Federal Alignment Update
Income Reporting and Definitions
In last month’s article we looked at the preliminary Federal Alignment Report on physical inspections released by Rental Policy Working Group, which strives to achieve less duplication and better standardization among Federal rental housing programs. (That article can be found along with the full text of this article on our website.) This month we will examine income reporting and definitions – both of which could have major implications for developers, owners, and managers of affordable housing.
The reports summarize the issues then suggest “actions to effect alignment.” They also identify challenges that may impede implementation. As an industry veteran, it is hard for me to contain my excitement at some of the proposed ideas set forth in these reports. However, it is that same industry experience that makes me hesitant to get my hopes up knowing how slowly the wheels of bureaucracy generally turn!
The goal of the income reporting and definitions report is to seek alignment for varying definitions of income between Federal housing programs. Current discrepancies cited include the Housing and Economic Recovery Act (HERA) of 2008 provision that Basic Allowance for Housing (BAH) for certain military personnel be excluded from income in certain areas of the country for purposes of LIHTC, and the fact that even with the same theoretical definitions of income, different programs have access to different data – HUD’s Enterprise Income Verification (EIV) system, for example. The LIHTC Program and USDA programs are statutorily prevented from using EIV, therefore creating the difference in how certain types of income will be calculated for purposes of ongoing eligibility. It promulgates a system that is divergent by design and more difficult to understand and navigate for those who must comply with its requirements.
The good news is that there are several progressive reforms suggested that would move us a lot closer to ease of use between programs when it comes to income, which would be especially helpful when Federal rental programs are blended or combined to finance one property. The first idea outlined in the report would be to pass legislation “grandfathering” pre-existing HUD and/or USDA-Rental Assistance (RA) tenants as qualified for LIHTC under acquisition/rehab conditions regardless of being over-income or otherwise not qualifying for the program. The idea would be, however, to retroactively determine whether they would have qualified for LIHTC upon their initial certification for the other programs. This, of course, could present another set of challenges for owners and managers, but would help alleviate the burden of having to deal with non-qualifying tenants who place tax credits at risk by remaining in residence after the property is placed in service.
Other ideas presented in the report are to coordinate new annual Area Median Income data for standard use among all programs and to create a common Tenant Income Certification form. Pretty radical, I would say, by our current standards. Another suggestion designed to free up development dollars (and reduce management challenges) would be Federal imposition of greater state-to-state uniformity of state administration requirements. An example given here which has already been developed and presented to the industry with varying degrees of acceptance and usage is the State HFA Data Transfer Standard created by the National Affordable Housing Management Association (NAHMA). Pros and cons to state discretion, especially as it applies to LIHTC, were also cited in the report.
So, folks, there you have it. As stated before, these proposals could be pretty exciting for us if they actually get approval from the Powers That Be, but let’s not get too hopeful just yet. Stay tuned and we’ll make sure to keep you in the loop on where all of this goes. In the meantime, keep your nose to the grindstone as usual but try your best to keep a smile on your face while you’re doing it!