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Housing Group Asks for LIHTC Clarification on Priority Guidance Plan

JUN. 9, 2023

Housing Group Asks for LIHTC Clarification on Priority Guidance Plan

DATED JUN. 9, 2023
  • Institutional Authors
    National Housing Law Project
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
  • Tax Analysts Electronic Citation
    2023 TNTF 128-23

June 9, 2023

Internal Revenue Service
Attn: CC:PA:LPD:PR (Notice 2023-24)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044

Re: Recommendations for 2023-2024 Priority Guidance Plan

The National Housing Law Project (NHLP) appreciates the opportunity to make recommendations to the Internal Revenue Service (IRS) and U.S. Department of the Treasury (Treasury) for their 2023-2024 Priority Guidance Plan. NHLP is a national organization that works to advance housing justice for poor people and communities by strengthening and enforcing the rights of tenants, increasing housing opportunities for underserved communities, and preserving and expanding the nation's supply of safe and affordable homes. This work extends to the Low-Income Housing Tax Credit program.

The LIHTC program has become the primary vehicle for financing the construction and rehabilitation of affordable housing nationwide. The annual federal investment in the program is just under $10 billion.1 Recently introduced 2023 tax legislation proposes to significantly expand the program by over twice its current size.2 Despite Congress' ever-growing investment in the program and its prominence in our nation's affordable housing policy, existing federal rules fail to address several critical issues facing LIHTC tenants, the program's intended beneficiaries. These include runaway rent increases, a complete lack of basic tenant and applicant protections that are common in every other affordable housing program, and preservation of the existing LIHTC housing stock.

Without addressing these issues, the LIHTC program will continue to fall short of achieving its central purpose of providing housing affordability and stability for low-income households. Under its broad mandate to “. . . prescribe such regulations as may be necessary or appropriate to carry out the purposes of [the LIHTC program] . . .”3 Treasury/IRS has ample authority to take administrative action to address these significant program deficiencies. Below are recommended regulatory reforms Treasury should adopt.


Unlike other federal housing programs, rent under the LIHTC program is not based on individual tenant income. Instead, the LIHTC rules only limit the amount of rent that an owner can charge to 30% of the applicable income limitation, which is a function of the Area Median Income (AMI). AMI is partially driven by inflation, and in 2022, high inflation resulted in double-digit rent increases at LIHTC projects across the country. Many LIHTC tenants were displaced as a result and those that were able to absorb the increase are barely hanging on.

Because Congress is unlikely to conform the LIHTC rent formula with the 30%-of-income limit used in other federal housing programs, Treasury should address this problem by instead imposing limits on rent increase amounts and their frequency. Several states have limited LIHTC rents in this way:

  • New Jersey, requires owners to annually certify that ". . . the rent charged to each existing tenant (excluding any rental assistance) has not increased by more than 5.00 percent annually, including due to changes in utility allowance calculations." New Jersey 2019-2020 Qualified Allocation Plan §5:80-33.32(f)(15), available at

  • In Montana, LIHTC ". . . rent increases in any calendar year shall not exceed the lesser of any rent increases permitted as a result of any increase in the Area Median Income(“AMI”) or five percent (5%) of the then-current rent amount." Montana Qualified Allocation Plan, Appendix C at p. 46, available at

  • In 2020, Oregon's state housing agency adopted a policy capping rent increases at 5% and established a tiered review process for approval of rent increases above that limit. The policy applies to a number of affordable housing programs administered by the state agency, including the LIHTC program. (Policy memo attached).

  • Georgia has sought to protect low-income LIHTC tenants from unrestricted rent increases by allowing only one rent increase per year and requiring a 120-day notice for any increase above 5%, with an option to the tenant to terminate the lease without penalty. Georgia LIHTC Compliance Manual (January 2023), ch. 3 at p. 59, availableat

Tenant and Applicant Rights

Affordable housing is about more than just producing below-market rents, it is also about providing housing stability and fairness with respect to their tenancies. A comprehensive set of basic tenant protections is essential to achieving this goal. Yet, the LIHTC program lacks such basic protections. The recommendations below — covering protections for both existing tenants and LIHTC housing applicants — address this significant gap.

Protections for existing LIHTC tenants

(1) More specific definition of Good Cause to evict

The LIHTC program requires good cause to evict a tenant.4 However, neither § 42 or its implementing regulations define what constitutes good cause. Without a more specific definition of good cause, tenants have little certainty about what actions could result in the loss of their affordable homes.

