HUD Handbook 4350.3 § 4-5

Program Except Where Otherwise Noted

        A.       Key Requirements

                 For each project assisted under a contract for project-based Section 8
                 assistance, the owner must lease not less than 40% of the dwelling units
                 (assisted under the contract) that become available for occupancy in any project
                 fiscal year to extremely low-income families. The methodology for income-
                 targeting must be described in the tenant selection plan. (For information and
                 guidance about income limit exceptions, see paragraph 3-7.)

                 NOTE: Compliance with income targeting requires owners to count both move-
                 ins and initial admissions to the Section 8 project based assistance program. For
                 example, an initial certification processed to move a tenant from Section 236
                 assistance to Section 8 assistance is counted for income targeting.

                 NOTE: Income targeting does not apply to the Section 202 PAC, Section 202
                 PRAC, Section 811 PRAC, RAP, Rent Supplement, Section 221(d)(3) BMIR or
                 Section 236 programs.

B.       Methods to Comply with Income-Targeting Requirements

                 HUD does not prescribe a method for achieving compliance with the income-
                 targeting requirement. Before determining a specific method to achieve income-
                 targeting requirements, it is a good practice for owners to evaluate the expected
                 admissions based upon the current waiting list.

                 1.       First, owners should determine whether the composition of a property’s
                          current waiting list enables the owner to achieve the income-targeting
                          requirement by simply following the standard waiting list order with no
                          additional procedures. If the current waiting list includes a significant
                          number of extremely low-income applicants, an owner may be able to
                          meet the 40% target with no additional procedures.

                          NOTE: In such cases, it is important that owners periodically review the
                          composition of admissions to confirm that the 40% target will be met for
                          that fiscal year. If an owner’s periodic review reveals that admissions of
                          extremely low-income applicants are below the 40% requirement, the
                          owner may need to begin using additional procedures to ensure that the
                          requirement is met by the end of the fiscal year. The owner’s Tenant
                          Selection Plan must clearly describe what method will be used and what
                          admission statistics will trigger implementation of the special selection
                          method.

                 2.       If an owner determines that following the property’s waiting list in standard
                          chronological order may not (or will not) achieve the admissions
                          necessary to meet the income-targeting requirement, then the owner must
                          implement procedures that will ensure compliance.

                          a.       To aid in determining the tenant selection procedures that will
                                   ensure compliance, HUD recommends that owners examine the
                                   volume of unit turnover and applicant admissions for at least the
                                   past two years and, based on this information, estimate the likely
                                   number of admissions for the coming fiscal year.

                          b.       Owners may choose any of the following methods, or may
                                   develop another method that is consistent with applicable civil
                                   rights requirements and does not result in disparate treatment of
                                   applicants with respect to any of the protected bases (see Chapter
                                   2). Regardless of the method implemented by the owner, that
                                   method must be described in the Tenant Selection Plan.

                                   (1)     Method 1 – Admit only extremely low-income families until
                                           the 40% target is met. In chronological order, owners
                                           select eligible applicants from the waiting list whose
                                           incomes are at or below the extremely low-income limit to
                                           fill the first 40% of expected vacancies in the property.
                                           Once this target has been reached, admit applicants in
                                           waiting list order.

(2)     Method 2 – Alternate between the first extremely low-
                                           income applicant on the waiting list and the applicant at the
                                           top of the waiting list. To implement this method, owners
                                           select the first extremely low-income applicant on the
                                           waiting list (which may mean "skipping over” some
                                           applicants with higher incomes) for the available unit, and
                                           then select the next eligible applicant currently at the top of
                                           the waiting list (regardless of income level) for the next
                                           available unit. As subsequent units become available,
                                           tenant selection continues to alternate between the next
                                           extremely low-income applicant and the eligible applicant
                                           at the top of the waiting list until the 40% target is reached.

                                           NOTE: It is possible that:

                                            Selection of the "next extremely low-income applicant"
                                             may result in selecting the applicant at the top of the
                                             waiting list; or

                                            Selection of the "eligible applicant at the top of the
                                             waiting list" may result in the selection of an extremely
                                             low-income family.

                                     (3)   Method 3 - Alternate between the first extremely low-
                                           income applicant on the waiting list and the applicant at the
                                           top of the waiting list in groups of 10. In chronological
                                           order, owners admit the first 4 extremely low-income
                                           families from the waiting list and then admit the next 6
                                           families from the top of the waiting list, regardless of
                                           income. This procedure results in 40% or more of
                                           admissions being extremely low-income. After filling the
                                           first 10 available units, owners again admit the first 4
                                           extremely low-income families on the waiting list and then
                                           the next 6 families currently at the top of the waiting list.

                                   NOTE: For more information about meeting income-targeting
                                   requirements, and examples of selecting applicants properly from
                                   the waiting list, see paragraph 4-25 of this chapter.