all TICs completed during the report period. Report periods are
from the first of the month to the last day of the same month.
The compliance staff will notify property staff of corrections needed in order
to complete the report and will send to agencies once all requested
corrections have been completed. Reports are due to the state agency by a
specific date. Not reporting on time is non-compliance.
Compliance Reporting Property Due Dates
Due Date Copies of TIC Required
16th each month TICs Completed 01-15 of the month
2nd each month TICs Completed 16-to last day of the previous month
12.2 NEXT AVAILABLE UNIT AND VACANT UNIT RULE
Regulations state that properties “are required to maintain records
identifying vacant low-income units and information that shows, when, and
to whom, the next available unit was rented.” This is why a record of the
Next Available Unit (NAU) and Vacant Unit Rule (VUR) documentation must
be maintained on an ongoing basis for move-outs and for households
exceeding 140 percent of the applicable income limit at recertification, as
well as the next available unit rented. Copies of this log can be requested
by contacting management.
This is applicable only to mixed used properties, in other words,
properties that are not 100% set-aside and have noncertified/market
units.
Records of the NAU should be kept on a building-by-building basis and
maintained at the properties. This is necessary in order to document that
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the next available unit in the building of comparable or smaller size is
rented to qualified lower-income tenants in the following situations:
a. In the event that a lower-income tenant’s income increases to a
level greater than 140 percent of the applicable income limit at
annual or interim certification, the tenant may continue to be
counted towards satisfaction of the lower-income requirements as
long as the unit continues to be rent-restricted and the next
available unit in the building of comparable or smaller size is rented
to a qualified lower-income tenant.
b. Vacant units whose most recent tenants were certified as lower
income and who occupied the unit at least 31 days may continue to
count toward the federal lower-income requirements as long as the
next unit in the building of comparable or smaller size is rented to a
qualified lower-income tenant.
REASONABLE ATTEMPTS
As long as reasonable attempts are being made to rent to qualified low-
income households before renting units to nonqualifying tenants, vacant
LIHTC units will continue to be included as qualified low-income units for
purposes of determining the minimum set-aside and calculating the
applicable fraction. What constitutes reasonable attempts to rent a vacant
unit is based on facts and circumstances and may differ from project to
project depending on factors such as the size and location of the project,
tenant turnover rates, and market conditions. Also, the different advertising
methods that are accessible to owners and prospective tenants would affect
what would be considered reasonable.
A state agency’s responsibility for reviewing the owner’s compliance with
the Vacant Unit Rule include a review of the owner’s advertising practices;
i.e., a project will be considered in compliance when the owner makes
reasonable efforts to rent vacant units to qualified low income households
before renting any vacant units to nonqualifying tenants.
EXAMPLE 12.2.0: Renting Market Rate Unit Before Low-Income Units
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Twenty market rate units and ten low-income units
previously occupied by income-qualified tenants in a 200-
unit mixed-use housing project are vacant. None of the low-
income units are over-income units. The owner displayed a
banner and for rent signs at the entrance to the project,
placed classified advertisements in two local newspapers,
and contacted prospective low-income tenants on a waiting
list for the project and on a local public housing authority’s
list of section 8 voucher holders. These are customary
advertising methods for apartment vacancies in the area
where the project is located. Subsequent to the low-income
unit vacancies, a market rate unit of comparable size to the
low-income units became vacant. The owner rents five
market rate units before any of the ten vacant low-income
units.
The owner is in compliance with the Vacant Unit Rule. The
owner has used reasonable methods of advertising an
apartment vacancy in the area of the project before renting
a market rate unit. In addition, the Available Unit Rule is not
violated by renting the market rate unit because there are no
over-income units in the building.
A unit is not available for purposes of the vacant unit rule when the unit is
no longer available to rent due to contractual arrangements that are
binding under local law, such as a reservation entered into between a
building owner and a prospective tenant.
EXAMPLE 12.2.1: Low-Income Unit Not Available
A building has 10 units, consisting of 7 low-income units
(none were over-income units) and 3 market rate units. All
units in the building were occupied except for one market
rate unit.
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A low-income unit became vacant on March 15, 2004, so the
owner started advertising to rent the unit to an income-
qualified tenant. On March 29, 2004, the owner agreed to
rent the unit to an income qualified household and the
parties signed a reservation binding on both parties. The
owner ceased advertising efforts for the low-income unit.
The vacant market rate unit was rented on April 15, 2004.
The low-income household signed their lease on April 30,
2004 and moved in on May 1, 2004.
Since a reservation had been signed for the vacant low-
income unit at the time the market unit was rented, the low-
income unit was not available for rent and, therefore, the
owner no longer needed to make reasonable efforts to rent
the low-income unit.
Noncompliance occurs when the owner does not make reasonable attempts
to rent vacant low-income units and rents units to nonqualifying tenants. If
the Vacant Unit Rule is violated, all vacant units previously occupied by
qualified households lose their low-income status and are not considered
qualified units. The date of noncompliance is the date the first low-income
tenant moved out of the now vacant units.
EXAMPLE 12.2.2: Owner Stopped Making Reasonable Efforts to Rent Low-
Income Housing Units
The owner of a mixed-use LIHC project with 100 units
stopped advertising efforts to attract low-income tenants on
January 15, 2004. 15 of the 25 market rate units are vacant
and 25 of the 75 low-income units are vacant at the time the
state agency conducts a tenant file review. The LIHC units
were vacated between September 25, 2003 and March 31,
2004.
The project is out of compliance on September 25, 2003,
when the first currently vacant low-income unit was vacated.
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12.3 LINE-BY-LINE INSTRUCTIONS (Preferred’s NAU Log)
This log is to be completed on a Building-by-Building basis within each
property. Each individual Building Identification Number (BIN) should have
a separate page.
Complete the Project Name, LIHTC Project Number, and the BIN Number,
for each page utilized and then show the following information for each
building for the entire compliance period (see chapter 1) of the property:
1. Unit Number:
Enter the unit number only. Do not include BIN Number here.
