National Housing Law Project Housing Law Bulletin

Changed HUD Rules on Calculating Income and Rent

On April 5, 1995, HUD issued new rules that exclude certain categories of income from the calculation of rents under the public housing, Section 8, Rent Supplement, Indian Housing, and Section 236 programs.¹ The exclusions are:

1. Student financial assistance
2. Students' earned income
3. Job training compensation
4. Resident management training compensation
5. Resident service stipends
6. Renters' tax credits and property tax rebates
7. Adoption assistance payments
8. Adult foster care
9. Homecare payments
10. Lump-sum SSI and Social Security

The new regulations became effective on May 5, 1995.

Except for the rule on lump-sum SSI and Social Security payments, which was dictated by a statute, these changes were adopted by HUD under its statutory discretion² to define income for housing assistance purposes. The first three are exclusions that will assist families seeking financial self-sufficiency. The next two further HUD's efforts to increase tenant involvement in the running of their developments. The property tax rebate and renters' tax credit exclusion is designed to support such state and local tax programs. The remaining four exclusions concern payments received by a family to meet extraordinary expenses, particularly for people with disabilities.

In addition to these changes regarding the definitions of income, the HUD's April regulations also modify the rules for implementing a 1992 statutory change in adjustments to income under the Indian housing programs.

Students' Financial Assistance and Earned Income

Under prior law, many aspects of financial assistance received by students were not counted as income, including all student loans and most grants and Work Study supplements.³ In some cases, however, students' grants that were designed to cover subsistence expenses, in contrast with educational expenses, were counted as income. Under the new rules, all forms of financial assistance for students will be disregarded when calculating the household's income and rents.⁴

In addition, the changed rules will require the exclusion of earnings above $480 per year of full-time students who are 18 years old or older.⁵ That exclusion does not include the earnings of the household head or the spouse of the head of household, whose earnings will be counted. In addition, the person earning the income must be a full-time student, i.e., one carrying what is considered a full load of courses for day students at the school. The schools may be vocational as well as academic.⁶ The first $480 are included because they will be offset by the $480 per year deduction for all full-time students.⁷ The earnings of students below age 18 are already excluded because the earned income of children is not counted.⁸

Job Training Compensation

To remove some of the financial disincentives to securing a job, the changed rules will exclude from income any earnings a tenant receives while employed under a state or local job training program.⁹ That income is excluded only while the person is in the program. Once they graduate, the compensation will be included as income. For some tenants, however, a separate provision will exclude their earnings for a longer period of time. For example, public housing tenants who get a job from a job training or JOBS program will have their increased income disregarded for 18 months after they complete the program and get the job.¹⁰

Current law had already excluded payments from job training program reimbursements to tenants for expenses of participation, such as childcare or travel costs.¹¹ HUD's rule change extends that exclusion to cover more kinds of training programs and earned income as well as reimbursements. For example, earnings of apprentices and others receiving on-the-job training will be excluded.

Resident Management Training Compensation and Resident Stipends

Two additional exclusions were created to support tenants who want to become more involved in the operation of their developments. First, all tenants will be allowed to exclude any moderate stipends they receive for helping out at the project.¹² The stipends may not exceed $200 per month. If they are larger, they may not be considered a stipend but are categorized as earned income. Even the first $200 of such higher payments will be included as income. The payments must be for activities that benefit the development, such as hall monitoring or resident initiatives coordination, and must be performed for the PHA or other landlord. More than one member of a household may receive one of these stipends and exclude it from consideration as income, but no individual tenant may exclude more than one stipend at a time. Unlike the public housing rules issued in August of 1994,¹³ a tenant does not have to be an officer of a resident organization to exclude these stipends.

The second exclusion is for compensation that a tenant may receive while being trained to be a tenant manager.¹⁴ This exclusion is designed to support HUD's efforts to encourage tenant management. It is similar to the exclusion of compensation received as part of a job training program.

