National Housing Law
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Mandatory Exclusion of Training Program
Payments and Earned Income Increases In The Public Housing and Certificate
& Voucher Programs
Appendix 1
Earned Income Disregards for Public Housing Tenants
28 Housing Law Bulletin 1 (January 1998)
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.5 HUD delayed
almost four years before issuing the regulations to implement that requirement,
but finally did so on August 24, 1994.6
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.7 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 and Regulatory Scheme
The 1990 statute is fairly simple. It provides:
The earnings of and benefits to any public housing resident resulting
from participation in a program providing employment training and supportive
services in accordance with the Family Support Act of 1988, section 1437t
of this title, or any other comparable Federal, State, or local law, shall
not be considered as income for the purposes of determining a limitation
on the amount of rent paid by the resident during--
(1) the period that the resident participates in such program; and
(2) the period that --
(A) begins with the commencement of employment of the resident in
the first job acquired by the person after completion of such program that
is not funded by assistance under this chapter; and
(B) ends on the earlier of --
(i) the date the resident ceases to continue employment without good
cause as the Secretary shall determine: or
(ii) the expiration of the 18-month period beginning on the date referred
to in subparagraph (A).8
The important qualifications are that the tenant must be living in public
housing and must have participated in a program providing employment training
and supportive services. If the tenant receives any benefits or earns any
income as a result of participating in such a program, those benefits and
earnings are disregarded when determining the tenant's rent. The period
for which they are disregarded includes the time when the tenant is participating
in the program, plus the first 18 months the tenant has a job after completing
the program.
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 Committee
explained its purpose:
Amendment of Public Housing Rent Rules. -- The Committee bill
would amend Section 3(a) of the United States Housing Act of 1937 to exempt
residents participating in a Federal, State or local program providing
employment training and supportive services from increases in rent while
they are actively engaged in such programs and for a transitional period
after finding employment. Under existing law, rules regulating rents in
public housing create a disincentive to work since increases in income
precipitate increases in rent. Working low-income families who pay income
and social security taxes face a reduction in their disposable income,
but they receive no compensatory reduction in their adjustable income for
rent.
The Committee bill would place a moratorium on rent increases while
an individual or family member is actively engaged in a self-sufficiency
program and for a transitional period thereafter so long as the moratorium
does not exceed 3 years. Income eligibility for public housing will also
be assumed during the period.
The bill would, therefore, preserve present benefits for program participants
and provide a transitional period to adjust to increased income -- important
incentives for those families seeking to become less dependent on welfare.
In this regard, the bill would follow the lead of recent welfare reform
legislation -- the Family Support Act of 1988 -- which provides transitional
periods of continued eligibility for services such as Medicaid, AFDC, and
day care.9
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:
(b) Annual income does not include the following:
. . .
(13) For public housing only:
(i) The earnings and benefits to any family member resulting from
the participation in a program providing employment training and supportive
services in accordance with the Family Support Act of 1988, section 22
of the 1937 Act (42 U.S.C. 1437t), or any comparable Federal, State, or
local law during the exclusion period.
(ii) For purposes of this paragraph, the following definitions apply:
(A) Comparable Federal, State or local law means a program providing
employment training and supportive services that --
(1) Is authorized by a Federal, State or local law;
(2) Is funded by the Federal, State or local government;
(3) Is operated or administered by a public agency; and
(4) Has as its objective to assist participants in acquiring employment
skills.
(B) Exclusion period means the period during which the family member participates
in a program described in this section, plus 18 months from the date the
family member begins the first job acquired by the family member after
completion of such program that is not funded by public housing assistance
under the 1937 Act. If the family member is terminated from employment
with good cause, the exclusion period shall end.
(C) Earnings and benefits means the incremental earnings and benefits
resulting from a qualifying employment training program or subsequent job.
. . .10
The regulations clarify certain points, most importantly, that it is only
the increase in family income above the previous welfare income resulting
from the employment program that is disregarded, not the entire paycheck.