2. Unit Size:
a. Number of Bedrooms:
Enter the number of bedrooms of the NAU rented (i.e. 1, 2, 3.)
b. Square Feet:
Enter the total square footage of the NAU rented.
3. Tenant Name:
Enter the tenant name as it appears on the Recap and/or Program
Report. Include both first and last name if possible.
4. Unit Activity
Enter applicable activity:
Move-out date if unit was vacated
Effective date if household income exceeded 140% of the
AMI
5. Unit Number (NAU rented):
Enter the unit number only. Do not include BIN Number here.
6. Unit Size (of the NAU rented):
a. Number of Bedrooms:
Enter the number of bedrooms of the NAU rented (i.e. 1, 2, 3.)
b. Square Feet:
Enter the total square footage of the NAU rented.
7. Tenant Name (of the NAU rented):
Enter the tenant name as it appears on the Recap and/or Program
Report. Include both first and last name if possible.
8. Move-In Date (NAU rented only):
Enter move-in date of household that certified the NAU rented.
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12.4 Special Needs/Link Tracking
Regulation states that properties with Special needs/Link requirements are
required to maintain records identifying vacant low-income units and information
that show referral, when, and to whom, the next available unit was rented.
The Owner (or the Management under a management agreement with the Owner)
shall be responsible for the following:
a) Holding Link units available for Special Needs Households sent to
property by Referral Agency. Link Unit vacancies must be held open for
referrals for, at least, a period of 30 calendar days starting from the date
the unit is vacant and ready to lease. Please note that the sites specific
regulatory agreements may state a different requirement. The Owner must
notify the Referral Agency(s) that the Link Unit is available on or before the
unit becomes vacant and ready to lease.
i. If a Special Needs Household referral is denied, Owner must notify
the Referral Agency when that denial is made and continue to hold
the Link unit available to allow the Referral Agency to make referrals
within the 30 calendar day-hold period.
b) Notifying the Referral Agency as to the disposition of applications for Link
Units and consider requests for Reasonable Accommodations for those not
accepted.
c) Working with Referral Agency to coordinate the first contact with the
Special Needs Working with Referral Agency to coordinate the first contact
with the Special Needs Household and to initiate the application process;
d) Designating a point person on-site at the Development to send notice of
unit availability to the designated point person from the Referral Agency
and to work with the Referral Agency during the leasing and occupancy
period for all referred Special Needs Household residents.
i. Employ and maintain a communications plan between
Management and Referral Agency that will accommodate staff
turnover and assure continuing linkages for the duration of the
compliance period.
e) Collaborating with the Referral Agency as appropriate and applicable, to
address the household’s needs for assistance at application;
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f) Notifying the Referral Agency regarding anticipated and actual vacancies
in Link Units.
g) Notifying the Referral Agency, in a timely manner, of issues or concerns
that may adversely affect the tenancy of the household;
h) Contacting Referral Agency if there are any issues or concerns that have
not been satisfactorily resolved with the household.
i) Informing the Referral Agency about the property and unit characteristics
and features, rents and related costs, household income limits or
restrictions, resident rights and responsibilities, the resident application
process, as well as the information and documents each household will
need when applying for the reserved unit.
j) Developing and maintaining a written policy and procedures information
document to be given to the Referral Agency that describes the procedures
to be used to help referred households apply for, get accepted, and
maintain tenancy in a Link Unit. Owner shall inform the Referral Agency of
any changes in these procedures. Owner shall include a section on
Reasonable Accommodation under the federal Fair Housing Act in this
document and the property’s process for applying for a Reasonable
Accommodation.
LEASE AGREEMENT VS. ANNUAL
RECERTIFICATION
13.0 LEASE AGREEMENT
Residential units must be for use by the general public and all of the units
in a project must be used on a nontransient basis. Generally, a unit is
considered to be used on a nontransient basis if the initial lease term is six
months or greater.
A unit is in compliance with this requirement if the initial lease term for
each tenant is at least six months. The presence of a six month initial lease
is the customary evidence used to document the property and tenant’s
intent to enter into a nontransient rental agreement.
EXAMPLE 13.0.1: Tenant Vacates Before End of the Lease
A couple vacates their unit before fulfilling their initial six-month lease
because the husband accepted a job in another state. Because the couple
was subject to a valid six-month lease and vacated the unit for a valid
reason, the low-income unit was not used on a transient basis.
13.1 LEASE AGREEMENT VS. ANNUAL RECERTIFICATION (AR)
A unit is not considered a program qualified unit until the qualified resident
actually takes physical occupancy. The Internal Revenue Code does not
define physical occupancy, but for management, a unit is considered
physically occupied when the residents have been given legal access to the
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unit. This should not be confused with entering into a lease agreement.
“Legal access” means the applicant has been given the keys to a unit that is
legally available for occupancy. However, please note that at no time a
resident should be given the keys to a unit until all residents 18 years of
age and older have signed the TIC, lease, and all other applicable
addendums.
The move-in date is used as the initial certification effective date. In order
for a unit to continue to be counted as a lower-income unit, the household
must annually recertify eligibility no later than twelve months after the
latest certification. However, some states require these be completed by
the 1st day of the month that the household initially certified.
Normally a lease ending date will be close to the annual recertification due
date. However, the AR should not be confused with the lease renewal.
Note, if the resident does not renew the lease, it may automatically renew
itself on a month-to-month basis. However, if the resident does not
recertify by the due date, the unit will be in non-compliance and cannot be
counted towards your property set-aside. To avoid this, it is the policy of
management that AR notices be sent to the residents no later than the date
shown on the “AR NOTICE SCHEDULE” (see section 13.3). In addition, that
all residents recertify no later than 30 days prior to AR due date or resident
will be served with a non-renewal notice.
