HOTMA Spotlight: Track Annual Inflationary Adjustments and Passbook Rate
Prepare for how these annual changes will affect income certifications.
The Housing Opportunity Through Modernization Act (HOTMA) Final Rule requires that certain amounts used to make income, asset, and eligibility determinations be adjusted by an inflationary factor on an annual basis. PHAs and Multifamily owners must use the HUD-published values when determining income, net family assets, and adjusted income for income examinations in accordance with the HOTMA Final Rule and other implementation guidance.
Although the recently issued HOTMA implementation notice (Notice H 2023-10) gave Multifamily owners breathing room by moving the deadline for full compliance up a year to Jan. 1, 2025, owners should take the time now to understand and prepare for the changes to come. We’ll put a spotlight on the eight inflation-adjusted items and the passbook savings rate that will change annually.
8 Inflation-Adjusted Items
According to HUD, it will annually publish the eight inflation-adjusted items below no later than Sept. 1. The publication will apply to both Multifamily and Public and Indian Housing programs. The revised amounts will be effective on Jan. 1 of the following year. And the first set of adjustments for inflation will be made effective Jan. 1, 2025.
Eligibility restriction on net family assets. HOTMA restricts families from receiving assistance in the Public Housing or Housing Choice Voucher program if their net family assets exceed $100,000 or if the family owns real property suitable for the family to live in. This figure is what will be adjusted annually in accordance with the Consumer Price Index for Urban Wage Earners and Clerical Workers.
The implementation guidance says the new asset limit is discretionary for currently served residents. PHAs and Multifamily Housing owners are “given discretion at reexamination in enforcing the asset limitation on eligibility for assistance in § 5.618(a).” HUD says it will issue additional guidance on the use of this discretionary authority.
Imputed income from assets threshold. In general, income from assets is considered income. If it’s possible to calculate actual returns from an asset, you should use that amount. If it isn’t possible to calculate an actual return on an asset, and the net family assets are $50,000 or less, the imputed income from that asset is excluded. But if the net family assets are over $50,000, you must impute income for the asset based on the current passbook savings rate, as determined by HUD. The $50,000 figure will be annually adjusted for inflation to the nearest dollar.
Non-necessary personal property threshold. The threshold above which the total value of non-necessary personal property is included in net family assets is $50,000. In other words, the combined total value of non-necessary items of personal property not exceeding $50,000 is considered an excluded asset. Examples of these items are vintage baseball cards, recreational boats, coin collections, and art—so long as the total value is under the limit.
Self-certification of assets threshold. The amount of net assets for which a PHA or Multifamily owner may accept self-certification by the family is $50,000 or under. In other words, owners may determine net family assets based on a self-certification by the family that the family’s total assets are equal to or less than $50,000, adjusted annually for inflation, without taking additional steps to verify the accuracy of the declaration at admission or reexamination. Owners aren’t required to obtain third-party verification of assets if they accept the family’s self-certification of net family assets. When owners accept self-certification of net family assets at reexamination, the owner must fully verify the family’s assets every three years.
Mandatory deduction for elderly and disabled families. The elderly/disabled family deduction increases from $400 to $525 and applies to a family’s next interim or annual reexamination, whichever is sooner. The amount of the deduction will be adjusted annually.
Mandatory deduction for a dependent. The dependent deduction amount is $480. This amount will be adjusted annually and applies to a family’s next annual or interim reexamination after the annual adjustment, whichever is sooner.
Income exclusion for earned income of dependent full-time students. With HOTMA, income is now defined broadly with an expanded and clarified list of income exclusions. Earned income of dependent full-time students in excess of the amount of the deduction for a dependent is excluded. The deduction is currently $480 per dependent. This will be adjusted annually for inflation to the next lowest multiple of $25. The end result is that these payments won’t be counted.
Income exclusion for adoption assistance payments. Earned income in excess of the amount of the deduction for a dependent is excluded. The deduction is currently $480 per child to be adjusted annually for inflation. The end result is that all adoption assistance payments will be excluded.
2024 Passbook Rate
Along with the inflationary adjustments, HUD will also annually publish a passbook rate to become effective Jan. 1 of each year. The 2024 passbook savings rate will be 0.4 percent and will change every year. This will apply to both Public and Indian Housing (PIH) and Multifamily Housing (MFH) programs. According to the HOTMA implementation notice, HUD will annually publish a passbook rate based on the Federal Deposit Insurance Corporation (FDIC) National Deposit Rate for savings accounts, which is an average of national savings rates published on a monthly basis.
Owners must use the HUD-published passbook rate when calculating imputed asset income for net family assets that exceed $50,000 (a figure that’s annually adjusted for inflation). To ensure updated passbook rates may be used for reexaminations with an effective date of Jan. 1, HUD will calculate the update in July each year, using FDIC data from April, May, and June.