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Navigating the maze of regulatory differences in blended occupancy projects: Part III

Posted by NMA on Nov 13, 2012 2:50:56 PM

blended occupancy projectsWith aging housing stock and dwindling resources, it's not uncommon to manage projects with two, three, or more separate sources of funding and/or subsidy, each with different oversight agencies and compliance requirements.

These blended occupancy projects, also referred to as mixed-finance projects, have multiple funding and/or subsidy sources, creating a maze of complicated and often conflicting regulations. In addition to being proficient in the HCV and public housing programs, PHA managers and staff must now be knowledgeable in a variety of other programs such as project-based vouchers (PBV), Low-Income Housing Tax Credit (LIHTC) and HOME.

Failure to maintain continuous program compliance in these programs can result in serious consequences. Follow our three-part series to learn more about some of the major regulatory differences in blended occupancy projects.

Part I: Inspection Standards/Frequency

Part II: Annual Recertification Requirements

Part III: Student Rules

Student Rules

Part-time students. Full-time students. Under the age of 24. No dependent children. Huh? If you're confused about the eligibility of students in your project, you're not alone. Depending on the funding and/or subsidy sources in your project, certain students are not eligible to live in blended occupancy projects. We've highlighted a few of the areas of student eligibility for certain programs below.

Low-Income Housing Tax Credit (LIHTC) Student Eligibility Requirements:

The Internal Revenue Service (IRS) defines a student a bit differently than HUD does. At IRC §152 (f)(2), the IRS defines a student as:

An individual, who during each of 5 calendar months during the calendar year in which the taxable year of the taxpayer begins, is a full-time student at an educational organization described in IRC § 170(b)(1)(A)(ii) or is pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of an educational organization described in IRC §170(b)(1)(A)(ii) or of a state or political subdivision of a state. Treasury Regulation §1.151-3(b) further provides that the five calendar months need not be consecutive.

What does this mean to you? It means that units receiving LIHTCs, comprised entirely of full-time students (none of which meet one of the exceptions outlined in the Internal Revenue Code), do not qualify as low-income units and are out of compliance.

You must have verification and documentation policies in place to verify student status when households initially move into LIHTC units. You must also have verification and documentation policies in place to verify a household's student status within 120 days before the anniversary of the effective date of the initial student verification.

Section 8 Project-Based Rental Assistance (PBRA) Student Eligibility Requirements:

HUD regulations prohibit PBRA assistance to any individual who is enrolled (either full or part time) as a student at an institution of higher education for the purpose of obtaining a degree, certificate, or other program leading to a recognized educational credential who is:

  • Under the age of 24
  • Not a U.S. veteran
  • Unmarried
  • Does not have a dependent child
  • Is not a person with disabilities, as such term is defined in 3(b)(3)(E) of the United State Housing Act of 1937 (42 U.S.C. 1437a(b)(3)(E)), and was not receiving Section 8 assistance as of November 30, 2005
  • Is not living with his or her parents who are receiving Section 8 assistance
  • Is not individually eligible to receive section 8 assistance and has parents (the parents individually or jointly) who are not income eligible to receive Section 8 assistance

This means that unless the student qualifies as an "independent student" as provided in HUD Handbook 4350.3, Chapter 3, Section 3-13, Paragraph (A)(3), assistance must be denied and/or terminated for students meeting all of the criteria listed above.

You must have verification and documentation policies in place to verify student status at the time households initially qualify for PBRA. You must also have verification and documentation policies in place to verify households’ student status at annual recertification, initial certification (when an in-place tenant begins receiving Section 8), and at the time of an interim recertification if one of the family composition changes reported is that a household member is enrolled as a student.

Section 8 Housing Choice Voucher Project-Based (PBV) Student Eligibility Requirements:

HUD regulations for the PBV program are exactly the same as the PBRA program above. Unless the student qualifies as a "independent student" as provided in your PHA's administrative plan, assistance must be denied and/or terminated for students meeting all of the criteria listed above in the PBRA section.

You must have verification and documentation policies in place to verify student status at the time households initially qualify for PBV. You must also have verification and documentation policies in place to verify household’s student status at annual recertification, and at the time of an interim recertification if one of the family composition changes reported is that a household member is enrolled as a student.

Public Housing Student Eligibility Requirements:

The prohibition on providing HUD rental assistance to students in the PBRA and PBV programs does not apply to the public housing program, meaning that both part-time and full-time students can live in public housing.

HUD did issue Notice PIH 2005-26, based on a concern that PHAs might be admitting ineligible college students to HUD's public and assisted housing programs. The notice provides guidance for determining and verifying the eligibility of full-time college students of non-parental/guardian households.

PHAs are encouraged (but not required) to adopt policies stating that the following must also be verified:

  • That the student does or does not anticipate receiving income from an outside source, such as a parent
  • That the student has established a household separate from his or her parents or guardian for at least one year prior to applying for admission
  • That the student is not claimed as a dependent by anyone, such as a parent, on that individual’s tax return

What does this mean to you? Both part-time and full-time students can reside in public housing. A blended occupancy unit with LIHTC will have to comply with the more restrictive LIHTC student eligibility requirements.

HOME Student Eligibility Requirements:

The prohibition on providing HUD rental assistance to students in the PBRA and PBV programs does not apply to the HOME program. Both part-time and full-time students can reside in HOME-assisted units. A blended occupancy unit with LIHTC, PBRA or PBV will have to comply with the most restrictive program requirements regarding student eligibility.

This concludes our three-part series on regulatory differences in blended occupancy projects. As an NMA trainer and consultant, Sheryl Putnam spearheaded the development of NMA's Blended Occupancy Management course. Contact sales@nanmckay.com to bring this training to your agency.

Topics: Blended Occupancy, Combined Funding, LIHTC, Mixed Financing, PBRA, PBV

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