LIHTC — Low-Income Housing Tax Credit FAQs

1. What is LIHTC compliance?
LIHTC compliance is the process of ensuring a Low-Income Housing Tax Credit property follows IRS Section 42 requirements, state housing agency rules, income limits, rent limits, tenant eligibility requirements, student rules, documentation standards, and affordability restrictions.

2. What does LIHTC stand for in affordable housing?
LIHTC stands for Low-Income Housing Tax Credit, a federal program that encourages private investment in affordable rental housing.

3. Who oversees LIHTC compliance?
The IRS establishes federal LIHTC requirements under Section 42, while state housing finance agencies generally monitor individual LIHTC properties for ongoing compliance.

4. What is an LIHTC tenant income certification?
A Tenant Income Certification, commonly called a TIC, documents household composition, income, assets, applicable income limits, unit information, and eligibility for an LIHTC household.

5. How do you calculate household income for LIHTC?
LIHTC household income is generally calculated using applicable Section 42 rules and the income-determination methodology required for the property, including current HOTMA-related implementation requirements where applicable.

6. What documents are required in an LIHTC tenant file?
An LIHTC tenant file commonly contains the application, household eligibility documentation, income and asset verification, student-status documentation, Tenant Income Certification, lease documents, required disclosures, and other state-agency-required forms.

7. What are the most common LIHTC compliance mistakes?
Common LIHTC compliance mistakes include incorrect income calculations, missing verification, incorrect rent calculations, incomplete TICs, student-rule violations, missing signatures, incorrect utility allowances, late certifications, and insufficient documentation.

8. What is the LIHTC student rule?
Generally, a household composed entirely of full-time students is not eligible for an LIHTC unit unless the household qualifies for one of the statutory exceptions under Section 42.

9. Can a full-time student live in an LIHTC property?
Yes. Having a full-time student in a household does not automatically make the household ineligible. The special concern generally arises when all household members are full-time students.

10. What happens if an LIHTC household goes over income?
An existing household exceeding the applicable income limit does not necessarily become immediately ineligible. The Available Unit Rule and other Section 42 requirements may apply.

11. What is the LIHTC Available Unit Rule?
The Available Unit Rule generally requires the next available comparable or smaller unit to be rented to a qualified household when an existing LIHTC household's income rises above the applicable threshold.

12. What is the LIHTC Vacant Unit Rule?
The Vacant Unit Rule generally allows a previously qualified low-income unit to continue being treated as a low-income unit while vacant if reasonable attempts are made to rent the unit to another qualified household and applicable requirements are satisfied.

13. How are LIHTC rent limits calculated?
Maximum LIHTC gross rents are based on applicable income limits, imputed household size, the designated income restriction, and the applicable utility allowance.

14. What is a utility allowance in LIHTC?
A utility allowance represents the estimated cost of tenant-paid utilities and generally must be considered when determining whether gross rent remains within the applicable LIHTC maximum.

15. How often do LIHTC utility allowances need to be updated?
LIHTC properties must monitor utility allowances and implement changes according to applicable Section 42 requirements and the property's approved utility allowance methodology.

16. Can an LIHTC property charge application fees?
Potentially, but owners must follow applicable federal, state, local, allocating-agency, and program requirements governing fees.

17. Can an LIHTC property charge additional mandatory fees?
Some mandatory charges can affect the LIHTC gross-rent calculation. Owners should review mandatory fees carefully before imposing them.

18. What is an LIHTC compliance audit?
An LIHTC compliance audit reviews tenant files and property documentation for potential violations involving eligibility, income, rent, utility allowances, student status, certifications, leases, and other Section 42 requirements.

19. What should managers review before an LIHTC audit?
Managers should review tenant files, TICs, income calculations, verification documents, student status, leases, rents, utility allowances, applicable income limits, unit status, and previous findings.

20. What is an LIHTC file audit checklist?
An LIHTC file audit checklist is a structured tool used to verify that each tenant file contains the documentation and calculations required to demonstrate Section 42 compliance.

21. What happens if an LIHTC property is out of compliance?
The monitoring agency may issue findings and, depending on the violation, may report noncompliance to the IRS using Form 8823.

22. What is IRS Form 8823?
Form 8823 is used by state housing credit agencies to report certain LIHTC noncompliance or building disposition information to the IRS.

23. What is the LIHTC compliance period?
The federal LIHTC compliance period is generally 15 taxable years, although properties commonly have longer affordability obligations through an extended use agreement.

