Adding a New Household Member into an Existing LIHTC Household

Property managers are permitted to add additional family members to an existing tax credit household even if their income will cause the family to increase above initial (move-in) income limits. However, this addition must be done correctly to be sure the unit and project remain in compliance with the Next Available Unit Rule (NAUR).

According to Chapter 4 of the 8823 Audit Technique Guide, Changes in Family Size: “The addition of new member(s) to an existing low-income household requires an income certification for the new member of the household, including third-party verification. The treatment of this addition to the household will depend on whether the building is a mixed-use (Applicable Fraction below 100%) or a 100% Low-Income Housing Tax Credit (LIHTC) building (Applicable Fraction is 100%).”

For a mixed-income building, the new tenant’s income is added to the income disclosed on the existing household’s most recent Tenant Income Certification (TIC). The household continues to be compliant and remain income-qualified, and the income of the new member is taken into consideration for purposes of the NAUR. Provided the NAUR is complied with, the unit remains in compliance.

For a 100% LIHTC building, the new tenant’s income is added to the income disclosed on the existing household’s original income certification or the household’s most recent full recertification (not an Alternate Certification, aka Self-Certification). Since the owner will always rent the next available unit to an income-qualified household as a low-income unit, the NAUR will not be violated if the household’s income, when the new household member’s income is added into original household’s income at time of move-in, exceeds 140% of the income limit.

The 8823 Guide states there is no difference between increased household income and increased household income resulting from the addition of a new member of the low-income household, as long as the household is not manipulating the income limit requirements. To avoid possible manipulation of the income limit requirement, it is highly recommended that no new adult household members are added to the household during the first year of the initial lease.

The 8823 Guide goes on to state that a household may continue to add members as long as at least one member of the original low-income household continues to live in the unit. If all original tenants move out of the unit, the remaining tenants must be certified as a new income-qualified household, unless the remaining tenants were income qualified at the time they moved into the unit.

The process of adding household members may vary with each state’s Housing Finance Agency (HFA), so be sure to check with your state HFA for their procedures. The Pennsylvania Housing Finance Agency (PHFA) has clarified that the following procedures should be followed when adding a new household member:

1. The new member should be treated as a new move-in according to the property’s Tenant Selection Plan (complete an application, perform background checks, verify all income, assets, student status, etc.). Third-party income verification is required.
2. Complete an Initial TIC to include only the new member’s information. The Effective & Move-In dates are both to be the date the person moves into the unit. The current income limits apply. If the new member is eligible as of that date, then they would also qualify to remain in the unit should all original household members vacate the unit. If the new member is over the current income limit, they will have to move-out if and when all original household members vacate.
3. Complete a second TIC to include all members of the household (existing, plus new). Check the “Other” category on the top of the TIC form. The effective date is the date the new member joins the household; the move-in date remains the same as the original move-in date of the household. The annual recertification date does not change for the household. Add the income from the new member’s Initial TIC to the income from the most recent full recertification or original move-in TIC for the existing household (no third-party documentation is required).
4. Compare the total household income from the second TIC to the 140% income limit as of the effective date of the TIC. If the income exceeds the 140% income limit, the NAUR must be followed.

Owners and Management Agents should be well trained in understanding the rules and regulations of the affordable housing programs pertaining to their properties as they relate to maintaining compliance. MLCM offers consulting services and training regarding various affordable housing programs. For more information on these services, don’t hesitate to contact us.

The information presented in this article is intended solely for informational purposes and should not be construed as consulting advice from M&L Compliance Management LLC.

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