HUD Asking for Comments on Revising “Hold-Harmless” Policy

HUD has published a Federal Register Notice seeking comments on a proposal to end its policy of maintaining Section 8 income limits at the previously published level in cases where they would otherwise decrease.

HUD adopted this “hold-harmless” policy to ensure that the Multifamily Tax Subsidy Projects (MTSPs) would not be subject to income-limit decreases. MTSPs are affordable rental housing projects subsidized with LIHTCs and/or financed by tax-exempt private equity bonds that are issued by the states. The rents of MTSPs are tied to Section 8 income limits and a decrease could jeopardize the financial feasibility of existing housing projects. The Housing and Economic Recovery Act of 2008 changed the tax code to protect existing projects from decreases in income limits and rents by creating project-level hold harmless calculation of income limits for existing tax subsidized projects, thus obviating the need for HUD to continue the hold-harmless policy for the benefit of MTSPs.

According to HUD, maintaining artificially high-income limits has had an adverse impact on other federal programs, because it increases the number of eligible participants, which makes it tougher for HUD to target its resources to those who need it the most. More than 99 percent of HUD-assisted households have incomes below the extremely low-income level (30 percent of area median family income), so modest decreases in the Section 8 income limits from these changes would have minimal impact on households residing in assisted housing. HUD’s rationale is that many other programs that use its Section 8 income limits to determine program eligibility may benefit from the proposed change.

The comment period for this proposal ends October 14. For a copy of the proposed notice, go to www.huduser.org/datasets/il/incomelimits_hh_fr.pdf. For background information on income limits, go to: www.huduser.org/datasets/il/il09/IncomeLimitsBriefingMaterial_FY09.pdf.