Calculating For Additional Set Asides

June 18th, 2015

Written by Jennifer Borland, Spectrum Enterprises

Many properties have included in the extended low income housing commitment set asides in addition to 40/60 or 20/50.  Most often Spectrum sees properties that include units set aside at 40%, 30%, 20%.  How are the income limits for these set asides calculated?

Given the 50% limits, determining additional set aside limits isn’t very hard:

40% = 50% x 0.8

30% = 50% x 0.6

20% = 50% x 0.4

Using limits for a property placed in service prior to 2009 in Portland, Maine:

            1 person           2 person           3 person          

50%     $27,300           $31,200           $35,100                      

            x     0.8            x     0.8            x     0.8

40%     $21,840           $24,960           $28,080

 

            1 person           2 person           3 person          

50%     $27,300           $31,200           $35,100                      

            x     0.6            x     0.6            x     0.6

30%     $16,380           $18,720           $21,060

 

            1 person           2 person           3 person          

50%     $27,300           $31,200           $35,100                      

            x     0.4            x     0.4            x     0.4

20%     $10,920           $12,480           $14,040

Spectrum recommends having your housing credit agency approve limits before implementing.

2015 HOME Limits

May 11th, 2015

HUD published the 2015 HOME income and rent limits on Friday. The go into effect on June 1, 2015.

Things to remember about HOME income and rent limits:

  1. There is no 45 day transition. You must begin using the new limits on the effective date;
  2. HOME limits are not “held harmless” like LIHTC limits. If HOME income limits go down, you must use the lower limits for both income and rent.

You can find the HOME limits either by following the link on our web site or directly at https://www.hudexchange.info/home/.

Elderly Housing

May 7th, 2015

Written by Edward Clark, Spectrum Enterprises

The term “Elderly Housing” gets thrown around a lot. Too much in fact, because often we hear a property described as “Elderly Housing” when it doesn’t actually meet the requirements to be called that.

“We have an Elderly Preference” – Don’t we all? They pay the rent on time, their apartments are usually very tidy and at least half the time they smell a little like my grandmother.  There is no “Elderly Preference” in housing. You may target the elderly in your marketing by placing advertisements in the AARP newsletter or passing out flyers at the local bingo parlor but don’t let your staff tell people your property has an “Elderly Preference”. That could be seen as discouraging eligible households from applying.

Elderly housing is unique in that it is the only type of rental housing that can actually discriminate on the basis of familial status. Even that doesn’t mean you can deny people with children however. You need to understand the different types of elderly housing and what makes them different from each other. Here is a quick and easy to follow primmer:

1) Any housing that is recognized by the Secretary of HUD as “Elderly Housing”. At least the head or co-head must be handicapped OR disabled OR 62 years old or older. I put handicapped/disabled ahead of 62 or older because people sometimes assume a 25 year old in a wheelchair doesn’t belong in “Elderly Housing”. They do. It’s the law. Children are allowed as members of the household too.

2) 62 and older housing. This one is easy. Every resident must be 62 or older. No kids, no 25 year olds in wheelchairs. Today, if you weren’t alive the year the Korean War ended, you cannot move into this type of housing.

3) 55 and older housing. This provides the biggest pool of potential tenants, and the biggest potential to make a mistake. 80% of the units must be occupied by a head or co-head that is 55 or older. The remaining units can be occupied by anybody. Families with kids, people with disabilities, ugly people. They can all live here. That doesn’t mean you should rent up 20% of your units to people under 55 though. Instead, you need to track the make-up of your community to make sure you never fall below the 80% threshold. If an 86 year old man moves in with his 30 year old second wife (it could happen) and he dies while doing push-ups trying to impress her (will probably happen), the household no longer counts as a 55 and older household. So they moved in as part of your 80% but suddenly became a part of your 20% instead. Once the property drops below 80% the property is no longer elderly housing and is open to everyone regardless of age. 55 and older housing must also provide at least one service or amenity that benefits people of advancing age. Yoga classes, trips to the grocery store, a fitness room can all qualify.

I hope this helps. Now where did I leave my keys??

REMINDER – Check for Updated Compliance Forms

April 24th, 2015

Written by Erik Whitton, Spectrum Enterprises

A recent trend we are noting as we review tenant files is that many sites are using outdated forms.  Most state agencies provide forms such as Tenant Income Certifications (TIC), Income Verifications, and Affidavit forms.  While many of these forms are suggested; others are mandatory.  From time to time these forms are modified to reflect new rules or policies.  For example, the imputed asset rate changed in February 2015 which means most state agencies have updated their TIC forms to reflect the new rate. Other forms may have changed as well.  

