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Rental Operations and Financial Management


The Low Income Housing Tax Credit Program
RIHousing is the designated housing credit agency responsible for the allocation and administration of the federal Housing Credit Program for the State of Rhode Island.

This includes the Low Income Housing Tax Credit Program (LIHTC—
click here to download compliance manual), which was created to encourage private sector participation in the construction and rehabilitation of apartments for low-income individuals and families. Proposed developments that best meet the needs and priorities established in the state’s Qualified Allocation Plan (QAP) will be considered for funding.

Selected proposals receive the actual allocation when the development is built and final requirements are met. It is the sale of the LIHTCs to private investors that provides cash equity to the development. This equity and the owner’s mortgage funds are the primary funds used to finance the development of apartments.

At a minimum, developments must maintain 20 percent of the project units as affordable for those at 50 percent of median income or 40 percent of the units as affordable for those at 60 percent of median income. In addition, these rent and use restrictions must stay in place for a period of 30 years.

Financial management requirements
RIHousing monitors the fiscal condition of development in its portfolio to ensure financial viability and program compliance. Financial reporting requirements include monthly submission of operating data and annual submission of audited financial statements and operating budgets.

RIHousing and the Internal Revenue Service (IRS) share the responsibility for administering the LIHTCs. Upon completion, RIHousing will monitor each project for compliance with the program regulations and assure that each property maintains a safe, decent and affordable standard. The investor is then eligible to use the LIHTCs to offset any tax liability.

RIHousing reports events of noncompliance with program regulations to the IRS. It is up to the IRS to recapture or deny previously used LIHTCs. While RIHousing and its staff may provide assistance, ultimate responsibility for compliance with federal tax code and state requirements is solely the responsibility of the taxpayer.

Detailed information on the application, development and allocation of Housing Credits is found in the Qualified Allocation Plan (QAP). The QAP is a part of the
Developer’s Handbook in our For Developers section.

Financial audit information
To help you as a landlord or property manager, we have summarized the following information for common operating and financial audit matters.

RENT INCREASES: For Low Income Housing Tax Credit (LIHTC) properties that do not have Section 8 Project-Based Assistance, owners may increase the current LIHTC rents charged to tenants in accordance with applicable program guidelines, but by no more than $25 every 6 months.

If you have any questions, please contact Michael DiChiaro, Assistant Director Dev/Asset Management & Compliance, at 401-457-1274 or at mdichiaro@rihousing.com.

Rent increase requests for properties with Section 8 Project-Based Assistance will be assessed through the Contract Administration Program (CAP) in accordance with the program guide.

If you have any questions, please contact Hope Lanphear, PBCA Supervisor, at 401-429-1409 or at hlanphear@rihousing.com.

CAPITAL IMPROVEMENTS AND REPLACEMENT RESERVE REQUESTS: Requests for capital improvements require the prior written consent of RIHousing. Requests should outline the need for the improvements, the timetable for completion, the cost estimate for the improvements and the desired source of funding. The cost estimate should include all labor, materials, taxes and permits necessary to complete improvements.

For items costing less than $3,000, a single cost estimate should be provided. Upon consent, the improvement item should be funded from the Property Operating Account. Upon completion, this may be reimbursed from the Replacement Reserve Account.

For items in excess of $3,000, three cost estimates should be provided for an identical work scope and specification provided to each contractor. Depending on the scope and scale of the work, technical assistance may be required by RIHousing’s Design and Construction division. Upon completion and inspection, funds may be requested from the Replacement Reserve Account to reimburse the Property Operating Account. Read more about this in Program Bulletin or in
chapter 4 of the HUD Handbook 4350.1.  

If you have any questions, please contact Michael DiChiaro, Assistant Director Dev/Asset Management & Compliance, at 401-457-1274 or at
mdichiaro@rihousing.com.

AVAILABLE CASH FLOW: Owners of developments funded by RIHousing are eligible for a distribution of available cash flow as specified in the legal and regulatory documents of each transaction. There are limitations on HUD-financed properties.

This cash flow is requested with the submission of each year's financial audit. In order to ensure that funds available for distribution are being determined in the most consistent and accurate manner, the annual financial reports, submitted by the CPA firms, must include the following schedule:
HUD Form 93486, Statement of Surplus Cash
 
This item must accompany the audited financial statements in order to determine the distribution to the owners.



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