D. Exceptions to the Income Limits for Post-1981 Properties Requiring HUD Approval

1. Conditions for exceptions. HUD will consider exceptions to the very lowincome limit in a post-1981 property only under certain conditions.

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• a. If very low-income applicants on the waiting list are substantially fewer than the number of units in the project, the owner must market the units to attract very low-income families.

• b. Requests for exceptions may fall into two categories: individual tenant exceptions for an individual family and project or unit exceptions for a specific number of units or for an entire property.

2. Individual tenant exceptions. HUD will consider approving owner requests for individual tenant exceptions under the following circumstances:

   • a. An in-place tenant would be displaced as a result of substantial rehabilitation under the Section 8 program; or

   • b. A family is displaced by a Rental Rehabilitation Demonstration project or by rehabilitation or development assisted under Section 17 of the Housing Act of 1937.

3. Project or unit exceptions. HUD will consider approving owner requests under the following circumstances:

   • a. A project is financed by a State housing finance agency (HFA). The HFA published a policy before October 1, 1981, requiring some of the Section 8 units to be leased to families whose incomes exceed the very low-income limit; the HFA has enforced, and will continue to enforce, that policy.

   • b. The project is financed under Section 11(b) of the Housing Act of 1937 or under Section 103 of the Internal Revenue Code, and the very low-income limit would make it impossible for the owner to comply with financing documents. The bondholders or mortgage must have been enforcing, and must intend to continue enforcing, the income mix requirements of those documents.

   • c. During development processing, a local government approved a project on the condition that some of the Section 8 units be leased to low-income families with incomes above the very low-income limit. The local government must have submitted this requirement in writing to HUD, and the owner must have been enforcing it since the date of initial occupancy.

   • d. All or some of the units in the project were intended for a particular occupant group (e.g., persons with disabilities or elderly persons), and there are not enough very low-income applicants in that group.

   • e. A project's current waiting list and the owner's marketing efforts will not provide enough very low-income applicants to fill current or imminent vacancies, and at least one of the following conditions exists:

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• (1) A mortgage default is likely if HUD does not grant an exception because rental income and any Section 8 vacancy payments do not cover the project’s essential operating costs and mortgage payments.

• (2) Market studies and rental history show that the very lowincome population is too small to provide enough applicants to sustain project occupancy.

4. The existence of one of these situations does not entitle an owner to an exception. HUD has no obligation to grant any exceptions.

5. HUD will review exceptions granted to owners at regular intervals. HUD may withdraw permission to exercise those exceptions for program applicants any time that exceptions are not being used or after a periodic review, based on the findings of the review.