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View Diary: Scary letter timing for HUD residents (35 comments)

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  •  Affordable Housing's not the same as Subsidized (3+ / 0-)
    Recommended by:
    Vetwife, Villanova Rhodes, VickiL

    Housing. This one I can speak to with some degree of expertise.

    Subsidized housing comes in a variety of flavors but Section 8 is the most common. Under Section 8, regardless of what the unit's stated rent is, the resident pays 30% of his or her income and the rest is paid by direct subsidy. In some older properties, the subsidy goes directly to pay the mortgage based on the difference between a stated interest rate for that mortgage and a rate (usually either 1% or 3%) established by HUD at the time the property was constructed. Based on the interest subsidy the actual tenant rent is reduced to whatever it takes to operate the project, allocated to each unit using a formula. Most of these properties are very close to the end of the term of their original mortgage. In some cases, because operating expenses have increased, there is also a Section 8 contract on top of the written-down rent, and some--or perhaps even all--residents receive Section 8 in addition to the benefit of the decreased rent.

    In most cases owners can chose to opt out of the Section 8 program; there are rules and procedures which must be followed. Chief among them is that residents must be provided with Housing Choice Vouchers (another name for Section 8 Vouchers, which is another name for what used to be called Section 8 Certificates. I've been around a long time).

    Affordable housing is quite different. HUD doesn't have that many rules regarding affordable housing; in general those are established under IRS rules. Rents are established so that (in theory at least) the entire rent can be paid with 30% of a resident's income; affordability restrictions can be set at one or more levels but in general those restrictions are set such that those eligible to live in affordable units earn no more than 60% of area median rent (AMI). I've seen them as low as 30% of AMI. In some cases all units are affordable at the same income level while other properties have units that pegged to varying percentages of AMI. Some affordable properties have HUD-insured mortgages; most do not. There are some that also have Section 8 contracts for some or (rarely) all of the units. Others don't have Section 8 contracts but have groups of Section 8 vouchers assigned to them or else accept Section 8 vouchers from individuals or families.

    Affordability restrictions come in many, many flavors. The most common are based on a portion of the money used to construct or renovate them having been generated from the sale of Low Income Housing Tax Credits (LIHTCs). In other cases the affordability restriction is based on financing from some other program (either federal, state or local or sometimes a combination of two or more of those), or is made a requirement of zoning approval at the local level. Generally speaking in those cases the affordability restrictions are incorporated in the deed and cannot be abandoned without great difficulty no matter who owns the property or what their intentions may be.

    LIHTCs are a tax benefit, the rules of which are written and overseen by the IRS. Someone in effect the right to be exempt from paying a certain amount of federal income tax in exchanged for having agreed to purchase the tax credits; the purchase price is what generates some of the funds needed to develop or renovate the property.

    Violating the affordability rules established by the IRS in conjunction with LIHTCs is not something an owner should ever want to do since it subjects the people who purchased the tax credits to a sudden and unexpected tax bill. Which will I suspect subject the owner to some very undesirable legal consequences. I think there are sanctions against the property owner as well the likelihood that he or she (or they; most such properties are corporations of one sort or another) will be sued by the people who have lost their tax write-offs.

    Where affordability restrictions are NOT tied to LIHTCs, the consequences of violating them vary depending on the who imposed the restriction. Most affordability restrictions have sunset dates but those tend to be set very far into the future.

    •  That was encouraging and informative (1+ / 0-)
      Recommended by:
      Villanova Rhodes

      thanks sfbob.   I have only been familiar with the section 8 part as a landlord....I would think the owner would sell before putting themselves in such a jeopardy of sorts with the IRS,, huh?

      We the People have to make a difference and the Change.....Just do it ! Be part of helping us build a veteran community online. United Veterans of America

      by Vetwife on Sun Jan 06, 2013 at 12:52:01 AM PST

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    •  I'll have to read the (1+ / 0-)
      Recommended by:
      Vetwife

      leagleze.

      The sort of thing I tend to put off.

      They took the trouble to put up a large bronze plaque. So it isn't a secret.

      "Til you're so fucking crazy you can't follow their rules" John Lennon - Working Class Hero

      by Horace Boothroyd III on Sun Jan 06, 2013 at 03:01:06 AM PST

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      •  It can be boring that's for sure (1+ / 0-)
        Recommended by:
        Horace Boothroyd III

        I noted above that affordability restrictions are usually things that HUD has nothing to do with.

        Strictly speaking that isn't entirely true; there are situations where, for one reason or another, HUD imposes affordability restrictions on a property where its original financing came from HUD in one way or another. Those restrictions take the form of a use agreement that is recorded like a deed and usually are set to extend beyond the time of HUD's involvement in the property.

        Details don't generally matter here unless you own such a property or live at one. Or maybe if you're a lawyer. :)

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