42 U.S.C. § 12745 — Qualification as affordable housing

(a) Rental housing (1) Qualification: Rental housing counts as affordable housing under this subchapter only if it meets all of the following: (A) Rent limit — rent cannot exceed the lesser of (i) the existing fair market rent for comparable units in the area, as the Secretary sets under section 1437f, or (ii) a rent that is no more than 30 percent of the adjusted income of a family earning 65 percent of the area median income (adjusted for bedrooms). The Secretary may set this 65 percent ceiling higher or lower if construction costs, fair market rents, or unusual incomes justify it. (B) Very low-income units — at least 20 percent of the units must either (i) be occupied by very low-income families paying no more than 30 percent of their monthly adjusted income toward rent (not counting any federal or state rental subsidy), or (ii) be occupied by very low-income families at rents no higher than the "gross rent" limit for rent-restricted units under section 42(g)(2) of title 26. (C) The housing can only be occupied by households that qualify as low-income families. (D) The owner cannot refuse to lease to someone just because they hold a Section 8 voucher or certificate of eligibility. (E) Long-term affordability — the housing must stay affordable, under binding commitments acceptable to the Secretary, for the property's remaining useful life (regardless of the mortgage term or any change in ownership), or for whatever period the Secretary determines is the longest feasible given sound economics and this Act's purposes — except (i) after a foreclosure (or a transfer in place of foreclosure), if that action recognizes any contractual or legal rights of public agencies, nonprofit sponsors, or others to prevent losing low-income affordability, and is not done just to escape the affordability rules, as the Secretary determines; or (ii) where affordable housing is no longer financially viable because of unforeseen events beyond the reasonable control of the jurisdiction or owner that significantly hurt the property's finances or condition, as the Secretary determines. (F) If newly built, the housing must meet the energy efficiency standards set under section 12709. (2) Adjusting the rent limit: The Secretary may adjust the rent limit set under paragraph (1)(A), but only if necessary to keep the project financially viable, and only by the amount needed for that purpose. (3) Rising tenant incomes: Housing still qualifies as affordable, despite temporarily not meeting the tenant-income rules in paragraph (1)(B) or (C), if that is because existing tenants' incomes rose, and the owner is taking action satisfactory to the Secretary to fill vacancies properly until the problem is fixed. Tenants who no longer qualify as low-income must pay the lesser of what state or local law requires, or 30 percent of their adjusted monthly income, recertified each year — except this recertification rule does not apply to units that also received a low-income housing tax credit under section 42 of title 26. (4) Mixed-income projects: Housing making up less than 100 percent of a project's units can still qualify as affordable if it meets this section's criteria. (5) Mixed-use projects: Housing in a project partly used for non-residential purposes can still qualify if it meets this section's criteria. (6) Waiving the rent limit: (A) To provide affordable housing for the families described in (B), the Secretary may — if the project owner applies — waive the rent-limit rule in paragraph (1)(A) for a unit, if (i) the unit houses such a family and gets Section 8 tenant-based assistance, (ii) the unit's rent does not exceed the fair market rent the Secretary sets under section 1437f, and (iii) the Secretary decides that this waiver, together with others like it in the project, will effectively improve affordable housing for these families. (B) "Eligible families" here means a family headed by at least one elderly person living with one or more of that person's grandchildren, great-grandchildren, great-nieces, great-nephews, or great-great-grandchildren (as the Secretary defines those terms) — but not including the parent of those children. Legally adopted children of the elderly person count too. (7) Qualification exception: Despite paragraph (1)(A), a rental unit still qualifies as affordable housing if (A) its tenant gets Section 8 tenant-based rental assistance, (B) the tenant's rent contribution does not exceed what that assistance allows, and (C) the total rent does not exceed the amount the public housing agency administering that assistance has approved. (b) Homeownership (1) Qualification: Housing for homeownership counts as affordable housing only if it meets all of the following: (A) Price limit — the initial purchase price cannot exceed 110 percent of the area's median purchase price, as the Secretary determines, with adjustments for housing type (single-family vs. multifamily) and for new versus older housing. (B) Income limit — the home must be the main residence of an owner whose family income does not exceed 100 percent of the area median (adjusted for family size), measured (i) at purchase, for a contract to buy existing housing; (ii) when the agreement is signed, for a lease-purchase deal; or (iii) when the contract is signed, for a contract to buy housing yet to be built. (C) Resale restrictions — the jurisdiction must set resale restrictions, approved by the Secretary as appropriate, that (i) allow resale only to buyers meeting the income qualifications, at a price that gives the seller a fair return (including improvements) while keeping the home affordable to buyers at or below the area median income; (ii) recapture the HOME investment to help other buyers, unless there are no or insufficient net proceeds; or (iii) preserve long-term affordability through a shared equity model, community land trust, limited equity cooperative, community development corporation, or similar mechanism the Secretary approves — including purchase options, rights of first refusal, or similar preemptive purchase rights. (D) If newly built, the housing must meet the energy efficiency standards under section 12709. (E) The jurisdiction must also set restrictions, approved by the Secretary as appropriate (considering the property's useful life), that either (i) require any later sale to go only to a buyer meeting the income qualifications in (B), at a price set by a formula the jurisdiction establishes that gives the owner a reasonable return (which can include a share of improvement costs); or (ii) recapture the HOME investment to help other buyers, unless there are no or insufficient net proceeds. (2) Purchase by a community land trust or housing cooperative: Despite (1)(C)(i), and under terms the Secretary sets, the Secretary may let a participating jurisdiction allow a community land trust, housing cooperative, or community development corporation that used HOME funds to develop qualifying housing to buy back that housing — (A) under the terms of its preemptive purchase option, lease, land covenant, or similar legal instrument, as long as those terms stay subject to this subchapter's requirements; (B) if the purchase is meant to (i) enter the chain of title, enable a purchase by a qualified buyer on the trust's or co-op's waitlist, perform needed rehabilitation, or add a subsidy to preserve affordability, or (ii) serve another purpose the Secretary approves; and (C) if, within a reasonable time after that purpose is met, the housing is then sold to a qualified buyer under paragraph (1)(B). (c) Exceptions for homeownership (1) Military members: A jurisdiction, under terms the Secretary sets, may suspend or waive the income qualifications in (b)(1)(B) for a home that otherwise meets (b)(1)'s criteria, if the owner (A) is a regular armed forces member or a National Guard member on full-time duty, active Guard and Reserve duty, or inactive-duty training, and (B) has received (i) deployment orders to a location not reasonably close to the home, as the Secretary determines, for at least 90 days, or (ii) permanent change-of-station orders. (2) Heirs and beneficiaries: Housing that met the resale-restriction criteria in (b)(1)(C) before the owner's death keeps qualifying as affordable housing if (A) it becomes the main residence of the deceased owner's heir or beneficiary, as the Secretary defines that term, and (B) that heir or beneficiary, under terms the Secretary sets, takes on the deceased owner's duties and obligations regarding the HOME funds.