HOTMA Makes Significant Changes to the Handling of Interim Reexaminations at HUD Properties


The U.S. Department of Housing and Urban Development (HUD) has released Notice H 2013-10, which expands upon the Final Rule for implementing the Housing Opportunity Through Modernization Act (HOTMA). This final rule makes significant changes to the way managers of HUD-assisted housing will process interim reexaminations.

Basics of the Rule Change

A family may request an interim determination of family income or composition because of any changes since the last determination. Project owners must conduct interims within a reasonable period of time after the family request or when the Owner becomes aware of a change in the family’s adjusted income that must be processed in accordance with the final rule. While owners have some discretion in determining a “reasonable time,” interim reexaminations should generally be conducted no more than 30 days after the owner becomes aware of the changes.

Decreases in Adjusted Income

A family may request an interim determination of income for any change in income or family composition. However, the owner may decline to conduct an interim if the owner estimates that the adjusted income will decrease by less than 10 percent of the annual adjusted income. If owners select a threshold lower than 10 percent, the lower percentage threshold must be included in the ACOP, Administrative Plan, or Tenant Selection Plan, as applicable.

HUD has made some exceptions to the 10 percent threshold and applies a zero percent threshold in certain circumstances: (1) If there is a decrease in family size due to the death or permanent move-out from the assisted unit of a family member during the period since the family’s last reexamination that results in a decrease in adjusted income of any amount. If there is no change in adjusted income as a result of the decrease in family size, then a non-interim transaction is processed instead of an interim reexamination. This zero percent threshold applies only to decreases in adjusted income due to a decrease in family size. If the move-out of the family member results in an increase in annual adjusted income, the owner will process the removal of the member as a non-interim transaction without making changes to the family’s annual adjusted income.

Owners are not permitted to establish a dollar-figure threshold amount instead of a percentage threshold. Owners may establish policies to round calculated percentage decreases up or down to the nearest unit (e.g., a calculated decrease of 9.5% may be rounded up to 10%).

Increases in Adjusted Income

Owners must conduct an interim reexamination of family income when the family’s adjusted income increases by 10 percent or more, with the following exceptions: (1) owners may not consider any increases in earned income when determining whether to conduct an interim unless the family has previously received an interim reduction during the same reexamination cycle, and (2) owners may choose not to conduct an interim reexamination during the last three months of a certification period if a family reports an increase in income with three months of the next annual reexamination effective date.

Note: Families who delay reporting income increases until the last three months of their certification period may be subject to retroactive rent increases.

Owners may not establish a policy of conducting interim reexaminations for increases in annual adjusted income of less than 10 percent. When a family previously received an interim reexamination for a decrease in annual adjusted income during the same annual cycle, an owner has the discretion to consider or ignore a subsequent increase in earned income for the purpose of conducting an interim reexamination.

When an increase in income of any size is reported by a family, it is a recommended best practice for the owner to note the reported increase in the tenant file. If a series of smaller reported increases in adjusted income result in a cumulative increase of 10 percent or more, an interim reexamination is required.

Bottom Line

Project owners must process interim reexaminations of family income or composition if there’s a significant change since the last check. The interim should be done within 30 days of becoming aware of the change. Decreases in income warrant an interim if over 10%, with certain exceptions allowing a 0% threshold. For increases, an interim is required for a 10% rise in adjusted income unless a reduction has occurred in the same cycle. Owners should document all reported income changes, and cumulatively, a 10% increase triggers an interim reexamination.