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Definition of Income for 80/20

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Definition of Income for 80/20

Postby madehiggins » Wed Oct 18, 2006 1:31 pm

I applied for and was given a lease for an 80/20 apartment in NYC. Now I am being told I have to leave because I may be over income.

The history is, I started a business 6 years ago and it's a slow start, when I applied fpr the apartment I had a second job that paid more than the $20,000 income. I used my "total income" as defined on my tax returns - and yes they're correct! With the loss from my business factored in, I fell within the parameters to get the apartment.

A year later I'm told by a different administrator at the management co that I have to go. After days of research and talks witheveryone, noone can tell me that "total income" is wrong. The HUD manual doesn't say anything the HDC told me on the phone that the "smaller number" is ok, but they won't send me anything in writing.

Where can I find a ruling that relates to this? Or a lawyer that can help me keep my apartment?
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Postby Anna » Wed Oct 18, 2006 2:21 pm

per HDC site, application income is gross income, they should have been crystal clear on their application: http://www.nychdc.com/ApartmentSeekers/faq.html

How is income calculated?
The managing agents will calculate income using annual gross income, and also include interest income earned from assets.

Once I move into my apartment, will my rent go up?
Low-income HDC-financed apartments are entered into the rent stabilization system, which would usually mean that your rent will increase by a percentage every year, based on the increase allowed by the Rent Guidelines Board. However, these increases are limited by restrictions on rent increases in the low-income housing programs. Middle-income apartments are entered into the rent stabilization system, which means that your rent will increase by a small percentage every year, based on the increase allocated by the Rent Guidelines Board.


If they now believe you lied on your application and did not meet their income requirements, they might try to evict you. They can't do anyting verbally; they must send you something in writing.

Legal Aid, LSNY, etc [ http://lawhelp.org/ny/ ]], should be more familiar w/ 80/20 requirements than regular T-attys. Your local councilmember, state senator, assemblyperson office should too.
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Is there any legal rulings on this

Postby madehiggins » Wed Oct 18, 2006 2:34 pm

I saw that one liner... but the HUD manual doesn't say this and there's no other documentation out there.

It seems irrational that they ignore income calculations as done by the DHCR for rent stabilized apartments and as done by the IRS? They don't have any specific rulings on this that I can find.

Basically, I'm trying to prove that if you have a business that loses 10K and a job that pays 30K, then your income is 20K.

As it stands now, I will be evicted. What are the risks involved in fighting this. I already called and wrote HUD in DC, HDC in NYC, my congresswoman, senator, and LIHTC, and other groups.
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Postby Aubergine » Wed Oct 18, 2006 11:57 pm

The relevant IRS regulation for low-income housing tax credit buildings is 26 CFR 1.42-5 (b) (vii), which states, "Tenant income is calculated in a manner consistent with the determination of annual income under section 8 of the United States Housing Act of 1937 ('Section 8'), not in accordance with the determination of gross income for federal income tax liability."

The definition of "annual income" for Section 8 is found at 24 CFR 5.609. Paragraph (b) specifies that annual income includes
"(2) The net income from the operation of a business or profession. Expenditures for business expansion or amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation of assets used in a business or profession may be deducted, based on straight line depreciation, as provided in Internal Revenue Service regulations. Any withdrawal of cash or assets from the operation of a business or profession will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the family;"
(Emphasis added.) There are a number of ways to define income from a business, but this is the one that applies to Section 8 tenants and thus to tenants in LIHTC buildings, such as NYC HDC 80/20 buildings.
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Thanks... but

Postby madehiggins » Thu Oct 19, 2006 1:47 pm

That helps, I read the housing act of 1937 and a ton of other stuff. But even with this I am unclear.

My business is six years old, I hit a rough patch in 2005 and that's when I applied for the 80/20 program. If my business lost S10,000 and I earned $30,000 in other part time employment then do I qualify for a program that requires an income of 20,000?

Basically, can the negative net from my business be included in my income? I didn't spend money to expand the business, nor did I make any investments, I just covered the year to year operating costs and had a bunch of clients who stiffed me so I came up with a loss.

The note below doesn't seem to cover this. And if the answer is no, I want to change the rules. Is this possible?

2) The net income from the operation of a business or profession. Expenditures for business expansion or amortization of capital indebtedness shall not be used as deductions in determining net income. An allowance for depreciation of assets used in a business or profession may be deducted, based on straight line depreciation, as provided in Internal Revenue Service regulations. Any withdrawal of cash or assets from the operation of a business or profession will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested in the operation by the family;

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Postby Aubergine » Thu Oct 19, 2006 2:44 pm

One part of your question was whether gross or net income from a business was counted. The regulation clears that up -- the net, not the gross, income from a business is what is counted for a LIHTC tenant. Now you are asking whether that "net income," if negative, can offset other income. HUD interprets its own regulation as meaning it can not:
G. Income from a Business

When calculating annual income, owners must include the net income from operation of a business or profession including self-employment income. Net income is gross income less business expenses, interest on loans, and depreciation computed on a straight-line basis.

1. In addition to net income, owners must count any salaries or other amounts distributed to family members from the business, and cash or assets withdrawn by family members, except when the withdrawal is a reimbursement of cash or assets invested in the business.

2. When calculating net income, owners must not deduct principal payments on loans, interest on loans for business expansion or capital improvements, other expenses for business expansion, or outlays for capital improvements.

3. If the net income from a business is negative, it must be counted as zero income. A negative amount must not be used to offset other family income.

HUD Handbook 4350.3 REV-1: Occupancy Requirements of Subsidized Multifamily Housing Programs, ch 5, paragraph 5-10 (G), http://www.hudclips.org/sub_nonhud/cgi/ ... 3503c5.doc (emphasis added).
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Can that be changed? If yes, how?

Postby madehiggins » Thu Oct 26, 2006 8:09 pm

Thanks for all the insights so far.

That doesn't seem right to me. In this case the net income can only go to zero so someone with two jobs gets penalized for having the second job, whereas someone with one job gets rewarded for working half as hard??

Can you tell me the reasoning behing this? I assume it's to avoid hustlers with fake comanies, but what about the people with two REAL jobs?

and

Do you know if it's possible for individuals to apply for exceptions or reviews by HFA?

Or better yet, is it possible to change the HUD manual?
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