Maintaining compliance at a blended site is a tall order on a good day. Of the many challenges that managers at these sites must contend with, however, one of the most vexing issues may be that of over-income tenants.
When qualifying applicants to determine eligibility upfront, managers can expect to encounter a few discrepancies between the regulatory requirements for each program. While income definitions and calculations are generally standard across the industry, each program will have its own documentation requirements for certification and managers may even find variation within verification requirements between programs. This requires more time, energy, and paperwork to process than if there were only one program on site, but it should still feel pretty manageable. It’s when annual recertification time rolls around that management’s compliance competency is truly tested by the widely divergent regulatory requirements pertaining to over-income tenants.
HUD project-based programs present the most straightforward approach when it comes to over-income tenants. Within the tenant rent calculation model, increases in income generally translate into tenants paying more rent, regardless of whether or not their income is still below the applicable income limit. When their income reaches a certain level, then they no longer qualify for subsidy and may remain in their unit as long as they are willing to pay market rent.
The Low-Income Housing Tax Credit program deals with over-income tenants using a couple of rules written into the Section 42 regulations. The 140% Rule protects tenants whose income exceeds the current applicable income limit at recertification but still falls within 140% of the limit and the Available Unit Rule provides guidance when tenant’s annual household income goes over 140% of the limit. If properly followed, these rules allow the over-income tenants to remain in their units and the units to stay in compliance and to continue generating tax credits.
Things get thornier where the HOME program is concerned. Two components of the program that contribute to this complexity are the unit designations of High HOME Rent and Low HOME Rent and whether or not these units are fixed or floating. The HOME guidance gives owners/management very specific steps to take with each possible scenario involving over-income tenants, including unit conversions between designations and adjustments to rent.
So, what do you do when you have a combination of any of these three programs on site and an over-income tenant? Bite your nails? Tear your hair out? Lose your mind? My advice would be to save yourself the trouble and simply attend NCHM’s upcoming Blended Challenges webinar on Over-Income Tenants scheduled for Tuesday, July 14 at 2pm EST. Join me as I guide you through the intricacies of each set of regulations and, most importantly, teach you how to successfully navigate them when they are blended.