Rent and Income Limit Calculator Demo

Rent and Income Limit Calculator Demo

Rent & Income Limit Calculator:

Frequently Asked Questions

Q:  If your property is not placed in service until December 2011 but on the carryover agreement you chose the gross rent floor as of the date of allocation which was prior to May 31, 2011, does that mean the 2011 rent limits will be based on the 2010 MSTP/VLI­?

A:  That is correct.  Under the tax credit program, your project’s income limits will be based on the 2011 MTSP limits and your project’s rent limits will be based on the higher of the 2010 MTSP or 2011 MTSP limits.

Q:  If you have a LIHTC project with HOME, would the LIHTC units use the Hold Harmless and the HOME units use the HUD amounts? ­

A:  That is correct.  The HOME units would be restricted to the HOME income and rent limits.  ­The HOME rents are held harmless also, but HUD publishes the hold harmless amounts for HOME and it is not dependent on when your project is placed-in-service.  Please note that the HOME income and rent limits have not been published by HUD yet.  The other units may use the MTSP limits. 

Q:  Can you explain different rent calculation for 1.5 persons per bedroom and 1+1 persons per bedroom?

A:  The rent calculation for 1.5 persons per bedroom is assuming that for every 1 bedroom in the unit, there are 1.5 persons.  So for a 1 bedroom unit, you are assuming that there are 1.5 persons in the unit.  You will need to use the income limit for 1.5 persons to determine the rent limit.  To get to the 1.5 person income limit, you would average the 1 and 2 person income limit for your AMGI percentage for that unit.  So for a 3 bedroom unit, you are assuming that there are 4.5 persons in the unit.  You will need to use the income limit for 4.5 persons to determine the rent limit.  To get to the 4.5 person income limit, you would average the 4 and 5 person income limit for your AMGI percentage for that unit.  All tax credit limits are calculated under the 1.5 persons per bedroom assumption and, some other programs also use this methodology.

The rent calculation for 1+1 persons per bedroom is assuming that for every 1 bedroom in the unit, there is one additional person.  So for a 1 bedroom unit, you are assuming there are 2 persons in the unit.  You will need to use the income limit for 2 persons to determine the rent limit.  So for a 3 bedroom unit, you are assuming there are 4 persons in the unit.  You will need to use the income limit for 4 persons to determine the rent limit.  Many bond programs and other programs use this methodology to calculate rent limits under those programs.  In order to determine the methodology for any programs you have other than tax credit, you must refer to your regulatory agreements.

Q:  What limits would a property use if it has not been placed in service yet?

A:  For tax credit and tax-exempt bond projects that are placed in service after 5/31/2011, your project would need to use the 2011 MTSP income limits.  For tax credit projects that are placed in service after 5/31/2011, your project would need to use the higher of the 2011 MTSP rent limits or rent floor election year’s MTSP/VLI rent limits.  For tax-exempt bond projects, your project’s rent limits are determined by the state and/or regulatory agency.  They determine how your rent limits are calculated (whether it is based on MTSP, Section 8, or AMI) and whether there is hold harmless.

Q:  In Chapter 11 of the 8823 Guide, revised in January 2011, it states "The lowest rents owners will be
required to charge (gross rent floor) are based on the income limits in effect when the building is allocated credits, unless the owner elects (and notifies the housing credit agency of the election) to treat the rent floor as taking effect on the date the building is placed in service.”  Your presentation uses PIS as the date in question.  Why does the presentation refer to PIS as the "floor" date rather than the date the credits were allocated?  These dates can be significantly different­.

A:  The income limits are determined by when your project is placed in service.  For tax credit projects that placed in service after 5/14/2010, the rent limits are determined by your rent floor election.  Beginning in 2010, HUD published income limits that were no longer held harmless.  So, prior to the 2010 income limits, if a counties income limit dropped, HUD held it harmless and published income limits that never showed a decrease over the years.  Therefore, it was not necessary to look at your rent floor election year’s income limits because the income limits would always be held harmless.
However, in 2010, we saw 2010 income limits that were less than the 2009 income limits for some counties.  So, if your tax credit project was placed in service before 5/14/2010, which was the effective date of the 2010 income limits, your project’s income limits were held harmless to the 2009 income limits. 

