Hot Topics: New Developments Impacting the Tax Credit Industry

6 min read

Four recent developments require attention from owners and managers of low-income housing tax credit properties.

Hoarding Behavior Now Protected Under Fair Housing Law

Mental health experts estimate that about 15 million Americans are compulsive hoarders. Recently, the American Psychiatric Association announced that compulsive hoarding is now considered a mental disability.

As a result, persons with this behavioral issue are now protected under disability related laws, including federal, state, and local fair housing statutes. Renters with hoarding issues must be considered eligible for reasonable accommodations under fair housing law, and their leases may not be automatically terminated.

Clinical hoarding is defined as:

  1. The acquisition of, and failure to discard, a large number of possessions that appear to be useless or of limited value;
  2. Living spaces so cluttered that they can’t be used for their intended purpose; and,
  3. Significant distress or impairment in functioning caused by the hoarding.


Potential problems from hoarding at apartment properties include noxious odors, pest infestation, mold growth, increased risk of injury or disease, fire hazards, and even structural damage.

Property management staff should stay alert for signs of hoarding, immediately investigate if an issue is detected or suspected and proactively try to assist residents with a hoarding problem to resolve the issue rather than wait for a request for help. While management must be open and respond to reasonable accommodation requests by residents, a landlord isn’t obligated to make an accommodation for a tenant that actively resists.

A resident’s lease may be terminated if the hoarding:

  • Threatens the health and safety of other residents and the health/safety issues can’t be resolved through a reasonable accommodation (such as by giving a resident more time to obtain help to clean their unit); and/or,
  • Causes significant damage to a unit and the tenant won’t reimburse the landlord for repairs.


Lease termination is also possible if the resident won’t discuss the hoarding issue or cooperate with efforts to bring him or her back into compliance with lease requirements.

HUD to Reduce Verification Requirements for Public Housing and Vouchers

The U.S. Department of Housing and Urban Development (HUD) is preparing new rules that will allow public housing authorities (PHAs) to drastically alter the income verification requirements for public housing and Section 8 Housing Choice Voucher tenants. These changes could impact owners of LIHTC properties with public housing and voucher residents.

Tax credit properties may be affected by planned rule changes:

  1. Simplifying the earned income disregard, which protects unemployed tenants against a rent increase for some time after obtaining a job. (Note: This is important because the exclusion of such income is not permitted for LIHTC and project-based Section 8 properties); and,
  2. Permitting PHAs to charge property owners a fee if the re-inspection of a voucher unit shows that the housing quality standard violation has not been fixed.


HUD is also likely to give PHAs more discretion in accepting the word of applicants regarding their sources of income, instead of strictly requiring verifications. While details of this change aren’t yet known, this revision would significantly impact owners who rely on PHA verifications of income for tax credit residents.

In January 2013, HUD revised its rules governing PHAs’ administration of their public housing and voucher programs. These changes, which may impact LIHTC properties, include:

  1. Allowing assisted households to self-certify assets of $5,000 or less (this ability already exists in the LIHTC program);
  2. Permitting less frequent recertifications (once every three years) of elderly families and families with fixed incomes. (Note: Mixed-income LIHTC projects must perform annual income recertifications for all low-income tenants, including those with vouchers.)


The Department is also expected at some future point to make changes:

  1. Establishing a threshold for processing changes in family income;
  2. Permitting self-certification of community service;
  3. Modifying utility reimbursements;
  4. Simplifying prorated rent calculations for families with members unable to demonstrate legal resident status;
  5. Removing the obsolete designated housing rule (i.e. a property can designate certain areas for seniors and certain areas for families);
  6. Allowing PHAs to set exception payment standards to 120% of Fair Market Rents for reasonable accommodation purposes; and,
  7. Basing utility allowances on unit size rather than type.

New Social Security Verification Methods

Starting October 1, 2014, Social Security Administration (SSA) offices will no longer provide letters to individuals verifying their Social Security benefits.

To obtain verification, residents and renter applicants should now go online to the SSA Web site (http://www. The first step is to set up a personal account. Once this is done, a recipient can view, print, or save official letters pertaining to proof of benefit amount and type, Medicare start date, withholding amount, and age.

Verification Changes to HUD Handbook 4350.3

On December 13, 2013, HUD posted revisions (Change 4) to HUD Handbook 4350.3 (Occupancy Requirements of Subsidized Multifamily Housing Programs).

An important change was made to Appendix 3, adding a new column that describes specific documents provided by applicants that will now be acceptable as third-party verification for various income sources, assets, and expenses. These documents are too numerous to fully list here, but include: recent original letters from the court for alimony or child support; copies of receipts for child care expenses that enable a household member to work or attend school; bank statements and property appraisals for current household assets; W-2 forms, paycheck stubs, or earnings statements for employment income; copies of income tax forms for medical expenses; and tax returns or tax forms for self-employment or business income. (For a complete list, go to

These changes affect HUD-assisted properties that are governed by Handbook 4350.3. Those relating to income also apply to LIHTC properties.

These changes will impact the way that files are documented for all types of projects. Before making any change in the way verifications are done, owners of LIHTC properties should ensure that their state housing credit agency will permit the change.

A. J. Johnson is president of A. J. Johnson Consulting Services, Inc., a Williamsburg, Va.-based full service real estate consulting firm specializing in due diligence and asset management issues, with an emphasis on low-income housing tax credit properties. He may be reached at 757-259-9920,