HUD Memo Regarding Occupancy Protections for Residents in LIHTC Projects
On January 12, 2015, HUD sent a memorandum to HUD offices and contract administrators providing guidance on protection of tenants of HUD projects when Low-Income Housing Tax Credits (LIHTC) are added to the project.
The guidance has been provided because HUD has had reports that some owners have attempted to terminate the tenancy of current HUD-assisted tenants (usually project-based Section 8) who do not meet LIHTC eligibility guidelines. This will usually occur when the income of the resident exceeds the permitted income under the LIHTC program. HUD makes clear in the Memo that tenancy in a HUD project may only be terminated under circumstances allowed by HUD regulations, and this does not include failure to meet LIHTC eligibility requirements, including income and student eligibility issues.
The Memorandum also states that if an owner wishes to terminate occupancy based on criminal activity, such termination must be done in accordance with HUD regulations. If the new owner’s practices in this area creates a change in existing house rules, owners must notify tenants who have completed their initial lease terms, 30-days prior to implementation, of the modifications to the house rules. If a tenant has not completed the initial lease term, the owner must provide 60-days notice, prior to the end of the lease term.
Owners may offer incentives to tenants who are not LIHTC eligible to encourage the tenant to vacate the property. However, the incentives may not be paid from Section 8 or FHA project funds. Owners should inform the tenants in writing that they have the option of remaining in occupancy as HUD-assisted tenants under the terms of the lease in order to ensure that tenants understand that the option of moving is fully voluntary.
This is not new guidance, and has been part of the training I provide for a number of years. It does provide a strong reminder to developers and managers of Section 8 projects to which credits are being added that involuntary displacement of Section 8 residents who do not tax credit qualify is not permitted.