13.2 ANNUAL RECERTIFICATION (AR)
After move-in, residents must be recertified annually. Although, not
required to meet income guidelines at time of AR, the “resident” is
considered an applicant for continual residency. Continual residency is
determined based on the household’s current eligibility. Resident must
complete a questionnaire and provide supporting documentation no
different than what was done at time of initial certification.
Regulations for documenting eligibility at time of AR are the same, with no
exceptions, as those for the initial certification. There are no special
considerations in documenting household eligibility at time of AR, the
process is the same as IC.
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Even if the residents are moving out in the month recertification is
due, they must recertify if they will occupy the unit on or after the
first day of the month of their move-in date.
The key to completing annual recertifications is to develop and maintain an
accurate tracking system of the units due for recertification. Always use
the household move-in date not the lease expiration date to properly
develop your tracking system. Notices should be sent to residents
beginning 120 days before the recertification due date. Staff must follow-
up on these notices to ensure the households are recertified on time.
In section 13.2 is a required schedule of progressive recertification notices
for reminding residents that recertifications are due. Although this
schedule sets the minimum amount of notices to be given to the residents,
communities may use a more stringent schedule depending on the
individual community.
AR EXEMPTION
Although the IRS does not require 100% LIHTC properties to complete
annual recertification of the household’s income, some properties that do
not have HOME units, may qualify to not be required to complete annual
recertification of households’ income or to complete only the first year
recertification. Please note that in most cases, properties are not exempt
from having to determine households’ student eligibility.
Prior to adapting a no recertification procedure, you must have compliance
approval and written policies and procedures to follow.
13.3 AR NOTICE SCHEDULE
The following is an AR schedule that has been proven to eliminate the so
often referred to as “Late AR Syndrome.” Clients of Preferred Compliance
Solutions have stated they have been able to completely eliminate late
recertifications when implementing this schedule consistently.
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120 days prior to Recertification due date 1st Notice to recertify
90 days prior to Recertification due date 2nd Notice to recertify
60 days prior to Recertification due date 3rd Notice to recertify
45 days prior to Recertification due date Final recertification notice
40 days prior to recertification due date 7 days to cure non-compliance
30 days prior to Recertification due date Non-Renewal Notice
RESIDENT PROGRAMS (TENANT SERVICES)
14.0 RESIDENT PROGRAMS
During the funding application process the owner of your community
agreed to provide some if not all of the following resident programs (tenant
services):
❖ Welfare to Work or Self Sufficiency Program
❖ Home Ownership Incentives to residents
❖ Educational Courses
❖ Health Screening
❖ After-school Program for Children
❖ First Time Homebuyers Seminars
❖ Literacy Training
❖ Job Training
❖ Resident Activities
❖ Private Transportation
❖ Resident Assurance Checklist Program
❖ Nutrition Classes
❖ Financial Counseling
❖ English as a Second Language
❖ Computer Lab
❖ Resident Assistance Referral Program
❖ Swimming Lessons
❖ Life Safety Training
❖ Mentoring
❖ Others
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14.1 FREQUENCY
Applicable resident programs/tenant services required to be provided in
your community are listed in the regulatory agreements. Frequency
required to provide programs/services listed in section 14.0 will vary from
property to property.
In addition, your community has a “Resident Programs” schedule that
details requirements and frequency in which the programs/services are
required to be offered.
14.2 RECORD KEEPING
The “Resident Services Log” and “Resident Programs” binder must be
updated as services are provided. The “Resident Program” binder must
never be destroyed or discarded. The binder must be stored in a safe
location. It must be stored based on the year services were provided.
Documentation entered in the log and stored in the binder must include the
following:
1. Date of service
2. Type of Service
3. Name of entity that provided the service
4. Detailed information of the person and entity that provided the
service. Preferably a business card.
5. Copies of ways in which residents were notified (flyers) of the
location, date, time, and providers name of programs/services
provided in your community.
6. In addition, it is required that sign-in logs be completed for each
program/service and stored in the “Resident Programs” binder.
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7. There is NO need to keep pictures of the activity in the binder.
These are not required nor needed.
14.3 COMPLIANCE INVOLVEMENT
The compliance staff will monitor that your community is providing
programs/services as required per the LURA and as instructed in the
“Resident Programs” binder. Management may request at any time proof
of services completed. Proof must be in the form of flyers, sign-in logs and
provider’s business cards and literature.
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FORMS
15.0 COMPLIANCE FORMS
Preferred Compliance Solutions will continually work with management to
custom create and update compliance forms. These will increase the
marketability of the properties and also assist properties when determining
households’ eligibility to reside in an affordable housing unit.
Users of NextGen eFile have access to all our recommended compliance
forms. Many use these forms when determining households’ eligibility.
Because compliance regulations and best practices change from day to day
forms are updated regularly. In order to ensure that properties are using
the latest forms, it is management’s policy that these be printed directly
and not at any time copied.
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MAINTENANCE STAFF COMPLIANCE POLICIES AND
PROCEDURES
16.0 MAINTENANCE STAFF AND STATE AUDITS
The following policies and procedures have been created to assist all
maintenance staff responsible for preparing properties for a state physical
inspection and representing management during the date of such inspection.
Guidance to state agencies requires that noncompliance finding corrected by the
owner after notification of a state inspection be reported by issuing IRS Form
8823. All findings on the date of the inspection, regardless to their corrected
status at the completion of the inspection, must be reported as noncompliance.
Therefore, property staff must do all they can to identify and correct any
noncompliance prior to receiving notification of a state audit and/or inspection.
State agencies must inspect LIHTC properties to ensure that LIHTC buildings
and units are suitable for occupancy. During their visit they must assess
whether low-income housing tax credit properties are in safe, decent, sanitary
condition and in good repair, according to either the Uniform Physical Conditions
Standards (UPCS) established by HUD, or local inspection standards. See
section 16.2 for detailed description of major areas outlined in the UPCS.
A building is in compliance if, during an inspection of the building, it meets the
requirements of the UPCS or local code.
