How Your Rent Is Determined Office of Housing, 06/2007
This Fact Sheet is a general guide to inform the owner/ management agents (OA) and HUD assisted residents of the responsibilities and rights regarding income disclosure and verification.
Why Determining Income and Rent Correctly is Important
Department of Housing and Urban Development studies show that many resident families pay incorrect rent. The main causes of this problem are:
• Under-reporting of income by resident families, and OAs not
granting exclusions and deductions to which resident families
are entitled
• OAs and residents all have a responsibility in ensuring that
the correct rent is paid
OAs' Responsibilities:
• Obtain accurate income information
• Verify resident income
• Ensure residents receive the exclusions and deductions to
which they are entitled
• Accurately calculate tenant rent
• Provide tenants a copy of lease agreement and income and
rent determinations
• Recalculate rent when changes in family composition are
reported
• Recalculate rent when resident income decreases
• Recalculate rent when resident income increases by $200 or
more per month
• Provide information on OA policies upon request
• Notify residents of any changes in requirements or practices
for reporting income or determining rent
Residents' Responsibilities:
• Provide accurate family composition information
• Report all income
• Keep copies of papers, forms, and receipts which document
income and expenses
• Report changes in family composition and income occurring
between annual recertifications
• Sign consent forms for income verification
• Follow lease requirements and house rules
Income Determinations
A family's anticipated gross income determines not only eligibility for assistance, but also determines the rent a family will pay and the subsidy required. The anticipated income, subject to exclusions and deductions that the family will receive during the next twelve (12) months, is used to determine the family's rent.
What is Annual Income?
Gross Income – Income Exclusions = Annual Income
What is Adjusted Income?
Annual Income – Deductions = Adjusted Income
Determining Tenant Rent
Rental Assistance Payment (RAP) Rent Formula. The rent a family will pay is the highest of the following amounts:
• 30% of the family's monthly adjusted income
• 10% of the family's monthly income
• Welfare rent or welfare payment from agency to assist family
in paying housing costs
*Note: An owner may admit an applicant to the RAP program only if the total tenant payment is less than the gross rent for the unit.
Income and Assets
HUD assisted residents are required to report all income from all sources to the Owner or Agent (OA). Exclusions to income and deductions are part of the tenant rent process. When determining the amount of income from assets to be included in annual income, the actual income derived from the assets is included except when the cash value of all of the assets is in excess of $5,000, then the amount included in annual income is the higher of 2% of the total assets or the actual income derived from the assets.
Annual Income Includes
• Full amount (before payroll deductions) of wages and salaries,
overtime pay, commissions, fees, tips and bonuses and other
compensation for personal services
• Net income from the operation of a business or profession
• Interest, dividends and other net income of any kind from real
or personal property (See Assets Include/Assets Do Not
Include)
• Full amount of periodic amounts received from Social Security,
annuities, insurance policies, retirement funds, pensions,
disability or death benefits and other similar types of periodic
receipts, including lump-sum amount or prospective monthly
amounts for the delayed start of a periodic amount **(except
for deferred periodic payments of supplemental security
income and social security benefits, see Exclusions from
Annual Income)**
• Payments in lieu of earnings, such as unemployment and
disability compensation, worker's compensation and severance
pay **(except for lump-sum additions to family assets, see
Exclusions from Annual Income)**
• Welfare assistance
• Periodic and determinable allowances, such as alimony and
child support payments and regular contributions or gifts
received from organizations or from persons not residing in
the dwelling
• All regular pay, special pay and allowances of a member of
the Armed Forces (except for special pay for exposure to
hostile fire)
**For Section 8 programs only, any financial assistance, in excess of amounts received for tuition, that an individual receives under the Higher Education Act of 1965, shall be considered income to that individual, except that financial assistance is not considered annual income for persons over the age of 23 with dependent children or if a student is living with his or her parents who are receiving section 8 assistance. For the purpose of this paragraph, "financial assistance" does not include loan proceeds for the purpose of determining income.**
Assets Include
• Stocks, bonds, Treasury bills, certificates of deposit, money
market accounts
• Individual retirement and Keogh accounts
• Retirement and pension funds
• Cash held in savings and checking accounts, safety deposit
boxes, homes, etc.
