Gearing Up For Layered Subsidy

As much of the existing Section 8 housing inventory reaches the 30-40 year mark, more and more owners are investigating options for private investors to leverage capital to renovate their apartment communities. To fund these improvements and continue to compete in the rental housing market, the ever-popular financing route is often Low Income Housing Tax Credits.

The Low Income Housing Tax Credit (LIHTC) Program is regulated by the Internal Revenue Service and administered by state housing finance agencies. While participating in a variety of subsidy programs has financial benefits, it also carries risk and requires additional oversight by individuals with a more complex skillset to ensure proper compliance with all funding programs.

For example, a manager of a property with both Section 8 and tax credits must be well-versed in governing regulations established by HUD, IRS, and the individual state housing finance agencies administering the tax credits. In order to navigate through the maze of compliance and, at times, manage conflicting regulations, significant preparatory training is a must. In addition to training, it is equally critical that each 50059 and TIC certification created is carefully scrutinized by a “fresh set of eyes” to ensure human error did not result in incorrect eligibility determination or certification calculations for a given program. Income calculation rules, income limits, calculations of expenses and deductions, citizenship requirements, and recertification frequencies are just a sampling of regulatory topics with different programmatic rules that managers must be aware of and apply correctly to separate programs.

If you are an owner of a property considering the LIHTC program, it is common to focus, during the initial stages, on financing and development aspects of this program. However, equal consideration should be given in preparing staff for compliance success. When devising your approach, be sure to include the additional oversight and quality control required to ensure layered compliance and that your investors are eligible to claim the maximum amount of tax credits. PMCS is available to assist you in this regard with our LIHTC compliance review services. To learn more about how PMCS can serve in this quality control role, please contact us at solutions@pmcsinc.com.