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Student Restrictions: HUD vs. LIHTC vs. HOME

 US Housing Consultants receives numerous inquiries regarding student status and proper documentation of applicant/tenant files to ensure compliance. This article applies to properties with HUD Section 8, Low-Income Housing Tax Credit (LIHTC) and/or HOME funding. Confirming student status requirements are met is a critical piece in determining eligibility. Applying student rules based on funding can be challenging, especially when properties have multiple funding sources in which an applicant/tenant may need to meet separate student-related rules in order to qualify. Here are some guidelines that we hope will be helpful when determining eligibility for a household with a student(s).

Why are there student restrictions in affordable housing?

For LIHTC… The LIHTC student restrictions were primarily implemented to prevent dormitory and/or transient housing.

For HUD… The HUD student restrictions were primarily implemented for two reasons:

  • To address incidents of children of wealthy parents receiving federal housing assistance; and
  • To address incidents of college students obtaining federal housing assistance without their educational financial assistance counted as income for purposes of income eligibility for federal housing assistance.

For HOME… In 2013, HUD revised regulations governing the HOME program and decided that HOME funded properties should follow HUD's student restrictions.

What are the student restrictions?

For LIHTC… A household cannot be comprised of all full-time students (Kindergarten through 12th grade and institutions of higher education) unless they meet one of the following exceptions:

  • A student receiving assistance under Title IV of the Social Security Act (TANF); or
  • A student who was previously in the foster care program; or
  • A student enrolled in a job training program receiving assistance under the Job Training Partnership Act or under other Federal, State or local laws; or
  • The household is comprised of single parents and their children and such parents are not dependents of another individual and such children are not dependents of another individual other than a parent of such children. In the case of a single parent with children, the legislative history explains that none of the tenants (parent or children) can be a dependent of a third party; or
  • The household contains a married couple entitled to file joint tax returns.

Note that for the LIHTC program, a student who is a full-time student for any portion of 5 months out of the current calendar year is considered a full-time student for the entire calendar year. The months do not need to be consecutive.

For HUD/HOME programs… A household is not eligible for occupancy if the household contains a full- or part-time student at an institution of higher education and all of the following statements are true for the student:

  • Is under the age of 24;
  • Is not a veteran of the United States military;
  • Is unmarried (if married, the couple cannot live apart from each other);
  • Does not have a dependent child who resides with the household member at least 50% of the time;
  • Is not a person with disabilities receiving Section 8 assistance as of November 30, 2005;
  • Is not otherwise individually eligible or has parents who (individually or jointly) are not income eligible to receive Section 8 assistance, unless the student can demonstrate his or her independence from his/her parents*.
  • Is not residing with parents who are receiving or applying for Section 8 assistance.

To determine a student's independence from his or her parents, the owner/manager should use the following criteria:

  • The individual must be of legal contract age under state law.
  • The individual must have established a household separate from parents or legal guardians for at least one year prior to application for occupancy, or the individual must meet the U.S. Department of Education's definition of an independent student. Per definition, an independent student is:
    • At least 24;
    • Married;
    • A graduate or professional student;
    • A veteran;
    • A member of the armed forces;
    • An orphan;
    • A ward of the court;
    • Someone with legal dependents other than a spouse;
    • An emancipated minor; or
    • Someone who is homeless or at risk of being homeless.
    • The individual must not be claimed as a dependent by parents or legal guardians pursuant to IRS regulations.
    • The individual must obtain a certification of the amount of financial assistance that will be provided by parents, signed by the individual providing the support. This certification is required even if no assistance will be provided.

Note that for HUD/HOME, current student status is determined; the 5-month rule does not apply (LIHTC only).

Since there are substantial differences in the student restrictions, it is important that property owners/managers are asking the right questions of applicants/tenants when there is layered funding to ensure proper eligibility guidelines are met.

If…

Is the HUD/HOME student rule triggered?

Is the LIHTC student rule triggered?

The student is aged 18-23

Yes

Yes, if all household members are full-time students

The household is comprised of all full-time students

Yes

Yes

The household is comprised of all part-time students

Yes

No

The household consists of all full-time high school students

No

Yes

The household consists of all recent high school graduates

No

Maybe (if full-time students for 5 months of the current calendar year)

The household consists of all recent college graduates

No

Maybe (if full-time students for 5 months of the current calendar year)

For properties with layered funding (both LIHTC and HUD Section 8 or HOME), both sets of student restrictions must be met.

Is Financial Assistance in Excess of Tuition and Required Fees considered income?

For LIHTC… If an applicant/tenant does not receive Section 8 assistance, all forms of student financial assistance are excluded from annual income. Financial assistance includes grants, scholarships, educational entitlements, work study programs, and financial aid packages. It doesn't matter whether the assistance is paid to the student or directly to the educational institution.

For HUD/HOME and for an LIHTC household who receives Section 8 assistance… Financial assistance in excess of tuition and other required fees and charges is included as income, except for students who are living with their parents who are applying for or receiving Section 8 assistance or if the student is over the age of 23 with dependent children.

Has your verification form been updated to include fees? In December 2015, HUD updated the definition of "tuition" to include "required fees and charges". Required fees include all fixed sum charges that are required for a large proportion of all students. Examples of required fees and charges include lab fees, athletic fees, student center fees, technology fees and fees specific to the student's major or program (i.e., nursing program).

Expenses associated with room and board, books, supplies, meal plans, transportation, parking and other non-fixed sum charges are not included in tuition.

At Annual Recertification…

  • For LIHTC, if the entire household is comprised of full-time students and does not meet an exception to the student rule, the tenant household no longer qualifies for the unit and may be required to vacate the unit.
  • For HUD, if the student rule is triggered and the household does not meet an exception to the student requirements, the household is no longer eligible to receive a subsidy. Therefore, termination of assistance is warranted.
  • For HOME, if the student rule is triggered and the household does not meet an exception to the student requirements, please check with your HOME-monitoring participating jurisdiction. It is unclear how these situations should be handled since tenants in HOME units do not pay rent based on income; therefore, termination of assistance would not be applicable.

What about unborn children?

For LIHTC… An unborn child IS considered a household member when determining eligibility based on student status. Therefore, if a self-certification is provided that a household member is pregnant, the unborn child is not a student and the student rule is not triggered.

For HUD/HOME… An unborn child IS NOT considered a household member for the HUD/HOME programs when determining eligibility based on student status.

Examples:

For LIHTC

  • Sally applies to XYZ Apartments, which is a Tax Credit property. She is applying for herself and is 18 years old. She indicates on her application that she is expecting a child, is a full-time student, and is not a dependent of someone else. Is Sally eligible for this property?
  • YES - According to the IRS, an unborn child is a member of the household for both determining whether the household is income qualified and applying the student exception rules. Sally can be considered eligible for an apartment based on meeting one of the exceptions to the student rule.

For HUD/HOME

  • Debbie applies to ABC Apartments, which is a HUD Section 8 property. She is applying for herself and is 23 years old. She indicates on her application that she is expecting a child and is a full-time student. Is Debbie eligible for this property?
  • NO-- According to HUD regulations, any person applying for HUD Housing who is a full or part-time student, enrolled in an institution of higher education, who is expecting a child and doesn't meet one or more of the exceptions to the rule is not eligible to receive Section 8 assistance. The unborn child is only taken into consideration for purposes of establishing the student's income eligibility and appropriate unit size.

Due to the complexity of student rules, it is best practice to ensure all required information specific to funding source(s) is captured on third party verification forms. Having the right student questions answered is the key to determining both initial and continued eligibility.

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