Section K: Calculating Resident Rents
In this section...
- Calculating Resident Rent
- Annual Gross Income
- Annual Adjusted Income
- The Earned Income Disallowance (EID)
- Special Topics for Calculating Rent
SHP allows grantees to charge participants rent under specific guidelines outlined in 24 CFR 583.315. Rent collected from participants is considered program income. This means that grantees and project sponsors must comply with the regulations at 24 CFR 84.24 and 24 CFR 85.25 regarding the use of program income or use rent as permitted by 24 CFR 583.315 (b).
This section provides guidance for grantees and project sponsors in calculating rents. Please keep in mind that participants who are paying utility costs are paying rental costs.
For guidance on calculating resident rent see:
- Tenant Rent Calculations for Certain HUD McKinney Act Programs CPD-96-03
- Annual Income Regulations:
24 CFR Subtitle A, Section 5.609
- Mandatory Income Deductions:
24 CFR Subtitle A, Section 5.611
- Earned Income Disallowance:
24 CFR Subtitle A, Section 5.617
Monitor participant income and calculate resident rent using tools in the Supportive Housing Program Self-Monitoring Tools Guide
Calculating Resident Rent
Grantees and project sponsors may, but are not required to, enter into leases or occupancy agreements with program participants. Local law will determine whether an occupancy agreement creates a tenancy that is protected by the state’s landlord/tenant laws. Grantees and project sponsors should consult with legal counsel to prepare their agreements.
Nothing in the McKinney-Vento Act or its implementing regulations requires program participants to pay rent or occupancy charges for participation in the project. However, when the grantee or project sponsor does decide to charge the program participant, Section 426(d) of the McKinney-Vento Act and 24 CFR 583.315 set the maximum amount that may be charged. The maximum resident rent is the higher of:
- 30% of monthly adjusted income;
- 10% of monthly gross income; or
- the welfare rent (if applicable in your state; if unsure, check with the HUD Field Office).
Charging rent is optional and projects may charge rent as long as the amount does not exceed the statutory limitations. If grantees or project sponsors decide to charge rent, the SHP Self-Monitoring Tools worksheet in the “Tips & Tools” box above will take you through the steps to arrive at the maximum rent, and includes a section on determining resident rent for units when utilities are not included in the rent.
Annual Gross Income
HUD’s Tenant Rent Calculations for Certain HUD McKinney Act Programs (CPD-96-03) and 24 CFR Part 5 Subpart F specify how income is to be calculated for the SHP program. In particular, 5.609(b) explains what is to be included in income.
- The full amount, before any 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 and personal property;
- The full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts, including lump sum payment for delayed start of a periodic payment;
- Payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay;
- Welfare assistance. Welfare or other payments to families or individuals, based on need, that are made under programs funded, separately or jointly, by Federal, State or local governments (e.g. Social Security Income (SSI) and general assistance available through state welfare programs);
- Periodic and determinable allowances, such as alimony and child support payments, and regular contributions or gifts received from persons not residing in the dwelling; and
- All regular pay, special pay and allowances of a member of the Armed Forces, except special hostile fire pay.
Section 5.609(c) explains what is not included in income.
- Income from employment of children (including foster children) under the age of 18 years;
- Payments received for the care of foster children or foster adults (usually individuals 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 (except payments in lieu of earnings, such as unemployment and disability compensation, worker’s compensation and severance pay);
- 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 as defined in 24 CFR 5.403;
- The full amount of student assistance 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 disabled person that are disregarded for a limited time for purposes of SSI income eligibility and benefits because they are set aside for use under a Plan for Achieving Self-Support (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;
- Amounts received under a resident service stipend. A resident service stipend is a modest amount (not to exceed $200 per month) received by a resident for performing a service for the PHA or owner, on a part-time basis, that enhances the quality of life in the development. Such services may include, but are not limited to, fire patrol, hall monitoring, lawn maintenance, resident initiatives coordination, and serving as a member of the PHA’s governing board. No resident may receive more than one such stipend during the same period of time;
- Incremental earnings and benefits resulting to any family member from participation in qualifying State or local employment training programs (including training programs not affiliated with a local government) and training of a family member as resident management staff. Amounts excluded by this provision must be received under employment training programs with clearly defined goals and objectives, and are excluded only for the period during which the family member participates in the employment training program;
- 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 the head of household and spouse);
- Adoption assistance payments in excess of $480 per adopted child;
- Deferred periodic payments of SSI 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 or local law for property taxes paid on the dwelling unit;
- Amounts paid by a State agency to a family with a developmentally disabled family member living at home to offset the cost of services and equipment needed to keep the developmentally disabled family member at home; and
- Amounts specifically excluded by any other Federal statute from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under any program to which the exclusions set forth in 24 CFR 5.609(c) apply. A notice will be published in the Federal Register and distributed to PHAs and housing owners identifying the benefits that qualify for this exclusion. Updates will be published and distributed when necessary.
