Managing LIHTC recertification requirements can feel like a major hurdle for property managers and owners of affordable housing. If you are trying to figure out exactly what you need to do, you are not the only one. These rules can be complex, but following them is essential to maintain compliance and protect your tax credits.
With over 29 years of experience in the LIHTC field, I have seen every possible recertification scenario. I have guided numerous property managers through this process, and I am here to explain it in simple terms. Let’s look at what you truly need to understand about LIHTC recertification requirements.
Over the course of my career, I’ve helped property managers and owners avoid costly compliance pitfalls — including saving one housing authority from additional enforcement action. My approach blends technical expertise with a people-first mindset, ensuring properties stay audit-ready while preserving the dignity of residents. I’ve been recognized as a trusted compliance consultant in Texas and beyond, and I’m passionate about simplifying complex regulations so affordable housing professionals can feel confident in their compliance.
Table Of Contents:
- What Are LIHTC Recertification Requirements?
- Why LIHTC Recertification Requirements Matter
- Key Components of LIHTC Recertification
- Timing of LIHTC Recertifications
- Documentation for LIHTC Recertifications
- Common Pitfalls in LIHTC Recertifications
- Handling Over-Income Tenants
- Using Technology for LIHTC Recertifications
- Training Your Team on LIHTC Recertification Requirements
- Preparing for a LIHTC Compliance Audit
- Conclusion
What Are LIHTC Recertification Requirements?
LIHTC recertification requirements are the set of rules used to confirm that tenants in low-income housing units continue to be eligible. Think of it as an annual eligibility check-up for your residents. You must verify their income, assets, and household composition to confirm they still meet the program’s strict criteria.
However, these requirements can change based on several factors. The specifics of your LIHTC project and the regulations in your state can alter your responsibilities. It is rarely a one-size-fits-all process. Make sure you check with the program requirements and your specific state agency for guidance.
The entire system is built to uphold the integrity of the Low-Income Housing Tax Credit program. Your state housing finance agency provides oversight to confirm properties are meeting their obligations. This process is fundamental to the long-term viability of affordable housing projects.
Why LIHTC Recertification Requirements Matter
You may ask why this annual paperwork is so important. There are several critical reasons for this diligence in affordable housing management. The process is foundational to the program’s success.
Following the recertification process correctly confirms that only eligible households receive the benefits of the program. It also keeps your property in compliance with IRS regulations, which is a major part of property compliance. Most importantly, it protects your valuable tax credits from being recaptured.
Ignoring these requirements is not a viable option. The consequences of non-compliance can be severe, leading to the loss of tax credits or significant financial penalties. An IRS Form 8823, which reports non-compliance, can jeopardize the financial health of your property.
Key Components of LIHTC Recertification
When you handle LIHTC recertification, there are a few main areas that need your full attention. Let’s examine each of these components closely. Mastering them is essential for successful property management.
Income Verification
This is the most critical part of the recertification process. You must verify every source of income for all adult members of the household. This includes employment wages, Social Security benefits, pension payments, and unemployment benefits.
You will need to obtain specific documentation for each income source to build a complete tenant file. Pay stubs, benefits letters, and tax returns are standard documents. The goal is to create a full and accurate picture of the household’s annual income certification.
Calculating income requires careful attention to detail. Referencing the HUD Handbook 4350.3 is often necessary to handle variable income sources like overtime or seasonal work. Accurate income calculation is a cornerstone of tenant eligibility determination.
Asset Verification
Assets are also a key part of the eligibility equation because they can generate income. You need to verify all assets held by the household. This includes bank accounts, real estate, stocks, and bonds.
Important HOTMA Update: Retirement accounts are no longer verified as assets unless the household is actively receiving income from them. In those cases, you must verify the income being received — but you do not need to verify the total value of the retirement account itself.
For each asset, you will need to collect recent statements or valuations. It’s not just about the total value of the asset — you must also calculate any actual income the asset generates. Imputed income only comes into play if total household assets exceed a specific threshold and under certain circumstances defined by program rules.
Asset limitations are an important factor in the LIHTC program. Be sure to document all assets and their corresponding income thoroughly. This step is often scrutinized during a compliance audit.
Note on State and Program Variations: Assets can be tricky, so always check with your state housing agency to confirm exactly what is required. Not all states have fully adopted the updated HOTMA rules, which expanded asset limit thresholds and documentation requirements. On top of that, there are program-specific differences, so don’t assume all rules are the same. When in doubt, verify directly with your agency to avoid compliance issues.
