Rounding Up When Calculating Rents

Q We calculated the maximum allowable rent for our low-income units. Since we’d like all our rents to be whole numbers, can we round the rents up to the nearest whole number?

A No. As a rule, you should always round down when calculating any maximum, such as the maximum allowable rent. Remember that the rents you’ve calculated are the highest amount you can charge. Charging more than the maximum could trigger noncompliance. In other words, if you round to the nearest whole number, you’ll charge some households more than the tax credit law allows. If you want to charge a whole number as your rent, you should round down. For example, if you calculate a household’s rent to be $499.99 and you want to charge a whole-dollar amount, you must round down to $499—not up to $500.

Conversely, you should round up when performing tax credit calculations when calculating any sort of minimum and when calculating household income. Calculating a minimum could involve the minimum number of units you must rent to qualified low-income households. For example, to meet a building’s minimum set-aside, you determine that you must rent 11.2 units at your building to qualified low-income households. In this case, you should rent at least 12 units to such households. You might think that it’s okay to round down to 11 because that’s the closest whole number to 11.2. But because 11.2 is the minimum, rounding down to 11 would cause you to not meet your building’s minimum set-aside and to jeopardize the owner’s tax credits.

You also should round up when calculating household income. Households are eligible to occupy low-income units only if they earn no more than the income limit. If a household earns more than the limit, it’s not eligible, and you mustn’t round down to make the household eligible. If your state housing agency discovers that you rounded down, it could cite you for noncompliance and put the owner’s tax credits at risk.