National Housing Law Project Housing Law Bulletin

In 1990, Congress enacted a provision mandating that public housing tenants who secure employment and increased income by participating in an employment training program not have their rent increased for 18 months after they get their job.¹ HUD delayed almost four years before issuing the regulations to implement that requirement, but finally did so on August 24, 1994.² That statute and the implementing regulations should be of great importance as people are being moved from welfare to work. However, it appears, as a result of work done by legal services attorneys in Connecticut and a few other places, that PHAs have not been following either the statute or the regulations. HUD has just issued a Notice explaining how the requirement works.³ With the issuance of that Notice, this is a good time to make sure that tenants benefit from the delayed rent increases that the law requires, both prospectively and retroactively.

The Statutory Scheme

The 1990 statute is fairly simple. It provides:

It is clear from the legislative history that Congress was intent upon removing any work disincentives from the public housing rent formulas and mitigating any difficulties a tenant might encounter while making the transition to work. The provision originated in the Senate bill and the Senate Banking Committee explained its purpose:

As is indicated above, it took HUD until August 24, 1994, to add this disregard to its regulations on public housing rents, but when it did, the rules were similarly straightforward. They provide:

It is also important to note that these regulatory exclusions have different effective dates. The exclusion of amounts received under HUD-funded training programs has been in the regulations since 1987.⁹ The rules on other training programs were added by the April 5, 1995, interim regulations that became effective on May 5, 1995.¹⁰

Difficulties with Implementation

It appears that many tenants who qualify have not been getting the benefits of the income exclusions that the statute and HUD regulations require. At least in Connecticut, where legal services attorneys began looking into the matter, it was found that few of the housing authorities were following the rules. The response from the PHAs was that they were not aware of them. However, that does not justify failure to follow the law, either as a matter of law or of fact. The rules on the statutory disregard have been published in the Federal Register three times, first in August 1994, then in April 1995, and finally in October 1996. Before that, they were published for comment in April of 1994. The additional regulations on training program exclusions were included in the April 1995 and October 1996 Federal Registers. When these regulations were published in April 1995 and October 1996, HUD sent special Notices to all housing authorities telling them that new rules had been published and attaching copies of them.¹¹ Back in October 1992, HUD had sent all PHAs a Notice explaining the exclusion of income received under HUD-funded training programs, and HUD extended that Notice with a new Notice in June of 1995.¹² Thus PHAs had plenty of opportunities to be aware of the rules.

All is not lost, however. PHAs, if informed, can now begin to implement the regulations prospectively. The new HUD Notice should both inform them of the rules and help resolve any ambiguities. Just as important as prospective implementation, the PHAs may also retroactively implement the changes for all tenants who have been charged the wrong rents since the regulations went into effect. Tenants who have been overcharged are entitled to refunds or credits against future rent obligations.¹³ Tenants who are now facing eviction for nonpayment of rent may have their evictions dismissed if their rent was wrongfully raised in violation of the exclusion statute and regulations and if past overpayments exceed the amount now owing.

HUD has made it clear that the regulations should be implemented retroactively to their effective date in cases where a tenant’s rent was not changed until a recertification subsequent to the effective date of the regulations. Thus, in its introductory comments to the October 18, 1996, regulations, HUD stated that one commenter had asked that PHAs be allowed to make the required rental adjustments at the first regular reexamination after the final rule’s effective date. HUD responded:

The retroactive implementation should not be limited to providing refunds or credits for tenants who are still in public housing. In the Connecticut situation, the HUD office has indicated support for a series of additional steps. They include (1) tracking down tenants who have moved out in cooperation with the welfare department; (2) placing people who were wrongfully evicted back into public housing units or at the top of the waiting list; (3) voiding repayment agreements entered into by tenants to avoid evictions, and refunds for attorneys’ fees and costs paid under such agreements; (4) reviewing pending eviction actions to see whether the tenants were entitled to a rent reduction and whether the grounds for eviction do not exist; (5) allowing former tenants who moved out when their rents were increased to move back in at the lower rent, based on the disregard. In dealing with the local HUD office and the PHAs in Connecticut, it became clear that both were much more receptive to resolutions of the implementation issues that are administratively simple. Thus the aim is to advocate for administrative ease, as well as compliance with the law.

Implementation Issues

As the PHAs implement these provisions, there will be some questions of interpretation. Some of them are answered by the new HUD Notice.¹⁶ A brief summary of the ambiguities answered by the Notice follows.

