It’s not unusual for tax credit sites to be mixed-income, consisting of both low-income and market-rate units. Market-rate units aren’t rent-restricted and may be rented to households of any income. Even so, certain provisions of the tax credit law apply to those units. If you don’t keep those units in compliance with the tax credit law, you’ll risk bringing your entire site into noncompliance.
Here are five rules to help keep your market-rate units in compliance. Follow these rules at every mixed-income tax credit site you manage.
The tax credit law requires that your buildings be suitable for occupancy, taking into account local health, safety, and building codes.
How to comply. You should review your state housing agency’s standards for inspecting units to learn what else you may need to do to keep the unit suitable for occupancy. Agencies may use HUD’s uniform physical condition standards or local codes as their inspection standards. But even if your agency uses HUD’s standards, you must comply with those standards and fix all local code violations relating to your market-rate units to avoid noncompliance. This may require you to fix electrical, heating, plumbing, or pest problems, or to repair a faulty smoke detector, sprinkler, or appliance. It’s also important to note that your market-rate units must stay suitable for occupancy even if they’re temporarily unoccupied.
The tax credit program requires that you rent your units to the general public.
How to comply. To keep your market-rate units open to the general public:
Complying with fair housing law involves much more than not rejecting applicants for illegally discriminatory reasons. When you manage a mixed-income tax credit site, you must follow fair housing law scrupulously with both your market-rate and your low-income residents. Your state housing agency must report all fair housing violations to the IRS as tax credit noncompliance—even if they concern only market-rate units. This means, for example, that:
Your market-rate units, like your low-income units, must be used primarily for residential purposes. It’s okay to have some commercial space at a tax credit site. But market-rate units are included in your site’s eligible basis, which means you must keep them residential.
How to comply. To keep your market-rate units in compliance with this tax credit requirement:
Be sure to charge the same administrative fees to market-rate residents that you charge to low-income residents. You can’t charge market-rate residents higher fees. For instance, if you charge low-income residents a $30 fee for running a credit or criminal background check, you must charge market-rate residents $30 for the same check.