How to Figure Minimum Set-Aside for a Multi-Building Site

How to Figure Minimum Set-Aside for a Multi-Building Site

Managers of low-income housing tax sites often ask: Can I total all the units across different buildings for purposes of meeting the minimum set-aside? The answer is: sometimes. That’s because for a multi-building site, the owner may elect to meet its minimum set-aside based on the entire site (i.e., counting all the units in all the buildings together) or building by building (that is, the owner has to meet the minimum set-aside for each building individually).

To figure out whether the owner elected to meet its minimum set-aside based on the entire site, look at line 8b on IRS Form 8609, Low-Income Housing Credit Allocation and Certification. This line asks: “Are you treating this building as part of a multiple building project for purposes of section 42?” If the owner checked yes, then you may aggregate all units from all buildings to satisfy the minimum set-aside for the project.

For example, suppose you manage five 20-unit buildings (#1 to #5) on a site. The owner told you the minimum set-aside for the project is 40-60, meaning 40 units of the 100-unit site (40% × 100) must be occupied by qualified low-income households below 60 percent of the area median gross income. If you choose, you may satisfy the minimum set-aside by, for example, renting 20 units in building #1 and 20 units in building #2 to qualified low-income households. In that case, you may lease all units in the other three buildings to market-rate households.

According to the instructions to Form 8609, two or more qualified low-income buildings may be included in a multiple building project only if they:

  • Are located on the same tract of land, unless all of the dwelling units in all of the buildings being aggregated in the multiple building project are low-income units (section 42(g)(7));
  • Are owned by the same person for federal tax purposes;
  • Are financed under a common plan of financing; and
  • Have similarly constructed housing units.

A qualified low-income building includes residential rental property that is an apartment building, a single-family dwelling, a town house, a row house, a duplex, or a condominium.