HCCP Utility Allowances and Rent Calculations

Question 1

Under Section 42 of the Internal Revenue Code, how is 'gross rent' defined for LIHTC compliance purposes?

Accepted Answer

The contract rent charged to the tenant plus any utility allowance for tenant-paid utilities

Answer

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.

Question 2

Maximum gross rents under Section 42 are set at what percentage of the applicable income limit divided by 12?

Accepted Answer

30%

Answer

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.

Question 3

For a 1-bedroom LIHTC unit, what imputed household size is used to determine the income limit for maximum gross rent?

Accepted Answer

1.5 persons

Answer

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).

Question 4

When a tenant pays utilities directly to the utility company, how must this be accounted for in the Section 42 gross rent calculation?

Accepted Answer

The utility allowance is added to the contract rent to calculate gross rent

Answer

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.

Question 5

Under Treasury Regulation 1.42-10, how frequently must utility allowances be reviewed for LIHTC properties?

Accepted Answer

Annually

Answer

Treasury Regulation 1.42-10 requires that utility allowances be reviewed and, if necessary, updated at least annually to reflect current utility costs.

(HCCP) Housing Credit Certified Professional Practice Test

(HCCP) Housing Credit Certified Professional Practice Test

HCCP Utility Allowances and Rent Calculations