• Cash value of whole life insurance policies available to the
individual before death
• Equity in rental property and other capital investments
• Personal property held as an investment
• Lump sum receipts or one-time receipts
• Mortgage or deed of trust held by an applicant
• Assets disposed of for less than fair market value
Assets Do Not Include
• Necessary personal property (clothing, furniture, cars, wedding
ring, vehicles specially equipped for persons with disabilities)
• Interests in Indian trust land
• Term life insurance policies
• Equity in the cooperative unit in which the family lives
• Assets that are part of an active business
• Assets that are not effectively owned by the Applicant or are
held in an individual's name but the assets and any income
they earn accrue to the benefit of someone else who is not a
member of the household, and that other person is
responsible for income taxes incurred on income generated by
the assets.
• Assets that are not accessible to the applicant and provide no
income to the applicant (Example: A battered spouse owns a
house with her husband. Due to the domestic situation, she
receives no income from the asset and cannot convert the
asset to cash.)
• Assets disposed of for less than fair market value as a result
of Foreclosure; Bankruptcy; Divorce or separation agreement if
the applicant or resident receives important consideration not
necessarily in dollars.
This Fact Sheet is a general guide to inform the owner/ management agents (OA) and HUD assisted residents of the responsibilities and rights regarding income disclosure and verification.
Why Determining Income and Rent Correctly is Important
Department of Housing and Urban Development studies show that many resident families pay incorrect rent. The main causes of this problem are:
• Under-reporting of income by resident families, and OAs not
granting exclusions and deductions to which resident families
are entitled
• OAs and residents all have a responsibility in ensuring that
the correct rent is paid
OAs' Responsibilities:
• Obtain accurate income information
• Verify resident income
• Ensure residents receive the exclusions and deductions to
which they are entitled
• Accurately calculate tenant rent
• Provide tenants a copy of lease agreement and income and
rent determinations
• Recalculate rent when changes in family composition are
reported
• Recalculate rent when resident income decreases
• Recalculate rent when resident income increases by $200 or
more per month
• Provide information on OA policies upon request
• Notify residents of any changes in requirements or practices
for reporting income or determining rent
Residents' Responsibilities:
• Provide accurate family composition information
• Report all income
• Keep copies of papers, forms, and receipts which document
income and expenses
• Report changes in family composition and income occurring
between annual recertifications
• Sign consent forms for income verification
• Follow lease requirements and house rules
Income Determinations
A family's anticipated gross income determines not only eligibility for assistance, but also determines the rent a family will pay and the subsidy required. The anticipated income, subject to exclusions and deductions that the family will receive during the next twelve (12) months, is used to determine the family's rent.
What is Annual Income?
Gross Income – Income Exclusions = Annual Income
What is Adjusted Income?
Annual Income – Deductions = Adjusted Income
Determining Tenant Rent
Rental Assistance Payment (RAP) Rent Formula. The rent a family will pay is the highest of the following amounts:
• 30% of the family's monthly adjusted income
• 10% of the family's monthly income
• Welfare rent or welfare payment from agency to assist family
in paying housing costs
*Note: An owner may admit an applicant to the RAP program only if the total tenant payment is less than the gross rent for the unit.
Income and Assets
HUD assisted residents are required to report all income from all sources to the Owner or Agent (OA). Exclusions to income and deductions are part of the tenant rent process. When determining the amount of income from assets to be included in annual income, the actual income derived from the assets is included except when the cash value of all of the assets is in excess of $5,000, then the amount included in annual income is the higher of 2% of the total assets or the actual income derived from the assets.
Annual Income Includes
• Full amount (before payroll deductions) of wages and salaries,
overtime pay, commissions, fees, tips and bonuses and other
compensation for personal services
• Net income from the operation of a business or profession
• Interest, dividends and other net income of any kind from real
or personal property (See Assets Include/Assets Do Not
Include)
• Full amount of periodic amounts received from Social Security,
annuities, insurance policies, retirement funds, pensions,
disability or death benefits and other similar types of periodic
receipts, including lump-sum amount or prospective monthly
amounts for the delayed start of a periodic amount **(except
for deferred periodic payments of supplemental security
income and social security benefits, see Exclusions from
Annual Income)**
• Payments in lieu of earnings, such as unemployment and
disability compensation, worker's compensation and severance
pay **(except for lump-sum additions to family assets, see
Exclusions from Annual Income)**
• Welfare assistance
• Periodic and determinable allowances, such as alimony and
child support payments and regular contributions or gifts
received from organizations or from persons not residing in
the dwelling
• All regular pay, special pay and allowances of a member of
the Armed Forces (except for special pay for exposure to
hostile fire)
**For Section 8 programs only, any financial assistance, in excess of amounts received for tuition, that an individual receives under the Higher Education Act of 1965, shall be considered income to that individual, except that financial assistance is not considered annual income for persons over the age of 23 with dependent children or if a student is living with his or her parents who are receiving section 8 assistance. For the purpose of this paragraph, "financial assistance" does not include loan proceeds for the purpose of determining income.**
Assets Include
• Stocks, bonds, Treasury bills, certificates of deposit, money
market accounts
• Individual retirement and Keogh accounts
• Retirement and pension funds
• Cash held in savings and checking accounts, safety deposit
boxes, homes, etc.