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16.1 PREPARING FOR A PHYSICAL INSPECTION
Before
Audits are normally scheduled in the same month year after year. As the
month the property was last audited approaches, but always before
receiving notification of a state audit to be conducted by a monitoring
agency and/or the state, under the direction of the property manager the
maintenance staff should:
Property Walk - Walk the property and create a list of all safety or health
hazards to the residents. This list should include, but not be limited to:
❖ Exposed electrical wiring and/or equipment
❖ Broken and/or missing emergency lighting and/or signs
❖ Broken windows and/or missing window screens
❖ Broken or missing window coverings (blinds) regardless to whether or
not the unit will be inspected
❖ Chipped paint on building exterior including rails
❖ Loose staircases and hand rails, including exposed rebar and stair tread
❖ Dumpsters and compactor areas free of garbage and/or debris
❖ Unused and unlicensed vehicles
❖ Oil stains in need of cleaning and treatment
❖ Vandalized buildings, equipment, and amenities with graffiti or other
type of damage
❖ Missing or expired fire extinguishers in common areas
NOTE 16.1.1: Guidance to state agencies requires that noncompliance finding corrected
by the owner after notification of a state inspection be reported by
issuing IRS Form 8823. All findings, regardless of the corrected status at
the end of the inspection must be reported.
Unit Walk – Walk all units and create a list of all safety or health hazards
to the residents. This list should include, but not be limited to:
❖ All rooms being accessible
❖ Broken and/or missing smoke detector(s)
❖ Broken and/or missing electrical and cable cover(s)
❖ Broken and/or exposed lighting fixture(s)
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❖ Inoperable stove exhaust fan (hood) and light
❖ Inoperable stove elements (including oven)
❖ Inoperable garbage disposal
❖ Broken refrigerator gaskets (door seals)
❖ Burned counter top
❖ Leaking faucets (including those in the bathroom(s))
❖ Broken vanity mirror(s)
❖ Broken and/or loose toilet and toilet seat(s)
❖ Broken and/or missing towel bar(s)
❖ Missing water stopper(s)
❖ Broken and/or unplugged bathroom exhaust fan
❖ Blocked windows and doors
❖ Broken windows and/or missing window screens
❖ Broken or missing window coverings (blinds)
❖ Broken carpet
❖ Excess storage in living areas
❖ Water heater closet used as storage
❖ Unsanitary living conditions
❖ Missing or expired fire extinguishers
❖ Paint on the sprinkler head
❖ Broken or inoperable GFCI
❖ Infestations or signs of an infestation
Vacant Unit Walk – Walk all vacant units by no later than the day before
the state physical inspection.
30 Days or more - All units that have been vacant for more than 30 days
must be rent ready by no later than the day before the state physical
inspection.
30 Days or less All units that have been vacant for less than 30 days must
meet safety and hazard standards based on an inspection no different than
of an occupied unit. Particularly, all appliances must be present in the
vacant unit.
State agencies are instructed to consider as inhabitable, and are
required to report as noncompliant using IRS Form 8823, all units
that have been vacant for more than 30 days (may be different in
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your state) that are not ready and suitable for occupancy on the date
of inspection.
Action List
Once the above reference list is created, and under the direction of the
property manager the maintenance supervisor should:
1. Create punch out list and when applicable, work orders to correct and/or
repair all findings from each walk mentioned above
2. Correct and/or repair all findings by no later than the day before the
state physical inspection
3. Report to the property manager once all findings have been corrected
and/or repaired
At least 24 hours prior to the date of the state inspection all tenants should
be notified that their unit may be selected as part of the physical inspection.
During
Upon arrival, the person completing the state audit and physical
inspection will provide management a list of the units to be inspected.
Immediately upon receiving this list, maintenance must:
❖ Pull the key for each one of the selected units
❖ Prepare a box to include smoke detectors and batteries, screw drivers,
electrical covers, garbage disposal wrench, and other tools or replacements
that may be needed
❖ Have available a stick or pole to test smoke detectors
❖ Immediately send someone from the maintenance team, prior to
the inspector going, to quickly inspect all selected units to ensure all
of the following are in working order and free from major damages or
defects:
▪ Smoke detectors
▪ Stove elements
▪ Garbage disposal
▪ Lights
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There is no excuse as to why any of the above would be found
inoperable when the inspector arrives into the unit.
Maintenance must work with the property manager in the event that
anything is found inoperable, and these must do whatever it takes to
ensure issues are corrected before the inspector arrived in the unit.
❖ Maintenance staff must assist during the physical inspection. This shall
include, but not be limited to:
▪ Opening and closing entrance doors
▪ Opening all interior doors
▪ Smoke detector testing
▪ Turning on and off stove elements
▪ Testing garbage disposal
▪ Turning on and off lights
❖ All physical deficiencies should be corrected and/or repaired immediately
upon finding
❖ All communication with the auditor will be made by the property
manager or other management representative only
After
It is anticipated not to happen if maintenance staff carefully follows the
above policy and procedure, but in the event that any deficiencies could not
be addressed prior or during the physical inspection, the maintenance
supervisor should correct and/or repair these immediately upon completion
of the inspection. Maintenance staff should not be allowed to take breaks
and/or lunch prior to correction or repair of any pending deficiencies. A
completed work order must be provided prior to inspector’s departure on
the same day.
16.2 MAJOR AREAS OF FOCUS
State agencies must inspect LIHTC properties to ensure that LIHTC
buildings and units are suitable for occupancy using UPCS or local codes.
The following outlines major areas of consideration:
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1. Site: The site components such as fencing and retaining walls,
grounds, lighting, mailboxes/project signs, parking lots
and driveways, play areas and equipment, refuse disposal,
roads storm drainage, and walkways must be free of
health and safety hazards and in good repair. The site
must not be subject to material adverse conditions, such
as abandoned vehicles, dangerous walks or steps, poor
drainage, septic tank back-ups, sewer hazards, excess
accumulations of trash, vermin or rodent infestation, or
fire hazards.
