Don't Rent Tax Credit Units to Third Parties

Don’t violate the tax credit rules by renting tax credit units to anyone other than the households that live in them. For instance, some social service agencies that deal with special needs, such as the elderly or single mothers, may want to rent a block of units so they can house their clients right away. But don’t let these agencies rent the tax credit units from you, even if their clients qualify for the tax credit program.

For instance, when one manager of a tax credit housing site received an offer from a county mental health agency to rent a four-bedroom tax credit unit so the agency could place its clients directly into the unit, she decided to decline the agency’s offer. While it seemed tempting to accept an offer from the agency guaranteeing the rent and occupancy of certain units, tax credit rules require that you rent directly to households and not through a third party. Tax credit units must be available to the general public, and the units must not be transient, meaning they must be rented for a minimum of six months. If you do lease a unit to an agency instead of a household, you could be violating both these rules.

But this doesn’t mean that you still can’t work with social service agencies to house their clients. Instead of renting to an agency directly, you can accept referrals from the agency of qualified applicants as long as you treat them like all tax credit applicants. You cannot give them preference simply because they were referred by the agency. Like all tax credit applicants, they must fill out an application, be placed on the appropriate waiting list, if necessary, and be certified as eligible for the tax credit program.