Affordable Housing Connections
September 2022 Newsletter
Student Rules – Applying Two or More Sets of Rules
Question: Our property is under construction, and we are leasing units that have both Low-Income Housing Tax Credit (LIHTC) and HOME Program funding. The household is comprised of three adults, all of whom are under the age of 24. One applicant is a Full-Time student, one is a Part-Time student, and one is employed full-time and is not a student. Is this household student eligible or ineligible by the housing program student rules?
Answer: The household must meet both program requirements if the unit is assisted by both programs. And, the student rule for an eligible household is different for each program!
Most projects will be 100% LIHTC but will not have 100% of the units assisted by HOME funds. So, most managers should start with the LIHTC student rule.
IRS has determined that, as a rule for LIHTC, a household is not eligible to live in a unit if all household members are full time students. However, there are five exceptions to this limitation. Full-time student households that are income eligible and satisfy one or more of the following conditions are considered eligible:
- Students are married and entitled to file a joint tax return:
- The household consists of single parents(s) with children and such parents and children are not dependents of another individual
- At least one member of the household receives assistance under Title IV of the Social Security Act (formerly Aid to Families with Dependent Children (AFDC), now known as Temporary Assistance for Needy Families (TANF). *NOTE: Each state has its own name for its TANF program; for example, in Minnesota, it’s called MFIP, and in Wisconsin, it’s known as W-2.
- At least one member of the household participates in a job‐training program receiving assistance under the Job Training Partnership Act (JTPA) or other similar federal, state, or local laws
- At least one student in the household was previously in foster care within five years of the effective date of the initial certification
In other words, a part-time student household is eligible to live in a LIHTC unit while a full-time student household is ineligible unless it qualifies for one of the five exceptions listed above.
HOME is a HUD program and has a different rule for when a unit may be occupied by a student. The HOME student rule is the same as the Section 8 student rule.
This definition of an eligible student household requires residents who are either a part‐time or full‐time student to meet any one of several qualifying factors. Management should ask/determine if the prospective student household member is:
- A graduate or professional student
- A dependent of the household
- 24 years old or older
- A U.S. military veteran
- Have a dependent child(ren) living with them in the unit
- An orphan or ward of the court
- Disabled and was receiving section 8 assistance on 11-30-2005
If the answer is "yes" to one or more of the above, the student may qualify for occupancy.
If an applicant/current resident does not meet any of the above, the household may be ineligible to live in a HOME-assisted unit.
If an applicant is a student under age 24, s/he may be eligible under the following “independence” special rule:
Must be of legal contract age under state law AND
Have established a household separate from parents or guardians for at least one year
Meet the U.S. Department of Education's definition of an independent student, including being any one of the below:
- At least 24 years old by December 31 of the current year
- A veteran of the U.S. Armed Forces
- Have legal dependents other than a spouse (i.e., an elderly dependent parent)
- A graduate or professional student
- Is an emancipated minor or was one before they became an adult
- Is or was an orphan or a ward of the State or in foster care at any point since age 13
- Been established this school year to be an unaccompanied homeless child or youth and self-supporting as defined by:
- The McKinney-Vento Act
- Runaway and Homeless Youth Act or
- A financial aid administrator
If the student meets the U.S. Department of Education’s definition of Independence (defined above) the student qualifies.
If the student doesn’t meet the definition of an independent student, they must demonstrate that they are not being claimed as a dependent by a parent or legal guardian pursuant to IRS Regulations; AND the parent/legal guardian must provide a signed certification of financial support provided, if any (i.e. verify the regular contribution).
If none of the above applies, the owner/manager must verify that the student and the student’s parent/s or legal guardian are income qualified (at or below 80% for HOME).
Question: A household in my project qualified for occupancy at move-in under BOTH the LIHTC full time-student rule AND the HOME program rule. At annual recertification, the household no longer qualified as eligible under EITHER program’s student rule. What must I do to document continuing program compliance?
Answer: It depends and it’s complicated.
A full-time student household that no longer can claim one of the five permitted exceptions for LIHTC is ineligible to occupy a LIHTC unit and to qualify that unit for tax credits. This is a program violation, and the lease must be terminated. In a mixed income project, the unit becomes a Market unit and the Available Unit Rule must be applied. If the project was 100% LIHTC, the project becomes mixed income and full annual recertifications must be implemented.
An ineligible student in a HOME-assisted unit is not “just cause” for termination of tenancy. How to treat an ineligible student in a HOME assisted unit depends on whether or not the HOME units are fixed or floating.
If the project has floating HOME assisted units, the owner can “float” the HOME designation to another non-HOME comparable unit that meets all HOME requirements: the household occupying the unit is income eligible, meets the HOME student rule and the rent is compliant with the HOME rent limit for that unit size. Once a new HOME unit is identified, the ineligible HOME unit loses its HOME designation and is treated as a market unit (or LIHTC unit, if that designation is appropriate and retained).
If the project has fixed HOME units, the HOME designation can’t be switched with any other unit. The owner/manager must adjust the unit’s rent to 30% of the monthly adjusted income of that student’s household, which would include the income of that student’s parent/s or legal guardian. If the unit retains its LIHTC status, the rent is capped at the LIHTC limit for that unit. If the unit no longer qualifies as LIHTC, then there is no cap on the rent charged.
PY2022 LIHTC Monitoring Fees
Because of this and other factors, PY2022 LIHTC Monitoring Fees will remain consistent with the past three-year level.
Invoices will be available to Management Companies on October 1st.
Please reach out directly to Jessica Harris, firstname.lastname@example.org with any questions.
Farewell to Amanda Hitzeman
Please join us in saying goodbye and Best Wishes for the future to Amanda Hitzeman, effective August 31st.
Amanda had been an integral part of AHC’s management team over the past 3 years working on program monitoring design, implementation, and overall compliance for local pilot programs.
For those of you currently working with Amanda, please reach out to Bryan Hartman (Bryan@ahcinc.net) with any questions and he will be happy to assist or direct you to the proper AHC staffer.
Affordable Housing Connections
We deliver monitoring and consulting services to governmental organizations, property owners and managers; and education to individuals who aspire to leadership in the affordable housing industry. Our aim is to protect the investment of private equity and tax dollars and to ensure continued quality affordable rental housing.