HUD Handbook 4350.3 § 4-25

A.       HUD does not prescribe a method to ensure compliance with income-targeting.
                 Sample steps that an owner may want to follow are listed in Figure 4-6.

Figure 4-6: Sample Steps Owners May Use to Implement Income-Targeting

Step 1: Estimate annual turnover for the property based on turnover history.

  Step 2: Analyze the waiting list by income category, looking particularly at the top of the list, that is,
  those applicants who are likely to be offered units during the coming year.

  Step 3: Take no action if at least 40% of the applicants on the waiting list who are expected to be
  offered units during the year have incomes at or below the extremely low-income limit. Applicants
  may be admitted in order, and compliance with the income-targeting rules will likely be achieved.
  Monitor quarterly to confirm compliance.

  Step 4: If at least 40% of the applicants who are expected to be offered units in the next year do not
  have incomes at or below the extremely low-income limit, then the property must establish tenant
  selection procedures to ensure that the 40% requirement is met. Owners should also consider
  increasing their efforts to market to extremely low-income applicants to ensure that a sufficient
  number of applicants on the waiting list meet the income-targeting requirements.

 See the discussion and examples following this figure for methodologies designed to achieve
 the income targeting requirements.

B.       Owners may not select families for unit/property occupancy in an order
                 inconsistent with the waiting list in order to house relatively higher-income

families. However, an owner may select a family for occupancy of a property or
                 unit based on its extremely low-income status in order to satisfy income-targeting
                 requirements. (See paragraph 4-5 for an explanation of the income-targeting
                 requirement.)

        C.       Regardless of the method chosen to comply with the income-targeting rule, the
                 results should be monitored quarterly and adjusted if necessary. The selected
                 method must be stated in the property’s tenant selection plan.

                 NOTE: Tracking initial admissions to the Section 8 project based assistance
                 program is important to ensure accurate tracking. For example, an initial
                 certification processed to move a tenant from Section 236 assistance to Section
                 8 assistance is counted for income targeting.

                                                Example
                   A 100 unit Section 236 property with 50 Section 8 subsidy units is
                   100% occupied and has very little turnover. A Section 8 tenant
                   moves out of the property. The manager would like to give the
                   Section 8 assistance to a Section 236 very low-income family who
                   qualifies for Section 8 assistance but must be sure that income
                   targeting requirements will be met. If the owner determines that the
                   income targeting requirement cannot be met by initially certifying a
                   low-income tenant, the owner must fill the vacancy with an extremely
                   low-income family from the waiting list.

D.       Occupancy records must be kept so that auditors and those performing
                 management reviews can monitor for compliance with the income-targeting
                 requirement. Reviewers will check the tenant selection plan for a written
                 description of the process and then review the admissions to ensure that the
                 process was followed and the results are in compliance. Both move-in and initial
                 admissions records must be maintained for auditing purposes.

        E.       If an owner actively markets to extremely low-income families but is unable to
                 attract a sufficient number to lease 40% of available units during the year to
                 extremely low-income families, the owner may rent to other eligible families after
                 a reasonable marketing period.

        F.       To market adequately the owner must, at a minimum, advertise in the locality and
                 conduct outreach to local organizations serving the extremely low-income
                 population for no less than 30 days. If, after that period of time (with
                 documentation of the marketing efforts), the owner is unable to attract eligible
                 extremely low-income applicants, the owner may admit other eligible families.
                 The owner must continue to advertise to extremely low-income applicants. Both
                 the initial and ongoing marketing must be in compliance with the Affirmative Fair
                 Housing Marketing Plan.

G.       The owner must maintain records that demonstrate to HUD’s satisfaction that all
                 reasonable steps were taken to fill these units with extremely low-income
                 tenants.

        H.       Whatever method is used by owners to meet the income targeting requirement
                 for Section 8 properties, they must periodically monitor actual admissions to
                 ensure that at least 40% of admissions are extremely low-income families.

                 1.       If an owner chooses to follow the waiting list chronologically and through
                          monitoring determines that the income-targeting goal will not be met, a
                          specific targeting methodology may be implemented during the year.
                          (See Example 1 – Income-Targeting Method below.) In such
                          circumstances, the owner must clearly document in property records the
                          date of any revision to the property’s income targeting procedures. In
                          addition, the owner must make the revised methodology very clear to any
                          applicants who are selected from the waiting list after the change in
                          methodology.

                 2.       If an owner uses a method other than the standard waiting list order, and
                          the monitoring results show that more than 40% of admissions are
                          extremely low-income families, the owner may revise the tenant selection
                          procedure to follow the waiting list in chronological order for the remainder
                          of the year. Again, if the method is changed mid-year, documentation
                          must be kept indicating the reason and date of such change.

                 3.       An example of an admissions log is shown below. An owner can use this
                          type of log to monitor the percentage of extremely low-income admissions
                          to a property during the year. In the example below, assume that the
                          owner's methodology is to alternate between the first extremely low-
                          income applicant on the waiting list and the eligible applicant at the top of
                          the waiting list.

        I.       Owners of properties with project-based Section 8 must comply with TRACS
                 income-reporting requirements that will permit HUD to maintain the data
                 necessary to monitor compliance with income-targeting requirements.

