TCS Rent and Utility Allowances 1 — Questions and Answers
Question 1: Under LIHTC rules, what is the maximum gross rent allowed for a 60% AMI two-bedroom unit?
- 60% of the published Fair Market Rent
- 30% of 60% AMI adjusted for unit size (Correct answer)
- The HUD Fair Market Rent for the area
- 50% of the published Area Median Income
Correct answer: 30% of 60% AMI adjusted for unit size
The maximum gross rent is 30% of the income limit applicable to the unit, based on the AMI set-aside percentage and assumed household size by bedroom count.
Question 2: Gross rent for LIHTC purposes includes:
- Contract rent only
- Contract rent plus the utility allowance (Correct answer)
- Contract rent minus any tenant-paid utilities
- Only utility allowances provided by the owner
Correct answer: Contract rent plus the utility allowance
Gross rent equals the contract rent charged plus any utility allowance applicable to tenant-paid utilities.
Question 3: Which agency is responsible for publishing the utility allowances used at most LIHTC properties?
- The IRS
- The state housing finance agency (HFA) (Correct answer)
- HUD directly
- The local public housing authority
Correct answer: The state housing finance agency (HFA)
State housing finance agencies typically publish and update utility allowance schedules that LIHTC properties are required to use.
Question 4: If a tenant pays all utilities, the utility allowance must be:
- Added to the rent when checking gross rent limits (Correct answer)
- Subtracted from the rent when checking gross rent limits
- Ignored since the tenant pays utilities
- Applied only at annual recertification
Correct answer: Added to the rent when checking gross rent limits
When tenants pay their own utilities, the utility allowance is added to the contract rent to determine the gross rent for compliance testing.
Question 5: How often must utility allowances be updated at LIHTC properties?
- Every five years
- Annually (Correct answer)
- Only when HUD publishes new FMRs
- At each tenant recertification
Correct answer: Annually
Utility allowances must be reviewed and updated at least annually to reflect current utility costs.
Question 6: What happens to gross rent compliance if a utility allowance increases and pushes gross rent above the maximum?
- The owner must reduce contract rent to bring gross rent back into compliance (Correct answer)
- The tenant must absorb the increased utility cost
- The unit is automatically decertified
- A waiver can be filed with the IRS
Correct answer: The owner must reduce contract rent to bring gross rent back into compliance
If an increase in the utility allowance causes the gross rent to exceed the maximum allowable, the owner must lower the contract rent to restore compliance.
TCS Rent and Utility Allowances 1
Under LIHTC rules, what is the maximum gross rent allowed for a 60% AMI two-bedroom unit?