HUD's Income and Assets Rule: A New Paradigm for Public Housing Agencies
Get ready for a groundbreaking shift in public housing dynamics. The Department of Housing and Urban Development (HUD) is ushering in the most significant change to tenant income and eligibility for public housing in over 30 years with the 2023 Final Rule, popularly known as the “Income and Assets Rule”. BRONNER has examined the impact of the Income and Assets Rule on the Housing Opportunity through Modernization Act (HOTMA). From regulations on over-income families to revamped income exclusion rules and streamlined deduction guidelines, Public Housing Agencies (PHAs) need to be prepared to navigate these changes, effective January 1, 2024.
Over-Income Residents and Grace Period
In accordance with section 92.203(a)(1) of HOTMA, tenants’ income will be reviewed at initial occupancy, during interim reexaminations, and during annual reviews of eligibility, as applicable under each program's rules. If a family earns above the over income (OI) threshold, a 24-month grace period will be triggered. If the family continues earning OI for the entire grace period, the PHA can choose to terminate the tenancy, or allow the allow the family to stay for an increased fee. If the PHA maintains the family’s tenancy, the PHA will charge the value of the HUD subsidy or to fair market value, whichever is greater. If there is any month within the 24-month grace period that the family’s income drops below the threshold, the grace period will cease, and will resume the next time the family earns above the OI threshold.
Eligible Income and Deductions
The Income and Assets Rule substantially changes the evaluation of eligible income and streamlines income requirements. The final rule indicates that all income will be included unless it is from any of the following sources:
Non-recurring income. The new definition of non-recurring income includes sources such as tax refunds and gifts for special occasions and replaces previous exclusions for temporary and sporadic income.
Veterans’ aide and attendant care under 38 U.S.C. 1521.
Payments from Medicaid, or other state and local programs meant to keep a family member living at home.
Any distribution of principal from a non-revocable trust and distribution of income from a non-revocable trust meant to pay for medical expenses for a minor.
Families are ineligible for admission to housing under affected programs or continued occupancy if:
Net family assets exceed $100,000, or
The family owns property suitable for them to live in.
If a family is excluded from public housing based on the above criteria, the PHA can delay termination for the family for six months at their discretion. The final rule also includes changes to deductions for eligible income, most notably:
Establishment of the Consumer Price Index (CPI) as the basis for inflation adjustments to deductions; previously, HUD did not state an index for inflationary adjustment.
Increase in allowable deduction from income for medical and attendant care expenses from 3% to 10%.
Alignment of needs-based hardship exemptions for “medical expenses” with the IRS-defined “healthcare and medical expenses”. Long-term care premiums are an example of healthcare and medical expenses that may cause hardship.
Hardship exemptions for childcare expenses provided the tenant's inability to claim childcare expenses as income deductions leads to their inability to pay rent.
Transition to Housing Information Portal (HIP)
As of January 1, 2024, PHAs will only be able to submit transactions via the Housing information Portal (HIP). Software vendors must update their systems to convert to HIP as all transactions previously submitted through the Public and Indian Housing Information Center (PIC) will now be submitted through HIP.
Making a Smooth Transition
HUD has established HOTMAQuestions@hud.gov to address questions or concerns about the Income and Assets Rule. PHAs must be prepared to communicate OI guidelines and changes to allowable income deductions as of January 1, 2024.
BRONNER’s experts understand the unique constraints and challenges faced by PHAs and combine industry knowledge and proven methodologies to help PHAs find the right path forward. BRONNER has helped many of the largest PHAs in the nation manage change in their organizations, develop policy and procedures and optimize management structures to ensure they can deliver quality public housing to residents.