The default on the carryover allocation is that your rent floor election will be on the date of the carryover (which is considered the date when you are “allocated” credits).  You can elect to have your rent floor be on the placed-in-service date; however, this election would not benefit your project, since HERA already provides protection that allows your rents to be held harmless to the placed-in-service date.  Keeping your rent floor election at the carryover allocation date allows you to take advantage of any higher rent limits that are potentially in effect at that time.  If the rent limits are lower at the carryover allocation date, the project will just use the rent limits that are effective when the project places in service, and continue to be held harmless from that point.  The reason the presentation often refers to the placed-in-service date as the “floor” instead of saying the placed-in-service date or the carryover allocation, whichever was elected, is merely for simplicity, since all projects at least have the floor at the levels in effect on the placed in service date.

The Novogradac Rent & Income Calculator© starts with the placed in service question to determine whether your project is eligible for HERA special income limits and which year your project’s income limits began being held harmless to.  If your project placed in service prior to 1/1/09 and your project is in an HERA eligible county, your project would use the HERA special limits.  If you project placed in service between 1/1/09 and 5/14/10, your project would use the highest of the 2009, 2010, or 2011 MTSP limits in 2011.  If you project placed in service between 5/14/10 and 5/31/2011, your project would use the higher of the 2010 or 2011 MTSP limits in 2011.  If you project placed in service after 5/31/2011, your project would use the 2011 MTSP limits in 2011. 

Q:  Where do we find the rent floor elections? ­

A:  In accordance with Revenue Procedure 94-57, for tax credit projects, the IRS will treat the rent floor election effect on the date an Agency initially allocates a housing credit dollar amount to the building (usually at carryover).  ­­For tax exempt bond projects, the IRS will treat the rent floor election as taking effect on the date an Agency initially issues a determination letter to the building.  ­For California, you must select the rent floor election at carryover to be either at carryover or placed in service.  We advise clients to select carryover.­

For your tax credit project, the rent floor election date is usually the date of your carryover allocation.  For your tax exempt bond project, the rent floor election date is usually the date of the tax exempt reservation letter.

Q:  Did I hear you say the 2012 RFE project can charge rents based on the 2012 limit, but tenants must qualify at the lower 2013 limit?­

A:  That is correct.  If the rent floor election is effective in 2012, and the project places in service in 2013, the rent limits the project can use are the higher of the 2012 rent limits or 2013 rent limits, but the income limits that the project must use will be the 2013 limits, even if they are lower than 2012.  Let’s look at the following example.

Year               50% Income Limit for a 4-Person Household
2012               $45,000
2013               $43,000

Assuming that your project places in service in 2013 and a 2012 rent floor election was made, your project would use the lower 2013 income limit to qualify households, but the higher 2012 income limit to charge rent.

Q:  ­I've heard multiple people say that the hold harmless policy has been eliminated with 2011 limits.  Is this true?  From your examples, it appears that statement is incorrect.­

A:  That is not a completely true statement.  HUD’s hold harmless policy has been eliminated, so the raw income limits that they publish do not take into account any hold harmless policy.  The hold harmless rule is now on a project by project basis.  So all projects’ rent and income limits are held harmless, but only from the point that they place in service (or for rents, in the year they make the rent floor election).  So even though each individual project’s income and rent limits can never go down, other projects in the same area can have lower income and rents limits than the first project that has been placed in service for a while, since the new projects have to start with the 2011 limits (which could potentially be lower than previous years) and then are only held harmless from that point on.
Let’s look at the following example.

Year               50% Income Limit for a 4-Person Household
2009               $48,000
2010               $47,000
2011               $46,000
2012               $45,000
2013               $43,000

To determine the 2013 income limits, you would need to first determine when your project placed in service.  Let’s assume that the county in question is not eligible for HERA special limits. 
If you project placed in service during 2009, your income and rent limit would be the highest of the 2009, 2010, 2011, 2012, or 2013 income limits, which would be $48,000. 

If you project placed in service during 2010, your income limit would be the highest of the 2010, 2011, 2012, or 2013 income limits, which would be $47,000. 

If you project placed in service during 2011, your income limit would be the highest of the 2011, 2012, or 2013 income limits, which would be $46,000. 

If you project placed in service during 2012, your income limit would be the higher of the 2012 or 2013 income limits, which would be $45,000. 

Q:  Can mixed finance projects have different income limits to qualify for MTSP or Section 8 units or is the project qualification standard the "lower of?" ­

A: Projects can have different income limits.  It depends on the regulatory agreements imposed on your project.  Let’s look at the following example.

