Restoring Subsidy of Residents Whose Assistance Was Terminated

By Daniel Bagliore

From time to time, a resident’s project-based rental subsidy may be terminated due to failure to recertify, income increases to a level where they can pay the full Contract Rent, or another HUD-allowable reason. Under HUD rules [HUD Handbook 4350.3, 8-6(B)], a resident’s subsidy may be reinstated if:

• The original termination of assistance was not due to fraud;
• The resident remains eligible for assistance; 
• The resident submits all required recertification information; and
• Assistance is available for the unit.

Maximum Income Limits & Subsidy Reinstatement

Importantly, maximum income limits are not reviewed when restoring subsidy for an in-place resident who has previously been determined eligible. The key point is that income limits apply only at initial move-in for new admissions and at initial certification when an in-place household begins receiving subsidy for the first time. Income limits do not apply when reinstating assistance for a household that was already receiving subsidy [HUD Handbook 4350.3, pars. 3-4 and 3‑6(C)(2)].

To qualify for reinstatement, in addition to other eligibility factors, there must be a need for subsidy, which may be as little as $1.00. This need is based on the relationship between Total Tenant Payment (TTP) and Gross Rent (Contract Rent + Utility Allowance). If the calculation shows there is no subsidy need (zero or a negative amount), it means the household’s income is high enough to be able to afford the full Contract Rent on its own. In other words, unless the calculation results in at least $1.00 of subsidy, the household remains a market tenant and assistance cannot be reinstated.

How to Determine If Subsidy Resumes

There are two tests:

Method 1: If the household’s TTP is less than the Gross Rent, the difference is paid as subsidy.

Keep in mind that this calculation is always based on Gross Rent, not the Contract Rent. Even when the household’s TTP is higher than the Contract Rent, the presence of a utility allowance can still create a subsidy need. Therefore, refrain from comparing TTP (which equals the tenant’s share of the rent including utilities) to Contract Rent.

Method 2: If the Tenant Rent is less than the Contract Rent, there is a need for subsidy.

While they might sound different, the two methods are actually mathematically the same in the sense that using either one will yield the exact same results.

Reminder: These methods show how subsidy is determined based on rent calculations only. HUD income limits are not part of the process when reinstating assistance for an existing tenant who was previously subsidized.

Example—Subsidy Need

Here is an example of how these methods work in a hypothetical situation where a resident seeks restoration of terminated subsidy involving the following numbers: 

• Household income: $41,000
• TTP: $1,025
• Utility allowance: $100
• Contract rent: $1,000
• Gross Rent: $1,100

Method 1

Compare TTP to Gross Rent.  

If TTP is < Gross Rent  subsidy needed

If TTP is ≥ Gross Rent  no subsidy

In this case, TTP of $1,025 < Gross Rent of $1,100 (subsidy needed)

Calculate Subsidy: $1,100 (Gross Rent) - $1,025 (TTP) = $75 (Subsidy)

Method 2

Compare Tenant Rent to Contract Rent

If Tenant Rent is < Contract Rent  subsidy needed

If Tenant Rent is ≥ Contract Rent  no subsidy

In this case, Tenant Rent of $925 < Contract Rent of $1,000 (subsidy needed)

Calculate Subsidy: $1,100 (Gross Rent) - $1,025 (TTP) = $75 (Subsidy)

As shown in both methods, the household qualifies for $75 in monthly subsidy.

As you can see, although the inputs differ, both methods lead to the same outcome.

What Happens If TTP Covers Gross Rent?

If TTP is equal to or greater than Gross Rent, there is no subsidy to reinstate. The household continues as a market tenant until their income changes.

Example 1: TTP Is greater than Gross Rent (No Subsidy)

• Contract Rent: $1,200
• Utility Allowance: $50
• Gross Rent: $1,250
• TTP: $1,400

$1,250 (Gross Rent) – $1,400 (TTP) = (−150) 

A negative result means the tenant’s income is high enough to cover the full rent, so no subsidy is provided.

Another view: $1,400 (TTP) - $50 (UA) = $1,350 (Tenant Rent), but since that exceeds the Contract Rent of $1,200, the tenant simply pays the full $1,200 to the owner.

Either way, no subsidy is reinstated.

Example 2: TTP Equals Gross Rent (No Subsidy)

• Contract Rent: $950
• Utility Allowance: $75
• Gross Rent: $1,025
• TTP: $1,025

$1,025 (Gross Rent) – $1,025 (TTP) = $0 (no assistance)

Another view: $1,025 (TTP) - $75 (UA) = $950 (Tenant Rent) which equals the Contract Rent of $950—tenant simply pays the full $950 to the owner.

Either way, no subsidy is reinstated.

Key Takeaways

• Do not review HUD income limits when reinstating assistance for an in-place tenant who previously received subsidy.
• Subsidy depends on the rent calculation, not income limits.
• If Gross Rent > TTP (or Tenant Rent < Contract Rent), subsidy resumes.
• If Gross Rent ≤ TTP (or Tenant Rent ≥ Contract Rent), there is no subsidy.

Daniel Bagliore is a freelance writer with more than 25 years of affordable housing experience.