Include Four Key Items in Tax Credit Resident Selection Plan

Creating a resident selection plan is a good idea for any type of site you might manage, including a tax credit site. Although the tax credit program doesn’t require written resident selection plans, creating one can help you process applications more effectively, educate your prospects about your site’s requirements, and show your state housing agency that you treat prospects fairly.

We’ll tell you more about how having a resident selection plan at your tax credit site can benefit you. We’ll tell you about four items that every tax credit resident selection plan should include, and give you a Model Form: Use Resident Selection Plan to Communicate Important Program Requirements, that you can adapt for use at your site.

How Plan Helps

Having a written resident selection plan benefits tax credit sites in many ways. An effective plan puts a site’s application policies and procedures in a single written reference so that all its staff members can process applications the same way. The site also can distribute the plan to prospects to read before they apply. As a result, they won’t be surprised at any of your site’s screening criteria or other requirements. In addition, they may be less likely to think they’ve been discriminated against if they’re rejected. Having a resident selection plan at a tax credit site also helps show your state housing agency that you treat prospects fairly and comply with the tax credit program’s requirements. Not having a written plan could send the wrong message to your agency and cause auditors to scrutinize your policies and procedures more carefully.

FOUR ITEMS TO INCLUDE IN PLAN

Here’s a rundown on the four recommended items to include in any tax credit resident selection plan. If you’re creating the plan, make sure it includes these items. If your site already has a plan, review it to see if any items we list are missing. Then talk to the appropriate staff members at your site about amending your plan to include these items.

Item #1: Statement of Nondiscrimination

A good resident selection plan for any type of site should include a statement of nondiscrimination. But it’s especially important to include this statement in a tax credit site’s plan. If your state housing agency ever finds that you violated fair housing law, it must report your site to the IRS for tax credit noncompliance. Therefore, taking extra steps to increase awareness of fair housing laws and prevent violations is important.

Your statement of nondiscrimination should say that your site follows all nondiscrimination laws and that you don’t discriminate based on the seven characteristics that the federal Fair Housing Act protects: race, color, religion, national origin, sex, disability, and familial status. If your state or local fair housing laws protect prospects and residents based on additional characteristics (such as sexual orientation or source of income), also list these in your plan. If you’re not sure what fair housing protections apply to your site, talk with your attorney or a fair housing consultant.

Even if your state or local government doesn’t prohibit or recognize lawful source of income discrimination, your site may not refuse to rent to Section 8 voucher holders because of their status. This is because the tax credit law includes a provision that bans sites from turning away prospects simply because they hold a Section 8 voucher [26 U.S.C.A. § 42(h)(6)(B)(iv)]. So say in your statement of nondiscrimination that prospects won’t be rejected for holding Section 8 vouchers. And say that such prospects are subject to the same eligibility requirements as prospective residents who don’t hold vouchers.

Item #2: Income-Eligibility Requirements

Every site’s resident selection plan should include a section on screening criteria. This section normally spells out the information you require from prospects and third parties to determine whether the prospects will pay their rent on time and be responsible residents. But an effective tax credit selection plan should also include an explanation of the basic income-eligibility requirements for prospects who apply to live in low-income units.

You needn’t copy Chapter 5 of the HUD Handbook into your resident selection plan. But you should:

• Specify the income limits that apply to your site and say that households must earn no more than a certain percentage (for instance, 50 percent) of area median gross income to be eligible;
• Say whether any of your site’s units are designated for a special population group (such as the elderly, disabled, or homeless);
• Say that the value of all income and assets may affect prospects’ eligibility for a low-income unit; and
• Say that you’ll need to verify with third parties or through other appropriate means all income information that prospects provide.

Including this information in your resident selection plan lets prospects know what to expect before they decide whether to apply. It’s not only a good way to communicate your requirements to prospects, but it can also help you stave off problems. For instance, if a prospect learns up front that you verify all prospects’ income, that prospect won’t think you’re discriminating against him when you ask to verify his income.

Item #3: Restrictions on Full-Time Student Households

It’s also important to let prospects know that the tax credit program requires low-income households to be eligible under the student rule. So you should include a statement in your site’s resident selection plan that simply says households comprised of only full-time students generally aren’t eligible.

It’s best not to say in your plan what “full-time” means or mention the exceptions to the student rule. It’s not necessary, and if you include this information it could tip off student households about how to evade the rule to get less expensive housing.

Item #4: How Prospects Will Be Placed in Unoccupied Units

Every site’s resident selection plan should specify how management will place prospects on the waiting list in unoccupied units. For example, you may choose to rank prospects chronologically, based on the date they submitted their application or the date you approved it. If your site has market-rate apartments or participates in additional housing programs, your tax credit resident selection plan should also note sublists for each income level at your site. This will indicate that you may need to choose prospects out of order to comply with certain tax credit program requirements. For example, if a qualified, low-income household goes over income, you might need to rent the next available unit in the building to a new qualified, low-income household—even though market-rate households may currently be the top two names on the building’s master waiting list.

Editor’s Note: If you own or manage a tax credit site that also gets assistance through a HUD-regulated program, such as Section 8 or Section 236, you are required to have a written resident selection plan [Handbook 4350.3, par. 4-4 (A)]. Your plan must incorporate policies and procedures covering each step of the selection process and must reflect HUD’s eligibility, admission, and screening requirements for assisted sites. For example, if you’re required to give preferences to certain prospects at your site, you must say so in your plan.