Depending on which state you are in, HOTMA is either here or coming very soon to your LIHTC, HOME, and NHTF properties. Legally, HOTMA applied 1/1/2024, although federal HUD offices affected by HOTMA have given grace periods into or through 2025, and some LIHTC, HOME, and NHTF agencies have followed HUD's model. However, in light of the significant benefits HOTMA brings to properties, tenants, and owner/agents, most agencies have implemented HOTMA already, or will not follow the next inevitable HUD program delay past 1/01/2026. Regardless, there is no time to waste! Compliance professionals in the industry are taking the lead and learning what they need to know to succeed at implementing HOTMA. 

In over a hundred articles in this blog, we have covered many topics changed by HOTMA. This series of articles will discuss how to forge the elements into a specific set of five steps to succeed in HOTMA implementation.

Prep: Build a HOTMA Library

To be successful in understanding the requirements in a HOTMA world, the following documents will be indispensable.

HOTMA

• HUD regulations 24 CFR 5.603 (net family assets) and 5.609(a) (income inclusions) and (b) (income exclusions).
• HOTMA Notice HUD 2023-10 (revised Feb 2024).
• Federal Register FR-6410–N–01 Federally Mandated Exclusions From Income—Updated Listing.
• HUD Handbook, Change 4 (2013).
  • Note: In researching HOTMA topics, check the HOTMA Notice, other Notices, FAQ, and Federal Registers above first. If a topic is not addressed there, then the HUD Handbook guidance still applies.

Additional Recent Specialty Topics

• HUD Notice H-2019-06 Treatment of ABLE Accounts in HUD-Assisted Programs
• Federal Register FR-6476–N–01 Section 8 Housing Choice Vouchers: Revised Implementation of the HUD-Veterans Affairs Supportive Housing Program.
• FAQ HUD-assisted Housing and Medicare Advantage Supplemental Benefits

Step 1 | Determine state implementation policy

January 1, 2024…January 1, 2025…July 1, 2025…January 1, 2026… HUD’s rollout of HOTMA has had several dates to come into compliance with HOTMA, as implementation has progressively been postponed. Reportedly, this is because HUD cannot get the TRACS 203A software system and forms finalized. These barriers to starting HOTMA do not specifically apply to LIHTC, HOME, or NHTF agencies. According to LIHTC statute and regulation, these program income determinations are “made in a manner consistent with the determination of annual income and the estimates for median family income under section 8 of the United States Housing Act of 1937 (H.U.D. section 8).” Very similar language applies to HOME and the NHTF. The challenge here is that HOTMA legally applies to Section 8, but they cannot implement it yet, and so are given extra time to ‘come into compliance’ with the regulation. This leaves it up to each state agency to decide when HOTMA must be applied for LIHTC purposes in its state. For the LIHTC, there is also uncertainty regarding the timing at which noncompliance with HOTMA, resulting in over-income households for LIHTC purposes, will be reported as a violation of LIHTC regulations using Form 8823. The uncertainty of how making determinations ‘in a manner consistent with’ section 8 applies in an era where HUD Section 8 is between the legal date and the ‘in compliance’ date has led several states to allow a grace period between when HOTMA must be applied and when HOTMA noncompliance that leads to LIHTC noncompliance will be reported as such to the IRS, when past rules would not have resulted in LIHTC noncompliance.  

See the blog post HERE for a summary of options that exist.

Note that three additional options have arisen since HUD delayed implementation from 7/01/2025 to 1/01/2026. These include (1) a deadline of 1/01/2026, with owner/agents selecting a date before or on that date, (2) a firm state-mandated implementation date sometime before 1/01/2026 when HOTMA must be implemented, and (3) a firm 1/01/2026 implementation date.

Examples of state LIHTC implementation plans

• Texas. TDHCA set 1/01/2024 as the mandatory HOTMA start date. Instances of HOTMA noncompliance resulting in LIHTC noncompliance have been reported to the IRS effective January 1, 2024.
• Indiana.  IHCDA set 1/01/2024 as the firm HOTMA start date. Instances of HOTMA noncompliance that result in LIHTC noncompliance must be remedied; however, such issues will not be reported to the IRS as noncompliance until January 1, 2026. HOTMA/LIHTC noncompliance that occurs after that date will be reported.
• Arizona. ADOH required implementation of HOTMA ‘as much as possible’ starting 1/01/2024. HOTMA issues causing LIHTC noncompliance must be fixed, but won't be reported on form 8823 until January 1, 2026. Any HOTMA/LIHTC noncompliance after that date will be reported.
• Wyoming.  WCDA has set a deadline of 1/01/2026 for HOTMA implementation. If an owner applies HOTMA, HOTMA noncompliance that leads to LIHTC noncompliance must be corrected, but will not be reported as noncompliance on form 8823 until noncompliance that occurs after 1/01/2026.

Note | All examples in this article reflect the author’s understanding based on written statements and training provided by the state. Individual states should be consulted to confirm accuracy and for further details.

When is the start date for HOTMA for the program?

1. Is this date a hard start date or a “no later than” date?
2. For the LIHTC: Will there be a grace period before HOTMA-related noncompliance that creates LIHTC noncompliance will be reported to the IRS on form 8823?

Up next: Step 2 | Adapt verification rules.

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