Train Staff to Offer Empty Unit before Vacant Unit
The tax credit program’s vacant unit rule allows you to claim credits for tax credit units even if they are unoccupied. But there is a steep price to pay if you do not handle vacant units properly. At a mixed-income site, one false move by your rental staff in handling vacant units can lead to recapture of the owner’s tax credits. Therefore, you need to ensure that your staff knows what to do when a tax credit unit becomes vacant and to understand the difference between a unit that is “vacant” and one that is “empty.”
Vacant units are tax credit units that have been previously occupied by qualified low-income households. Empty units are tax credit units that have never been occupied and cannot be claimed for tax credit purposes until they have been occupied by qualified households.
What should your rental staff do when faced with a choice to rent a vacant unit or an empty unit? Tell your staff to make every attempt to rent the empty unit first so that the owner can begin to claim credits on that unit. This is especially important during the initial rent-up of the site to ensure that the site meets the minimum percentage of tax credit units required by the IRS and your state housing agency.
However, your staff must still make reasonable attempts to rent any vacant units to qualified households. While the IRS rules do not define “reasonable attempts,” your staff can use a variety of resources to show that you are diligent about renting the units, for example, placing newspaper ads, distributing fliers, using outdoor advertising at your site, and contacting local employers.