§4104 Annual Authorized Return and Preservation Rents

Summary

The federal official in charge must set a yearly allowed return equal to 8 percent of the project's preservation equity (a value defined elsewhere). That official also figures a project's total preservation rents to compare with federal cost limits. Those total rents are the income the project would need to pay certain costs. If affordability rules are extended, the income must cover the 8 percent return, rehab loan payments, payments on the federal mortgage, operating costs, and reserves. If the owner is selling, the income must cover acquisition loan payments instead of the 8 percent return, plus rehab loan payments, federal mortgage payments, operating costs, and reserves. Actual rents owners may charge are set in other parts of the law. Owners may get new loans or refinance. With refinancing they must do needed rehab based on a capital needs study acceptable to the lender. Any rent increases tied to the new loan must include the loan payments, a normal debt-service cushion, and replacement reserves. For units without rental subsidies, rent increases from refinancing cannot exceed 10 percent per year. Tenants living there when the refinancing happens cannot be forced to pay more than the greater of 30 percent of their income or what they paid before, unless they do not give proof of income. The 10 percent rule does not stop rent rises that come from higher operating costs.