24. What is the LIHTC extended use period?
The extended use period is the additional affordability period established under Section 42 and the property's extended use agreement, frequently resulting in at least 30 years of affordability.

25. What is the minimum set-aside in LIHTC?
The minimum set-aside is the elected federal income-targeting test a project must satisfy to qualify as a qualified low-income housing project.

26. What does 40/60 mean in LIHTC?
Historically, the 40/60 minimum set-aside generally means at least 40% of units must be occupied by households at or below 60% of area median gross income, subject to Section 42 requirements.

27. What is income averaging in LIHTC?
Income averaging allows qualifying projects to designate units at multiple income levels, subject to Section 42's requirements and applicable average-income tests.

28. Can LIHTC managers accept self-certification of income?
Self-certification rules depend on the specific circumstance, applicable Section 42 requirements, state agency policy, and any other funding programs layered onto the property.

29. Are annual recertifications required at every LIHTC property?
Not necessarily. Federal rules provide different treatment for certain 100% LIHTC projects, but state agencies and layered programs can impose additional requirements.

30. What should a new LIHTC property manager learn first?
New managers should understand the property's regulatory agreements, set-asides, income and rent limits, utility allowances, student rule, verification requirements, certification process, unit-status tracking, state agency rules, and file-retention requirements.

31. What is HUD Section 8 housing?
Section 8 provides federal rental assistance that helps eligible low-income households afford housing.

32. What is Project-Based Section 8?
Project-Based Section 8 assistance is attached to specific assisted units or properties rather than following an individual household.

33. What is a Section 8 annual recertification?
An annual recertification is the required process for reviewing household composition, income, assets and other eligibility information to determine the household's continuing rent and assistance.

34. When should a Section 8 annual recertification be started?
Owners and agents should maintain a recertification schedule that provides sufficient time to complete required notices, verification, processing, tenant review, and implementation before the effective date.

35. What happens when a Section 8 recertification is late?
Late recertifications can create incorrect rent or subsidy calculations, repayment issues, compliance findings, and potential problems during a HUD Management and Occupancy Review.

36. What is an interim recertification in Section 8 housing?
An interim recertification addresses qualifying changes occurring between annual recertifications under applicable HUD requirements.

37. When is an interim recertification required?
Whether an interim is required depends on the type and amount of household change and current HUD/HOTMA requirements.

38. What is EIV in HUD housing?
EIV stands for Enterprise Income Verification and is HUD's system used by authorized housing professionals to access certain income and benefit information for assisted households.

39. How often should EIV reports be reviewed?
EIV reports must be obtained and reviewed according to the requirements applicable to the specific report and program.

40. What is the EIV Income Report?
The EIV Income Report displays certain income and benefit information that can assist owners and agents with income verification and discrepancy resolution.

41. What is an EIV Income Discrepancy Report?
An Income Discrepancy Report identifies certain differences between tenant-reported information and information available through EIV that may require investigation.

42. What is the EIV Existing Tenant Search?
Existing Tenant Search helps identify applicants or household members who may already be receiving HUD rental assistance elsewhere.

43. What is the EIV Multiple Subsidy Report?
The Multiple Subsidy Report helps identify individuals who may appear to be receiving rental assistance at more than one location.

44. What is a HUD tenant file audit?
A HUD tenant file audit evaluates household eligibility, certifications, income calculations, EIV documentation, leases, notices, verification and other required compliance documentation.

45. What are common Section 8 file errors?
Common problems include missing signatures, incorrect income calculations, incomplete verification, EIV deficiencies, late recertifications, incorrect household composition, missing notices, and rent-calculation errors.

46. What is a HUD MOR?
MOR stands for Management and Occupancy Review. It evaluates an owner's or management agent's compliance with HUD requirements for a multifamily assisted property.

47. How do I prepare for a HUD MOR?
Review tenant files, EIV requirements, waiting-list practices, leasing documentation, recertifications, policies, required postings, management procedures, previous findings, and other areas covered by the MOR.

48. What happens if you fail a HUD MOR?
The reviewer may issue findings or observations requiring corrective action, supporting documentation and follow-up.

49. What is a HUD corrective action plan?
A corrective action plan explains how identified deficiencies will be corrected and, when appropriate, what procedures will prevent recurrence.

