HUD Issues Guidance on Tenancy Protections for HUD-LIHTC Households

HUD recently issued a memo clarifying tenant protections for households when owners use both HUD-assistance and LIHTC financing. According to HUD, there have been reports that some owners had been trying to terminate the tenancy of current HUD-assisted tenants who don’t meet LIHTC eligibility guidelines.

For example, HUD-assisted tenants have been threatened with displacement by owners who obtain LIHTC equity and then seek to remove tenants, citing the lower LIHTC income eligibility threshold. Some tenants were also threatened with displacement when an owner tried to rescreen them under LIHTC guidelines. If an assisted household becomes over-income in a HUD program, its rent assistance ends, but it may continue to live in the unit paying market rent.

The clarifying guidance states that owners may terminate tenancy only in limited circumstances, which don't include failure to meet LIHTC requirements, including LIHTC-specific income and student eligibility rules. The notice states that lease agreements and HUD regulations detail grounds for termination and specifies that owners must follow HUD and state/local procedures.

The restriction also covers any proposed termination for criminal activity, which generally is limited to specified activity during the term of the lease or when an owner discovers there was fraud in the application process. Owners can conduct criminal background checks on existing tenants at recertification for lease enforcement or eviction, if permitted by house rules or any legally adopted changes to them, pursuant to HUD Handbook 4350.3, Chapter 8.

However, if this practice constitutes a change to the existing house rules, owners must first notify tenants who have completed their initial lease terms, 30 days prior to implementation, of the modifications to the house rules. Notification is accomplished by forwarding a copy of the revised house rules to existing tenants. For those tenants who haven’t yet completed their initial lease terms, the owner must provide 60 days’ notice, prior to the end of their lease terms, of the change in the house rules.

In cases where an assisted household becomes over-income and is no longer eligible to receive a HUD subsidy, or the owner determines through the annual or an interim recertification that the tenant now has the ability to pay the full contract rent or market rent, the owner can terminate the assistance to the tenant. However, in accordance with the lease agreement, the tenant retains all other rights under the lease, including the right to occupy the unit.

HUD pointed out that in some cases, LIHTC site owners have offered incentives to HUD-eligible households who become over-income for LIHTC or don’t meet another LIHTC requirement, to move voluntarily. Owners are allowed to do so as long as the incentives are not paid from Section 8 or FHA project funds. In such cases, HUD says owners should first inform tenants in writing that they have the option of remaining in occupancy as HUD-assisted tenants under the terms of their lease to ensure that the choice of moving with incentives is truly voluntary.