Other federal programs make clear that good cause for any tenancy termination requires some affirmative wrongdoing by a tenant, such as material noncompliance with the lease and violations of applicable law. See, e.g., 7 C.F.R. § 3560.159(a) (covering USDA Rural Development tenancies); 24 C.F.R. pt. 247 (covering several HUD-subsidized and project-based programs); 24 C.F.R. § 966.4(l) (covering public housing). These federal programs also make clear that expiration of the lease alone is not good cause to evict. See, e.g., 7 C.F.R. 3560.159(b) (for RD properties). Treasury should clarify the good cause requirement by adopting a similar definition of good cause for the LIHTC program.

Treasury should further clarify that LIHTC good cause protections supplant any less protective state or local laws and should require incorporation of these protections into existing and future LIHTC leases. This will make protections more widely known to landlords, tenants, and judges, and more directly enforceable.

(2) Clarify Good Cause related to over-income tenants and income certification

The Next Available Unit Rule allows a tenant whose income increases to a level beyond the applicable income limitation to remain in their LIHTC unit at the subsidized rent and, critically, allows the owner to continue claiming its credits.. However, LIHTC rules do not expressly provide whether a tenant's over-income status constitutes good cause to evict, allowing owners to evict so-called over-income households despite the lack of affirmative wrongdoing by the tenant and the lack of injury to the owner. Similarly, LIHTC rules for 100% LIHTC properties require tenant income recertification for only two years after initial occupancy. However, the rules do not protect tenants from eviction for not participating in subsequent recertifications required by the owner, but not by federal law.

To avoid confusion and unfair evictions, Treasury should clarify that there is no good cause to evict a tenant in these circumstances.

(3) Right to Cure Alleged Lease Violations

Evicting tenants based on minor lease violations or even a significant yet isolated violation is fundamentally unfair to the tenant5 and creates undue uncertainty with respect to their tenancy. That is why Treasury should clarify that LIHTC tenants have a right to cure alleged lease violations. We suggest using the opportunity to cure regulations promulgated by the USDA for its Rural Development multi-family housing program. Those regulations require an owner to give the tenant written notice of the alleged violation and an opportunity to cure and require documentation of owner compliance before an eviction can be commenced.6

(4) Fair lease requirements

Treasury should establish minimum fair lease and occupancy rules that must be included in, and unfavorable terms that must be excluded from, every LIHTC rental agreement. Other federal housing programs already do this through regulatory mandates. See, e.g., 7 C.F.R § 3560.156(b); 24 C.F.R. § 886.127; 24 C.F.R. § 880.606; 24 C.F.R. § 966.4; 24 C.F.R. §982.308. These lease provisions offer basic fairness that low-income tenants cannot generally secure due to their lack of bargaining power.

(5) Grievance procedures

Eviction cases are difficult to navigate given that they unfold with breakneck speed and because tenants are typically unrepresented by legal counsel. The eviction process is even more difficult where a case turns on the application of complex LIHTC rules and regulations, which even judges sometimes struggle to understand. Yet the consequences of eviction for tenants are enormous.

That is why LIHTC tenants should have the right to a grievance process (or a similar alternative informal procedure) for resolving landlord-tenant disputes, before any judicial eviction proceedings. Several federal housing programs already include a grievance process. See, e.g., 7 C.F.R. §3560.160 et seq. [outlining the grievance process for RD Section 515 rental properties]; 42 U.S.C.A. § 1437d(k), 24 C.F.R. §§ 966.50-966.57 [requiring a grievance hearing in public housing units]; 42 U.S.C.A. § 12774(a) [requiring a grievance procedure for HOME-funded units that are developed, sponsored or owned by community housing development organizations]; see also Form HUD-90105a [HUD required form lease for HUD multifamily provides for a meeting with management prior to eviction]) As these other federal agencies have done, Treasury can administratively require a LIHTC grievance process.