• Cash value of whole life insurance policies available to the
individual before death
• Equity in rental property and other capital investments
• Personal property held as an investment
• Lump sum receipts or one-time receipts
• Mortgage or deed of trust held by an applicant
• Assets disposed of for less than fair market value
Assets Do Not Include
• Necessary personal property (clothing, furniture, cars, wedding
ring, vehicles specially equipped for persons with disabilities)
• Interests in Indian trust land
• Term life insurance policies
• Equity in the cooperative unit in which the family lives
• Assets that are part of an active business
• Assets that are not effectively owned by the Applicant or are
held in an individual's name but the assets and any income
they earn accrue to the benefit of someone else who is not a
member of the household, and that other person is
responsible for income taxes incurred on income generated by
the assets.
• Assets that are not accessible to the applicant and provide no
income to the applicant (Example: A battered spouse owns a
house with her husband. Due to the domestic situation, she
receives no income from the asset and cannot convert the
asset to cash.)
• Assets disposed of for less than fair market value as a result
of Foreclosure; Bankruptcy; Divorce or separation agreement if
the applicant or resident receives important consideration not
necessarily in dollars.
Fact Sheet for HUD Assisted Residents
Rental Assistance Payments (RAP)
(download PDF version)
Fact Sheet for Resident Rights and Responsibilities (download PDF version)
Find out more about HUD's programs at www.hud.gov.
Rental Assistance Payments (RAP)
(download PDF version)
Fact Sheet for Resident Rights and Responsibilities (download PDF version)
Find out more about HUD's programs at www.hud.gov.
Exclusions from Annual Income:
• Income from the employment of children (incl. foster children)
under the age of 18
• Payment received for the care of foster children or foster
adults (usually persons with disabilities, unrelated to the
tenant family, who are unable to live alone
• Lump-sum additions to family assets, such as inheritances,
insurance payments (including payments under health and
accident insurance and worker's compensation), capital gains
and settlement for personal or property losses
• Amounts received by the family that are specifically for, or in
reimbursement of, the cost of medical expenses for any
family member
• Income of a live-in aide **Subject to the inclusion of income
for the Section 8 program for students who are enrolled in an
institution of higher education under Annual Income
• Includes, above,** the full amount of student financial
assistance either paid directly to the student or to the
educational institution
• The special pay to a family member serving in the Armed
Forces who is exposed to hostile fire
• Amounts received under training programs funded by HUD
• Amounts received by a person with a disability that are
disregarded for a limited time for purposes of Supplemental
Security Income eligibility and benefits because they are set
aside for use under a Plan to Attain Self-Sufficiency (PASS)
• Amounts received by a participant in other publicly assisted
programs which are specifically for or in reimbursement of out-
of-pocket expenses incurred (special equipment, clothing,
transportation, child care, etc.) and which are made solely to
allow participation in a specific program
• Resident service stipend (not to exceed $200 per month)
• Incremental earnings and benefits resulting to any family
member from participation in qualifying state or local
employment training programs and training of a family
member as resident management staff
• Temporary, non-recurring or sporadic income (including gifts)
• Reparation payments paid by a foreign government pursuant
to claims filed under the laws of that government by persons
who were persecuted during the Nazi era
• Earnings in excess of $480 for each full-time student 18 years
old or older (excluding head of household, co-head or spouse)
• Adoption assistance payments in excess of $480 per adopted
child
• Deferred periodic payments of supplemental security income
and social security benefits that are received in a lump sum
amount or in prospective monthly amounts
• Amounts received by the family in the form of refunds or
rebates under state of local law for property taxes paid on the
dwelling unit
• Amounts paid by a state agency to a family with a member
who has a developmental disability and is living at home to
offset the cost of services and equipment needed to keep the
developmentally disabled family member at home
Federally Mandated Exclusions:
• Value of the allotment provided to an eligible household
under the Food Stamp Act of 1977
• Payments to Volunteers under the Domestic Volunteer
Services Act of 1973
• Payments received under the Alaska Native Claims Settlement
Act
• Income derived from certain submarginal land of the US that
is held in trust for certain Indian Tribes
• Payments or allowances made under the Department of
Health and Human Services' Low-Income Home Energy
Assistance Program
• Payments received under programs funded in whole or in part
under the Job Training Partnership Act
• Income derived from the disposition of funds to the Grand
River Band of Ottawa Indians
• The first $2000 of per capita shares received from judgment
funds awarded by the Indian Claims Commission or the US.
