The National Housing Law Project (NHLP), Regional Housing Legal Services (Pennsylvania), and the Legal Aid Society of Southwest Ohio describe a new option for developers in the Low Income Housing Tax Credit (LIHTC) program that allows “income averaging.” Potential adverse consequences for voucher households and other extremely low income households, along with opportunities for advocates to engage their state housing finance agencies to prevent those adverse outcomes, are highlighted in the webinar What Do Advocates Need to Know About the New Income Averaging Rules for LIHTC Properties?
Congress added income averaging as an option to the LIHTC program on March 23, 2018. Income averaging allows LIHTC developers to choose to serve households with incomes up to 80% of the Area Median Income (AMI), as long as at least 40% of the units are both rent-restricted and occupied by households with incomes that do not exceed the “designated income limits,” which may range from 20% of AMI in 10% increments up to 80% AMI. The rent for a unit must not exceed 30% of the designated income limit, for example, 30% of 20% AMI, 30% of 30% AMI, etc.
The presenters highlight three concerns that advocates should address with their state LIHTC allocating agency:
- LIHTC rents affordable to households at 70% or 80% of AMI could exceed voucher payment standards, providing a loophole for owners to reject voucher households for these units. Therefore, advocates should encourage their state allocating agency to establish a policy in their state’s Qualified Allocation Plan that assumes that for project underwriting and financing purposes all LIHTC units accept vouchers.
- Tenants might not know what their maximum rent should be if they do not know their unit’s LIHTC income designation. Therefore, advocates should encourage their state allocating agency to require owners to indicate each unit’s income designation in the tenant’s lease.
- There is no guidance regarding the size of units assigned to each AMI level. Consequently, only small units could be in the 30% AMI category while larger units are in higher income categories.
What Do Advocates Need to Know About the New Income Averaging Rules for LIHTC properties? is available at: https://bit.ly/2KrGZXc
Basic information about the LIHTC program is on page 5-30 of NLIHC’s 2018 Advocates’ Guide.