HUD Proposes Public Housing, Voucher Rules Implementing FY 2014 Appropriations Act

On Jan. 6, HUD published proposed rules to codify statutory changes made by the fiscal year (FY) 2014 Appropriations Act relating to certain elements of the public housing and Housing Choice Voucher (HCV) programs. HUD also proposes changes to streamline some regulatory requirements in order to reduce burdens on public housing agencies (PHAs). You can submit comments to HUD by March 9, 2015.

Eight proposed changes pertain to both public housing and HCV programs. An additional five changes are proposed just for public housing, and another six would affect the HCV program.  

On Jan. 6, HUD published proposed rules to codify statutory changes made by the fiscal year (FY) 2014 Appropriations Act relating to certain elements of the public housing and Housing Choice Voucher (HCV) programs. HUD also proposes changes to streamline some regulatory requirements in order to reduce burdens on public housing agencies (PHAs). You can submit comments to HUD by March 9, 2015.

Eight proposed changes pertain to both public housing and HCV programs. An additional five changes are proposed just for public housing, and another six would affect the HCV program.  

Proposed Changes Affecting All Programs

The following are the proposed changes affecting HCV, multifamily rental assistance, and public housing programs:

Social Security number verification. Under current regulations, most applicants are required to have a Social Security number (SSN) at move-in. Absent a regulatory waiver, this requirement results in an applicant family being denied assistance if the addition of a child occurs in close proximity to the applicant’s move-in date and the family is unable to obtain an SSN for the child, due to circumstances beyond its control. By contrast, HUD regulations provide for the addition to a participant family of a new household member under the age of 6 years who has no assigned SSN.

HUD proposes to align the requirements across applicant and participant households with respect to new household members under the age of 6 years who lack SSNs. Specifically, HUD proposes to authorize applicant households to become program participants even if a child under the age of 6 years is added to the household within the six-month period prior to the household’s date of admission and that child has not yet been issued an SSN. The household would have 90 days from the date of move-in to provide the documentation evidencing issuance of an SSN. As is the case with program participants, an extension of one 90-day period would be required for assistance applicants under certain circumstances.

Definition of “extremely low-income family.” HUD’s 2014 Appropriations Act defines the term “extremely low-income family” to mean a very low-income family whose income does not exceed the higher of 30 percent of area median income or the poverty level. This rule would amend Section 5.603 to include the revised definition of an extremely low-income family, and apply to all programs assisted under the 1937 Act.

Use of actual past income. 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 process of projecting income introduces the potential for error.

This rule proposes to allow PHAs and site 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 effective date and would therefore simply exclude the additional step of projecting income based on this information.

For PHAs, whichever definition is chosen for either the HCV or public housing program must be applied to all families in the respective program. Likewise, a site owner must apply the same definition of annual income for all families in a single site.

If a PHA or site owner chooses to define annual income as actual past income, then it may not adopt the option to provide for the streamlined annual reexamination of fixed-income families. In other words, if a PHA or site owner adopts the streamlined annual reexamination for families on fixed incomes, below, then it must use projected income to determine annual income. Also, the PHA must use projected income if the family makes a request. For example, the family may have experienced a decrease in income that would result in a lower family payment than would be calculated if income is defined as actual past income.

Exclusion of mandatory education fees from income. Current regulations provide that education assistance in excess of amounts needed for tuition is to be counted as income for the purposes of determining whether an individual is eligible to receive assistance. However, in recent years, appropriations acts have also excluded from income amounts needed to pay required fees charged to students as part of a growing trend among institutions of higher education moving from a traditional tuition-only structure to a structure of tuition and fees. Fees often include, but are not limited to, student service fees, student association fees, student activity fees, and laboratory fees.

HUD believes that including many of these fixed fees within the definition of tuition, in accordance with statutory instructions in recent years, will increase opportunities for its participants to further their education. Therefore, HUD is amending the definition of income with respect to higher education costs pursuant to the recent statutory changes.

Streamlined annual reexamination for families on fixed incomes. PHAs and site owners are statutorily required to verify income and calculate rent annually, including for families on fixed incomes. The requirement to undertake the complete process for income verification and rent determination for families on fixed incomes is not necessary given the infrequency of changes to their incomes.