Common Income & Asset Sources Table
To make things clearer, here is a table of common income and asset sources and the documentation typically required for verification. This can serve as a quick reference during the recertification process. Having a consistent approach to documentation is very helpful.
| Source Type | Example | Required Documentation |
|---|---|---|
| Employment Income | Wages, Salaries, Tips | Recent pay stubs (4-6 consecutive), Employment Verification Form |
| Benefit Income | Social Security, SSI, Pension | Current award letter from the issuing agency. |
| Self-Employment | Contract work, Small business | Recent tax returns with Schedule C, notarized affidavit of income. |
| Assets | Checking/Savings Accounts | LIHTC Following HOTMA: Most current statement only. LIHTC Not Following HOTMA: Six consecutive months of statements. HOME Program: Two statements required. |
| Other Assets | 401(k), IRA, Stocks | LIHTC Following HOTMA: Most current statement only. LIHTC Not Following HOTMA: Most current statement only. HOME Program: Two statements required. |
HOTMA Thresholds for Asset Forms:
-
Following HOTMA: If net family assets are under $51,600, households may self-certify assets using the Asset Certification form (formerly the Under $5K Asset Form).
-
Not Following HOTMA: If net family assets are under $5,000, the Under $5K Asset Form must be used.
For a full list of what counts as an asset, refer to the HOTMA Asset Inclusions and Exclusions page.
Household Composition
You must confirm every person living in the unit. This information is vital because household size directly impacts the applicable household income limits. It also determines the appropriate unit size for which the household qualifies.
Obtain a signed statement from the head of household that lists every person residing in the apartment. Any changes in household composition must be documented immediately. This includes additions to the family or members who have moved out.
Special rules apply to situations like live-in aides, foster children, and guests. Understanding these distinctions is important for maintaining accurate records and proper compliance. These details affect the overall tenant eligibility.
Timing of LIHTC Recertifications
When you are managing LIHTC recertification requirements, timing is a critical factor. You must complete the process within specific deadlines to maintain property compliance. Here is what you need to know about the schedule.
Annual Recertifications
For the majority of LIHTC properties, recertifications must be performed annually. This means you are verifying all income, asset, and household information every year for each tenant. The recertification must be completed by the anniversary of the tenant’s move-in date.
A helpful tip is to begin the process well in advance. I advise my clients to start at least 90 to 120 days before the deadline. This provides ample time to gather the necessary third-party verification and address any issues that may arise.
100% LIHTC Properties
If you manage a property where 100% of the units are designated for LIHTC, you might have a different requirement. The Housing and Economic Recovery Act of 2008 introduced a waiver for annual recertification after the first year. This can reduce the administrative burden significantly.
However, this waiver is not universal. Tenants are still required to complete an annual self-certification of their income. Furthermore, some state housing agencies have stricter rules and still mandate full recertifications, so you must confirm your state’s policy.
Mixed-Income Properties
For mixed-income properties, which have both market-rate and LIHTC units, annual recertifications are always required. There are no exceptions for these types of properties. This regular review helps manage tenant eligibility across the property.
This annual process is crucial for correctly applying the Next Available Unit Rule if a tenant becomes over-income. Diligent recertification is a key part of affordable housing management in a mixed-income setting. It helps track compliance for the entire compliance period.
Documentation for LIHTC Recertifications
With LIHTC recertification requirements, documentation is absolutely essential. You need to maintain a complete and organized record for every action you take. Here is a look at the key documents you should be collecting for your tenant file requirements.
Tenant Income Certification (TIC) Form
The TIC form is the central document of the LIHTC recertification process. It summarizes all of the household’s relevant information. This includes a list of household members, all income sources, asset details, and the rent amount.
The form also confirms that the household qualifies under the correct income limit. It is critical that this form is filled out completely and accurately. All adult household members must sign and date it.
Income Verification Documents
You must obtain third-party verification for all sources of income. This documentation provides objective proof of the household’s earnings. Examples include Employment Verification forms sent directly to employers or recent pay stubs covering a specific period.
Other common documents are Social Security award letters, pension statements, and unemployment benefit letters. If third-party verification is not possible, you may have to rely on tenant-provided documents or sworn affidavits. However, direct verification is always preferred.
Source Documentation
For assets, you need to collect current documentation as well. This includes recent bank statements, typically for the last six months. You will also need statements for investment accounts or assessments of real estate value.
Remember to verify both the value of each asset and any income it generates. This information is needed to correctly calculate the household’s total income. Meticulous asset documentation protects your property during a compliance audit.
Refer back to the asset documentation rules outlined above for specific requirements on statements, thresholds, and forms, as these vary depending on HOTMA status and program type.
Student Status Verification
The LIHTC program has very specific student eligibility rules regarding households composed entirely of full-time students. You must verify the student status of all adult members of the household. This can be done with school enrollment forms or transcripts.