Please make sure that properties in your portfolio are using the current version of all forms provided by your state agency.  Most state agencies maintain a website with all compliance materials such as forms, income/rent limits, and compliance manuals.  It is therefore very easy to compare the forms you are using with the current versions provided by the state agency.  Usually the forms have a date on the bottom of the form to indicate when they were  last updated.  

I would additionally suggest:

  • Reviewing any recent changes to your state compliance manual
  • Compare the income and rent limits in use at your sites with the figures provided by your state agency
  • See if the state is providing any compliance training seminars that you should participate in
  • See if you can subscribe to an email notification service to receive these types of updates

Please see our forms package here.

Spring Inspection & Clean Up!

April 9th, 2015

Written by Cathy Turner, Spectrum Enterprises

It sure has been a difficult time to do property inspections in the east coast this winter.  So glad that Spring has finally arrived!  A special thanks goes out to the managers and maintenance personnel that braved the cold temperatures with me this winter. 

It is clear that due to the grueling winter conditions and stress on property budgets, managers had to focus all efforts on safety and snow/ice removal.  General site inspections and routine maintenance had to take a backseat.   Now that the weather is improving and temperatures are raising it is time to get back out on your properties.  It is time to take note of storm damage and make a plan for repairs.  Obviously, the big repair items such as roof damage are already in the works.  However, I am willing to bet that once you get out and walk the grounds and building areas, you will find many other projects needing attention sooner rather than later.     

Here are some of the items that I have noticed in my recent travels.

  • Look for tripping hazard on walkways and grounds. 
  • Repair potholes.
  • Pick up trash left under the melting snow.  Especially, broken glass. 
  • Check playgrounds.  Look for damaged equipment and sharp edges.
  • Look for fallen or hanging cable and telephone wires.
  • Look for damaged trees and vegetation. 
  • Walk all of the halls and look for water damage.  I have found many damaged ceilings in closets.
  • Check handicap parking spaces.  Be sure signage is not damaged or missing.
  • Repair fence damage. 
  • Look for damaged or missing window screens.
  • Storm doors can take a beating in the winter wind.  Be sure all doors properly close and latch.  Repair screens as needed.

If you want more ideas and suggestions for your properties spring clean up check out this blog by Laine Nadeau.

Impact of LIHTC Housing in the US

April 3rd, 2015

Written by Harold Tucker, Spectrum Enterprises

The LIHTC program is the most successful affordable housing program in U.S history. What does that mean? Does it simply mean the country has a lot of families living in affordable housing? Yes, but there is so much more! Besides providing thousands of affordable units to families the impact the LITHC program has on a community is much wider.

According to the NAHB (National Association of Home Builders) every 1,000 unit LIHTC apartment developed creates 1,130 jobs. A lot of those jobs are in the construction sector. Nationwide the LITHC program creates 95,700 jobs, $3.5 billion in federal, state and local taxes and $9.1 billion in economic income (wages and business income).

The benefits to the local area in service and trade, the food industry, health industry and education remain long after the LIHTC project is constructed.  Up to 30 jobs in each field remain in close proximity to the LIHTC project after construction.

A last thought. 90% of affordable housing is from the Low Income Tax Credit Housing program. 90%! How can this program not impact almost every city in the United States? Citizens everyday drive by LIHTC housing and don’t know it. The perception of affordable housing is often one of dilapidated buildings in crime ridden areas of the city. We who work in this housing field know this is not the case. The impact of the affordable housing program is wide across this country and we are all are part of it. 

Tip Affidavits

April 1st, 2015

Written by Lois Churchill, Spectrum Enterprises

When a job pays tips, or can be reasonably expected to pay tips, the use of a Tip Affidavit is highly recommended.

Servers in restaurants have to report credit card tips but not cash tips, the same with taxi drivers.  Valet attendants don’t necessarily have to report any tip income but don’t be fooled into believing they don’t earn any. At the typical $1 per time I typically pay times the overall number of cars parked/retrieved in a shift, this can add up to some serious income!

Regardless of whether some tip income is reported on pay stubs, if the job is one in which tips are or could be earned obtain an affidavit to determine if there’s additional countable income.

