What Is Section 42?
Section 42, also known as the Low Income Housing Tax Credit, is a tax credit that encourages apartment builders and developers to build affordable housing. These affordable housing options are often in communities that low-income families wouldn’t otherwise be able to afford to live in. As an incentive to the developers, they would receive a reduction in their tax liability in return for providing affordable housing to people with a fixed or lower income.
Unlike the Section 8 rental assistance program, where a resident pays a percentage of the rent based on their income, Section 42 residents pay a fixed amount of rent each month for their apartment rentals. Affordable rents are defined and calculated based on Median Household Income figures published annually by the U.S. Department of Housing and Urban Development (HUD).
Who Qualifies for Section 42?
To determine if you qualify for Section 42 and qualifying apartment rentals, HUD looks at the percentage of the median household income for the county or city you live in, and the number of people in your household. Your income is, of course, your weekly wages, but it also takes into account payments you receive from child support, alimony, social security, and other sources. It also counts any assets, such as stocks and bonds, cars, etc., that you have.
Your income will be verified each year to determine whether you still qualify for the program.
How Do I Apply for Section 42?
When you begin the application process for Section 42 and participating apartment rentals in Minnesota, you’ll start by completing forms which will request information regarding your income, family size and financial assets. This information is what determines your eligibility for the program. Once you’re deemed eligible to participate in Section 42, you are not instantly approved for an apartment rental. You then need to apply for specific apartment buildings, and the owner or manager will process your application with standard screening procedures.
If something changes, like your income or the number of people in your household, you must notify HUD and may have to reapply for Section 42.
We Offer Affordable Housing Options
At Real Estate Equities, we strive to provide affordable housing options in Minnesota, Wisconsin, and Indiana. We understand finding affordable housing for you and your family in Minneapolis and St. Paul can be difficult, but we work with property owners of single-family houses and apartments to ensure you have options. If you’re looking for affordable housing options in the Twin Cities, or want to discuss Section 42 and participating apartment rentals with us, reach out today!