Are you looking for an affordable rental unit? If so, during your search you may have come across a “tax credit” development. Do you wonder what is different about those developments and why they require more paper work than a conventional apartment complex?
The Housing Tax Credit (HTC) program was created to encourage the construction and rehabilitation of affordable rental housing units. The program provides incentives, in the form of tax credits, to owners and developers who set aside a portion of their housing communities for low to moderate-income families. The tax credits allow owners to acquire equity from investors for the financing and development of the housing community. The owners and investors generally claim these credits over a period of ten to fifteen years. Tax credit units are required to be maintained as affordable units for at least thirty years.
What to Expect
The program is designed to service low to moderate-income families. As a result, owners and managers are required to confirm the income and income from assets of applicants. Most developments will have an application process where the prospective tenant will provide general household information along with details regarding income and assets. Upon verification of the information and determination of eligibility, applicants will certify on various documents that the information verified is true. Once all the necessary information is acquired, developments will sign at least a six-month lease. Most developments in the industry will require a twelve-month lease.
Benefits to the Applicants or Residents
Once a household is qualified as eligible based on the applicable income limit and moves in, the household will always be income-eligible, meaning that a family will not be forced to move solely because their income has increased.
Rents at tax credit properties are restricted at a certain level and are generally lower than conventional properties. Unlike other affordable housing programs, the HTC program does not set the rent based on an applicant’s income. Residents living in a HTC development cannot be charged more than the applicable rent limits for the development. The maximum rents are based on various factors, which include the owner’s elected obligations to the IRS and area median gross income for the county in which the development is located. Keep in mind, owners and managers are allowed to set income minimums to ensure that the applicant will be able to afford the rent.
Most HTC developments, especially ones built in the last 10 years, provide a wide range of amenities and services to the tenant. The amenities in these developments rival those of regular, market rate housing communities. They may include washer and dryers in the units; a business center with computers, internet access and copiers/printers; pools; fitness centers; clubhouses; etc. Additionally, the developments may provide services or classes to the tenants free of charge. Some of the services are workshops on health and wellness, personal finance, job training or job-seeking classes, drug and alcohol prevention, home ownership classes, etc.
Single- Family Developments
At single-family developments, there may be opportunities for the resident to purchase the home at the end of the owner’s obligation to the IRS. The homes are designed to be sold to the resident at a price which would make the resulting mortgage payment comparable to the rental payments.