If rental applicants, residents, or household members (which we’ll refer to collectively as “household members”) tell you they have no income, be skeptical. Very skeptical. You can be sure that HUD management reviewers and auditors will—especially in these times where preventing (and recovering) housing benefit overpayments has become a policy imperative of the highest order. And if they discover that the household member did have income after all, HUD may contend that you didn’t do enough to verify the zero-income claim and come after you for the resulting overpayment. Here are the six things you can do to avoid getting burned.  

Step 1. Give Zero-Income Claimants a List of HUD Income Sources

“Income” may mean different things to different people. One common conception is that “income” refers only to salary and wages but not government benefits, child support, and other non-employment-related sources. Of course, that’s not how HUD sees it. And when you’re operating federally assisted housing, HUD’s conception of income is what matters.  

Strategy: Verify and don’t simply assume that the zero-income claims you get are in line with HUD income rules. The best and simplest way to ensure that everybody is on the same page is to show household members who say they have no income a copy or summary of Exhibit 5-1 of HUD Handbook 4350.3 listing specific sources of money that do and don’t count as income. Instruct them to go over the exhibit carefully to ensure that what they’re representing to be their income corresponds with HUD rules. 

Step 2. Ask Zero-Income Claimants How They Plan to Pay Rent & Expenses

Chances are that household members will revise their claims of zero income after looking at HUD’s list of income sources. But then again, they may not. 

Strategy: Ask those who still contend that they have no income how they plan to subsist from day to day. Where will they get the money to pay for food, clothing, transportation, and other daily needs? If necessary, remind them that food stamps won’t cover other necessities like toiletries, house-cleaning and paper products, telephone bills, and gasoline. 

Step 3. Perform Current Expense Spreadsheet Analysis

If household members continue to claim zero income after Steps 1 and 2, you might have to crunch the numbers. 

Strategy: Perform a current expense analysis in a spreadsheet. Basic process:

• Have household members list all of their current expenses;
• Determine the status of each listed expense; and 
• Compare those figures to the amount of income reported. 

A finding that all of the listed expenses are currently paid should raise a red flag that zero-income claimants are hiding or overlooking something. So, ask them for an explanation or clarification if this occurs.

Step 4. Send Verification Forms to Government Agencies

If household members continue to say they have no income, tell them it’s your policy to verify that they don’t get payments from government agencies such as the Social Security Administration and state and local unemployment and welfare benefit agencies. 

Strategy: Use the form you normally use to verify government benefit income. Make a list of the most common sources of government payments and use the list for any adult household member that claims to have zero income.

What if you learn that government agencies are, in fact, providing benefits? Answer: Inform the zero-income claimant of what you’ve learned and that you must count the benefits in their income to determine the entire household’s eligibility. And if they contend that the agency gave you the wrong information, tell them to contact the agency to correct the mistake.

Compliance Pointer: To avoid potential discrimination claims by household members protected by fair housing laws, make it a point to send verification forms to all of the agencies on your list for each member of a household that claims zero income. Don’t let your personal or subjective impressions of particular household members dictate the agencies to which you send verification forms, such as by seeking verification of food stamps for members because they’re Black or Hispanic.

Step 5. Make Zero-Income Claimants Sign Written Certification 

Taking all of the above verification measures should provide a level of comfort that the household member’s claims of zero income are true. But there’s one more thing you should do to smoke them out and minimize your own liability risk.

Strategy: Before certifying them, have zero-income claimants complete a written form certifying that they aren’t employed and have no income from any sources listed in HUD Handbook 4350.3, Exhibit 5-1. This certification should be made under penalty of perjury. You can use our Model Form below.

Step 6: Document Your Verification Efforts

Last but not least, remember to keep a written record documenting the steps you took to verify that zero-income claimants really had no income. Such documentation should include a list of the questions you asked, the responses you received, the verification forms you sent out, and any signed certifications you obtained. Retain these records for at least two years in case HUD questions your diligence and bills you for an overpayment.