Example 1 – Income-Targeting Method
            Methodology: Select (at minimum) an extremely low-income applicant
                         to be admitted to every other vacant unit.
            Happy Acres: 110 units – contains both efficiencies and 1-bedroom units
            Section 8 New Construction Property
            HAP Effective Date: 11/15/81
            Anticipated annual turnover: 10%, or 11 units

            Waiting List

            Efficiency                                      1-Bedroom
            Alice Johnson (VLI)                             Phil Jones (VLI)
            Aiko Kihara (ELI)                               Maria Rodriguez (ELI)
            Tina Purcell (ELI)                              Elsa Anderson (ELI)
            Rita White (VLI)                                Bill Rogers (VLI)
            Betty Harvey (VLI)                              Uja Gupta (VLI)
            Jean Miller (ELI)                               Robert Johnson (VLI)
            Randy Lopez (ELI)                               Sam Sorenson (ELI)

Analysis to determine whether a method other than following the waiting list
            in chronological order is needed:

             5 applicants with ELI must be admitted to the property

             Of the top 14 applicants from the waiting list, seven (50%) have extremely low-
               incomes. It appears that by following the waiting list in chronological order, the
               property will meet the 40% requirement.

             However, if the 11 vacancies occur in a mix of five efficiencies and six 1-bedroom
               units, then the percentage of those admitted with extremely low-incomes will be
               only 36% (4 units) following the order of the waiting list.

             The owner may decide to monitor admission carefully and change policies mid-
               year if the targeting goal is not being achieved, or may develop another method
               to ensure compliance. Monitoring is essential.

            Owner Policy on Admissions: This owner has decided to follow the waiting list in
            chronological order. The Tenant Selection Plan states that: "Applicants will be
            selected based on waiting list order. Each quarter, the percentage of extremely low-
            income admissions for the year to date will be examined. An alternate tenant
            selection method will be implemented if extremely low-income admissions are:

                      Less than 30% after the first quarter of the fiscal year.
                      Less than 35% after the second quarter of the fiscal year.
                      Less than 40% after the third quarter of the fiscal year.

            This policy will ensure that, regardless of which bedroom size units become
            available, the owner will meet the income targeting requirements.

Example 2 – Income-Targeting Method
            Methodology: Admit extremely low-income families to the first 40% of
            expected vacancies and then admit eligible applicants from the top of
                               the list regardless of income.
             Friendship Heights: 80 units - contains both efficiencies and 1-bedroom units
             Section 8 New Construction Property
             HAP Effective Date: 3/27/80
             Anticipated annual turnover: 10%, or 8 units

             Waiting List

             Efficiency                                      1-Bedroom

            Alice Johnson (VLI)                              Phil Jones (VLI)
            Aiko Kihara (ELI)                                Maria Rodriguez (ELI)
            James Johnson (VLI)                              Elsa Anderson (ELI)
            Rita White (VLI)                                 Aretha Samuels (ELI)
            Betty Harvey (VLI)                               Uja Gupta (VLI)
            Jean Miller (ELI)                                Robert Johnson (VLI)
            Randy Lopez (ELI)                                Sam Sorenson (ELI)

Analysis to determine whether a method other than following the waiting list
             in chronological order is needed: In this property, following the waiting list may
             not achieve the required results, depending on where the vacancies occur.

                   Four admissions must be extremely low-income applicants to achieve the
                    targeting goal.

                   If there are five vacancies in the efficiencies and three in the 1-bedrooms,
                    and the list is followed in chronological order, the owner will not achieve 40%
                    ELI admissions. In order to comply, the owner will have to skip some of the
                    applicants with higher incomes.

              Owner policy on admissions: The owner chooses to meet the target based on
              expected vacancies first, and then use the waiting list in chronological order. The
              Tenant Selection plan states that: "Extremely low-income applicants will be
              selected from the waiting list first to occupy 40% of the number of units expected to
              be filled during the year. Subsequently, families will be selected from the top of the
              waiting list, regardless of income." (I.e., if 6 vacant units are projected, the owner
              selects 3 extremely low-income families from the list first, then goes to the top of
              the list for eligible families regardless of income).

Example Admissions Log to Track Income-Targeting Progress

A:                      B:                      C:                   D:               E:
    Type of              Family Name           Extremely Low-         Very Low- or     Percentage of
  Admission -                                      Income             Low-Income           Total
  Based Upon                                                                            Admissions
   Targeting                                   (check if family   (check if family       That Are
  Methodology                                      is ELI)          is LI or VLI)     Extremely Low-
                                                                                         Income*

Extremely Low          Aiko Kihara             X
Income (ELI)

Top of Waiting List    Alice Johnson                              X
(TOL)

ELI                    Tina Purcell            X

TOL                    Rita White                                 X

ELI                    Jean Miller             X

TOL                    Betty Harvey                               X

ELI                    Randy Lopez             X

Total                                          4                  3                   57%

*NOTE: The percentage in Column E is calculated by dividing the number of extremely low-income
families admitted (Column C) by the total number of families admitted (Column C plus Column D).