How to Encourage Residents to Cooperate with Conversion to Tax Credit Site

If you already manage tax credit sites, you may be asked to help manage the conversion of an existing site to tax credit housing. If so, there are two key challenges you’re likely to face. First, you’ve got to certify the income and eligibility of existing residents to make sure they’ll qualify once the site becomes tax credit housing. Second, you’ll need to ensure that any site rehabilitation work goes smoothly. Many conversions involve significant physical rehabilitation, which may occur while residents continue to occupy the site.

Both of these challenges require you to get residents’ cooperation. For instance, you may need to relocate residents to different units or keep them away from areas of the site during construction. And you’ll need residents to show up for interviews and complete the certification paperwork. If you can’t get residents to cooperate with the certification process, you may end up affecting the amount and timing of the owner’s tax credits. The owner and the tax credit investors expect you to keep things running smoothly during the conversion, so they can claim the tax credits they bargained for at the time they expect to claim them.

Living at a site undergoing major renovations can be a hassle. And having to go through the certification process can be an even bigger annoyance for residents. Residents may fear that they’ll lose their housing if they don’t qualify for the tax credit program.

Dissatisfied residents can cause serious problems for a site, especially if they band together and refuse to complete the certification process. And even if the certification process doesn’t bother residents, the construction work itself will often inconvenience and aggravate them. If you don’t explain to your residents what you’re doing, why you’re doing it, and how it will affect them, you’re likely to get a lot of complaints.

Send Announcement Letter

The best way to ensure cooperation is to send existing residents a letter to announce the tax credit conversion and enlist their support. You can drum up resident cooperation and keep complaints to a minimum by being up front with residents from the beginning. To help you do this, we’ve provided a Model Letter: Use Announcement Letter to Head Off Trouble During Tax Credit Conversion.

It’s important to set the right tone early on in the letter. Stress the benefits to residents, rather than focusing on the administrative hassles. Most residents will cooperate if they understand the changes going on at the site and realize you’re making their site a better place to live. As our Model Letter illustrates, your letter should:

• Explain what you’re doing.
• Explain how it will improve the site and residents' everyday lives.
• Introduce the tax credit program and explain why income certification is necessary.
• Ask residents to attend certification interviews.
• Ask residents to complete a certification package before their interview.
• Tell residents about any inconveniences from construction. Give residents an estimate of when and for approximately how long the work will take place.
• Announce a meeting to further explain the program.
• Give a telephone number to call.

Follow Up with Resident Meeting

Before the project begins, consider holding a resident meeting. Use the meeting to explain the details of the rehabilitation project and the requirements of the tax credit program and to answer any questions your residents may have. Tell residents whether the site will be 100 percent tax credit housing for qualified residents only or whether there will also be market-rate units available for residents with higher income levels.

To get residents enthusiastic about the physical changes at the site, you can display renderings or diagrams of what the finished project will look like so that they can see what they’re getting. Include plans for each unit size. The architect or contractor should be able to provide these items for you. This can help drum up excitement among residents and encourage them to cooperate with the process.

Tenant Income Certifications for Existing Residents

If your site is solely obtaining rehabilitation credits, the timing of when the initial tenant income certifications for existing residents needs to be done is dependent on when the rehabilitation activities will be finished. If you finish a building’s rehabilitation the same year you acquire it, units occupied by residents you qualify for the LIHTC program can begin to generate credits at acquisition. The IRS says an owner may complete a resident’s initial income certification within 120 days of acquiring the building and make it effective on the date of acquisition.

If you finish a building’s rehabilitation the year following acquisition, units occupied by residents you qualify for the LIHTC program can begin to generate credits in January of the year you finish the rehab. Complete the initial income certifications within 120 days of when you plan to start the credit period.

To help meet the 120-day deadline, you should consider a mass approach to getting income certifications from residents. This means you would set aside a few days to do as many certifications as possible. This way, you can meet the critical 120-day deadline to qualify the project, have an opportunity to review initial tenant certifications for accuracy, and devote time to the site and residents for continued quality customer service during relocations and construction.

In order to accomplish a productive day of interviews, be sure to identify community space suitable for interviews. The space should be able to accommodate all the seasoned managers conducting interviews and hold all the office equipment needed to process verifications.

Keep Residents Informed

To keep enthusiasm up during the entire period of the project, post pictures or diagrams of what each area will look like when the project is complete. Include on the poster the telephone number you put in the announcement letter. It’s also a good idea to tell residents from time to time about the progress you’re making. As you complete phases of the project, you can send update letters telling residents what work you’ve completed, what work remains, and how that work will affect them.

After all residents are certified, you still have to deal with those residents who aren’t eligible for the tax credit program. For example, their household income may exceed tax credit limits or they’re full-time student households. If you let these residents stay at the site, particularly if the site will be 100 percent tax credit, you risk losing the owner’s tax credits. If enough over-income households don’t move out by the deadline for claiming credits, the owner may even have to forfeit the tax credits on the entire site.

But relocating these households or getting them to move out can be tricky. You need to develop policies on how you’ll deal with these residents, such as offering them incentives or refusing to renew their leases at expiration. Speak to your attorney about what you should and shouldn’t do when trying to get ineligible households to move out.