Utility Allowances and Rent Calculations Flashcards
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Read the first 7 Utility Allowances and Rent Calculations flashcards as text
Under Section 42 of the Internal Revenue Code, how is 'gross rent' defined for LIHTC compliance purposes?
Answer: The contract rent charged to the tenant plus any utility allowance for tenant-paid utilities
Gross rent under Section 42 equals the contract rent plus the utility allowance for utilities the tenant pays directly, and this combined amount cannot exceed the Section 42 maximum.
Maximum gross rents under Section 42 are set at what percentage of the applicable income limit divided by 12?
Answer: 30%
Section 42 caps maximum gross rents at 30% of the applicable income limit for the imputed household size, divided by 12 to arrive at the monthly figure.
For a 1-bedroom LIHTC unit, what imputed household size is used to determine the income limit for maximum gross rent?
Answer: 1.5 persons
A 1-bedroom unit uses an imputed household size of 1.5 persons, which represents the average of the 1-person and 2-person income limits under Section 42(g)(2)(C)(ii).
When a tenant pays utilities directly to the utility company, how must this be accounted for in the Section 42 gross rent calculation?
Answer: The utility allowance is added to the contract rent to calculate gross rent
When tenants pay utilities directly, those costs are represented by the utility allowance, which must be added to contract rent to determine gross rent for Section 42 compliance.
Under Treasury Regulation 1.42-10, how frequently must utility allowances be reviewed for LIHTC properties?
Answer: Annually
Treasury Regulation 1.42-10 requires that utility allowances be reviewed and, if necessary, updated at least annually to reflect current utility costs.
Which entity publishes the utility allowance schedule most commonly used as an approved source for LIHTC properties?
Answer: The local Public Housing Authority (PHA)
The local PHA publishes utility allowance schedules that LIHTC owners may use as an approved source under Treasury Regulation 1.42-10.
If a utility allowance increases at the annual review and causes gross rent to exceed the Section 42 maximum, what must the owner do?
Answer: Reduce the contract rent so that gross rent does not exceed the maximum allowable amount
When an increased utility allowance pushes gross rent above the Section 42 maximum, the owner must lower contract rent to bring total gross rent back into compliance.