Military Reserve and National Guard Pay

March 30th, 2015

Written by Melissa Zera-Flavell, Spectrum Enterprises

When household members serve in the National Guard and Reserve, they normal receive Drill Pay and Annual Training pay.  The Drill Pay is earned by working (primarily) on weekends and Annual Training is earned at full-time training events. 

The National Guard and Reserve usually perform a minimum of one weekend of drills per month. Compensation for drills is called Drill Pay.  Rank and years of service determine the pay rate.  For example, an E-2 who has been in the service for 4 years earns $231.20 per month.  Each weekend generally counts as 4 days of active duty for pay purposes.  (More specifically, each drill Reserve members perform is paid as one day.  The minimum duration of a drill is four hours, and Reservists usually perform two drills per day – hence four days pay over the weekend.)  Active duty monthly pay for an E-2 over four years is $1,734.00 per month.  The prorated calculation is $1,734.00/30*4 = $231.20.  Monthly pay charts can be found at http://www.dfas.mil/militarymembers/payentitlements/military-pay-charts.html .

In addition to monthly drills, Reservists typically work an additional two weeks per year called (AT) Annual Training.  More often than not, this pay is missed when calculating annual income.  AT pay is considered active duty pay which also entitles them to receive food and housing allowances (BAS and BAH respectively) for that time period. These benefits are also countable. 

Be sure to inquire about  AT pay on any 3rd party income verification forms and look for it on the LES (Leave and Earnings Statement).  See the Military Income blog article for more details on the how to read the (LES).  Depending on the time of year it may be included in the year-to-date.  

Spectrum 2015 Reporting Format

March 26th, 2015

Written by Wesley Chisholm, Spectrum Enterprises

SPECTRUM 2015 REPORTING FORMAT

Spectrum has recently completed an update to the reporting format we use for investor clients.  We have refined our reports to include more information, to improve the text quality for reading and printing, and to make it easier for property management staff to understand what corrections are needed.  It may take some time before you feel familiar with these reports as they are a departure from what our previous reports looked like.  However, I have spent a lot of time on this and I firmly believe these are an improvement for you and your partners.  Spectrum 2015 Sample Investor Report is available for review.

Going forward, all reports will consist of a cover letter along with the following items:

 Exhibit A: “File Results Based on Risk”

The primary concerns of our work relate to income eligibility, student eligibility, and rent restriction.  This exhibit lists all units sorted to show files with a highest risk of noncompliance first.  These files should be prioritized by management staff responsible for submitting corrections for re-review. The files with the least risk of noncompliance will be sorted to appear later in the report. The exhibit includes detailed notes from the Spectrum Compliance Analyst to list all issues of potential noncompliance along with suggested corrective action.

 Exhibit B: “File Results Sorted by Unit Number”

This exhibit is a streamlined listing of all files submitted for review.  Each file is sorted by Unit Number and the report can be compared to rent roll or year-end status reports prepared by the site.  Although the full text of our findings is not included here, the exhibit does include our file ratings.  Also listed is the tenant name; move in date; bedroom size; set aside election; income; rent; and utility allowance.  This exhibit includes a summary of unit mix (bedroom size and set aside elections) which can be compared to the property’s tax credit application filed with the HFA.

 Exhibit C: “Spectrum Review of Management Procedures”

In this exhibit we assess critical procedures related to the organizational structure of tenant files; how applicants are screened for eligibility; how income/assets are verified; whether the manager tests income using a variety of approaches; whether the correct income and rent limits are used; and whether the correct utility allowance is used.  Our Compliance Analyst will provide suggestions on any area that could be improved.

 Exhibit D: “Income and Rent Limits”

Spectrum performs an independent calculation of Section 42 income and rent limits.  Our data is included for your reference.

FILE RATINGS EXPLAINED

On the Exhibit A and Exhibit B reports our Compliance Analyst has summarized a risk rating for each file submitted.  The risk rating includes 2 elements.  The overall household/unit LIHTC eligibility is ranked as follows:

 Yes: Spectrum Analyst has confirmed the household/unit is eligible based on income; gross rent; and student status.

A: Spectrum Analyst believes the household/unit appears to be eligible based on income; gross rent; and student status.  Additional work is required to make a final determination.

