3.1.25 Sustaining Occupancy

A. Sustaining occupancy is a level or percentage of occupancy of tenant units by rent paying tenants consistent with signed leases such that the monthly rents paid are sufficient to pay all operating expenses for the month (actual or prorated annual costs as applicable) plus monthly debt service composed of principal, interest, and MIP. Any subordinate debt requiring current payment must be included in the sum of debt service. This is equivalent to a debt service coverage ratio (DSCR) of 1.0, a ratio also referred to as “breakeven.” When this level of occupancy is sustained for a period of consecutive months, it is referred to as “sustaining occupancy”. The standard number of months for achieving sustaining occupancy in HUD new construction and/or substantial rehabilitation projects is 6 months. HUD may vary the number of months of sustaining occupancy required to address specific project risk for individual cases or cases with identified risk conditions.