(6) Meaningful Language Access

For tenants with limited English proficiency (LEP), the lack of meaningful language access represents a significant barrier to accessing and maintaining housing. For example, LEP tenants may not understand the terms of their lease or the house rules that apply, and they may not understand a property owner's proposed adverse action, giving them little chance of successfully challenging the action. A lack of meaningful language access may also constitute national origin discrimination under the Fair Housing Act.7 Therefore, Treasury should adopt meaningful language access requirements or direct state housing agencies to promulgate such requirements. Language access requirements may include requiring LIHTC owners to adopt a written language access plan that provides for the translation of notices and other written documents involving a person's tenancy rights and the provision of interpretive services to facilitate communication between tenant and owner or the owner's management agent.

(7) Ensure Compliance with the Violence Against Women Act (VAWA)

VAWA applies to people who are harmed by domestic violence, dating violence, sexual assault, or stalking. These types of harms may directly impact a person's ability to remain safely housed in the aftermath of such trauma. As survivor advocates have done in separate comments, we also recommend that Treasury formally recognize that VAWA applies to LIHTC housing and implement VAWA in the following critical ways:

  • Require LIHTC owners to use the VAWA lease addendum.

  • Replicate HUD's proposed new Notice of Occupancy Rights and Certification form.

  • Use HUD's proposed new template on emergency transfer plans to create one for LIHTC projects. It would be helpful to include an FAQ that, among other things, highlights existing state housing agency transfer plans (e.g., Illinois).

  • Issue guidance similar to this Unnumbered Letter from the Rural Housing Service on VAWA implementation to state housing agencies and/or project owners.

  • Issue guidance similar to this HUD Public and Indian Housing notice. Of particular importance is the language regarding adverse factors, family break-up, documentation requirements, and the notice of occupancy rights.

  • Issue guidance suggesting that state housing agencies should outline VAWA priorities in their Qualified Allocation Plans, Extended Low-Income Housing Commitments (LURAs), compliance manuals, and program bulletins.

  • An FAQ mentioning that LIHTC housing can be an especially important supply of affordable housing for immigrant survivors, who will not face immigration restrictions as they would when trying to access other federally-assisted housing.

Applicant Protections

(1) Standards and procedural protections for LIHTC housing applicants

To lessen the risk of discriminatory, arbitrary or unfair admissions decisions, Treasury should require LIHTC owners to have written admissions policies with standards that demonstrably relate to an applicant's ability to perform the obligations of a LIHTC tenancy. As in other affordable housing programs, these admissions policies should be available to any applicant or member of the public upon request.

Also, the right to grieve suggested above for existing tenants should be extended to prospective tenants that have been denied admission to a LIHTC property. This would require owners to give written notice to such prospective tenants that explains the basis for the denial. Without this requirement, prospective LIHTC tenants will be kept in the dark about why their rental application was denied, opening the door to discriminatory and arbitrary admissions decisions without accountability.

(2) Limits on the use of criminal records in the tenant selection process

Treasury should prohibit (or at least issue guidance) on screening policies that categorically exclude applicants with a criminal history, including those with misdemeanor or felony convictions. Where an adult criminal conviction does exist, owners should be required to conduct an individualized assessment of the applicant that takes mitigating factors into account. The use of juvenile criminal records, arrest records that do not result in a conviction, and sealed or expunged records should also be banned in the admissions process.

Categorical exclusions and the unqualified use of criminal records exclude Black and Hispanic applicants at disproportionate levels and thus raise substantial fair housing concerns. This is in addition to the fact that a person's criminal record is a poor indicator of a person's ability to meet the terms of their lease. This suggested regulatory reform will better ensure owner compliance with fair housing laws and it is consistent with federal guidance.8 The Louisiana Housing Corporation recently enacted a policy in accordance with this federal guidance.9

(3) Limits on the use of prior eviction judgements and filings in the tenant selection process

Similar to a person's criminal history, past evictions from market-rate housing and credit transactions tend to reveal little (if anything) about a person's current ability to be a good tenant of affordable housing, making it objectively unfair for LIHTC owners to use such information as a basis to deny a rental application. Many tenants have eviction records based on inability to pay rent during the COVID-19 pandemic despite restrictions on evictions. Accordingly, Treasury should require LIHTC owners to consider extenuating or mitigating circumstances that explain an applicant's prior failure to pay rent, rather than automatically denying the person admission, which is the current practice of most owners. These recommendations are consistent with guidance recently issued by HUD on compliance with Title VI of the Civil Rights Act.10

This reform is squarely within Treasury's administrative authority. For example, the Ohio Housing Finance Agency recently took administrative action to prohibit owners from refusing admission to prospective tenants on the basis of certain types of past evictions, including any eviction filed or judgment entered more than four years before a rental application is submitted.11