2. Exterior: Each building on the site must be structurally sound,
secure, habitable, and in good repair. Each building’s
doors, fire escapes, foundations, lighting, roofs, walls, and
windows, *where applicable,* must be free of health and
safety hazards, operable, and in good repair.
3. Building Systems: Each building’s domestic water, electrical systems,
elevators, emergency power, fire protection, HVAC, and
sanitary system must be free from health and safety
hazards, functionally adequate, operable and in good
repair.
4. Dwelling Units: Each dwelling unit within a building must be
structurally sound, habitable, and in good repair. The
dwelling unit must be free from health and safety hazards,
functionally adequate, operable and in good repair. This
includes all areas and aspects of the dwelling unit; i.e.,
bathroom, call-for-aid (if applicable), ceiling, doors,
electrical systems, floors, hot water heater, HVAC,
kitchen, lighting, outlets/switches, patio/ porch/balcony,
smoke detectors, stairs, walls and windows.
Where applicable, the *dwelling* unit must have hot and cold running
water, including an adequate source of *potable* water. If the unit
includes its own sanitary facility, it must be in *proper* operating
condition, usable in privacy and adequate for personal hygiene and the
disposal of human waste. The unit must include at least one battery-
operated or hard-wired smoke detector in proper working condition on
each level of the unit.
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5. Common Areas: The common areas must be structurally sound,
secure, and functionally adequate for the purposes
intended, including meeting all ADA requirements. The
basement/garage/carport, restrooms, closets, utility,
mechanical, community rooms, day care, halls and
corridors, stairs, kitchens, laundry rooms, office, porch,
patio, balcony and trash collection areas, if applicable,
must be free from health and safety hazards, operable,
and in good repair. All common area ceilings, doors,
floors, HVAC, lighting, outlets/switches, smoke detectors,
stairs, walls, and windows, *to the extent applicable,*
must be free of health and safety hazards, operable, and
in good repair.
6. Health/Safety: All areas and components of the housing must be
free of health and safety hazards. These areas include, but
are not limited to, air quality, electrical hazards, elevators,
emergency/fire exits, flammable materials, garbage and
debris, handrail hazards, infestation and lead based paint.
For example, buildings must have fire exits that are not blocked and have
hand rails that are not damaged, loose, missing portions, or otherwise
unusable. The housing must have no evidence of infestation by rats,
mice, vermin, *or garbage and debris.* The housing must have no
evidence of electrical hazards, natural hazards, or fire hazards. The
dwelling units and common areas must have proper ventilation and be
free of mold as well as odor (e.g., propane, natural, sewer or methane
gas) or other observable deficiencies. The housing must comply with all
requirements related to the evaluation and reduction of lead-based paint
hazards and have available proper certifications of such.
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LAS POLÍTICAS Y PROCEDIMIENTOS DE
CUMPLIMIENTO DEL PERSONAL DE
MANTENIMIENTO
17.0 EL PERSONAL DE MANTENIMIENTO Y LAS AUDITORIAS DEL ESTADO
Las siguientes políticas y procedimientos han sido creadas para asistir a todo el
personal de mantenimiento que sea responsable en preparar las propiedades
para una inspección física del estado y para representar la administración
durante el día de tal inspección.
El seguimiento a las agencias estatales requiere que los incumplimientos
encontrados y corregidos por el dueño después de la notificación en la
inspección estatal sean reportados con el uso del Formulario 8823 del IRS.
Todos los descubrimientos en la fecha de la inspección, sin tener en cuenta que
hayan sido corregidos al final de la inspección, deben ser reportados como
incumplimientos. Por lo tanto, el personal de la propiedad debe hacer todo lo
posible en identificar y corregir cualquier incumplimiento antes de recibir una
notificación de la auditoria estatal y/o inspección.
Las agencias estatales deben inspeccionar las propiedades de LIHTC para
asegurarse que los edificios de LIHTC y las unidades sean adecuadas para
ocupación. Durante su visita, ellos deben evaluar si las propiedades con crédito
fiscal y de bajos ingresos sean seguras, decentes, en condición higiénica y de
buen estado, acuerdo al estándar del Uniform Physical Conditions Standards
(UPCS) establecido por el HUD o el estándar de inspección local.
Vea la sección 17.2 para una descripción detallada sobre las áreas
mayores subrayadas en el UPCS.
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Un edificio está en cumplimiento si durante una inspección cumple con los
requerimientos del UPCS o los del código local.
17.1 PREPARAMIENTO PARA UNA INSPECCIÓN FÍSICA.
Antes
Las auditorias son normalmente programadas en el mismo mes, año tras año.
Cuando el mes que la propiedad fue auditada anteriormente se aproxime, pero
siempre antes de haber recibido una notificación de una auditoría estatal que va
ser completada por una agencia y/o el estado, bajo la dirección del
administrador de la propiedad el personal de mantenimiento debe:
Caminata de la propiedad - Camine la propiedad y haga una lista de peligros
de seguridad o salud a los residentes. La lista debe incluir, pero no ser limitada
a:
❖ Cables y/o equipos eléctricos expuestos
❖ Luces y/o letreros de emergencia dañados y/o extraviados
❖ Ventanas rotas y/o pantallas de ventanas extraviadas
❖ Cobertores de ventanas (persianas) rotas y/o extraviadas, sin tener en
cuenta que la unidad será inspeccionada
❖ Pintura descascarada en el exterior del edificio; incluyendo las rieles
❖ Escaleras y pasamanos sueltas
❖ Las aéreas de los contenedores de basura y compactadores que estén
libre de basura y/o escombros
❖ Vehículos que no estén en uso o no estén registrados
❖ Manchas de aceite que necesiten una limpieza y/o un tratamiento
❖ Edificios, equipos, y comodidades que haya sido dañadas por grafitis y
otros tipos de vandalismo
NOTA 17.1.1: El seguimiento a las agencias estatales requiere que los incumplimientos
encontrados y corregidos por el dueño después de una notificación de
inspección por el estado sean reportados con la emisión del Formulario
8823 del IRS.