?: Spectrum Analyst is questioning whether the household/unit is eligible based on income; gross rent; or student status.  Additional work is required to make a final determination.

No: Spectrum Analyst has confirmed the household/unit is not eligible based on violations related to income; gross rent; or student status.

 In addition to a determination of household/unit eligibility; our reports reflect a numerical rating to assess overall tenant file compliance and whether the manager should be required to submit additional corrective materials.  Here is an outline of the ratings criteria used:

Rating 3:  Household/unit is not LIHTC qualified.  File contains severe noncompliance which could result in loss of credit.  Please submit file corrections for re-review.

Rating 2:  File appears to contain at least one issue which may be reported to the IRS as noncompliance.  Please submit file corrections for re-review.

Rating 1:  Unit is qualified; file corrections are suggested however they do not need to be submitted for re-review.           

Rating 0:  Unit is qualified; file does not require corrective action.

Snow!

March 26th, 2015

Written by Wil Whalen, Spectrum Enterprises

As of March 7, Boston’s snowfall amount was 105.7, just shy of the record of 107.6 set in 1995-1996. Keep in mind that snowfall in March is not all that uncommon, so they are still poised to break that all-time record.  To say Bostonians are tired of the snow would be a monumental understatement, but most, if not all of them, would like to see this record broken.  In some small way, it’s almost the reward for their perseverance.

Boston is a congested city in many ways.  Apartments, condos, restaurants, bars, office buildings and colleges all occupy the same neighborhoods.  Couple this with the amount of personal vehicles that need to park and you’ve got a recipe for a winter disaster.  Some of the side streets are so narrow that you can barely maneuver them in the summer with cars parked on both sides.  In winter, you’re lucky if you can get down the street at all.

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A common practice in Boston and the outlying areas is to “mark your space.”  Since the city itself isn’t very good at removing the snow on the side streets, the residents are forced to dig out their cars.  Once they have spent hours digging out their car and creating a parking space, they then mark it with something such as a chair.  This tells everyone else that this space is now reserved for the unknown owner of the chair.  If you feel brave enough to remove this chair, be ready for something to happen to your car.  

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Recently, I heard of a plumber whose tires were slashed because he used a marked space for an hour.  One resident replaced the snow he removed onto the car who took his spot.

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That’s just the snow.  If the temperature warms up for even one day you then have to contend with falling ice.  And the aforementioned ice is no joke.  Have a look for yourself.  Ice falling from buildings has been known to destroy cars and even cause fatalities.

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So now you’re wondering why there is a story about snow on the Spectrum LIHTC blog. I’m sure the LIHTC communities in warmer climates are having a hard time wondering why this is such a big deal.  Well….Imagine all this snow and now imagine what it would be like if you were the property manager or even a maintenance staff member on an LIHTC scattered site.  Remember that budget you did last year?  Now you have to figure out how to manage all of the overtime hours your maintenance staff will incur due to the never ending bouts of snow.  Now imagine that you have just suffered through a debilitating blizzard and your maintenance staff has been working around the clock to keep your property clear.  It’s taking a few days because you have numerous walkways, stoops, parking lots, egresses, etc.  Then you remember that Spectrum is coming to conduct an annual inspection. You’d love to cancel it, but you remember that you’ve already notified your residents, Spectrum has driven down from Maine, you’ve pulled all the files and the keys and your staff is ready.  As big of a pain it is, you go through with the inspection.  You just hope that no one slips and falls or gets hit by falling ice.

You also have to contend with the damage that can be caused by this snow and ice.  The weight of the snow can cause your entire roof to collapse.  The ice dams that form on your roof can cause extensive leaking and even pull the gutters off your building from their sheer weight. The ice falling from your buildings can damage people, property and cars.  The snow and ice will wreak havoc on your parking lot and walkways with frost heaves and pot holes.

So how does an LIHTC property in Boston manage in conditions like this? They just do, because they’re Boston Strong.  It may be a congested city, but it’s also a resilient city.  The mayor can close down public transportation, call parking bans and declare a state of emergency, but Bostonians will carry on with life because it’s what they do.  So the next time you grow weary because you think it’s too hot to conduct an inspection, or too cold, or even too wet, just be thankful you’ll never have to conduct an inspection in 9 feet of snow.  Yes, you read that correctly, 9 feet of snow.  If anyone city was looking forward to spring this year, it’s Boston. Happy Spring Boston, it’s just around the corner.

 


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