It is important to understand the exceptions to the student rule. For example, a household of full-time students may be eligible if they meet certain criteria, such as being married and filing a joint tax return. Self-certification of student status is also a common part of the documentation. However, under the new HOTMA rules, you must also verify any student financial aid to determine how much of it counts as income, in addition to verifying student status.
Lease Agreement
While not a direct part of the recertification itself, reviewing the lease is a good practice during this time. Confirm that it is current and reflects any changes. This includes updates to the rent amount or household composition.
Common Pitfalls in LIHTC Recertifications
In my experience, I have seen property managers encounter the same issues with LIHTC recertification requirements time and again. Being aware of these common mistakes can help you avoid them. Here are a few key areas to watch out for.
Missing the Deadline
This is likely the most frequent mistake in the recertification process. The annual recertification must be completed by the tenant’s move-in anniversary. Missing this deadline can put a unit out of compliance for that period.
To prevent this, implement a tracking system for all recertification due dates. Start the process early, at least 90 days out, to allow for delays. Proactive management of timelines is essential for maintaining LIHTC compliance.
Incomplete Documentation
Another significant problem is failing to collect all the required documents. Forgetting to obtain a final pay stub or a missing page from a bank statement can create issues during an audit. These small oversights can have big consequences.
A simple solution is to use a detailed checklist for every recertification file. Review it carefully before finalizing the process. This helps confirm you have all necessary paperwork in order.
Miscalculating Income
Income calculations can become complicated, especially with variable income from overtime, bonuses, or seasonal employment. Many property managers find this part of the process challenging. Errors here can lead to incorrect eligibility determinations.
The solution is to be consistent and thorough in your calculations. When you are uncertain about a specific income type, consult the HUD Handbook 4350.3. A compliance expert or your state housing finance agency can also provide clarification. For detailed guidance on how income and assets should be calculated and documented, refer to Chapter 5 of the HUD Handbook 4350.3, as it specifically addresses these requirements.
Overlooking Changes in Household Composition
Tenants do not always report when someone moves in or out of their unit. These changes can impact the household’s eligibility, so you need to stay informed. A new household member could push the total income over the limit.
During every recertification interview, ask directly about household composition. Have the tenant sign a form confirming the current members. Some properties conduct mid-year check-ins to catch any unreported changes.
Forgetting About Student Rules
The LIHTC student eligibility rules are specific and often misunderstood. Properties can face non-compliance findings for failing to verify student status. They may also overlook a household that has become an ineligible student household.
Always verify the student status of every adult as part of your recertification process. If you have a household where all members are full-time students, confirm they meet one of the allowed exceptions. Document this finding carefully in the tenant file.
Handling Over-Income Tenants
One of the more complex aspects of LIHTC recertification requirements is managing tenants whose income grows beyond the program limits. There is a specific protocol you must follow in this situation. Here is what you need to know.
The Next Available Unit Rule
If a tenant’s income increases to over 140% of the applicable income limit for their household size, they are classified as “over-income.” However, you do not have to evict them. Instead, you must apply the Next Available Unit Rule.
This rule requires that the next available unit of a comparable or smaller size in the building must be rented to a qualified low-income household. The over-income unit can continue to be counted as a low-income unit as long as the rent remains restricted. This continues until the next comparable unit is leased to an eligible tenant.
Rent Increases for Over-Income Tenants
In certain situations, you may be permitted to increase the rent for an over-income tenant. This policy depends on your state’s rules and the terms of your LIHTC agreement. Some states allow a rent increase up to the market rate, while others do not.
Before you implement any rent changes for over-income households, you must check with your state housing finance agency. They will provide guidance based on your specific program requirements. Acting without their approval can lead to non-compliance.
Documentation for Over-Income Tenants
When you identify an over-income tenant, it is crucial to document the situation completely. You will need to keep clear records of several items. This includes the recertification that first identified the over-income status.
Also, keep copies of any notices sent to the tenant about their status change. Document your efforts to rent the next available unit to a qualified household, including marketing and application records. Good documentation will protect you during a compliance audit.
Using Technology for LIHTC Recertifications
In today’s world, technology offers powerful tools to help manage LIHTC recertification requirements. Using software can streamline your workflow and improve accuracy. Here is how technology can simplify your responsibilities.
Property Management Software
Many property management software systems include modules specifically for LIHTC compliance. These platforms can help you track recertification dates and generate the necessary forms. They can also perform income and rent calculations.
Leading options like Yardi, RealPage, and MRI Software offer robust features for affordable housing management. This software can be a significant time-saver, especially for portfolios with multiple properties. It also helps with storing and organizing all your documentation digitally.
