Don’t Use Same Household to Qualify Multiple Units

Some managers have tried to use the same household to qualify more than one unit as low income. It’s true that leasing up enough units to meet the set-aside on time can be stressful. But this seemingly time-saving strategy will only lead to noncompliance. If you need to transfer a low-income household shortly after move-in, just follow the unit transfer rule to determine the status of the new and old units. Under that rule, if you move a household to another unit in the same building at your site, the two units swap status.

For example, suppose you lease up Unit 4A, an empty unit at your site, to a qualified low-income household. That unit is now a low-income unit. Suppose that after move-in, a household member breaks her leg and asks you to transfer her household to Unit 1A, an empty unit on the ground floor. If you grant this request, under the unit transfer rule Unit 1A then becomes a low-income unit and Unit 4A becomes an empty unit. You must then find a new qualified low-income household to qualify Unit 4A as low income.

If you move a household to a unit in a different building at your site, the situation is more complicated. The income of the household that’s requesting the transfer should be tested against the current income limits to ensure that the Available Unit Rule is not violated. In other words, you must test the household’s eligibility once more, redoing its initial certification to check if the household qualifies for a low-income unit.

If the household’s income changed or if the minimum set-aside is more restrictive in the other building, the household might not qualify. If the household qualifies and transfers from its old unit to a new building, the new unit becomes low income. As for the status of the old apartment, the IRS and most state housing agencies have generally been unwilling to let the same household qualify two units. So it’s likely that the old unit would be considered empty. If your state housing agency takes this position, you would need to requalify that unit by renting it to a new low-income household.

To help you keep track and certify unit transfers within the same LIHTC project, we’ve created a Model Form: Document Unit Transfers within the Same Site, which you can use to help maintain compliance with respect to set-aside elections and the Available Unit Rule. For this Model Form, as well as similar compliance tips, see “How to Avoid Six Common Minimum Set-Aside Requirement Mistakes,” available to subscribers here.