Contact: Michael Tucker
(202) 974-2360
mtucker@nmhc.org
Washington, DC, May 5, 2009 – The National Multi Housing Council (NMHC) and National Apartment Association (NAA) applaud guidance issued today by the IRS concerning utility allowance calculations on Low-Income Housing Tax Credit (LIHTC) properties that submeter.
At the urging of NMHC/NAA, last July the IRS issued regulations changing the way rents are adjusted on LIHTC properties where residents pay for their own utilities. The changes allowed property owners to use more accurate data to calculate resident-paid utilities.
"These changes were very important to the nation's supply of affordable housing," said David Cardwell, NMHC's Vice President of Capital Markets. "Rents on LIHTC properties are reduced by the amount a resident pays in utilities. Before last year's changes, the methods the IRS was using to estimate resident utility costs tended to overestimate them. This, in turn, reduced the gross rent received by property owners and was threatening the financial viability of many LIHTC properties."
"Unfortunately, the 2008 regulations included a provision that fundamentally changed an owner’s ability to submeter," explained Cardwell. "Specifically, they stated that only utilities directly paid by the resident to the utility company can be included in the utility allowance."
Today's IRS guidance confirms that utilities paid by a renter on actual consumption in a submetered property count as resident-paid utilities under the utility allowance regulation.
"This is good news for apartment renters and for apartment owners," continued Cardwell. "By helping to ensure sufficient operating capital for these properties, the rules preserve a critical source of affordable housing during an economically challenging time."
The IRS’s 2008 regulations and today's clarification, Notice 2009-44, are available at www.nmhc.org/goto/4821.
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NMHC and NAA operate a Joint Legislative Program and represent the nation’s leading firms participating in the multifamily rental housing industry. NMHC/NAA’s combined memberships are engaged in all aspects of the development and operation of apartment communities, including ownership, construction, finance and management. Together, the organizations operate a federal legislative program and provide a unified voice for the private apartment industry. Nearly one-third of Americans rent their housing, and more than 14 percent of all U.S. households live in an apartment home. For more information, contact NMHC at 202/974-2300, e-mail the Council at info@nmhc.org, or visit NMHC’s web site at www.nmhc.org.