Swapping Unit Status from One Unit to Another
Q At our “100 percent” site, all the units are low-income units rented to households that are either 50 percent or 60 percent below area median income (AMI). Upon recertification it was discovered that a resident who initially qualified at 50 percent AMI is now over-income. Can we transfer that resident to a 60 percent unit, increase his rent with proper notice, and thereby free up the 50 percent unit for a qualifying applicant?
A Since a site with both 50 percent units and 60 percent units is a 60 percent property for IRS purposes, the method used for “swapping” the status of units between 50 percent and 60 percent is up to the state agency. So guidance should be sought from the appropriate agency, says tax credit consultant A.J. Johnson. Most state agencies would not permit you to raise the rent of the previously 50 percent resident to the 60 percent rent level until a vacant 60 percent unit is rented to a 50 percent resident at the 50 percent rent level, he adds.
Once that’s done, the resident who qualified previously at the 50 percent level could have his rent raised to the 60 percent rent level, in accordance with the terms of his lease. Since many agencies consider the transfer of a resident to be a “swap” in unit status from one unit to the other, very little would be gained by transferring the over-income resident. The best option is probably just to rent the next vacant 60 percent unit to a 50 percent resident and avoid the transfer.
A.J. Johnson, HCCP: President, A.J. Consulting Services, Inc., 3521 Frances Berkeley, Williamsburg, VA 23188; www.ajjcs.net.