Claims Court, the interests of individual Indians in trust or
restricted lands, including the first $2000 per year of income
received by individual Indians from funds derived from
interests held in such trust or restricted lands
• Amounts of scholarships funded under Title IV of the Higher
Education Act of 1965, including awards under the Federal
work-study program or under the Bureau of Indian Affairs
student assistance programs
• Payments received from programs funded under Title V of the
Older Americans Act of 1985
• Payments received on or after January 1, 1989, from the
Agent Orange Settlement Fund or any other fund established
pursuant to the settlement in In Re Agent-product liability
litigation
• Payments received under the Maine Indian Claims Settlement
Act of 1980
• The value of any child care provided or arranged (or any
amount received as payment for such care or reimbursement
for costs incurred for such care) under the Child Care and
Development Block Grant Act of 1990
• Earned income tax credit (EITC) refund payments on or after
January 1, 1991
• Payments by the Indian Claims Commission to the
Confederated Tribes and Bands of Yakima Indian Nation or
the Apache Tribe of Mescalero Reservation
• Allowance, earnings and payments to AmeriCorps participants
under the National and Community Service Act of 1990
• Any allowance paid under the provisions of 38U.S.C. 1805 to a
child suffering from spina bifida who is the child of a Vietnam
veteran
• Any amount of crime victim compensation (under the Victims
of Crime Act) received through crime victim assistance (or
payment or reimbursement of the cost of such assistance) as
determined under the Victims of Crime Act because of
the commission of a crime against the applicant under the
Victims of Crime Act
• Allowances, earnings and payments to individuals participating
under the Workforce Investment Act of 1998
Deductions:
• $480 for each dependent including full time students or
persons with a disability
• $400 for any elderly family or disabled family
• Unreimbursed medical expenses of any elderly family or
disabled family that total more than 3% of Annual Income
• Unreimbursed reasonable attendant care and auxiliary
apparatus expenses for disabled family member(s) to allow
family member(s) to work that total more than 3% of Annual
Income
• If an elderly family has both unreimbursed medical expenses
and disability assistance expenses, the family's 3% of income
expenditure is applied only one time
• Any reasonable child care expenses for children under age 13
necessary to enable a member of the family to be employed
or to further his or her education.