50. What is TRACS?
TRACS is HUD's Tenant Rental Assistance Certification System, which processes tenant and assistance-related data for applicable HUD multifamily programs.

51. What is a HUD 50059?
HUD Form 50059 records certification information used to determine household rent and assistance for applicable HUD multifamily programs.

52. Who signs the HUD 50059?
Required signatures depend on the applicable HUD requirements and certification circumstances.

53. What is a Section 8 move-in certification?
A move-in certification establishes the household's initial eligibility, income, assets, household composition, rent and assistance at admission.

54. What is third-party verification in Section 8?
Third-party verification involves obtaining eligibility information from an independent source, subject to HUD's applicable verification hierarchy and requirements.

55. What is HOTMA?
HOTMA is the Housing Opportunity Through Modernization Act and includes significant changes affecting income, assets, deductions, verification, interim reexaminations and other assisted-housing requirements.

56. Does HOTMA apply to Section 8?
HOTMA affects multiple HUD rental-assistance programs, including applicable Section 8 programs, although implementation requirements and effective dates must be reviewed carefully.

57. What is a Section 8 repayment agreement?
A repayment agreement may be used in certain circumstances when a tenant owes money resulting from unreported or underreported income or other applicable situations.

58. How long should Section 8 tenant files be retained?
Retention requirements vary by document and program requirement, so managers should follow current HUD record-retention rules and other applicable requirements.

59. What documents should be in a Section 8 tenant file?
Files commonly contain applications, eligibility documentation, certifications, verification, EIV documentation, leases, notices, household information and other required HUD forms.

60. How can a property fix a Section 8 recertification backlog?
Create a master aging report, prioritize the oldest and highest-risk certifications, assign dedicated staff, establish file-quality controls, track daily production and correct systemic errors simultaneously.

61. What is the HOME Investment Partnerships Program?
HOME is a HUD block-grant program that provides funding to participating jurisdictions for affordable housing activities.

62. What is HOME rental housing compliance?
HOME rental compliance includes meeting applicable affordability, income, rent, occupancy, property and recordkeeping requirements.

63. Who monitors HOME properties?
The applicable HOME Participating Jurisdiction is responsible for overseeing compliance with HOME requirements.

64. What are HOME income limits?
HOME income limits establish household-income thresholds used to determine eligibility for HOME-assisted housing.

65. What are HOME rent limits?
HOME rent limits establish maximum rents for applicable HOME-assisted units, subject to program requirements and utility allowances.

66. What is a High HOME Rent unit?
A High HOME Rent unit is a HOME-assisted unit subject to the applicable High HOME rent requirements.

67. What is a Low HOME Rent unit?
Certain HOME projects must maintain designated units meeting the more restrictive Low HOME rent requirements.

68. Are HOME income limits the same as LIHTC limits?
No. HOME and LIHTC are separate programs with different governing requirements, even when their limits sometimes appear similar.

69. What happens when HOME and LIHTC are layered?
The property must comply with the applicable requirements of both programs, and the more restrictive applicable requirement often controls a particular compliance issue.

70. Does HOME require annual income recertification?
HOME-assisted rental housing is subject to ongoing household-income compliance requirements, with the permitted methodology depending on current HOME rules and applicable circumstances.

71. What is the HOME affordability period?
The HOME affordability period is the period during which HOME-assisted housing must continue satisfying applicable affordability requirements.

72. How long is the HOME affordability period?
The period varies based on the type of activity and amount of HOME assistance.

73. What is a HOME utility allowance?
A HOME utility allowance accounts for applicable tenant-paid utility costs when determining compliance with HOME rent requirements.

74. Can HOME units also receive Section 8 assistance?
Yes, HOME units can potentially have rental assistance, but the property must comply with all applicable layered-program requirements.

75. What are common HOME compliance mistakes?
Common issues include incorrect income determinations, rent errors, improper utility allowances, missing documentation, incorrect unit designation, and failure to follow applicable affordability requirements.

76. What is an NSP property?
An NSP property is associated with HUD's Neighborhood Stabilization Program, which provided funding to address foreclosed, abandoned and distressed properties and neighborhoods.

77. What does NSP stand for?
NSP stands for Neighborhood Stabilization Program.

78. Does NSP have income restrictions?
Yes. NSP activities are subject to applicable income-targeting and benefit requirements.

79. How is household income determined for NSP?
Managers must use the income-determination methodology applicable to the property's NSP funding and governing agreement.

