§4104 Annual authorized return and preservation rents

Summary

The Secretary must set an annual authorized return equal to 8% of the project’s preservation equity. Preservation equity is a defined measure of the project’s equity. The Secretary must also calculate a total preservation rent amount for each appraised project. That total is only used to compare with Federal cost limits; actual rents are set under other rules. There are two totals. For keeping the low‑income rules in place, the total is the gross income needed to pay the 8% return, any rehab loan debt, the federally assisted mortgage debt, operating costs, and adequate reserves. For a sale, the total is the gross income needed to pay acquisition loan debt, rehab loan debt, the federally assisted mortgage debt, operating costs, and adequate reserves. Owners may get new loans or refinance and use the money. With refinancing they must fund needed rehab, include the new debt service, reasonable coverage, and replacement reserves in the budget, and limit rent increases from the refinancing to 10% per year for tenants without subsidies. Tenants living there at refinancing cannot be charged more than the greater of 30% of their income or their prior rent-plus-utilities for as long as they stay, unless they do not provide proof of income.