Caminata de las unidades - Camine todas las unidades y haga una lista de
peligros de seguridad o salud a los residentes. La lista debe incluir, pero no ser
limitada a:
❖ Todos los dormitorios deben ser accesibles
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❖ Detectores de humo dañados y/o extraviados
❖ Tapas de electricidad y cables dañadas y/o extraviadas
❖ Artefactos de luz dañados y/o expuestos
❖ Extractores de aire de las estufas inoperables
❖ Elementos de las estufas inoperables (incluyendo la estufa)
❖ Trituradores de basura inoperables
❖ Juntas de refrigerador rotas
❖ Encimeras quemadas
❖ Llaves que goteen (incluyendo las de los baños)
❖ Espejos de vanidad rotos
❖ Inodoros y asientos de inodoro rotos y/o flojos
❖ Toallero(s) rotos y/o extraviados
❖ Tapones de agua extraviados
❖ Extractores de baño que estén rotos y/o desenchufados
❖ Ventanas y puertas obstruidas
❖ Pantallas de ventana rotas y/o extraviadas
❖ Persianas rotas y/o extraviadas
❖ Alfombra dañada
❖ Exceso de almacenamiento en las salas de estar
❖ Armario del calentador de agua que se use como almacén
❖ Condiciones de vivienda antigénicas
Caminar las unidades vacantes - Camine todas las unidades vacantes a mas
tardar el día antes de la inspección física del estado.
30 Días o más - Todas las unidades que han estado vacantes por más de 30
días deben estar listas para alquilar a más tardar el día antes de la inspección
física del estado.
30 Días o menos - Todas las unidades que han estado vacantes por menos de
30 días deben cumplir con las normas de seguridad y peligro sobre la base de
una inspección que no se diferencie a la de una de unidad ocupada. En
particular, todos los electrodomésticos deben estar presentes en la unidad
vacante.
Las agencias estatales están instruidas a considerarlas como habitables, y
están requeridas a reportarlas como incumplimientos usando el
Formulario 8823 del IRS, todas las unidades que hayan estado vacantes
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por más de 30 días (puede diferir en su estado) que no estén listas ni
adecuadas para ocupación en la fecha de la inspección.
Lista de Acción
Una vez que la lista referenciada arriba este creada, y bajo la dirección del
administrador de la propiedad, el supervisor de mantenimiento debe:
1. Crear una lista de verificación y cuando aplique, las ordenes de trabajos
para corregir y/o reparar todo lo encontrado de cada caminata
referenciada arriba.
2. Corregir y/o reparar todo lo encontrado a más tardar el día antes de la
inspección física del estado.
3. Reporte al administrador de la propiedad una vez que todo lo encontrado
que haya sido corregido y/o reparado.
Durante
A su llegada, la persona completando la revisión estatal y la inspección
física proporcionara a la administración una lista de todas las unidades
que van a ser inspeccionadas. Inmediatamente al recibir esta lista, el
personal de mantenimiento debe:
❖ Sacar la llave para cada una de las unidades seleccionadas
❖ Preparar una caja que incluya detectores de humo y baterías,
desarmadores, tapas eléctricas, llave inglesa de triturador de basura, y
otras herramientas o reemplazos que se puedan necesitar.
❖ Tener disponible un palo o barra para probar los detectores de humo
❖ Inmediatamente mandar a alguien del personal de mantenimiento
a rápidamente y antes que el inspector llegue a esa unidad, a
inspeccionar todas las unidades seleccionadas para asegurarse que
todo lo siguiente este funcionando y libre de daños o defectos
mayores:
❖ Detectores de humo
❖ Elementos de la estufa
❖ Trituradores de basura
❖ Luces
No debe haber excusas de por que ninguna de las cosas mencionadas
arriba se encuentren inoperables cuando el inspector llegue a la unidad.
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El personal del mantenimiento debe trabajar con el administrador de la
propiedad en el evento que cualquier cosa se encuentre inoperable, y debe de
hacer lo que sea necesario para asegurarse que los problemas sean corregidos
antes que el inspector llegue a la unidad.
❖ El personal de mantenimiento debe asistir durante la inspección física.
Esto incluye pero no se limita a:
▪ Abrir y cerrar la puerta de entrada
▪ Abrir todas las puertas interiores
▪ Probar los detectores de humo
▪ Prender y apagar los elementos de las estufas
▪ Probar los trituradores de basura
▪ Prender y apagar las luces
❖ Todas las deficiencias se deben corregir y/o reparar inmediatamente al
ser encontradas.
❖ Toda comunicación con el revisor se hará por el administrador de la
propiedad u otro representativo de la administración solamente.
Después
Se prevé que no ocurriría si el personal de mantenimiento siga atentamente las
anteriores políticas y procedimientos, pero en el evento que cualquier deficiencia
no se pueda tratar antes o durante la inspección física, el supervisor de
mantenimiento debe corregir y/o reparar estas inmediatamente después de la
inspección. El personal de mantenimiento no debe ser permitido a tomar
descansos ni/o almuerzo antes de la corrección o reparación de las deficiencias
pendientes. Una orden de trabajo completa debe ser proporcionada antes de la
salida del inspector en el mismo día.
17.2 ÁREAS PRINCIPALES DE ATENCIÓN
Agencias estatales deben inspeccionar propiedades de LIHTC para asegurarse
que los edificios de LIHTC y sus unidades sean adecuados para ser ocupadas
usando códigos de UPCS o códigos locales.
1. Sitio: Los componentes del sitio, tales como cercas, muros de
contención, todo lo expuesto, la iluminación, letreros de
buzones y proyectos, plazas de estacionamiento y vías de
acceso, áreas y equipos de recreación, la eliminación de
residuos, vías de drenaje pluvial, y las aceras deben estar
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libres de riesgos de salud y seguridad y en buen estado.
