Setting Rent for Section 8 Resident in Tax Credit Unit

Q How can a low-income housing tax credit (LIHTC) site owner collect rent that is above the area median income rent when the resident is receiving Section 8 in a tax credit unit?

A The tax credit program allows owners to charge more than the tax credit rent for residents receiving rental subsidies, says tax credit consultant Elizabeth Bramlet.

HUD's Housing Choice Voucher (HCV) program regulations provide that the public housing authority (PHA) may not approve a lease until the PHA determines that the initial rent is “reasonable” [24 CFR 982.507]. A reasonable rent is defined as one that does not exceed the rent charged for comparable units in the private unassisted market. In addition, the rent may not be more than the rent charged by the owner for comparable unassisted units on the premises.

The HCV program is not intended to drive rents up or down, Bramlet explains. “It is not supposed to impact the market—it is supposed to reflect the market. While the local housing authority sets the rent, the owner or site manager is responsible for proposing the rent. When doing so, be sure that you do not propose a tax credit rent, but, rather, what you believe would be a reasonable market rent based on comparable units and properties in your marketplace.”

How do you determine a reasonable rent for your tax credit site? Be sure to consider the following factors when comparing your tax credit unit to similar types of units in your area:

• Location (proximity to transportation, shopping, etc.);

• Unit size, including the number of rooms and square feet;

• Type of unit/construction;

• Housing condition;

• Year built;

• Amenities (that is, for the unit, site, and neighborhood);

• Utilities included in the rent; and

• Handicap accessibility.

“You may have to negotiate with the local PHA, so be prepared to provide information on comparable rents to justify the rent that you're asking for,” says Bramlet.

Insider Source

Liz Bramlet: President, Liz Bramlet Consulting, LLC; (800) 784-1009; liz@lizbramletconslting.com.