HUD is in the process of preparing new rules that will allow public housing authorities (PHAs) to drastically alter the income verification requirements for public housing and Section 8 Voucher tenants. These changes could impact owners of Low-Income Housing Tax Credit properties that house public housing and voucher residents.
The purpose of the new rules is to provide administrative relief to PHAs that have suffered more than a 30% cut in administrative fees in recent years. The planned changes that may affect tax credit properties include:
- Simplification of the earned income disregard, which permits tenants who have been out of work to avoid a rent increase for some time after obtaining new employment. This is important because the exclusion of such income in not permitted for project-based Section 8 properties and tax credit projects; and
- Permits PHAs to charge owners a fee if re-inspection of a voucher unit shows that a housing quality standard violation has not been fixed.
Also, HUD is likely to give PHAs more discretion in accepting applicant’s words regarding sources of income, rather than strictly requiring verifications. While the details of this are unclear, this would have a significant impact on owners who rely on PHA verifications of income for tax credit residents.
HUD has already implemented a number of changes for PHAs in their implementation of the public housing and voucher programs, including the following:
- Assisted households may self-certify when assets are $5,000 or less (this ability already exists for the LIHTC program);
- Less frequent recertifications for elderly families and families with fixed incomes (every three years).
Other areas that HUD is looking to make changes in include:
- Establishing a threshold for processing changes in family income;
- Permitting self-certification of community service;
- Modifying utility reimbursements;
- Simplifying prorated rent calculations for families with members who cannot demonstrate legal status in the country;
- Removal of the obsolete designated housing rule (a rule where a property could have areas designated as elderly and other areas as family);
- Permit PHAs to set exception payment standards to 120 percent of the Fair Market Rents for reasonable accommodation purposes; and
- Base utility allowances on the size of each unit – not on the type of unit.
These changes are almost certain to be implemented, although the timeframe remains uncertain. Owners of properties involved with local PHAs should stay abreast of any new regulations in these areas and be aware that any changes will impact the day-to-day operations of some LIHTC projects.