In order for a property to qualify for tax credits, several requirements must be met.
Available to the General Public
Developments must be available to the general public without restriction to members of particular social, religious, or other specific group. Developers may offer accommodations to particular types of occupants, including older adults and persons with disabilities, as long as state and federal fair housing and civil rights statutes are observed.
Developments must be permanent housing, not transient accommodations. Rental units with initial lease terms shorter than six months are considered transient housing. Qualified single room occupancy facilities that permit units to be rented on a monthly basis may be exempt from this requirement.
Suitable for Occupancy
In accordance with health, safety and building codes, units qualifying for tax credits must be suitable for occupancy.
Certain maximum income restrictions, determined as a percentage of county median income and household size, apply to residents of tax credit rental units:
- For an entire building to be eligible for tax credits, all units must be rented to households with incomes no higher than 60 percent of the applicable county median.
- For part of the building to be eligible, certain minimum “set-asides” are required. At least 20 percent of the units must be rented to households with incomes no higher than 50 percent of the county median; or at least 40 percent of the units must be rented to households with incomes no higher than 60 percent of the county median.
- At least 40% or more of the residential units in the development are both rent-restricted and occupied by households whose income is designated in 10% increments between 20% and and 80% that on average are 60% or less of area gross median income.
One of the above options must be chosen by the time the building is placed-in-service. Owners have until the close of the first year of the tax credit compliance period to comply with the elected set-asides.