El sitio no debe estar sujeto a condiciones de materiales
adversos, tales como vehículos abandonados, aceras o
gradas peligrosas, mal drenaje, atascos de tanques
sépticos, riesgos de drenaje, acumulaciones de basura
excesivas, infestaciones de insectos o roedores, o riesgos
de incendios.
2. Exterior: Todos los edificios en el sitio deben estar estructuralmente
firmes, seguros, habitables, y en buen estado. Las
puertas, escaleras de incendios, cimientos, la iluminación,
techos, paredes, y ventanas, *los que apliquen* de cada
edifico deben estar libres de riesgos de salud y seguridad,
ser operables y estar en buen estado.
3. Sistemas del Edificio: Los sistemas de agua de uso domestico,
sistemas de electricidad, elevadores, energía de
emergencia, protección contra incendios, HVAC, y el
sistema de sanidad deben estar libres de riesgos de salud
y seguridad, estar funcionando adecuadamente, ser
operables y estar en buen estado.
4. Unidades de Vivienda: Cada unidad de vivienda dentro de cada edifico
deben estar estructuralmente firmes, seguros, habitables,
y en buen estado. La unidad de vivienda debe estar libre
de riesgos de salud y seguridad, estar funcionando
adecuadamente, ser operables y estar en buen estado.
Esto incluye todas las áreas y aspectos de la unidad de
vivienda; es decir, los baños, convocatorias de ayuda (si
aplica), techos, puertas, sistemas electicos, pisos,
calentadores de agua, HVAC, cocinas, luces, toma
corrientes / interruptores, patios/ balcones/terrazas,
detectores de humo, escaleras, paredes y ventanas.
La unidad de vivienda debe tener agua corriente (caliente y fría), incluyendo una
fuente adecuada de agua potable. Si la unidad incluye sus propias instalaciones
sanitarias, deben estar en buenas condiciones de funcionamiento, utilizables en
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la intimidad y adecuadas para la higiene personal y la eliminación de residuos
humanos. La unidad debe incluir por lo menos un detector de humo que
funcione con batería o electricidad corriente en cada nivel de la unidad y deben
estar en buenas condiciones de funcionamiento.
5. Áreas Comunes: Las áreas comunes deben estar estructuralmente
firmes, seguras, y funcionalmente adecuadas paro los
fines previstos. El sótano/garaje/plaza de
estacionamiento, baños, armarios, utilidades, cuartos de
comunidad, guarderías, pasillos y corredores, escaleras,
cocinas, cuartos de lavandería, oficinas, porches, patios,
balcones, y áreas de colección de basura, si es aplicable,
debe estar libres de riesgos de salud y seguridad, ser
operables y estar en buen estado. Todos los techos,
puertas, pisos, HVAC, luces, toma corrientes /
interruptores, detectores de humo, escaleras, paredes y
ventanas de las áreas comunes, *hasta la medida que
sean aplicables*, deben estar libres de riesgos de salud y
seguridad, ser operables y estar en buen estado.
6. Salud / Seguridad: Todas las áreas y sus componentes de la vivienda
deben estar libres de riesgos de salud y seguridad. Estas
áreas incluyen, pero no están limitadas a, la calidad de
aire, riesgos de electricidad, elevadores, salidas de
emergencia/incendios, materiales inflamables, basura y
escombros, riesgos de los pasamanos, infestación y
pinturas basadas en plomo.
Por ejemplo, los edificios deben tener salidas de emergencia que no estén
obstruidas y que tengan pasamanos que no estén dañadas, flojas, tengan
partes que falten, o de otro modo inusable. Las vivienda no deben tener
evidencia de infestaciones de ratas, ratones, bichos, *o basura y escombros*.
La vivienda no debe tener evidencia de peligros de electricidad, peligros de
naturaleza, o peligros de incendios. Las unidades de vivienda y áreas comunes
deben tener ventilación apropiada y estar libres de moho así como olores (de
propano, naturales, de cloaca, o de metano) y otras deficiencias observables.
La vivienda debe cumplir con todos los requerimientos relacionados a la
evaluación y reducción de los peligros de pinturas basadas en plomo y tener
disponible certificaciones adecuadas para lo tal.
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ACQUISITION AND REHABILITATION
18.0 ACQUISITION AND REHABILITATION
In January of 2007, The IRS released the Guide to Completing Form 8823.
Within the guide, Chapter 4 contains a section on Income Certifications when
completing an Acquisition / Rehab property. The chapter states that a unit
occupied before the beginning of the credit period will be considered to be a
low-income unit at the beginning of the credit period, even if the household
income exceeds the income limit at the beginning of the first year of the credit
period, if two conditions related to income qualifications are met and the units
remain rent restricted:
• The household must be income qualified at the time of Acquisition or the
date the household started occupying the unit, whichever is later.
• Properties must maintain documentation of the income qualification
If a household is already occupying a unit at the time of Acquisition, the initial
Income Certification must be completed within 120 days before or after the
date of the acquisition using the current income limits in effect on the day of
acquisition. The effective “move-in” date would be the date of acquisition since
the household is already occupying the unit. All required and updated
documentation must be in the file as well as an updated Application showing the
current household composition. However, unless there is a management
change, it is not required a new lease to be signed, providing there is already a
valid lease in effect and a copy of that lease is in the file.
If a household is already occupying a unit at the time of acquisition, but the
Income Certification is completed more than 120 days from the Acquisition date,
Chapter
18
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the household must be treated as a new move-in. A new lease and all required
documentation must show the household is income eligible. The property would
use the income limits in effect at the time of certification, and the effective date
would be the date the last adult household member signs the TIC.
18.1 APPLICABLE FRACTION
Section 42 requires that the Applicable Fraction for the first year of the credit
period be calculated based on a month-to-month accounting of units or floor
space occupied by income qualified households. For Acquisition/Rehab projects
there are two separate allocations of credits – one for Acquisition, one for
Rehabilitation. However, there does not need to be a separate calculation for
the applicable fraction of both credit allocations. The IRS mandates that
the Applicable Fraction for the Rehabilitation will be the same as the
Acquisition.
