Rent Increase and Monitoring Procedure For Bond-Financed Multifamily Projects
As Bond Issuer and Regulatory Agency, the DC Housing Finance Agency (the “Agency” or “DCHFA”) approves and monitors rent increases for the Agency’s bond financed multifamily projects. It is the Owner (Borrower)’s responsibility to make sure their project’s rent level and rent increases meet requirements of the regulatory agreements, bond documents, and if applicable, LIHTC regulations.
1) Governing Documents
Rent increase approval requirements vary among DCHFA’s bond financed projects. In general, these requirements are specified in the projects’ Financing and Regulatory Agreements, Tax Regulatory Agreements, and/or other bond documents. In most cases, the projects are also required to meet the LIHTC program regulations.
2) Timeline for Rent Increase Request Submission, Review, and Notification
- Rental units at a project can have only one rent increase during a twelve-month period;
- Rent increase requests shall be submitted to DCHFA at least 90 days prior to the effective date of the new rent schedule;
- DCHFA shall issue a notice of approval, denial, or request more information from the Owner within 30 days of receipt of a rent increase request;
- The Owner must give the tenants written notification at least 30 days prior to the effective date of the new rents;
- For projects that are not required to have DCHFA’s approval for rent increases, DCHFA requires the Owners to submit new rent schedules within 30 days after the rent increases become effective.
3) Submission of Rent Increase Requests or Rent Schedules
For projects that are subject to DCHFA’s approval for rent increases, the Owner must submit a request for increases, together with information on the current rents, proposed rents, utility allowance schedule, the dollar amount and percentage of rent increases, market survey, as well as a certification confirming that the submission follows the Financing and Regulatory Agreement, Tax Regulatory Agreement, and other applicable bond and LIHTC program requirements. For all other projects, the Owner must still submit the above information except the rent increase request.
Rent increase requests and rent schedules shall be submitted to:
DC Housing Finance Agency
815 Florida Ave, NW
Washington, DC 20001
4) DCHFA’s Review of Rent Increase Request and Rent Schedule
DCHFA’s goal is to ensure compliance of the projects with the bond and LIHTC program requirements. Our Asset Management Staff reviews the request for rent increases and rent schedules according to the Financing and Regulatory Agreement, Tax Regulatory Agreement, and other applicable bond documents. The Staff compares the proposed rents with the applicable LIHTC and bond program rent limits. If necessary, the Staff may review the project’s financial status to verify the eligibility for a rent increase. As long as the proposed rents are below rent limits of the applicable financing programs, the Owner should implement rent increases within the range of 2-4%. A larger percentage of rent increases may be approved if the project’s financial status requires the Owner to do so and if the rental market in the project’s local area supports the increased rents. The Owner should avoid large increases that may bring undue financial burden to the tenants or drive up the project’s turnover and vacancy.
5) Non-Compliance Notices
If a project’s rent increases are not in accordance with the bond and the applicable LIHTC program requirements, DCHFA may issue a Notice of Non-Compliance and require the Owner to take necessary corrective actions. The Notice will become a part of the project’s compliance records and may be shared with the District of Columbia Department of Housing and Community Development (“DHCD”). Pursuant to the LIHTC program guidelines, DHCD may file Form 8823 to IRS for the project’s non-compliance.
If rents are above limits for the applicable bond or LIHTC program, the owner must refund the excess rents to tenants affected by the rent increase.