HUD proposes to simplify the requirements associated with determining the annual income of families on fixed incomes by allowing PHAs and owners to opt to conduct a streamlined annual reexamination of income for families when 100 percent of the family’s income consists of fixed-income sources. In a streamlined annual reexamination, PHAs and owners will recalculate family incomes by applying a published cost-of-living adjustment (COLA) for the source of income to the previously verified income amount. If COLA information isn’t publicly available and can’t be provided by the tenant through a document generated by a third party, then the PHA or owner must follow the standard verification process to determine the appropriate adjustment for the fixed-income source.

If a family has several sources of fixed income, then the PHA or owner must apply the respective COLA or verify the adjustment for each source. Calculating adjustments to annual income (such as medical deductions and child care deductions) is still required as part of the streamlined annual reexamination of income. PHAs must follow the requirements related to deductions for such expenses, including third-party verification of these deductions.

Furthermore, PHAs using the streamlined annual reexamination of income may not exercise the option to use actual past income to determine annual income, instead they must use projected income.

Proposed Changes Affecting HCV and Public Housing Regs

Utility reimbursements. As required by current regulations, where tenants pay for their utility usage, PHAs must reimburse tenants if the utility allowance exceeds the total tenant payment. HUD’s public housing regulations specify the conditions under which a utility reimbursement must be paid but don’t specify how frequently such reimbursement must be made. HUD’s HCV regulations, however, require voucher agencies to pay any utility reimbursement on a monthly basis. As a result, voucher agencies may have to process small monthly checks and expend postage to mail them to voucher holders, which may constitute an administrative and financial burden.

For both the public housing and HCV programs, this rule proposes to permit PHAs to make reimbursements of $20 or less (per quarter) on a quarterly basis, in order to eliminate the burdensome process of processing and mailing monthly reimbursement checks. In the event a family leaves the program in advance of its next quarterly reimbursement, the PHA would be required to reimburse the family for a prorated share of the applicable reimbursement.

Earned income disregard. HUD’s regulations establish the earned income disregard (EID), which permits certain tenants of public housing and persons with disabilities participating in the HCV and certain CPD programs to accept a job without having their rent increase right away due to the increase in earned income. The EID is available for a total of 24 months, but those months can be spread across 48 months to account for intermittent job losses. In addition, PHAs are required to fully exclude income for the first 12 months of EID, and to exclude only 50 percent for the last 12 months. Tracking employment for a 48-month period and determining how much to exclude depending on the month can be burdensome to PHAs.

HUD proposes to retain the current framework for the earned income disregard as applied to the HOPWA program and to relocate these requirements in the HOPWA regulations. These requirements will continue to apply to qualified families, defined as those families that reside in HOPWA-assisted housing (including tenant-based rental assistance funded under HOPWA).

For programs other than HOPWA, HUD proposes to limit the EID to 24 consecutive months from the date that a participant qualifies for the EID. The rule would maintain the full exclusion for the first 12-month period, provided the eligible family member remains continually employed for such period. For the second 12-month period, the rule would provide PHAs with the discretion to phase in a rent increase, disregarding not less than 50 percent of the excluded amount in determining a family’s rent, but again only if the eligible family member remains continually employed. After the expiration of the consecutive 24-month period during which a family has remained continually employed, the EID would terminate. These changes would eliminate the burden on PHAs of having to track employment starts and stops over a 48-month period.

Family declaration of assets under $5,000. Families are required to report all assets annually. The amount of interest earned on those assets is included as income used to calculate the tenant’s rent obligation. Tenants with assets below $5,000 typically generate minimal income from these assets, which results in small changes, if any, to tenant rental payments. PHAs spend significant time verifying such assets.

HUD proposes that, for a family that has net assets equal to or less than $5,000, a PHA, at both admission and recertification, may accept a family’s declaration that it has net assets equal to or less than $5,000, without taking additional steps to verify the accuracy of the declaration. The declaration must state the amount of income the family expects to receive from such assets; this amount will be included in the family’s income.