80. Can NSP be layered with other affordable housing programs?
Yes. NSP properties can involve other funding or affordability requirements, requiring managers to track each applicable program.

81. What documents should be kept for HOME compliance?
Documentation should substantiate household eligibility, income determinations, rents, unit designation, lease requirements and other applicable HOME requirements.

82. What happens during a HOME compliance review?
Monitoring can include review of tenant eligibility, rents, unit designation, property standards, records, leases and compliance with the written agreement.

83. Can HOME rent exceed the published HOME rent limit?
The applicable gross rent must remain within the program's permitted limits after accounting for relevant program requirements.

84. How should managers handle layered HOME and LIHTC files?
Use a layered compliance checklist that separately tests the household and unit against each applicable program before determining final eligibility.

85. What is the biggest mistake new HOME managers make?
A major mistake is treating HOME requirements as interchangeable with LIHTC or Section 8 rules rather than separately testing compliance with each program.

86. What is Public Housing?
Public Housing is federally assisted rental housing generally owned or operated by public housing agencies to serve eligible low-income households.

87. What is a Public Housing Authority?
A Public Housing Authority or Agency—commonly called a PHA—is a state or local entity administering applicable HUD housing programs.

88. How is rent calculated in Public Housing?
Public Housing rent is calculated according to applicable HUD requirements and the household's circumstances, with different rent options potentially available.

89. What is Total Tenant Payment?
Total Tenant Payment, or TTP, is a HUD calculation used in determining the amount a household is responsible for paying toward rent and utilities.

90. What is flat rent in Public Housing?
Flat rent is an alternative rent option established according to HUD requirements and applicable local PHA policies.

91. What is income-based rent?
Income-based rent is determined using household income and applicable deductions under HUD requirements.

92. Does HOTMA apply to Public Housing?
Yes. HOTMA contains provisions affecting Public Housing income, assets, deductions, interim reexaminations and other requirements.

93. Does Public Housing use EIV?
PHAs use EIV and related verification procedures as required by HUD for applicable Public Housing functions.

94. What is a Public Housing annual reexamination?
An annual reexamination reviews household composition, income, assets and other information used to determine continued eligibility and rent.

95. What is an interim reexamination?
An interim reexamination processes qualifying household changes occurring between regularly scheduled reexaminations.

96. What is ACOP?
ACOP stands for Admissions and Continued Occupancy Policy and establishes a PHA's policies for administering its Public Housing program consistent with HUD requirements.

97. What should be included in a Public Housing tenant file?
Files generally include applications, eligibility documentation, verification, certifications, leases, notices, EIV documentation and records required by HUD and the PHA's ACOP.

98. What is a Public Housing waiting list?
A waiting list tracks applicants seeking admission to Public Housing according to the PHA's established policies and applicable HUD requirements.

99. How are applicants selected from a Public Housing waiting list?
Applicants are selected according to the PHA's approved policies, preferences and applicable fair housing and HUD requirements.

100. What are Public Housing preferences?
Preferences are permitted priority categories used by a PHA in applicant selection when established in accordance with applicable requirements.

101. What is a Public Housing grievance procedure?
The grievance procedure provides qualifying tenants an administrative process for addressing certain PHA actions or disputes.

102. What is a reasonable accommodation in Public Housing?
A reasonable accommodation is a change, exception or adjustment that may be necessary to provide a person with a disability an equal opportunity to use and enjoy housing or participate in a program.

103. What is a reasonable modification?
A reasonable modification generally involves a physical change to a dwelling or common area needed because of a disability, subject to applicable fair housing and program requirements.

104. What are community service requirements in Public Housing?
Certain non-exempt adult Public Housing residents can be subject to community service and self-sufficiency requirements under federal law and HUD regulations.

105. What is over-income Public Housing?
HUD has specific requirements addressing Public Housing families whose income exceeds applicable limits for prescribed periods.

106. What should a new affordable housing property manager learn first?
Start with the regulatory agreement, funding sources, program type, income and rent restrictions, current tenant certifications, waiting list, utility allowances, compliance calendar and unresolved findings.

107. What is layered affordable housing compliance?
Layered compliance occurs when a property has multiple programs—such as LIHTC + HOME + Section 8—and must satisfy each applicable program simultaneously.

108. Which rule applies when affordable housing programs conflict?
Managers must evaluate each funding source independently and determine which applicable requirement governs the specific issue; the most restrictive requirement often controls, but not universally.

