Low-Income Housing Tax Credit regulations allow tenants to stay in place as their income increases, as long as they qualified when they first moved into the unit. As a result, the California Tax Credit Allocation Committee and California Debt Limit Allocation Committee have seen more and more over-income tenants in more deeply targeted units. In these cases, a resyndication can result in a decrease in the income targeting on some of the units. Additionally, over-income tenants in any resyndication project receive a reduction in rent corresponding to the lower income and rent targeting, giving such tenants an incentive to remain in place.

TCAC and CDLAC developed the following proposal to deal with this issue and are seeking feedback through March 17.

  • For purposes of the tax-exempt bond and 4% tax credit program (not including 4% plus state credit applications), TCAC and CDLAC will allow a project to receive a reservation even when it is known that the project cannot meet the 10% at 50% requirement with its current households. (e.g., the project must have ten units at 50% AMI and only six households meet the 50% AMI). At the time of placed in service, if the project still cannot meet the income targeting independent of unit sizes (see below), then the owner shall designate as the deeply targeted units those units that are occupied by the lowest income households. As units become vacant, the owner shall offer each vacant unit at the more deeply targeted levels committed to under the new CDLAC and TCAC reservation until all deeply targeted units are occupied by tenants whose incomes meet the deeper targeting income restrictions. As vacant units are occupied by tenants meeting the deeper targeting income qualifications, the owner may then raise the targeting and rent on a unit occupied by the higher income household.
  • CDLAC will allow the applicant to allocate the 50% units to 50% income-eligible tenants without regard to unit size as needed to meet the requirement stated above. If a mismatch of bedroom sizes remains at placed in service (e.g., 50% AMI units are one-bedroom units rather than two- or threebedroom units as otherwise required), as a unit with an underrepresented bedroom size becomes vacant the owner shall lease this unit as a 50% unit. The owner may then raise the targeting and rent on a unit in the overrepresented bedroom size. For deeply targeted units in excess of the 10% at 50% requirement, TCAC and CDLAC will require the applicant to show that the project, as occupied at application, can meet the income targeting for which the applicant applies.
  • For purposes of the competitive 9% and 4% plus state credit programs, TCAC will not provide a resyndication applicant with lowest income points unless the applicant can show that the project, as occupied at application independent of unit sizes (see below), can meet the income targeting for which the applicant is seeking points. TCAC will allow an applicant to score two points for providing 10% of units at 30% AMI if at least 10% of the units have households meeting the 30% income limits at application, even if those households do not occupy units with bedroom counts that meet the unit mix distribution requirement. In such cases, TCAC will allow the applicant to allocate the 30% units to 30% income-eligible tenants without regard to unit size as needed to meet the requirement stated above. If a mismatch of bedroom sizes remains at placed in service (e.g., in a large family project the occupied 30% AMI units are onebedroom units rather than three-bedroom units as required by this point category), as a unit with an underrepresented bedroom size becomes vacant the owner shall lease this unit as a 30% unit. The owner may then raise the targeting and rent on a unit in the overrepresented bedroom size.

For all more deeply targeted units, the applicant must use each household’s income from the most recent recertification. In addition, upon the project placing in service, owners who have over-income tenants in non-competitive 4% tax credit projects pursuant to the first bullet above and owners who utilize the flexibility on unit sizes pursuant to either bullet above shall do all of the following:

  1. Include in the placed in service application a document clearly identifying the overincome/overrepresented bedroom size units and the “in-lieu” units replacing them.
  2. Provide a certification that the owner will bring the project into compliance with all income targeting and bedroom size requirements as soon as possible pursuant to the requirements described above.
  3. Track compliance with these requirements and provide our monitoring staff with a compliance report prior to each monitoring visit. The report must show that the owner designated the correct inlieu unit(s) and document whether or not turnover has occurred in the over-income/overrepresented bedroom size unit(s).

Public Comment Accepted TCAC invites public comment on this proposed policy by 5 p.m. on Thursday, March 17. Thereafter, TCAC will review the comments with the intent of issuing a final policy in the near future. Please email comments to Mark Stivers at mark.stivers@treasurer.ca.gov.