(4) Strengthen existing LIHTC Voucher non-discrimination provisions

LIHTC rules have long contained a provision requiring owners not to discriminate against voucher holders because of their status as such. Yet, many properties have few or no voucher holders as tenants. This is partly due to illegal discrimination hidden in owner selection criteria, like minimum income and credit score requirements, that voucher holders are unlikely to meet given their low-income status. Such financial requirements are largely irrelevant in assessing a voucher holder's ability to perform under their prospective lease, since the majority of the rent will be paid by a reliable third party government agency. Treasury should prohibit LIHTC owners from using such financial criteria when reviewing a voucher holder's rental application.

We have also recently heard of LIHTC owners limiting the number of voucher holders they will lease to, which requires an owner to deny admission to any voucher holder who applies after the limit is reached on account of the applicant's status as a voucher holder. Treasury guidance clarifying that such policies violate the LIHTC program's voucher protections will go a long way in addressing this emerging issue.


Integral to the housing stability of low-income LIHTC tenants and the overall policy objectives of the LIHTC program is preservation of existing LIHTC projects. The preservation of existing projects is threatened by private equity interests through various tactics designed to take LIHTC projects out of the program well before the end of their extended use periods.An equally significant threat is the pending scheduled expiration of the extended use period for thousands of LIHTC projects, which puts hundreds of thousands of LIHTC tenants at risk of displacement. Federal rules currently do not provide any protection for tenants in this situation. Treasury can significantly mitigate these threats by adopting the policy reforms suggested below.

(1) Nonprofit Right of First Refusal

The special right of first refusal (ROFR) reserved for nonprofit LIHTC partners is designed to preserve LIHTC project affordability and viability for the long-term via nonprofit control. Recently, however, private equity interests have developed a scheme wherein they acquire the original investor's ownership stake for the purpose of obstructing the nonprofit partner's ability to exercise their ROFR and then extorting a payoff to step aside. These subsequent investors accomplish this by insisting on applying common law state rules (e.g., requiring partner consent and a bona fide independent third-party offer, which can rarely occur) as a condition of honoring the subject ROFR.

The DASH Act12, recently reintroduced by Senator Ron Wyden, D-Ore., proposes to change the nonprofit ROFR to an option for future projects. For existing properties, the DASH Act would make a ROFER exercisable without partner consent and clarifies that a ROFR may be triggered by a related-party offer. Should the DASH Act fail to pass, Treasury should take regulatory action to clarify that ROFRs (both existing and future) should not be interpreted in accordance with state law, unless the subject partnership agreement expressly provides otherwise. This is consistent with recent case law. (SunAmerica Housing Fund 1050 v. Pathway of Pontiac, Inc., 33 F.4th 872, 881 (6th Cir. 2022); Homeowner's Rehab, Inc. v. Related Corporation V SLP, L.P., 479 Mass. 741, 753 (2018).

(2) Qualified Contracts

The Qualified Contracts (QC) process serves as an exception the extended use period by giving LIHTC property owners the option at year 14 of offering their project for sale at a formula price to an entity willing to keep it in the program for the remainder of the period. However, if no bona fide offer is made within one year, the property is released from the LIHTC program. This result is a near certainty because the statutorily mandated sales price formula results in an above-market property valuation in almost every instance. (No rational actor would make a bona fide offer to buy a rent-restricted property at an above-market price.) The risk is that owners will use the QC process solely for the purpose of ending the extended use period early, never intending to sell their project at a sustainable price to a preservation buyer.

The DASH Act also seeks to address this preservation issue by repealing the QC option entirely, but only for future projects. This leaves existing tenants vulnerable to early termination of affordability protections and other program requirements. LIHTC program rules provide that the QC process “. . . shall not apply to the extent more stringent requirements are provided in the agreement or in state law.” 26 U.S.C. § 42(h)(E)(II). Treasury can mitigate the risk to existing projects and tenants by clarifying that a failure to expressly reserve the QC process as an exception to the extended use period in the subject regulatory agreement is a “more stringent requirement” for LIHTC program purposes, making the QC process unavailable. This is line with recent cases that have considered the issue. See Tuttle v Front St. Aff. Hsg. Partners, 478 F.Supp.3d 1030 (D.Haw. 2020); Creekside Ltd. v. Alaska Hous. Fin. Corp., 482 P.3d 377 (Alaska 2021).

