HUD Notice Implements HOTMA’s Public Housing Over-Income Limit

The Housing Opportunity Through Modernization Act of 2016 (HOTMA) amended an income limitation on public housing tenancy for families, otherwise referred to as an “over-income” limit. After commencing a notice regarding its implementation of HOTMA in 2016, HUD recently published a notice of its final implementation of the “over-income” limit. The income limit amounts are effective on Sept. 24, 2018.

This notice finalizes how the over-income limit is determined and informs housing authorities how to begin the process for tracking “over-income” public housing families. However, the notice doesn’t address how a public housing authority (PHA) is to determine the monthly subsidy to use in setting rents for over-income families that the PHA has allowed to remain in public housing.

Over-Income Limit for Public Housing Residents

The rule requires that after a family’s income has exceeded 120 percent of area median income (AMI), or a different limitation established by the HUD Secretary based on local housing costs, for two consecutive years, the PHA must either:

• Terminate the family’s tenancy within six months of the second income determination; or
• Charge the family a rent equal to the greater of the:
  • Applicable fair market rent; or
  • Amount of monthly subsidy for the unit, including amounts from the operating and capital fund (HOTMA Section 103).

HUD will publish the over-income limits. For the purpose of determining the income limit, including any adjustments, HUD will use the VLI limit as the basis of the 120 percent income limit (by multiplying the VLI limit by a factor of 2.4). For those areas without an adjustment, the result is an income limit of 120 percent of AMI. For areas where HUD has made an adjustment to the VLI limit, the result of the multiplier will be higher or lower than 120 percent of AMI, depending on the adjustments made. HOTMA allows HUD to adjust the over-income limit due to local construction costs, unusually high or low household incomes, vacancy rates, or rental costs.

Steps PHAs Need to Take

PHAs must update their Admissions and Continued Occupancy Policies (ACOP) to implement these changes. Such policies must include the imposition of an over-income limit in the program, all instances of when the two-year time frame begins, and notification requirements. PHAs must complete all relevant policy and PHA plan changes no later than March 24, 2019, which is six months after the effective date of this notice.

Once a PHA has completed updates to its ACOP and plan, when the PHA becomes aware that a family’s income exceeds the applicable income limit, the PHA must document that the family exceeds the threshold to compare with the family’s income one year later.

If, one year after the initial determination by the PHA that a family’s income exceeds the over-income limit, the family’s income continues to exceed the over-income limit, the PHA must provide written notification to the family that their income has exceeded the over-income limit for one year, and that if the family’s income continues to exceed the over-income limit for the next 12 consecutive months, the family will be subject to either a higher rent or termination based on the PHAs policies.

Note, the time period is two consecutive years. If the family’s income is reduced below the over-income limit at any time, these policies no longer apply. If the family subsequently experiences an increase that again causes their income to be at or above the over-income limit, the two-year period starts over. Therefore, if a family requests an interim reexamination, which then demonstrates that a family’s income has dropped below the over-income limit, the family is no longer considered over-income. If a PHA becomes aware, through a subsequent annual reexamination or an interim reexamination that the family’s income has increased to an amount that exceeds the over-income limit, the family will begin a new two-year clock.

HOTMA also requires PHAs to submit an annual report indicating how many households are over-income and how many are on the public housing waiting list. It’s important to note that this notice doesn’t apply to PHAs operating fewer than 250 public housing units that are renting to families with incomes exceeding the over-income limit, if the PHA is renting to those families because no income-eligible families are on the PHA’s waiting list [24 CFR 960.503].

Additional Guidance Expected

HUD will issue additional guidance on the following:

• The calculation of a unit’s monthly subsidy;
• Whether utility allowances apply to the calculation of rent under these options;
• The requirement to report the number of over-income families and the number of families on the waiting list;
• How PHAs are supposed to track over-income families; and
• How to notify families.