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Exhibit
N Projects
with HOME/Low-Income Housing Trust Funds
and
Low-Income Housing Tax Credits Projects
that combine HOME and/or Low-Income
Housing Trust Funds (Trust Funds) with
Low-Income Housing Tax Credits
("Tax Credits") or other
federal programs have a unique set of
rules to follow in order for a project
to be in compliance with all program
regulations. The following is a
list of areas where discrepancies may
exist, along with recommendations to
address them: A.
Rents For
units to qualify as both Tax Credit and
HOME/Trust Fund-assisted units, rents
cannot exceed either program
limit. Low HOME rent units are
subject to Low HOME rents and tax credit
rents. If a unit is being counted
under more than one program, the
stricter rent limit applies. It
will be necessary to have access to the
current rent limits for all programs in
order to make a determination of the
correct rents to use. Note:
When a tenant receives additional
subsidy through rental assistance
programs such as the Section 8 Voucher
Program, the rents of a HOME/Trust
Fund-assisted unit may be raised to the
rental assistance program limit only if
three requirements are met:
-
The
tenant pays no more than 30 percent
of their adjusted income;
-
The
subsidy is project-based
(affects the entire project, not
just a single unit); and
-
Tenant
income is less than 50 percent of
the area median income. If a
tenant's income exceeds 50 percent
of area median income, as reflected
on the HUD Income Limit publication,
then the High HOME Rent limit must
be used. The Tax Credit rule
of allowing the tenant's rent to be
raised to the higher Section 8 rent
limit as long as the tenant pays no
more than 30 percent of their
adjusted monthly income for housing
does not apply when a unit is
combined with HOME funds.
Unless the subsidy is project-based
(not tenant-based), the total HOME
rent is the maximum amount from all
sources that the project may receive
for HOME/Trust Fund-assisted units.
B.
Assets
HOME/Trust Fund programs require
verification of all asset income,
whereas the Tax Credit rules require
verification of asset income only if the
household's assets are greater than
$5,000.00. For units that combine
programs, the stricter HOME rules apply
and all assets must be verified and
documented in tenant/client files.
C.
Lease Agreements
The
Tax Credit Program requires an initial
lease term of six months minimum,
whereas the HOME/Trust Fund Program
requires an initial lease to be at least
one year, unless by mutual agreement
between the tenant and the
project. For units that combine
programs, the Tax Credit rule of six
months minimum may be accepted.
D.
Re-examinations of Tenant Eligibility
If
a Tax Credit project has received
permission from the Internal Revenue
Service to waive the annual
re-certification of annual income, the
HOME and Trust Fund-assisted units will
still have to be re-certified annually,
and verified with source documentation
every six years in accordance with HOME
regulations. Otherwise all units
will have to re-certified annually to
comply with the Tax Credit rules,
including the HOME and Trust
Fund-assisted units.
E.
Over-Income Tenants
The
definition of an over-income tenant
differs under the two programs.
Tax Credit rules define
"over-income" as having income
above 140 percent of the project income
limit. Under the HOME and Trust
Fund regulations, tenants are considered
over-income if their income rises above
80 percent for HOME units, and 60
percent for Trust Fund units. To
resolve this conflict, HOME and Trust
Fund rules state that when funds from
both Tax Credits and HOME/Trust Fund
programs are used on the same unit, the
Tax Credit rule of 140 percent should be
followed, and in no case can the rent be
raised to exceed the limits set by the
Tax Credit Program. HOME and Trust
Fund regulations do require that once
the tenant's income has exceeded 140
percent of the project's income limits,
the next available unit of the same size
be leased to a tenant that meets the
HOME and Trust Fund criteria, as long as
the original units were designated as floating
units in the project's Written
Agreement.
F.
Property Inspections
HOME
and Trust Fund program regulations
require that property managers conduct
their own unit inspections at least
annually, and that evidence of such
inspections must be maintained in the
tenant's files. Inspection records
will be reviewed by Division staff
during the compliance review.
G.
Fair Housing Activities
Projects
that have received HOME funding must
meet Section 504 of the Rehabilitation
Act in addition to the Fair Housing Act
requirements of the Tax Credit
program. Projects must develop a
tenant selection criteria and waiting
lists, which will be reviewed during the
Division's compliance review.
Rejected applications will also be
reviewed to ensure that there have been
no fair housing violations.
H.
Period of Affordability
The
Tax Credit program and the HOME/Trust
Fund programs require annual monitoring
to ensure compliance with program rules
over the length of a pre-established
period of affordability (compliance
period). Under the Tax Credit
program, the period of affordability is
generally 30 years, unless the project
has received preference points for an
extended period (currently 50
years). Projects with HOME dollars
may have a period of affordability of
5-20 years, depending upon the type of
project and the amount of HOME dollars
invested. As a result, projects
with combined HOME and Tax Credits may
be subject to two sets of affordability
periods and should be monitored
according to each specific project
requirement. NOTE: Projects
funded with Trust Funds have a period of
affordability of 30 years, regardless of
the amount of funds invested.
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