Regulatory Agreement                  Restrictions

  1. 10% of units must be restricted at HOME limits
  2. 20% of units must be restricted at Section 8 limits
  3. 100% of units must be restricted at MTSP limits

Let’s assume that your project has 100 units.  This would mean that 10 of the 100 units must qualify at the HOME income and rent limits, 10 of the 100 units must qualify at the Section 8 income and rent limits, and the balance of the units may use the MTSP limits.

Q:  Can you explain the difference between Statistical Name Rockland County-New York, NY HUD Metro FMR Area and Rockland County – Rockland County, NY HUD Metro FMR Area, and Westchester County, NY Statutory Exception Area and Westchester County, NY HUD Metro FMR Area?

A:  Per the FY 2011 Income Limits Briefing Material: In determining median incomes (of persons, families, or households) for an area or establishing any ceilings or limits based on income under this Act, the Secretary shall determine or establish area median incomes and income ceilings and limits for Westchester and Rockland Counties, in the State of New York, as if each such county were an area not contained within the metropolitan statistical area in which it is located. In determining such area median incomes or establishing such income ceilings or limits for the portions of such metropolitan statistical area that does not include Westchester or Rockland Counties, the Secretary shall determine or establish area median incomes and income ceilings and limits as if such portion included Westchester and Rockland Counties. In determining areas that are designated as difficult development areas for the purposes of the low-income housing tax credit, the Secretary shall include Westchester and Rockland Counties, New York, in the New York City metropolitan area.
In other words, HUD publishes limits for New York, which includes Rockland and Westchester.  However, HUD also publishes limits specifically for Rockland and Westchester.  So, if your project is in either Rockland or Westchester County, you should be using the limits for Rockland County – Rockland County and Westchester County – Westchester County. 

Q:  If we are currently using the Non-Metro limits for LIHTC properties can we continue using them or must we now start using the lower LIHTC 2011 limits?  Where can I find the 2011 non-metropolitan income and rent limits?

A:  Yes, you may continue using the National Non-Metropolitan Income Limit.  However, if the county’s MTSP limit is higher than the national non-metropolitan limit, the Rent & Income Calculator will not ask if your project is in a rural area or not for that county. 
The national non-metropolitan limit of $51,600 is listed in Attachment 6 on page 35 of the 2011 HUD Briefing Materials. 

Q:  The 2011 HUD Briefing Materials (page 11) indicate that the income limits are rounded up to the nearest $50 for the very low-income limit in relation to the 5% rule.  In reviewing the areas that qualify for the national non-metropolitan income limits under the tax credit program, how should we round the national non-metropolitan income limits?

A:  Per correspondence with HUD: The Low Income Housing Tax Credit program is a U.S. Treasury Department program; therefore, HUD has no official authority over setting maximum rental rates and the state housing financing agency that governs the tax credit project in question will ultimately have the final say. 

HUD implemented the rounding up protocol to ensure that areas experiencing a decrease in income limits would not have the 5% floor breached due to rounding. Rounding up would be consistent with the rest of HUD’s methodology.
Please note that the Novogradac Rent & Income Calculator© rounds to the nearest $50.

Q: I am using the Novogradac Rent & Income Calculator© to determine the limits for my project that placed in service prior to 1/1/09.  My project is located in a county that is eligible for HERA special limits and national non-metropolitan income limits.  The income and rent limits are the same no matter if yes or no is clicked for rural.  Please clarify.

A:  In 2010, the national non-metropolitan income limit may have higher than the HERA special limit.  Therefore, if your project was in a rural area, it could use the national non-metropolitan income limits.  If your project was not in a rural area, it would use the HERA special limits.  As a result, there are two different limits depending on whether your project is in a rural area or not in 2010.
In 2011, the national non-metropolitan income limit may have been lower than the HERA special limit.  Therefore, whether your project was in a rural area or not, the HERA special limit was the highest.  As a result, there are no differences in income limits whether your project is in a rural area or not in 2011.

Q:  I am using the Novogradac Rent & Income Calculator© to determine the 30% income limits for my project that placed in service after 5/31/11.  Why are the 30% income limits on Novogradac Rent & Income Calculator© different from the HUD published Section 8 30% income limits?

A:  The Novogradac Rent & Income Calculator© calculates the 30% income limits off of the HUD published 50% income limits, which would result in some slight differences.  Please note that the HUD published Section 8 and MTSP 50% income limits are the same.

Some states use the HUD published Section 8 30% income limits and some states use the calculated 30% income limits.  Please check with your state agency.