HUD Issues Final FAST Act Streamlining Rule

The Department of Housing & Urban Development (HUD) has issued its final rule implementing Fixing America’s Surface Transportation (FAST) Act legislation. The rule was effective on June 8, 2020.

In the final rule, HUD made official the FAST Act changes to requirements relative to asset verification, utility allowance reimbursements, and triennial income verifications.

Fixed-Income Verification

“Fixed income” is defined as periodic payments are reasonably predictable levels from one or more of the following sources:

  • Social Security, Supplemental Security Income, Supplemental Disability Insurance;
  • Federal, state, local, or private pension plans;
  • Annuities or other retirement benefit programs;
  • Insurance Policies;
  • Disability or death benefits;
  • Other similar types of periodic receipts; and
  • Any other source of income subject to adjustment by a verifiable cost-of-living adjustment (COLA) or current rate of interest.

Under this final rule, owners may streamline income recertification procedures for families with income that comes from fixed-income sources. This means that such income only has to be verified at move-in and then every three years thereafter. In the intervening years, the owner may use a previously determined or verified COLA or interest rate adjustment specific to each source of fixed-income. This significantly reduces the paperwork burden on both tenants and management.

If at least 90% of a family’s income comes from a fixed-income source, an owner may – but it not required to – adjust the non-fixed income using the same methodology, and verification of the non-fixed income is not required. If less than 90% of household income comes from fixed-income sources, all non-fixed income must be verified each year.

This “streamlining” applies only to the verification of income. If a household has medical expenses that are deducted for purposes of determining adjusted income, the medical expenses must be verified each year.

Changes to Asset Verification Procedures

If a household has total assets with a cash value of $5,000 or less, the final rule requires full verification of assets only every three years, with self-certifications in the interim years. Management should be aware that anytime verified assets exceed $5,000, the assets will have to be fully verified in the following year. The ability to accept self-certifications only applies for the two years following a year in which the assets have been verified to be $5,000 or less.

Utility Reimbursements

When tenants pay for their own utilities, owners must reimburse tenants if the utility allowance exceeds the total tenant payment. The payments have generally been made monthly, and in the case of very small reimbursements, the administrative costs associated with processing the payments may approach the reimbursements themselves.

With the final rule, owners may make utility reimbursements on a quarterly basis if the reimbursement is $15 or less per month ($45 per quarter). For example, assume a utility allowance of $100 per month and a Total Tenant Payment of $90. The utility reimbursement is $10 per month. Since it is not more than $15 per month, the owner may make the payment quarterly, so a payment of $30 may be made to the tenant on a quarterly basis, rather than $10 per month.

Owners who use this option must have a policy to assist tenants for whom the quarterly reimbursement will be a financial hardship.

Owners are not required to implement any of these streamlining procedures, but if they do so, a property’s written policies should be amended to outline the use of the procedures.