Federal officials are proposing a major change to the low-income housing tax credit (LIHTC) program’s occupancy threshold requirement.

They are looking at an “income averaging” option that allows properties to serve households whose average income is no greater than 60 percent of the area median income (AMI) and with no individual household above 80 percent, according to the Department of Housing and Urban Development’s (HUD) 2012 budget proposal unveiled Feb. 14.

The program’s current cap restricts LIHTC apartments to households earning no more than 60 percent of the AMI.

HUD officials say the change would allow greater income mixing at the project level and help align LIHTCs with HUD’s and the Department of Agriculture’s affordable housing programs, which define “low income at 80 percent of the AMI.”

The proposal would increase the ability to preserve HUD-assisted properties, according to officials, who noted that there are 69,224 households living in public housing and 23,271 households in multifamily housing with incomes above 60 percent of the AMI. The proposal allows these units to be counted in basis, increasing the equity flowing to these projects for preservation, according to the budget plan.

The proposal also calls for a basis boost, “which would give federally assisted housing a 30 percent increase in eligible basis for bond-financed projects, in the context of preserving, recapitalizing, and rehabilitating existing affordable housing.”

The 2012 budget plan also calls for cuts to the Community Development Block Grant (CDBG) and HOME programs.

The lean budget reflects a number of tough choices, said HUD Secretary Shaun Donovan in a call with reporters. There are programs that would not be cut under different fiscal circumstances, he said.

“American families are tightening their belts, and we need to do the same,” he said.

HUD has also proposed reforms to the Sec. 202 and Sec. 811 programs.
The department’s net budget authority of $43 billion is 1 percent below the fiscal 2010 enacted level of $43.5 billion.

The budget cuts CDBG funding by 7.5 percent, or $300 million, and HOME Investment Partnerships by 9.5 percent, or $175 million, compared with current levels.