Reference Materials
Regulations:
General HUD Program Requirements;24 CFR Part 5
Handbook:
4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs
Notices:
"Federally Mandated Exclusions" Notice 66 FR 4669, April 20, 2001
• Income from the employment of children (incl. foster children)
under the age of 18
• Payment received for the care of foster children or foster
adults (usually persons with disabilities, unrelated to the
tenant family, who are unable to live alone
• Lump-sum additions to family assets, such as inheritances,
insurance payments (including payments under health and
accident insurance and worker's compensation), capital gains
and settlement for personal or property losses
• Amounts received by the family that are specifically for, or in
reimbursement of, the cost of medical expenses for any
family member
• Income of a live-in aide **Subject to the inclusion of income
for the Section 8 program for students who are enrolled in an
institution of higher education under Annual Income
• Includes, above,** the full amount of student financial
assistance either paid directly to the student or to the
educational institution
• The special pay to a family member serving in the Armed
Forces who is exposed to hostile fire
• Amounts received under training programs funded by HUD
• Amounts received by a person with a disability that are
disregarded for a limited time for purposes of Supplemental
Security Income eligibility and benefits because they are set
aside for use under a Plan to Attain Self-Sufficiency (PASS)
• Amounts received by a participant in other publicly assisted
programs which are specifically for or in reimbursement of out-
of-pocket expenses incurred (special equipment, clothing,
transportation, child care, etc.) and which are made solely to
allow participation in a specific program
• Resident service stipend (not to exceed $200 per month)
• Incremental earnings and benefits resulting to any family
member from participation in qualifying state or local
employment training programs and training of a family
member as resident management staff
• Temporary, non-recurring or sporadic income (including gifts)
• Reparation payments paid by a foreign government pursuant
to claims filed under the laws of that government by persons
who were persecuted during the Nazi era
• Earnings in excess of $480 for each full-time student 18 years
old or older (excluding head of household, co-head or spouse)
• Adoption assistance payments in excess of $480 per adopted
child
• Deferred periodic payments of supplemental security income
and social security benefits that are received in a lump sum
amount or in prospective monthly amounts
• Amounts received by the family in the form of refunds or
rebates under state of local law for property taxes paid on the
dwelling unit
• Amounts paid by a state agency to a family with a member
who has a developmental disability and is living at home to
offset the cost of services and equipment needed to keep the
developmentally disabled family member at home
Federally Mandated Exclusions:
• Value of the allotment provided to an eligible household
under the Food Stamp Act of 1977
• Payments to Volunteers under the Domestic Volunteer
Services Act of 1973
• Payments received under the Alaska Native Claims Settlement
Act
• Income derived from certain submarginal land of the US that
is held in trust for certain Indian Tribes
• Payments or allowances made under the Department of
Health and Human Services' Low-Income Home Energy
Assistance Program
• Payments received under programs funded in whole or in part
under the Job Training Partnership Act
• Income derived from the disposition of funds to the Grand
River Band of Ottawa Indians
• The first $2000 of per capita shares received from judgment
funds awarded by the Indian Claims Commission or the US.
Claims Court, the interests of individual Indians in trust or
restricted lands, including the first $2000 per year of income
received by individual Indians from funds derived from
interests held in such trust or restricted lands
• Amounts of scholarships funded under Title IV of the Higher
Education Act of 1965, including awards under the Federal
work-study program or under the Bureau of Indian Affairs
student assistance programs
• Payments received from programs funded under Title V of the
Older Americans Act of 1985
• Payments received on or after January 1, 1989, from the
Agent Orange Settlement Fund or any other fund established
pursuant to the settlement in In Re Agent-product liability
litigation
• Payments received under the Maine Indian Claims Settlement
Act of 1980
• The value of any child care provided or arranged (or any
amount received as payment for such care or reimbursement
for costs incurred for such care) under the Child Care and
Development Block Grant Act of 1990
• Earned income tax credit (EITC) refund payments on or after
January 1, 1991
• Payments by the Indian Claims Commission to the
Confederated Tribes and Bands of Yakima Indian Nation or
the Apache Tribe of Mescalero Reservation
• Allowance, earnings and payments to AmeriCorps participants
under the National and Community Service Act of 1990
• Any allowance paid under the provisions of 38U.S.C. 1805 to a
child suffering from spina bifida who is the child of a Vietnam
veteran
• Any amount of crime victim compensation (under the Victims
of Crime Act) received through crime victim assistance (or
payment or reimbursement of the cost of such assistance) as
determined under the Victims of Crime Act because of
the commission of a crime against the applicant under the
Victims of Crime Act
• Allowances, earnings and payments to individuals participating
under the Workforce Investment Act of 1998
Deductions:
• $480 for each dependent including full time students or
persons with a disability
• $400 for any elderly family or disabled family
• Unreimbursed medical expenses of any elderly family or
disabled family that total more than 3% of Annual Income
• Unreimbursed reasonable attendant care and auxiliary
apparatus expenses for disabled family member(s) to allow
family member(s) to work that total more than 3% of Annual
Income
• If an elderly family has both unreimbursed medical expenses
and disability assistance expenses, the family's 3% of income
expenditure is applied only one time
• Any reasonable child care expenses for children under age 13
necessary to enable a member of the family to be employed
or to further his or her education.
Reference Materials
Regulations:
General HUD Program Requirements;24 CFR Part 5
Handbook:
4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs
Notices:
"Federally Mandated Exclusions" Notice 66 FR 4669, April 20, 2001
98 Hawthorne Road, Suite 3 | Pittsburgh, PA 15209 | 412.821.2118 (office) | 412.821.2119 (fax) | info@christian-housing.org
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