Hot Housing Credit Compliance Topics
In January, I made my annual pilgrimage along with many other Low-Income Housing Tax Credit (LIHTC) professionals to the National Council of State Housing Agency’s Housing Finance Institute in Washington, DC to review the latest and greatest news in the world of affordable housing. This year, I actually attended the HOME sessions in addition to those designated for LIHTC since the HOME Final Rule was published last summer and HUD had promised additional guidance on it. Naturally the information shared at the HOME sessions also found its way into the tax credit sessions, since the two programs are often blended to create or preserve affordable housing. There is no doubt that the implementation of the HOME Final Rule certainly continues to be a hot housing credit compliance topic.
What did I learn? One of the most enlightening discussions concerned HUD’s upcoming publication of an Applicability Chart where they will provide additional guidance on which of the Final Rule’s provisions apply just to properties with HOME funding commitments on or after the effective date of August 23, 2013 and which provisions will be applicable across the board to all HOME properties, new and existing. From what HUD reported at this event, it sounds like student eligibility restrictions are going to apply to all HOME properties and all HOME properties will be required to get annual rent approvals from their Participating Jurisdictions (PJs). Both of these will definitely have implications for those properties blended with LIHTC. The Final Rule designates the Housing Choice Voucher student restrictions as those applicable to HOME, which are very different from the LIHTC student restrictions and will make student household eligibility even more complicated at blended properties. And the annual rent approval requirement will more than likely provide a further delay when waiting for the HOME income limits and rent limits to be published by HUD and implemented at blended properties. Stay tuned and we’ll keep you posted on the status of the Applicability Chart.
In addition, Change 4 to HUD Handbook 4350.3 REV-1 was among the other hot compliance topics at the Institute. These changes, specifically as they apply to LIHTC, have been reported in HMU since the Handbook was updated last summer, but one interesting development is a reminder from the IRS that the verification guidance in Chapter 5 is simply that for LIHTC – good guidance, but not codified as part of Section 42. This means that it may be followed, but also allows for state housing agencies to be more specific in their verification requirements for LIHTC properties in their states. In fact, the IRS has stated that “in general, all taxpayers are held to a standard of “sufficiency” when it comes to documentation. That tells me that you should check in with your state agency to learn just what “sufficiency” means to them.
Finally, a few more of the hot compliance topics discussed were income limits (which I wrote about last month), resyndication, fair housing for LIHTC, and the Violence Against Women Act (VAWA). The IRS indicated that they may be creating some informal guidance on VAWA as it applies to LIHTC and cautioned that if a building owner takes an action to relocate a tenant for VAWA purposes to another unit, then the Section 42 rules still apply in terms of households that may be over income, for example. A VAWA violation by an LIHTC owner is not, however, in and of itself considered noncompliance by Section 42.
One other development that was mentioned in DC was the publication of the IRS Audit Technique Guide for Section 42 properties, which I will save for discussion next month. Until then, stay warm and do your best to stay compliant!