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Guide for Completing Form 8823 - page 126 / 197





126 / 197

Residential rental units are not for use by the general public, for example, if the units are provided only for members of a social organization or provided by an employer for its employees.

*Example 1: Proximity to Supportive Services3

A LIHC project composed entire of single room occupancy (SRO) units is located adjacent to, but is separate from, a clinic providing supportive services for homeless individuals. In addition to the street entrances to the project, the owner has provided covered walkways from the housing to the clinic facility. Although the owner anticipates that a large number of the SRO units will be rented to homeless individuals participating in the clinic’s programs, participation is not a requirement for leasing a unit.

The owner has not violated the General Public Use Rule. The SRO units are available to all homeless individuals regardless of whether the tenant participates in the clinic’s programs.*


*Owners must make reasonable attempts to make vacant low-income units available to the public for rent. Owners should advertise the availability of vacant units using advertising methods designed to be accessible to all prospective tenants.

“Reasonable attempts” will vary depending on factors such as size and location of the project, tenant turnover rates, and market conditions. Advertising can include printed and electronic media. Common examples include banners and “For Rent” signs at the entrance to the project, classified ads in local newspapers and accessing the local public housing authority’s list of section 8 voucher holders. Consider the appropriateness of the advertising for the location of the property. See Rev. Rul. 2004-82, Q&A #9.*

Out of Compliance

The failure of LIHC buildings to comply with the general public use requirements will result in the denial of low-income housing credits on a per-unit basis. A unit is out of compliance starting on the date of the event triggering the noncompliance. State agencies will also need to consider whether the problem is systemic and whether owner has met the minimum set- aside under IRC §42(g)(1). See chapter 10.

Example 1: LIHC Units Restricted to Members of a Social Organization

The owner of an LIHC building started renting only to members of a local fraternal organization in the third year of the compliance period. By the fifth year, all the tenants in the building were members of the organization.

This building is in violation of the general public use requirements under Treas. Reg. § 1.42-9(b), which provides that a residential unit rented only to a member of a social organization is not for use by the general public and is not eligible for the credit under IRC §42. The noncompliance started on the date the first


*For an example, see PLR 9814006*


Revised October 2009

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