Property Tax Rebates

Some states have programs that create tax credits for renters comparable to the property tax deductions that homeowners get or that make rebates to tenants for property taxes paid on the property that they rent. In order not to dilute the effectiveness of those programs, HUD has decided to exclude such payments from income for rent-calculation purposes.¹⁵

Adoption Assistance, Adult Foster Care and Homecare Payments

There are various programs that provide payments to families to cover extraordinary expenses that they may incur. For three of these kinds of payments, adoption assistance, adult foster care and homecare, HUD has created three more exclusions.¹⁶

For each exclusion, HUD's rationale is that it should not undermine the purposes of the state and local programs under which the payments are made. For adult foster care, HUD is also bringing these payments into line with payments for foster children which are already excluded.¹⁷

Lump-Sum SSI and Social Security Payments

Previously, HUD required tenants to include as income any retroactive awards of SSI or Social Security they might have received after favorably challenging a decision of the Social Security Administration to reduce or deny their benefits. In 1992, Congress outlawed that HUD practice,¹⁸ and HUD implemented that statutory change by a Notice in March of 1993.¹⁹ These new regulations conform the rules to that previous statutory change and the Notice. Even though the statute did not cover Section 236 and Rent Supplement assistance, HUD has extended its regulatory change to those programs to promote uniformity.

Indian Housing Travel and Childcare Expenses

Under the Indian housing programs, tenants who have excessive work- or education-related travel expenses are allowed to deduct them, up to $25 per week, from gross income before rent is calculated.²⁰ Prior to 1992, when that provision was enacted, HUD had allowed that deduction only for families that did not take the deduction for childcare expenses. The 1992 statutory provision required HUD to change that policy, and HUD issued a notice making the excessive travel expense available even to families that took the child-care deduction.²¹ These changes conform the regulations to the statute and HUD's 1993 Notice.

1. 24 C.F.R. §§ 215.21, 236.3, 813.106, 905.2 & 913.106, as amended at 60 Fed. Reg. 17,388 (Apr. 5, 1995).
2. 42 U.S.C.A. § 1437a(b)(4) (West 1994).
3. Former 24 C.F.R. § 813.106(c)(6) (1995). We will cite only the regulations at Section 813, which govern the Section 8 program, and the revisions to them, but the regulations that govern the other programs and the changes to them are virtually the same.
4. 24 C.F.R. § 813.106(c)(6), as amended at 60 Fed. Reg. 17,393.
5. 24 C.F.R. § 813.106(c)(11), as amended at 60 Fed. Reg. 17,393.
6. 24 C.F.R. § 813.102 (1995).
7. 24 C.F.R. § 813.102 (1995) (adjusted income and dependent).
8. 24 C.F.R. § 813.106(c)(1) (1995).
9. 24 C.F.R. § 813.106(c)(8)(v), as amended at 60 Fed. Reg. 17,393.
10. 24 C.F.R. § 913.106(c)(13) (1995).
11. 24 C.F.R. § 813.106(c)(8)(iii) (1995).
12. 24 C.F.R. § 813.106(c)(8)(iv), as amended at 60 Fed. Reg. 17,393.
13. 59 Fed. Reg. 43,622 (Aug. 24, 1994).
14. 24 C.F.R. § 813.106(c)(8)(v), as amended at 60 Fed. Reg. 17,393.
15. 24 C.F.R. § 813.106(c)(14), as amended at 60 Fed. Reg. 17,393.
16. 24 C.F.R. §§ 813.106(c)(2), (12) and (15), as amended at 60 Fed. Reg. 17,393.
17. 24 C.F.R. at § 813.106(c)(2) (1995).
18. 42 U.S.C.A. § 1437a(b)(4) (West 1994).
19. HUD Notice, PHA 93-11 (Mar. 16, 1993).
20. 42 U.S.C.A. § 1437a(b)(5)(G) (West 1994).
21. HUD Notice PHA 93-23 (May 19, 1993).