Proposed HCV Program Regulation Changes

Start of assisted tenancy. Under current regulations, there is no option for PHAs to adopt policies regarding the date when a tenant may move into an assisted unit once the unit is ready for move-in. HUD proposes to allow PHAs to limit move-ins to certain days of the month, such as the first day of the month. This would streamline administration of move-ins for some PHAs, reduce the need for pro-rated checks and possibly the number of checks issued, and provide housing assistance payment (HAP) savings by eliminating overlapping HAP payments.

Biennial inspections and the use of alternate inspection methods. The 2014 Appropriations Act authorizes PHAs to comply with the requirement to inspect HCV units during the term of a HAP contract by inspecting such units not less than biennially rather than annually to assure compliance with HUD’s housing quality standards. To avoid duplication of effort, for example where an HCV-assisted tenant resides at a property inspected under another program (for example, the Low-Income Housing Tax Credit program), the law authorizes a PHA to comply with the biennial inspection requirement by relying upon an inspection performed pursuant to such other program. Finally, the law authorizes the Secretary to adjust the frequency of inspections for mixed-finance properties assisted with project-based vouchers where inspections performed under the other program take place more or less frequently than biennially.

This rule proposes to update HUD’s regulations to reflect the statutory changes and to provide details on how PHAs may use the new flexibilities. PHAs will be required to obtain copies of reports of these inspections and will be prohibited from relying upon such inspections if such copies may not be obtained. In addition, because Section 8(o)(13)(F) of the 1937 Act states that the inspection requirements of Section 8(o)(8) apply to the PBV program, this rule proposes to update the PBV inspection regulations (Section 983.103) to reflect the new statutory authority in Section 8(o)(8).

Housing quality standards (HQS) and reinspection fees. HUD proposes to allow PHAs the option of charging a reasonable fee to an owner if the owner indicates that an HQS violation is fixed, but a reinspection proves that the violation hasn’t yet been fixed. This fee wouldn’t be permitted if the reinspection confirms that previous violations have been fixed but also reveals new HQS violations. The fee would pertain solely to owner obligations under Section 982.404(a) and not to family obligations under Section 982.404(b).

Exception payment standards for providing reasonable accommodations. Current regulations require a PHA to request a waiver from a HUD Field Office for an exception payment standard above 110 percent of the fair market rent (FMR) to provide a reasonable accommodation for a family that includes a person with a disability. This process takes considerable administrative time for the PHA and, in some cases, the processing time for the waiver prevents the family from leasing the unit.

HUD proposes to allow PHAs to approve, if they so choose, a payment standard of not more than 120 percent of the FMR without HUD approval if required as a reasonable accommodation for a family that includes a person with a disability. This proposed streamlining provision would allow a PHA to establish a payment standard within limits currently permitted but designated for approval only by a HUD Field Office. For any voucher unit assisted under the program, PHAs would still be required to perform a rent reasonableness determination in accordance with Section 8(o)(10) of the 1937 Act and HCV program regulations.

Therefore, PHAs that utilize this provision must maintain documentation that the PHA performed the required rent reasonableness analysis.

Family income and composition: regular and interim examinations. With respect to interim examinations, current regulations require PHAs to conduct a reexamination of income whenever a family member with income is added to a family participating in the voucher program. Regulations for the public housing program (at Section 960.257) are less prescriptive.

In the interest of streamlining requirements across programs, HUD proposes to revise Section 982.516 to align the regulatory language more closely with Section 960.257, which will facilitate HUD’s ability to issue guidance on interims that applies uniformly to the public housing and voucher programs.

Utility payment schedules. HUD’s current regulations require PHAs to establish a utility allowance based on size and type of units in a given locality. Requiring PHAs to establish a utility allowance based on both of these factors increases the complexity involved in developing a utility allowance schedule.

HUD proposes to require that the allowance be based on the size of the unit and either the type of the unit, as is currently required, or a streamlined version of “unit type,” limited to “attached” or “detached.” Also, the 2014 Appropriations Act requires that the amount allowed for tenant-paid utilities not exceed the utility allowance for the family unit size as determined by the PHA. Therefore, HUD proposes to revise the regulations to conform to the statutory change. The proposed rule would require PHAs to use the lesser of the two standards, unless the family is living in a larger unit as a result of a reasonable accommodation, in which case the PHA would be required to use the utility allowance for the size unit the family is actually leasing.