Online Tenant Portals
An online portal can improve the recertification experience for both your staff and your tenants. Through a portal, tenants can upload their documents directly. They can also fill out forms electronically and receive automated reminders about deadlines.
This functionality can accelerate the process significantly. It reduces the likelihood of missing or incomplete paperwork. Portals also provide a secure way to exchange sensitive information.
Training Your Team on LIHTC Recertification Requirements
A well-trained team is essential for successfully managing LIHTC recertification requirements. Proper training reduces errors and improves overall property compliance. Here is how to make sure your staff is prepared.
Initial Training
When new employees join your team, provide them with thorough training on LIHTC program rules. This should cover the basics of income and asset calculations. It should also include documentation standards and recertification timelines.
Consider enrolling new staff in a certification course like the Housing Credit Certified Professional (HCCP) program. These courses are offered by industry organizations and provide a strong foundation. A solid start is important for long-term success.
Ongoing Education
LIHTC regulations and interpretations can change, so continuous education is important. Keep your team current with regular in-house training sessions. Attending industry conferences and webinars from your state housing finance agency are also great opportunities.
Subscriptions to industry newsletters can provide timely updates on rule changes. Make ongoing education a standard part of professional development for your compliance team. This investment helps protect your property from non-compliance.
Preparing for a LIHTC Compliance Audit
A LIHTC compliance audit by your state housing finance agency is a standard part of managing an affordable housing property. Being prepared can make the process much smoother. A proactive approach, like my “Always be Audit-Ready Method“, reduces stress and improves outcomes.
Organizing Tenant Files
Auditors will focus heavily on your tenant files. Each file should be organized logically and consistently — it should read like a book, with a clear beginning, middle, and end. The goal is to answer the auditor’s questions before they even have to ask them.
Another way to think of it is like making a “compliance sandwich.” A well-prepared file has “bread,” “condiments,” “meat,” and “veggies” all neatly stacked and appealing to the eye. No one wants to eat a messy, sloppy sandwich — and no auditor wants to dig through a disorganized file.
Use a checklist for your tenant file requirements to confirm every required document is present and in the correct order. This extra effort shows professionalism and makes audits smoother for everyone involved.
Files should be easy to navigate, with clear tabs for applications, verifications, TICs, and lease documents. A well-organized file demonstrates a commitment to property compliance. This organization makes the auditor’s job easier and reflects well on your management.
Responding to Audit Findings
If an audit does result in findings of non-compliance, you will receive a report, which could be an IRS Form 8823. It is important to respond promptly and professionally. Your response should include a corrective action plan that details how you will fix the issues and prevent them from happening again.
Work closely with your state housing finance agency to resolve any findings. Clear communication and a cooperative attitude can help you navigate this process successfully. Use any findings as a learning opportunity to improve your internal processes.
Conclusion
LIHTC recertification requirements are a detailed but manageable part of affordable housing management. A systematic approach, thorough documentation, and a well-trained team are the pillars of success. By staying organized and proactive, you can maintain compliance and protect your property’s financial standing.
Remember that resources like the HUD Handbook 4350.3 and your state housing finance agency are there to help. Chapter 5 of the HUD Handbook 4350.3 is especially important, as it covers income and asset rules used by the LIHTC program. Use technology to streamline your workflow and reduce the risk of errors. With the right processes in place, you can handle your recertification duties confidently and effectively.
If you need guidance on LIHTC recertification or want a second set of eyes on your compliance processes, Jeanie can help. Reach out today to schedule a consultation and get expert support tailored to your property’s needs.
👉 Contact Sanchez Compliance
About Jeanie Sanchez and Sanchez Compliance & Consulting
I’m Juanita (Jeanie), and I provide compliance solutions for affordable housing providers. I specialize in managing file review process and backup; delivering greater security, reducing redundancy, and increasing staff understanding
More technically, I help management agents in applying Section 42 and State Agency requirements, analyze IRS Forms 8609’s and provide guidance on the Multi Building Election, Utility Allowance review and guidance, Pre-State Agency Audit preparation, and Post-State Agency Audit response. I primarily partner with Property Management Companies including:
• Owners/Developers
• Property Management Companies
• Syndicators/Investors
• Compliance Managers/Departments
• Regional Managers/Onsite Management Teams
When you partner with me (AKA: Sanchez Compliance & Consulting) you get 29+ years of industry experience and the most efficient and consistent compliance solutions that Property Management Professionals are looking for right now. Our primary goal is to minimize your organization’s exposure to possible non-compliance. We are certified as WBENC, WOSB, Texas HUB, and MWBE.
