§ 1807.401 - Affordable Housing—Rental Housing.

§ 1807.401 Affordable Housing—Rental Housing.

To qualify as Affordable Housing, each rental Multi-family housing Project financed with a CMF Award must have at least 20 percent of the units occupied by rent-restricted to any combination of Low-Income, Very Low-Income, or Extremely Low-Income Families and must comply with the rent limits as set forth herein. However, the in the applicable NOFA and Assistance Agreement in any CMF funding round. The CDFI Fund may require a greater percentage of the units per Project to be income-targeted and/or require a specific targeted income commitment in any given application CMF round, as set forth in the applicable NOFA and Assistance Agreement for that application round.

(a) Rent limitationlimitations. The gross rent limits for Affordable Housing are determined under the provisions in IRC section 42(g)(2). In this determination, if this part imposes an income restriction on a unit that is greater than 60 percent of area median income, adjusted for Family size, then the provisions of IRC section 42(g)(2) are applied as if that income restriction on the unit satisfied IRC section 42(g)(1). The maximum rent is a rent that does not exceed:

(1) For an Eligible-Income Family, 30 percent of the annual income of a Family whose annual income equals 120 percent of the area median income, with adjustments for number of bedrooms in the unit, as set forth in IRC section 42(g)(2).

(2) For a Low-Income Family, 30 percent of the annual income of a Family whose annual income equals 80 percent of the area median income, with adjustments for number of bedrooms in the unit, as set forth in IRC section 42(g)(2). If the unit or tenant receives Federal or State rental subsidy, and the Family pays as a contribution towards rent not more than 30 percent of the Family's income, the maximum rent (i.e., tenant contribution plus rental subsidy) is the rent allowable under the Federal or State rental subsidy program;

(3) For a Very Low-Income Family, 30 percent of the annual income of a Family whose annual income equals 50 percent of the area median income, with adjustments for number of bedrooms in the unit as described in paragraph (a) of this section. If the unit or tenant receives Federal or State rental subsidy, and the Family pays as a contribution towards rent not more than 30 percent of the Family's income, the maximum rent (i.e., tenant contribution plus rental subsidy) is the rent allowable under the Federal or State rental subsidy program; or

(4) For an Extremely Low-Income Family, 30 percent of the annual income of a Family whose annual income equals 30 percent of the area median income, with adjustments for number of bedrooms in the unit as described in paragraph (a) of this section. If the unit or tenant receives Federal or State rental subsidy, and the Family pays as a contribution toward rent not more than 30 percent of the Family's income, the maximum rent (i.e., tenant contribution plus rental subsidy) is the rent allowable under the Federal or State rental subsidy program.

(

further specified in the Assistance Agreement.

(b) Nondiscrimination against rental assistance subsidy holders. The Recipient shall require that the owner of a rental unit cannot refuse to lease the unit to a Section 8 Program certificate or voucher holder (24 CFR part 982, Section 8 Tenant-Based Assistance: Unified Rule for Tenant-Based Assistance under the Section 8 Rental Certificate Program and the Section 8 Rental Voucher Program) or to the holder of a comparable document evidencing participation in a HOME tenant-based rental assistance program because of the status of the prospective tenant as a holder of such certificate, voucher, or comparable HOME tenant-based assistance document.

(c) Initial rent schedule and utility allowances. The Recipient shall ensure that utility allowances and submetering rules are consistent with regulations concerning utility allowances and submetering in buildings that are subject to gross rent restrictions as set forth in the Assistance Agreement and under IRC section sec. 42(g)(2), as applicable.

(d) Periods of affordability. Housing under this section must meet the affordability requirements for not less than 10 years, beginning after Project Completion and at initial occupancyduring the Affordability Period. The affordability requirements apply without regard to the term of any loan or mortgage or the transfer of ownership and must be imposed by deed restrictions, covenants running with the land, or other recordable mechanisms. Other recordable mechanisms must be approved in writing and in advance by the CDFI Fundrecording instruments. Upon receipt of a written approval from the CDFI Fund, a Recipient may use a different recording instrument as provided for in the Assistance Agreement. The affordability restrictions may are allowed to terminate upon foreclosure or transfer in lieu of foreclosure. However, the affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed To the extent allowed under State law, in the event of a sale of property at foreclosure, transfer in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the Project.