The Applicable Fraction calculation is based off of the status of eligible
Households on the last day of each month and includes:
• Units that are occupied before the beginning of the credit period
providing they are income qualified at the start of the credit period.
• Units that become occupied by a qualified household after the beginning
of the credit period (regardless of rehabilitation costs)
• Units that are occupied by a qualified household that transferred from
another unit in the project. Please note – a household can only be used
to qualify a unit once in the 1st year period. If, during the 1st year
period, a household transfers from one unit to a vacant unit that had
never been occupied, the units swap status. (see IRS Guide to Form
8823 for rules on Tenant transfers)
• Vacant units that are suitable for occupancy AND were previously
occupied by an income qualified household.
Households that are not eligible for the Applicable Fraction calculation are:
• Units occupied by nonqualified households
• Vacant unit last occupied by a nonqualified household
• Units not suitable for occupancy – including units that are undergoing
Rehabilitation.
18.2 TRACKING THE APPLICABLE FRACTION DURING THE FIRST YEAR OF THE
CREDIT PERIOD
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The following serves as an example on how to best keep track of eligible and
noncertified units when units are rehabilitated during the first year of the credit
period.
An owner acquired a building with 10 units and determined that 6 of the units
(1-6) were occupied by nonqualifying households at the beginning of the first
year of the credit period on January 1, 2005. Four units (7-10) were occupied
by income-qualified households. The nonqualifying households moved out and
the owner rehabilitated the six vacant units. Five of the rehabilitated units (1-5)
were rented to new households that moved into the units in August of 2005.
The sixth rehabilitated unit (6) was rented in August to an existing tenant who
transferred from unit 7, one of the four units qualifying on January 1, 2005.
1. The owner may include units 1-5, the rehabilitated units occupied by
new low-income tenants in the applicable fraction computation under
IRC §42(f)(2) for August, September, October, November, and
December of 2005
2. For the tenant who transferred between units within the building, the
owner may include the unrehabilitated unit 7 that the tenant
occupied from January through July in the computation of the
applicable fractions for those months, but the unit is no longer a low-
income unit when the household moves to the rehabilitated unit 6 in
August; Unit 6 is a low-income unit for August through December.
Therefore, for purposes of computing the applicable fraction for August 2005,
there are three low-income units that have not been rehabilitated (units 8, 9,
and 10) and six low-income units that have been rehabilitated (units 1-6). Unit
7 is not a low-income unit.
During September, unit 7 was rehabilitated and the tenant from unit 8 moved
in; therefore, unit 8 is now considered a vacant market-rate unit. To expedite
completion of the rehabilitation of the remaining units, the property also
temporarily located the households in 9 and 10 in off-site quarters (and paid all
expenses) and started rehabilitation of units 8, 9, and 10. For purposes of
determining the applicable fraction for September, units 1-7 are low-income
units and units 9, and 10 are out of compliance low-income unit. Unit 8 is a
market-rate unit that is being rehabilitated in September.
The owner completed the rehabilitation of the final three units (8, 9, and 10) in
October and moved the two temporarily displaced households back into units 9
and 10 during October 2005. Unit 8 remains an unoccupied market rate unit
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through December. For purposes of computing the applicable fraction for
October, units 1-7, 9, and 10 are all low-income units. The same is true for
November and December.
The following chart summarized the status of each unit for each month during
2005. The columns (left to right) represent the individual months and the rows
(top to bottom) represent Units 1 through 10. The field where a row and column
intersect indicates the unit’s status as either “LIHTC” for a low-income unit or is
left blank if the unit is not a low-income unit.
18.3 TESTING FOR PURPOSES OF THE NEXT AVAILABLE UNIT RULE DURING
REHABILITATION
For purposes of Rev. Proc. 2003-82, the income of the individuals occupying a
unit occupied before the beginning to the first credit year are first tested for
purposes of the Next Available Unit Rule at the beginning of the first year of the
building’s credit period (January 1st of the first year of the credit period).
1. The test must be completed within 120 days before the beginning of the
first year of the credit period.
2. The “test” consists of confirming with the household that sources and
amounts of anticipated income included on the tenant income
certification are still current. If additional sources or amounts of income
are identified, the tenant income certification will be updated based on
the household’s documentation. It is not necessary to complete third
party verifications.
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3. If the household is over-income based on current income limits, the Next
Available Unit Rule is applied.
If the effective date of the initial tenant income certification is 120 days or less
before the required “test” (January 1st of the first year of the credit period), it is
not necessary to “test” for purposes of the Next Available Unit Rule because the
time period for completing the initial tenant income certification and the time
period for completing the “test” is the same. The annual tenant income
recertification will be completed each year on the anniversary of the original
tenant income certification’s effective date.
EXAMPLE 18.3.0: The Effective Date of Initial Tenant Income Certification is 120
Days or Less Before the Test Date
An owner purchased an existing building on September 1, 2004
and anticipated beginning the credit period on January 1, 2005.
Household A occupied a unit at the time of the purchase and was
determined to be income qualified on September 22, 2004.
Because the household was determined to be income-qualified
within 120 days of January 1, 2005, it is not necessary to “test”
for purposes of the Next Available Unit Rule.
If the effective date of the original tenant income certification is more than 120
days before the required “test,” the household’s income must be tested within
120 days before the beginning of the first year of the credit period.
EXAMPLE 18.3.1: The Effective Date of Original Tenant Income Certification is More
Than 120 Days Before the Beginning of the First Year of the
Credit Period
An owner purchased an existing building on March 1, 2004 and
anticipated beginning the credit period on January 1, 2005.
Household A, an income qualified household, moved into a rent-
restricted unit on April 1, 2004. Because the household was
determined to be income qualified more than 120 days before the
beginning of the credit period on January 1, 2005, the
household’s income must be tested no earlier than 120 days
before January 1, 2005 to determine whether the Next Applicable
Unit Rule should be applied.