HUD Proposed Rule on Multifamily Program Changes – January 6, 2015

HUD published a Proposed rule on 1/6/15, with comments due by March 9, 2015. The proposed rule makes some significant changes to operating procedures for many of HUD’s multifamily housing programs, including Section 8, Public Housing, and the Housing Choice Voucher Program. Major elements of proposed rule include:


  1. Amend §5.603 of the Code of Federal Regulations (CFR) to revise the definition of an extremely low-income family as required by HUD’s 2014 Appropriations Act. The new definition is a family whose income does not exceed the higher of 30 percent of area median income or the poverty level.


  1. Use of Actual Past Income (§5.609): HUD’s current regulations define “annual income” to mean income projected to be received in the 12 months following admission or the annual reexamination date. The projection of income introduces the potential for error.

            The proposed rule will allow PHAs and owners to define annual income as either actual past income or projected income. Actual past income would be based on amounts received prior to admission or the annual reexamination date and would exclude the additional step of projecting income based on this information. Owners must apply the same definition on annual income for all families in a single property.

If owners use the proposed streamlined annual reexamination of fixed-income families (discussed below), the projected income methodology must be used.


  1. Exclusion of Mandatory Education Fees from Income (§5.609(b)(9)): Current regulation requires that education assistance in excess of amounts needed for tuition is to be counted as income for the purpose of determining eligibility for assistance (i.e., Section 8). In recent years, Congressional appropriations acts have also excluded from income amounts needed to pay required fees charged to students. Such fees include, but are not limited to student service fees, student association fees, student activity fees, and lab fees. HUD is amending the definition of income with respect to higher education costs pursuant to recent statutory changes.


  1. Streamlined Annual Reexamination for Families on Fixed Incomes (§§5.657, 960.257, 982.516): PHAs and owners are statutorily required to verify income and calculate rent annually, including for families on fixed incomes. HUD believes that the requirement to perform annual reexaminations of income is not necessary for persons on fixed income due to the infrequency of changes to their income.

            HUD is proposing to simplify the requirement by allowing PHAs and owners to opt to conduct a streamlined annual reexamination of income for families when 100% of the family’s income consists of fixed income sources. In these cases, income will be calculated based on a published COLA for the source of income to the previously verified amount. If COLA information is not publicly available and cannot be provided by the tenant through a third party document, then the PHA or owner must follow the standard verification procedures (either past income or projected). If a family has several sources of fixed income, the respective COLA for each source is required.

 The calculation of adjustments to annual income (e.g., medical deductions, child care deductions) is still required, including third party verification of such deductions. Owners using the streamlined method of reexamination may not use actual past income to determine annual income for any households. They must use projected income.


            Additional changes are proposed for Housing Choice Voucher and Public Housing Program regulations, including (1) changes in how utility reimbursements will be handled; (2) changes in the Earned Income Disregard [EID]; (3) verification of assets of $5,000 or less may no longer be required; (4) public housing rents for mixed-families [those with and without citizenship and eligible immigration status; (5) public housing flat rents; (6) tenant self-certification for community service requirements; (7) Public housing grievance procedures; (8) biennial inspections for HCV units; (9) HQS reinspection fees; and (10) development of utility allowances for HCV program.


            Agencies participating in the Housing Choice Voucher and Public Housing programs, as well as owners participating in other HUD multifamily programs should review the proposed regulations carefully. Owners and operators of LIHTC projects should also become familiar with the proposed changes since some will affect operations at LIHTC properties.


            Since comments are not due until March 2015, it is unlikely that the regulations will become permanent until late Spring or Summer of 2015 at the earliest. It could even be later, depending on the extent of the comments.