Annual Adjusted Income
Annual adjusted income is determined by deducting from annual gross income the items listed below. 24 CFR 5.611 explains the adjustments to annual income.
- $480 for each dependent;
- $400 for any elderly or disabled family;
- The sum of the following, to the extent the sum exceeds 3 percent of annual income:
- Unreimbursed medical expenses of any elderly family or disabled family; and
- Unreimbursed reasonable attendant care and auxiliary apparatus expenses for each member of the family who is a person with disabilities, to the extent necessary to enable any member of the family (including the member who is a person with disabilities) to be employed. This deduction may not exceed the earned income received by family members who are 18 years of age or older and who are able to work because of such attendant care or auxiliary apparatus; and
- Reasonable child care expenses necessary to enable a member of the family to be employed or to further his or her education.
The Earned Income Disallowance (EID)
The Earned Income Disallowance (EID) applies to disabled participants of SHP projects as discussed in 24 CFR 5.617.
Special regulations apply to all disabled clients that became employed after April 20, 2001 and:
- were previously unemployed for one or more years; or
- earned less than $3,375 in the previous 12 months; or
- increased their income during a self-sufficiency or job training program; or
- received welfare benefits or participated in a Welfare-to-Work program within six months prior to getting a job.
For these participants, any increase in income due to employment is to be excluded from annual income for 12 months. For months 13-24 after getting a job, 50% of the income increase is to be excluded form annual income. This provision applies to any disabled household member.
A tenant is eligible to receive the EID during a lifetime 48-month period from the time that the EID is first applied for the affected tenant. The time begins to run the date that the project would have otherwise raised the tenant’s rent in response to a reported income increase.
As explained in HUD Notice CPD-96-03, grantees/sponsors should exclude the amount of income included in the residents' pay that is attributed to an earned income tax credit when calculating income. This amount will be listed separately on residents’ pay stubs. It will be the same amount in each check.
For more information on the Earned Income Disallowance, see the regulations at 24 CFR 5.617.
Special Topics for Calculating Rent
The following topics are discussed in more detail in HUD Notice CPD-96-03.
Review of Income
In order to determine the correct rent payment, residents' income must be reviewed. Their income should be reexamined at least annually. In addition, if there is a change in family composition (e.g., birth of a child) or a decrease in the resident's income during the year, an interim reexamination may be requested by the resident and the resident rent adjusted accordingly. Residents who receive an increase in income need not have their rent increased until the next scheduled (annual) reexamination. Residents should agree to supply such certification, release, information, or documentation as the grantee judges necessary to determine the resident's income. Self-declaration may be used only if there is no other means of verification available.
Use of Income Earned Through Participation in a Training Program
Income earned through training programs should be excluded if the training program is:
- Funded by HUD (including training provided by HUD grantees and sub-grantees using HUD program funds);
- Funded through the Job Training Partnership Act (JTPA), including AmeriCorps Living Allowances; or
- Funded by State or local employment training programs.
Distinguishing Between Employment That is Part of a Training Program and Regular Employment
Employment-related activities are considered to be training rather than employment if the work activity is of a time-limited nature and there is a curriculum of activities with discrete goals related to a participant's skill development and employability. Examples of such activities may include on-the-job training for maintenance work, data entry, or food preparation.
Eligible Child Care Expenses
As described in HUD Notice CPD-96-03, child care expenses can be deducted in full given the following conditions:
- the child or children are 12 years old and under;
- the resident is employed or enrolled in school while the dependent is receiving care;
- the amount deducted as child care expenses is necessary for the resident to work or attend school and the amount necessary for the resident to work does not exceed the amount earned while working; and
- the resident is not reimbursed for this expense.
Child Care Payments Through Program Fees
If participants’ program fees are being used for eligible child care expenses, then the amount paid should be deducted from the participant’s income.
Seasonal Employment Income
Unless the income is earned by family members younger than 18 years of age, seasonal income is counted just like other wages and salaries. Seasonal income includes, but is not limited to, holiday employment, summer employment, and seasonal farm work. Temporary, non-recurring income is income that is not expected to be regularly available in the future. An example of temporary, non-recurring income is income earned by census workers.
Saving a Portion of the Resident's Income
The SHP regulations do not prohibit grantees or project sponsors from instituting mandatory savings programs. However, such programs, if adopted, should be applied to all residents. In addition, grantees and project sponsors should be aware that savings plans may result in asset levels that could jeopardize residents' eligibility for benefits such as TANF, SSI and general assistance. Grantees/sponsors may want to consult with their local public welfare office to discuss ways to implement savings programs without jeopardizing benefits available to their residents.