A question many LIHTC properties have for us is who is and who is not considered a household member. A tenant’s income eligibility is determined by comparing the household’s gross annual anticipated income (per HUD guidelines) to the LIHTC set aside limits that apply to the project (50% AMI, 60% AMI, or Average Income Test). Let us go over a few of the more common situations so that you understand what income limits to use for the applicable household.
• All heads of household. This includes individuals who are absent.
• All co-heads and spouses. This includes individuals who are absent.
• Foster Children
• Foster Adults
• Children temporarily absent due to placement in a foster home
• Children away at school, but who live with the family during school recesses
• A person confined to a hospital or nursing home per family decision
• A son or daughter on active military duty only if this person leaves dependents or a spouse in the unit.
• The IRS considers unborn children and children in the process of being adopted as household members in determining income limits.
Do NOT count the following in determining income limits:
• Live-in Attendants
• Visitors or Guests (the length of time someone can be considered a guest needs to be reviewed with the local and landlord law)
It is important that there be consistency in the file as to who is considered a household member. Be sure to review all documents prior to certification.
Changes to household composition:
The addition of a new member(s) to an existing household requires initial certification steps for the addition(s). That means their income is third-party verified, assets are documented (in some cases third-party verified), student status is verified, they are put on the lease, etc.
This is regardless of how many people already live in the unit. If it is 100% low income, the income of the new household member is added to the original TIC (or recertification TIC for Florida). If it is a mixed income project, then it is added to the most recent TIC.
Removing a household member generally requires less documentation from a federal standpoint. When a member moves out, it is recommended that the owner have the household member complete a move-out form. A new Tenant Income Certification is not required; however, they will be removed from the composition and all recertification paperwork at their anniversary.
Under IRC 42 regulations, an original household member must always reside in the unit as changes are made to the household composition. If all original household members have vacated the unit, then the entire household must be treated as a new move-in by certifying them under initial certification procedures, including income qualifying them under the current income limit.
An exception to this is if the remaining members were income qualified as of the date they moved into the unit. This may look different depending on how your allocating agency interprets the 8823 Guide; however, many agencies choose one or both of the following guidelines:
• The entire household was income qualified under the income limits in effect at time of move-in based on the household size.
• The added member was independently qualified under the one-person income limit that was in effect at time of move-in.