(a) Tenant selection.

1. (1) Tenant selection shall reflect preferences as set out in section 1106-f (4) of the Act.
2. (2) Written leases with a term of at least one year are required for all tenants.

3. (3) Each unit assisted hereunder shall be rented as the principal residence of the tenant.

   (b) Rent structure.

4. (1) The rent structure established by an eligible owner shall set forth a plan for basic rents and market rents.

5. (2) Basic rent.

   1. (i) The basic rent for tenants who qualify under section 1106-f (4)(a) of the Act shall be set at the shelter rent allowance level as established by the State of New York. Increases in this basic rent are limited to adjustments made by the State of New York in the shelter rent allowance as provided for in section 131-a of the Social Services Law.
   2. (ii) The basic rent for the remaining tenants shall be set so that the total rental income for the project shall cover all projected operation and maintenance expenses of the project including deposits to all reserve funds. The basic rent shall be adjusted between tenants to reflect variances in income. Increases in this basic rent shall not exceed United States Department of Housing and Urban Development's annual adjustment factor for the previous year.
6. (3) Market rent shall be the sum of the basic rent established for each tenant plus an amount equal to a monthly payment charge of the grant or loan made by the Corporation as if it were amortized over a 30 year term with an interest rate set at the U.S. 30 year Treasury bond yield rate in effect at the time the grant or loan was made. Increases in the market rent shall be limited to the percentage increase in the basic rent to which it applies.
7. (4) Adjustments to the basic rents for tenants who experience changes in income are permitted but may not be adjusted to equal a greater amount than 30 percent of their income.

8. (5) Tenants who file false or misleading income affidavits or related documents or fail to file such affidavits or documents shall be charged the market rent for their apartment.

   (c) Tenant income verification.

9. (1) An eligible owner shall require that, as a condition of tenancy, all tenants file annually with the eligible owner affidavits of annual household income.
10. (2) The eligible owner shall make available to tenants a form prescribed by the Corporation upon which such an affidavit may be executed and returned to the eligible owner.
11. (3) An eligible owner shall require that all tenants attach to their affidavits copies of their most recent federal or state income tax returns or an affidavit certifying that no income tax returns were filed for the most recent tax year.
12. (4) The filing of a false or misleading affidavit of annual income of the failure to file such an affidavit and the failure of tenant to remedy such deficiency within 60 days after notice from the eligible owner by certified mail shall constitute a violation of a substantial obligation of the tenant's lease and shall justify the commencement of eviction proceedings against such tenant.