(3) Foreclosures

LIHTC owners can also exit the program early in case of foreclosure or a transfer in ownership of the LIHTC project via a deed in lieu of foreclosure. Taking advantage of this provision, some LIHTC owners conjure up faux foreclosures (more commonly known as planned foreclosures) as a way to take their projects out of the program well before the extended use period ends.

LIHTC program rules seem to give the IRS exclusive authority to determine whether a foreclosure is planned and to prevent a property from exiting the program in this way. However, to NHLP's knowledge, the IRS has never interceded in a planned foreclosure situation, including instances where the IRS was made aware of a potential planned foreclosure by the state housing agency and/or local advocates. To ensure that the LIHTC program's prohibition on planned foreclosures is actually enforced, Treasury should clarify that the planned foreclosure provision in § 42 does not preclude enforcement by state housing agencies nor does it preclude a private right of action to tenants under the regulatory agreement or the lease.13

(4) Expiring LIHTC Properties

Many LIHTC projects that went into service early in the program's history are now reaching the end of their 30-year extended use period. Many of these projects will subsequently be converted to market-rate housing, subjecting tenants to unaffordable rent increases and possible displacement. One study estimates that between 2020 and 2029, close to 500,000 units will be affected.14 Despite this significant risk, there are currently no dedicated funding sources to preserve affordability or specific protections for tenants of expiring LIHTC properties.

Similar to affordability terminations in other federal housing programs, Treasury should enact protections for tenants of expiring properties that include requiring owners to provide a written notice of expiring affordability restrictions at least one year in advance;15 continued application of LIHTC rent restrictions and good cause protections for at least three years after the extended use period ends; and rent subsidy vouchers that tenants can apply to their existing unit or to help pay for housing elsewhere.

Marcos Segura, Staff Attorney
The National Housing Law Project
1663 Mission St. Suite 460
San Francisco, CA 94103


1Tax Policy Center Briefing Book (May 2020) at p. 478 available at

2See H.R. 2573 — 118th Congress (2022-2025): Affordable Housing Credit Improvement Act of 2023.

326 U.S.C. § 42(n).

4Rev. Rul. 2004-82, Q&A#5 (interpreting 26 U.S.C. §42(h)(6)).

5For example, LIHTC tenants have been subject to eviction for the innocent mischief of a five-year old child, for having a verbal argument with a neighbor (the only such incident during the tenant's five-year tenancy), and for the failure to submit recertification documents before the owner's internal deadline even though the annual move-in anniversary had not yet passed.


7See U.S. v. Maricopa County, Ariz. (9th Cir. 2012) 915 F.Supp.2d 1073, 1079-1080 (citing Lau v. Nichols (1974) 414 U.S. 563 and other cases establishing the link between language discrimination and discrimination on the basis of national origin).

8U.S. Dept. of Housing and Urban Development, Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions (April 4, 2016) pp. 1-2 (federal guidance calling for an individualized assessment of an application's criminal history that considers mitigating circumstances).

10U.S. Dept. of Housing and Urban Development, Office of Fair Housing and Equal Opportunity, Guidance on Compliance with Title VI of the Civil Rights Act in Marketing and Application Processing at Subsidized Multifamily Properties (April 21, 2022) pp. 6-7.

11Ohio Finance Agency, 2022-2023 Qualified Allocation Plan, § VII(H) at 52-53, available at

12S. 680 — 118th Congress (2022-2025): Decent, Affordable, Safe Housing for All Act.

13The Affordable Housing Credit Improvement Act proposes to give state housing agencies authority to determine the legitimacy of a foreclosure. Though this may be a viable alternative, it would still force tenants to rely entirely on a government agency — one that is not structured or funded to take such enforcement action — to enforce this very important protection. A private right of action is thus indispensable.

14National Low-income Housing Coalition, Balancing Priorities: Preservation and Neighborhood Opportunity in the Low-Income Housing Tax Credit Program Beyond Year 30 (2018), available at

15Federal notice requirements can mirror California's Preservation Notice Law, which applies to all subsidized properties in the state. See Cal. Gov. Code § 65863.10 et seq.


  • Institutional Authors
    National Housing Law Project
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
  • Tax Analysts Electronic Citation
    2023 TNTF 128-23
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