Housing Seniors in LIHTC Properties

by A. J. Johnson, HCCP, A.J. Consulting Services, Inc.

Many Low Income Housing Tax Credit (LIHTC) properties are designated as senior housing or housing for the elderly. This often is a requirement of a project’s extended use agreement, sometimes known as a Land Use Restrictive Agreement or LURA. LIHTC developers often build senior facilities as a way of scoring more points on tax credit applications. This is done when state agencies make senior housing a priority in the Qualified Allocation Plan.

LIHTC program regulations do not have any specific requirements regarding senior housing. For a property to qualify as “senior,” it must meet the requirements of federal fair housing law.

The Fair Housing Amendments Act of 1988 added families with children under age 18 (familial status) as a protected class. As a result, rental housing properties may not restrict occupancy to adults. There is an exception, however, for properties that qualify as “housing for older persons.” The purpose is to ensure that the familial status provisions of the Fair Housing Act do not unfairly limit housing choices for the elderly. This exception, though, does not permit a dual-purpose facility, where part of a housing project is designated for elderly residents and part is open to anyone.

Three Qualifying Tests for Senior Housing

To qualify under this exception, a residential rental property must meet one of the following three tests:

  1. Housing provided under any state or federal program that HUD determines is specifically designed and operated to assist elderly persons. This recognizes that housing developed for elderly persons under government programs may be custom-tailored to their special needs and may exclude children. HUD and USDA Rural Development (RD) elderly projects fall within this category, although neither HUD nor RD have designated any of their elderly housing programs as exempt from the familial status provisions of the Fair Housing Act. Therefore, children of otherwise qualified applicants are permitted in these properties. HUD and RD elderly housing projects also classify apartments occupied by handicapped/disabled residents as elderly units.

  2. Housing intended for, and solely occupied by, persons 62 years of age or older (62+). To qualify, all residents of the property must be at least 62. A couple consisting of a 62-year-old husband and 59-year-old wife, for example, would not be eligible for occupancy. The only people under 62 who can live in the property are a site employee (and their family) or a live-in-aide necessary for the care of a 62+ resident. In addition, the property must be intended for persons 62+. Therefore, a property that has 10 one-bedroom apartments occupied solely by persons 62 and older will not be considered to be senior housing unless the property’s units are intentionally leased only to 62+ renters.

  3. Housing intended and operated for occupancy by persons 55 years of age or older (55+). This is housing in which at least 80% of the units are occupied by at least one person aged 55 or older. In addition, the property must comply with HUD rules regarding verification of such occupancy by reliable surveys and affidavits and publish and follow policies and procedures demonstrating an intent to provide housing for persons 55+. This provision was amended in 1995 to require all advertising, programs, and policies to clearly state that the property is for older persons. The 1988 law required that such housing provide “significant facilities and services specifically designed to meet the physical and social needs of older persons.” As now written, though, the rule requires only that a property have policies and procedures demonstrating an intent to provide housing for this age group. While this is much less restrictive than the requirements for 62+ housing, this exception places more requirements on a property. However, any property intended for older people will certainly meet these requirements, and the 55+ test is generally recommended. Verification that this threshold test has been met is required, which is achieved through reliable surveys and affidavits.

The Path to Compliance

Developers, owners and managers choosing No. 3 above should be aware of two potential traps. First, units occupied by onsite employees younger than 55 are not included in the unit count for purposes of determining compliance with the 80% threshold test. Secondly, in new construction projects, the 80% test must be met once 25% of the units have been occupied.

Care also should be taken with the other 20% of units. The intention when the law was written was to permit less than 100% elderly occupancy in properties to accommodate surviving spouses under age 55 and to allow live-in individuals that care for elderly residents (e.g., nurses, aides). While permitted, it was never actually intended that such properties be less than 100% senior.

Following are some general recommendations:

  • Make sure that properties stay well above the 80% threshold to avoid falling below this crucial marker due to the death of a surviving spouse, etc. A good policy is to require that all units be 55+.

  • Ensure that all marketing and internal operations clearly show that the property is intended completely for those age 55 and older. A property advertised as 80% senior and 20% non-senior will be treated as a family property.

  • For a new project, when the requirement for senior housing is part of a LURA or local regulatory agreement, owners should ask the allocating agency to word the LURA to allow the property to use the 55+ test as the standard for meeting the LURA’s requirements. In other words, try to avoid having a LURA that requires all residents to be 62+.

A.J. Johnson has been involved in the development and management of residential and commercial enterprises since 1976. Prior to creating his own consulting firm, Johnson served as executive vice president of Beacon Construction Co. of Newport News for 12 years. Before joining Beacon in August 1983, Johnson was with K-Mart Corporation, Portsmouth Redevelopment & Housing Authority and Suffolk Redevelopment & Housing Authority.