Although HUD provided little explanation of the regulations in its initial
comments to the original 1994 regulations, when they were reissued in April
of 1995, HUD explained:
The Department believes that these exclusions [the statutory ones
as well as others HUD created] are essential for achieving its goals of
ensuring economic opportunity, empowering the poor and expanding affordable
housing opportunities. Moreover, HUD believes that the costs of these additional
exclusions will be offset by long-term future savings because the exclusions
will increase the number of economically self-sufficient families residing
in assisted housing. Finally, because this interim rule promotes long-term
upward mobility, educational achievement and entrepreneurship, the number
of families dependent on welfare and other social services programs may
decline, thereby resulting in future cost savings for other Federal programs.11
In addition to the statutory exclusion discussed above, HUD's regulations
require the disregard of benefits and earnings resulting from participation
in training programs in other contexts.12
These include amounts received under training programs funded by HUD and
the incremental earnings and benefits a family receives from participating
in a state or local employment training program. These exclusions are generally
similar to the statutory disregard, but have several significant differences.
First, they cover Section 8 tenants, as well as public housing tenants.
Second, the training programs may be private ventures, as well as governmental
training programs. Third, if HUD funds the training program, the entire
amount of the earnings is excluded, not merely the incremental income.
Finally, the exclusion ends when the participation in the training program
ends. There is no transition period during the first 18 months on the job
after the training ends.
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 1987.13
The rules on other training programs were added by the April 5, 1995, interim
regulations that became effective on May 5, 1995.14
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, they 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.15
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 1995.16
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 them answer any ambiguities. Just as importantly,
the PHAs can 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 charged the wrong rent are entitled to refunds or
credits against future rent obligations.17
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 com-ments 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:
HUD has decided not to adopt the commenter's suggestions. Like the
interim rule, this final rule requires that PHAs amend their policies to
incorporate all the required changes, and that PHAS must then make whatever
retroactive adjustments are necessary for families that have applied, been
admitted, or been reexamined since the rule's effective date. Historically,
HUD has implemented all changes to the definition of income in such a manner,
so that the maximum benefit of the changes are realized.18
If the PHAs implement the regulations retroactively, they most likely will
be able to secure the payments from HUD instead of having to pay them out
of their own pockets. Historically, when PHAs and other HUD-assisted landlords
have overcharged large numbers of tenants, the retroactive payments eventually
have come from HUD.19 In Connecticut, HUD
has reportedly been willing to cover the PHAs' retroactive reimbursements
out of the operating subsidy payments. That makes sense, because, but for
the over-charging, the funds would have come out of the operating subsidy
account.
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.20
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:
Training Program -- A learning process with goals and objectives,
generally having a variety of components, and taking place in a series
of sessions over a period of time. It is designed to lead to a higher level
of proficiency, and it enhances the individual's ability to obtain employment.
It may have performance standards to measure proficiency.
Training may include, but is not limited to:
-- Classroom training in a specific occupational skill;
-- On-the-job training with wages subsidized by the program; or
-- Basic education.21
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.22
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.23
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:
• If HUD funds are used directly or indirectly for the training program,
the full amount of the wages is excluded.24
That is true, whether the PHA, a resident management corporation or some
other entity operates the training program.25
The key is that HUD funds are used to support the program, not who the
operator is. Likely HUD funds would be public housing operating subsidies,
comprehensive grants, HOPE VI money or CDBG funds.
• If HUD funds are not used for the training program, then the wage
exclusion is limited to the difference between the family's income before
it enters the program and its income during the program. Thus the Notice
gives the example of a person who receives $300 from a state's TANF program
and then enrolls in a state training program from which she receives $450
per month and loses her TANF benefits. In that case, the $150 difference
between the TANF benefits and the $450 training program payments is excluded
in calculating her rent.
The Notice goes on the deal with a myriad of variations on this situation.
