It is so tempting to bury our head in the sand. It seems that the ability to delude ourselves is part of the human condition. We can convince ourselves that just because we want something to be false, it is indeed not true. We are forced, however, to see the downside of this practice when the impact of not facing some inconvenient truth stares us straight in the face. I’ve experienced this phenomenon more times than I care to remember in my own life, and recently, I have been reminded of it during discussions with several low-income housing tax credit (LIHTC) owners and managers.
I have the pleasure of working with many of the best actors in the LIHTC industry. Be they developers, property managers, syndicators or housing finance agency (HFA) officials, I get to spend my professional life with people committed to providing quality housing for the neediest amongst us and to treating everyone with fairness and respect. Unfortunately, I also interact with owners and managers who refuse to see the importance of their fair housing requirements and of how they treat all the applicants and residents at their communities. It is critical that everyone in the industry understand that a violation of fair housing law is a violation of the LIHTC program that can rise to the level of jeopardizing an owner’s tax credits.
In recent months, several people I have spoken with were under the impression that they need not concern themselves with fair housing compliance because they do not receive any mortgage or rental assistance from the Department of Housing and Urban Development (HUD). In many cases, when an owner or a manager believes their LIHTC community is exempt from any fair housing requirements, they are confusing fair housing law with something we in the industry refer to as “Section 504.” Section 504 of the Rehabilitation Act of 1973 states (in part):
No otherwise qualified individual with a disability in the United States, as defined in section 705(20) of this title, shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Post Office.The receipt of HUD dollars is considered federal financial assistance. An owner, including an owner of an LIHTC project, with HOME or CDBG funding, a mortgage insured through FHA’s Section 236 program, including projects that have gone through the decoupling process, project-based rental subsidy through the Section 8 program or comparable programs such as RAP, Rental Supplement and PRAC, etc. must implement everything Section 504 requires of them to protect the rights of persons with disabilities. Owners of LIHTC projects without HUD dollars are not considered to be in receipt of federal financial assistance so are not covered by Section 504, but they must still protect the rights of the disabled in the operation of their property as required by fair housing law.
Those who want to know what the IRS says about fair housing law and its applicability to the LIHTC program should check out the 8823 Audit Guide. The Guide for Completing Form 8823 Low-Income Housing Credit Agencies Report of Noncompliance or Building Disposition provides instruction for HFA officials on how and when to issue a IRS Form 8823 notifying the IRS they found an owner to be out of compliance with the LIHTC program. In Chapter 13, the IRS explains an owner’s responsibilities under fair housing law, and how an owner jeopardizes their tax credits when failing to meet these responsibilities. Here is a sample of what the IRS has to say:
LIHC properties are subject to Title VIII of the Civil Rights Act of 1968, which makes it unlawful to discriminate in any aspect relating to the sale or rental of dwellings, in the availability of transactions related to residential real estate, or in the provision of services and facilities in connection therewith because of race, color, religion, sex, disability, familial status, or national origin.With an understanding of the IRS’ position, it frightens me every time I hear an LIHTC owner or manager say they won’t spend their time or energy learning fair housing law. I’ve seen fair housing law suits destroy organizations. Defending yourself from even a false claim of discrimination can cost an enormous amount of time and money. And in the case of an LIHTC community, a serious finding of discrimination may cause the loss or recapture of tax credits, and the associated equity investment. If the loss of investment is large enough, it can seriously weaken the financial structure of a project. And don’t forget that every year an owner must certify to their compliance with LIHTC requirements, including their adherence to all applicable fair housing laws. You don’t want to be found out of compliance for lying on your owner’s annual certification of compliance.
HUD is responsible for enforcing the Fair Housing Act. In so doing, HUD investigates allegations of housing discrimination, attempts to resolve the complaint, and determines whether there is reasonable cause to pursue civil action. If reasonable cause is present, HUD must bring the case before an administrative law judge. In the alternative, if either party elects to have claims or complaints decided in a civil action, HUD must refer the complaint to the U.S. Department of Justice for prosecution in the United States District Court.
State agencies must report the receipt of notices of Fair Housing Act (FHA) administrative and legal action issued by HUD or the Department of Justice to the Internal Revenue Service. The state agencies are responsible for reporting their receipt of notifications of administrative and legal action by HUD and the Department of Justice as outlined in the MOU. The IRS is responsible for determining whether the owner is out of compliance for purposes of IRC §42, and the associated out of compliance and back in compliance dates, based on the findings of the court proceeding. The determination will be based on the facts of the individual case.
Please, LIHTC owners, get your head out of the sand. Learn and implement your fair housing requirements. It’s the right thing to do.
Liz Bramlet is President of Liz Bramlet Consulting, LLC. Her firm provides training and consulting services to the affordable housing industry and specializes in the low-income housing tax credit (LIHTC) program. You can learn more about Liz, her firm, and the consulting and training services she offers by checking out her Web site at www.lizbramletconsulting.com, and her training center at www.lbctrainingcenter.com. You can follow Liz on her blog at www.lizbramlet.wordpress.com and on Twitter at www.twitter.com/lizbramlet.
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