(e) Subsequent rents during the affordability period. Any increase in rent for a CMF-financed unit requires that tenants of those units be given at least 30 days prior written notice before the implementation of the rent increase. Regardless of changes in annual rents and in median income over time, the CMF rents for a Project are not required to be lower than the CMF rent limits for the Project in effect at the time when the Project is Committed for use

short sale or other types of disposition, proceeds available to pay off a mortgage financed with a CMF Award shall be treated as Program Income.

(e) Standard lease terms and conditions. All tenants occupying rental CMF Units shall be required to enter into a written lease or rental agreement setting forth the terms and requirements which are, but not limited to, compliance with applicable State and local law.

(f) Tenant income determination.

(1) Each year during At the period of affordabilitytime of each initial lease and occupancy, the tenant 's income shall be determined to ascertain income eligibility. During the Affordability Period, the existing tenant income shall be re-examined ; tenant in a manner as set forth in the Assistance Agreement. Tenant income examination and verification is are ultimately the responsibility of the Recipient. Annual Tenant income shall include income from all household Family members. The Recipient must require the Project owner to obtain information on rents and occupancy of Affordable Housing financed or assisted supported with a CMF Award in order to demonstrate compliance with this section.

(2) One of the following two definitions of “annual income” must be used to determine whether a Family is income-eligible:

(i) Adjusted gross income as defined for purposes of reporting under Internal Revenue Service (IRS) Form 1040 series for individual Federal annual income tax purposes; or

(ii) “Annual Income” Annual Income as defined at 24 CFR 5.609 (except that when determining the income of a homeowner for an owner-occupied Rehabilitation Project, the value of the homeowner's principal residence may be excluded from the calculation of Net “Net Family Assets,” as defined in 24 CFR 5.603).

(3) Although either of the above two definitions of “annual income” is permitted, in order to calculate adjusted income, exclusions from income set forth at 24 CFR 5.611 shall be applied.

(4)

The CDFI Fund reserves the right to deem certain government programs, under which a

Low-Income

Family is a recipient, as income eligible for purposes of meeting the tenant income requirements under this section.

(g) Over-income tenants.

(1) CMF -financed or assisted units Units continue to qualify as Affordable Housing despite a temporary noncompliance caused by increases in the incomes of existing tenants if actions satisfactory to the CDFI Fund are being taken to ensure that all vacancies are filled in accordance with this section until the noncompliance is corrected.

(2) Tenants The maximum rent for tenants whose incomes no longer qualify must pay rent no greater than the lesser of the is either 30 percent of the Family's annual income, or the amount payable by the tenant tenants under State or local law or 30 percent of the Family's annual income, except if the gross rent of a unit is subject to the restrictions in IRC section 42(g)(2) or the restrictions in an extended low-income housing commitment under IRC section 42(h)(6), then the tenants of that unit must pay rent governed by those restrictions. Tenants who no longer qualify as Eligible-Income , whichever is less; however, tenants whose income exceeds the Eligible-Income level are not required to pay rent in excess of the market rent for comparable, unassisted units in the neighborhood.

(3) If the income of a tenant of a CMF -financed or assisted unit Unit no longer qualifies, the Recipient may designate another unit , within the CMF-financed or assisted Project , as a rent-restricted replacement unit that meets the affordability qualifications for the same income category as the original unit, as further set forth in the Recipient's Assistance Agreement. If there is not an available replacement unit, the Recipient must fill the first available vacancy with a tenant that meets the affordability qualifications for the same income category of the original unit as necessary to maintain compliance with the CMF requirements and the Assistance Agreement.