109. What is an affordable housing tenant file audit?
A tenant file audit is a systematic review of eligibility, income, assets, rent, certifications, verification and supporting documentation for compliance with applicable housing programs.

110. Should affordable housing properties audit 100% of tenant files?
A 100% file audit can identify problems that a sample review may miss and can be especially valuable before monitoring reviews, acquisitions, management transitions or when systemic compliance problems are suspected.

111. How often should affordable housing tenant files be audited?
Frequency should be based on program requirements, risk, staff turnover, previous findings, portfolio policies and upcoming monitoring events.

112. What is affordable housing third-party compliance?
Third-party compliance uses an outside affordable housing compliance specialist to review certifications, files, eligibility determinations and other compliance functions.

113. When should a property hire an affordable housing compliance consultant?
Common triggers include late recertifications, staff vacancies, upcoming MORs or agency audits, acquisition due diligence, lease-ups, repeated findings, layered programs and major regulatory changes.

114. What is an affordable housing recertification backlog?
A recertification backlog exists when required household certifications or reexaminations have not been completed within applicable deadlines.

115. How do you fix an affordable housing recertification backlog?
Identify every overdue certification, establish priorities, dedicate staff, create daily production goals, track outstanding documents, implement quality control and monitor completion until the property is current.

116. What is affordable housing compliance monitoring?
Compliance monitoring is the ongoing review of a property's adherence to applicable program, regulatory, eligibility, rent, documentation and physical requirements.

117. What is affordable housing compliance training?
Compliance training teaches property managers, leasing staff and compliance professionals how to administer programs such as HUD Section 8, LIHTC, HOME and Public Housing correctly.

118. What should a new manager do before approving a move-in?
Confirm eligibility, household composition, income, assets, student status when applicable, unit designation, rent, utility allowance, verification, required signatures and all requirements for every funding source attached to the unit.

119. What should a manager do after discovering a tenant file error?
Determine the affected program and period, document the issue, research the governing requirement, make permissible corrections, assess whether other files have the same problem and obtain specialized compliance assistance when necessary.

120. How can an affordable housing property prevent compliance findings?
Maintain written procedures, train staff, use standardized checklists, conduct internal file reviews, track deadlines, monitor regulatory changes and correct patterns before an outside monitoring review.

 BONUS Questions 

These are especially valuable because they target problem-based searches from owners and property managers.

121. Why does my affordable housing property keep failing file audits?
Repeated audit findings often indicate systemic problems involving staff training, inconsistent verification, income calculations, missing documentation, quality control or outdated compliance procedures.

122. How do I prepare tenant files for a HUD audit?
Conduct a pre-audit review of certifications, eligibility, income calculations, EIV documentation, leases, notices, signatures and other applicable HUD requirements, then correct permissible deficiencies before the review.

123. How do I prepare for an LIHTC state agency inspection?
Review tenant files, unit designations, certifications, income and rent limits, utility allowances, student status, leases, prior findings and property-level compliance documentation.

124. How can I catch up hundreds of late Section 8 recertifications?
Large backlogs generally require a dedicated recovery plan involving aging reports, prioritization, specialized staff, document tracking, production targets and independent quality control.

125. Can I outsource Section 8 recertifications?
Affordable housing organizations may use qualified third-party compliance professionals for certain certification-processing functions while the owner or agent remains responsible for satisfying applicable HUD requirements.

126. Can I outsource LIHTC file reviews?
Yes. Owners and management companies commonly use third-party LIHTC compliance consultants to review tenant files, certifications and supporting documentation.

127. How do I know if my LIHTC files are compliant?
Conduct a comprehensive LIHTC file audit against current Section 42 requirements, state agency requirements, the regulatory agreement and any layered funding requirements.

128. What happens when an affordable housing property changes management companies?
A management transition should include a comprehensive review of tenant files, certifications, waiting lists, compliance calendars, regulatory agreements, unresolved findings, unit designations and outstanding compliance issues.

129. Should I audit files before buying an affordable housing property?
Compliance due diligence can identify potential tenant-file deficiencies, unresolved findings, certification backlogs, rent issues and other risks before an acquisition closes.

130. Where can property managers get help with HUD, LIHTC, HOME and Public Housing compliance?
Owners and management companies can use experienced affordable housing compliance consultants for file audits, certification support, training, temporary staffing, backlog recovery and ongoing third-party compliance.