One of the issues that has been raised is what qualifies as a training program that enables tenants to qualify for the exclusions. The Notice defines training programs as follows:

In its question and answers, the HUD Notice provides additional explanation. It takes the position that merely participating in a state’s welfare program, even one modified as a result of the welfare act, does not automatically qualify as participating in a training program for any of these exclusions. For the statutory exclusion, the regulations require the training program to be governmentally funded, but the Notice clarifies that that does not mean 100 percent governmentally funded. Only a "material portion" of the funds must come from a governmental source.¹⁸ In addition, those regulations also require the program to be operated or administered by a public agency. Since private companies often provide training under contract with public agencies, the Notice clarifies that programs would qualify as long as the public agency establishes the goals standards and time frames and monitors the performance of the private contractors.¹⁹

The other major questions relate the proper calculation of the amounts to be excluded. During the time the tenant is participating in a training program, both the statutory exclusion and the additional regulatory exclusions require the PHA to disregard payments the tenant may receive to cover participation expenses, such as transportation, fees, materials or child care. In addition, if the tenant is employed and paid wages during the training program, some or all of those wage payments may be excluded.

The following are some of the specific examples addressed by the Notice:

The Notice explains how the amounts for that exclusion are calculated in different situations. Here are some examples:

1. 42 U.S.C. § 1437(a) (1998), as amended by Pub. L. No. 101-625, § 515(b), 104 Stat. 4199 (Nov. 28, 1990).
2. Former 24 C.F.R. § 913.106(c)(11) (1995), subsequently recodified at 24 C.F.R. § 5.609(c)(13) (1997).
3. HUD Notice PIH 98-2, Treatment of Income Received from Training Programs (Jan. 12, 1998).
4. 42 U.S.C. § 1437(a) (1998).
5. S. REP. NO. 316, 101st Cong., 2d Sess. 187 (June 8, 1990).
6. 24 C.F.R. § 5.609(c) (1997), originally issued as 24 C.F.R. § 913.106(c)(11), at 59 Fed. Reg. 43,622 (Aug. 24, 1994), subsequently reissued as 24 C.F.R. § 913.106(c)(13), at 60 Fed. Reg. 17,388 (Apr. 5, 1995).
7. 60 Fed. Reg. 17,388 (Apr. 5, 1995).
8. 24 C.F.R. § 5.609(c)(8) (1997).
9. Former 24 C.F.R. §§ 813.106(c)(8) and 913.106(c)(8), at 52 Fed. Reg. 34,108 (Sept. 27, 1987).
10. 60 Fed. Reg. 17,388 (Apr. 5, 1995).
11. HUD Notice PIH 95-23, "Addition of Nine Exclusions to the Definition of Annual Income" (Apr. 14, 1995); HUD Notice PIH 96-93, "Combined Income and Rent Final Rule" (Dec. 18, 1996).
12. HUD Notice PIH 95-43, "Extension of Notice PIH 92-48, Exclusion of Income Received under Training Programs."
13. National Tenants Org., Inc. v. Department of HUD, 358 F.2d 312 (D.D.C. 1973), subsequent settlement, No. 974-70 (D.D.C. Sept. 6, 1973) (Clearinghouse No. 10,297); Bloom v. Niagara Falls Hous. Auth., 430 F. Supp. 1183, 1192 (W.D.N.Y. 1977).
14. 61 Fed Reg. 54,494 (Oct. 18, 1996) (emphasis added).
15. See, e.g., National Tenants Org., Inc. v. HUD, supra, note 13; Underwood v. Harris, No. 76-0469 (D.D.C. order approving settlement agreement Apr. 5, 1979), previous and subsequent decisions reported at 414 F. Supp. 526 (1976) and 487 U.S. 552 (1988).
16. HUD Notice PIH 98-2, "Treatment of Income Received from Training Programs" (Jan. 12, 1998).
17. Id. at 3.
18. Id. at 7.
19. Id. at 7.
20. Id. at 6.
21. Id.
22. Id.
23. Id. at 4.
24. Id. at 9.
25. Id. at 5.
26. 42 U.S.C. § 1437a (1994).
27. 24 C.F.R. § 5.609(c)(13) (1997).
28. Id. at 6; 42 U.S.C. § 1437(a) (1998).
29. Id. at 5.
30. Id. at 8.
31. Id.
32. Id.
33. Id. at 10.