HUD Proposes Rules to Implement Several HOTMA Provisions

October 1, 2019

In 2016, President Obama signed into law the Housing Opportunity Through Modernization Act (HOTMA). HOTMA touched upon a broad range of topics. The housing law was enacted to expand housing providers’ ability to develop housing for extremely low-income households and streamline operational functions for housing providers.

In 2016, President Obama signed into law the Housing Opportunity Through Modernization Act (HOTMA). HOTMA touched upon a broad range of topics. The housing law was enacted to expand housing providers’ ability to develop housing for extremely low-income households and streamline operational functions for housing providers. The law affected inspections (Section 8 Housing Choice Voucher program), income and recertification (public housing and Section 8 programs), over-income tenants (public housing), asset limits (public housing and Section 8 programs), project-based vouchers (Section 8), family unification program (Section 8 Housing Choice Voucher program), and reasonable accommodations for an exception payment standard (Section 8 Housing Choice Voucher program).

Many of HOTMA’s provisions required HUD to implement regulations. Various provisions of HOTMA were implemented by other HUD actions. Most recently, HUD published in the Federal Register proposed changes to the regulations for the public housing, Housing Choice Voucher, and Section 8 project-based rental assistance programs. Comments are due by Nov. 18.

These proposed changes would implement HOTMA Sections 102, 103, and 104. Section 102 changes the requirements regarding income reviews for public housing and HUD’s Section 8 programs, the Housing Choice Voucher program, and the Project-Based Rental Assistance program that assists privately owned multifamily properties. Section 103 modifies the continued occupancy standards of public housing residents whose incomes have grown above the thresholds for initial occupancy. And Section 104 sets maximum limits on the assets of households living in public housing and Section 8 housing. The following is a summary of some of the major provisions of the proposed rules:

Section 102 Provisions

> Income Reexaminations

  • Reviews of family incomes may be made at the request of the family when it is estimated that a change in income or deduction will result in a decrease of 10 percent or more in annual adjusted income;
  • HOTMA allows a PHA or owner to establish a threshold lower than 10 percent. The proposed rule would bar a PHA or owner from having a threshold greater than 10 percent.
  • HOTMA requires PHAs and owners to reexamine household income any time their income is estimated to increase by 10 percent or more. However, an increase in income may not be considered if the household previously received an interim reduction during the year.

> Calculating Household Income

  • HOTMA requires PHAs and owners to estimate household income for the upcoming year to determine household income for initial occupancy, initial provision of housing assistance, or for an interim reexamination. For annual income reviews, income from the preceding year must be used.
  • HOTMA allows PHAs and owners to determine household income, prior to the application of deductions, by using income determinations made for other purposes such as Temporary Assistance for Needy Families (TANF), Medicaid, Supplemental Nutrition Assistance Program (SNAP), and the Earned Income Tax Credit programs.

> De Minimis Errors

  • HUD proposes PHAs will remain in compliance with the new provisions related to income review and income calculation if errors made by the agency are within 5 percent of the correct income.

> Definition of “Annual Income”

  • HOTMA provides a broader definition of “income.” The proposed rule lists 23 items in the HOTMA definition that won’t be counted as income. The proposed rule adds exclusions such as amounts in or from ABLE accounts (tax-advantaged saving accounts for people with disabilities) and it removes current exclusions such as inheritances, gifts, capital gains, and other sporadic income.

> Adjusted Income

  • A HOTMA deduction of $480 applies for minors, students, and persons with disabilities who are not the head of household or that person’s spouse.
  • HOTMA requires the amount to be adjusted each year for inflation.
  • HOTMA also increased the deduction for any elderly or disabled household member from $400 to $525, and requires annual adjustment for inflation.
  • HOTMA increased the threshold for obtaining a deduction for health and medical or child care expenses from 3 percent of household income to 10 percent. The applicable categories are unreimbursed medical expenses of any elderly or disabled family member, unreimbursed attendant care and auxiliary equipment expenses for each household member who has a disability, to the extent necessary to enable any household member to be employed, and child care expenses necessary to enable a household member to be employed or further his education.
  • HOTMA requires HUD to provide hardship exemptions if a household can demonstrate that they wouldn’t be able to pay the rent due to the higher 10 percent threshold to benefit from the health and medical deduction. The proposed rule’s hardship provision would require a PHA or owner to recalculate household income by deducting the amount of health and medical expenses that exceed 6.5 percent of household income.
  • HOTMA also allows a hardship exemption for the child care expense deduction. The proposed rule’s hardship provision would allow the deduction to continue for a household that no longer has a member who is employed or seeking to further her education. To qualify, the household must demonstrate that it can’t pay the increased rent due to the loss of the child care deduction, and that the child care expense deduction is still needed even though no family member is employed, seeking employment, or furthering her education.

Section 103 Provisions

> Over-Income Limit for Public Housing Residents

  • HOTMA established an “over-income” limit of 120 percent of the area median income (AMI) for public housing residents. It also allows HUD to adjust the over-income limit where there are high construction costs or unusually high or low household incomes, vacancy rates, or rental costs.
  • HOTMA exempts PHAs with fewer than 250 public housing units from the over-income rule if the PHA is renting to over-income households because there are no income-eligible households on the waiting list or apply for housing assistance.
  • When a PHA learns during an annual or interim income reexamination that a household’s income exceeds the over-income limit, the PHA must record that income level and compare it with the household’s income one year later. If the household’s income continues to be greater than the over-income limit at that one-year mark, the PHA must notify the household in writing. If the household’s income is again greater than the over-income limit at the second-year mark, the household would either have to pay the Fair Market Rent (FMR) or the amount of the monthly subsidy (operating and capital fund) for their unit, or be terminated from the public housing program after six months.
  • If a previously over-income household has a lower income at an annual or interim reexamination, the household is no longer subject to the over-income provisions and would have a two-year grace period if household income again exceeds the over-income limit.

Section 104 Provisions

> Limitations on Assets

  • HUD proposes that households be ineligible for public housing, voucher, or project-based rental assistance if their net household assets are greater than $100,000. HOTMA requires this amount to be adjusted each year for inflation.
  • HOTMA allows a PHA or owner to determine the net assets of a household based on a certification by the household that their net family assets are less than $50,000, after annual adjustment for inflation.
  • HOTMA excludes from the definition of “net family assets” family self-sufficiency accounts and the value of any accounts specifically dedicated to retirement. The proposed rule would add ABLE accounts. These are tax-advantaged saving accounts for people with disabilities.
  • HOTMA says “net family assets” don’t include the value of personal property, except for items of “significant value.” Not counting “necessary items,” the proposed rule would exclude items of personal property with a total value under $50,000. HUD requests suggestions for what items could be considered “necessary.”
  • HOTMA allows PHAs and owners to choose to not enforce the limit on eligibility for assistance based on assets. PHAs and owners can also establish exceptions. For PHAs and owners that do enforce the asset limit, they may delay eviction or termination for up to six months.

The proposed rule can be found at https://www.govinfo.gov/content/pkg/FR-2019-09-17/pdf/2019-19774.pdf.

 

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