• If a person had zero income before entering the training program
and received $350 from the training program, the full $350 would be excluded.27
The Notice does, however, allow the PHA some discretion to look at and
include the tenant's income over the few months prior to enrollment in
the training program, to see if the zero income is an aberration.28
• If a person happens to lose some income at the time she enters a training
program -- her children's father stops making child support payments, for
example -- that income is not counted in the calculating what the family's
income was before entering the program. In the Notice's example, if a person
had $400 from TANF and $100 of child support before entering the program
but received $400 from the training program and $150 from TANF, but no
child support after starting the program, $150 would be excluded (i.e.,
$550 - $400).29
If the tenant lives in public housing and has participated in a program
that meets the requirements for the statutory disregard, then the exclusion
of incremental income continues after the training program ends for the
first 18 months of employment. The statutory requirements for the training
programs are that they be operated in accordance with the old JOBS program
from the 1988 welfare act, the HUD Family Investment Center program or
a comparable federal, state or local law.30
The regulations amplify the statutory requirement, stating that the program
must be authorized by federal, state or local law, funded by the federal,
state or local government, and operated or administered by a public agency.31
If the public housing tenant secures a job as a result of participating
in such a program, the tenant's increased income is disregarded for 18
months after getting the job.
The Notice explains how the amounts for that exclusion are calculated
in different situations. Here are some examples:
• If the person is hired by the Housing Authority and paid with United
States Housing Act funds, the increased income is not excluded for the
18-month period, because that is what the statute mandates.32
There should be a different result if the person is paid from other funds,
such as state funds, CDBG funds or possibly, tenant rent collections, instead
of operating subsidies. But the Notice does not address those possibilities
specifically.
• If a person is employed, but quits her job to enter a training program
and gets a higher paying job after completing the program, the pay increase
is excluded for the first 18 months of the new job.33
• If a person was already in the training program before moving into
public housing and got the job either before or after moving into public
housing, she would still qualify to have her increased income excluded
for the first 18 months of the job.34 The
only limit specified in the Notice is that the person must have been in
the training program on or after September 23, 1994, when the regulations
went into effect.35 Since the statute went
into effect on November 28, 1990, even that limit in the Notice probably
does not apply.
• If a person gets a job but loses it before the 18 months are up and
then gets a second job, the increased income received from the first job
and from the second job is excluded until 18 months have run since the
first job was secured. However, any months between jobs count against the
18 month total, even if the person’s income was lower during that time.
• If the tenant gets a job before completing the training program, the
Notice states that the 18-month exclusion could still apply if the person
had substantially completed the program. That would be true whether she
quit the training program at that time or continued it.37
Both Congress and HUD have recognized that these disregard provisions can
contribute significantly to tenants' efforts to move from welfare to work.
If tenants are to have a fair chance to move into the workforce, it is
essential that PHAs that have not yet implemented the statute and regulations
do so right away. To the extent that they have ignored the rules up to
now, they must make the changes not only prospectively for current tenants,
but also retroactively, for present and former tenants who qualified. The
retroactive implementation must include refunds as well as credits against
future rents. Advocates representing tenants should inform them of their
rights and assist them in securing implementation by the PHAs.
-
42 U.S.C. § 1437(a) (1998),as amended by Pub. L. No. 101-625, §
515(b), 104 Stat. 4199 (Nov. 28, 1990).
-
Former 24 C.F.R. § 913.106(c)(11) (1995), subsequently recodified
at 24 C.F.R. § 5.609(c)(13) (1997).
-
HUD Notice PIH 98-2, Treatment of Income Received from Training Programs
(Jan. 12, 1998).
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42 U.S.C. § 1437(a) (1998).
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S. REP. NO. 316, 101st Cong., p. 187 (June 8, 1990).
-
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).
-
60 Fed. Reg. 17,388 (Apr. 5, 1995).
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24 C.F.R. § 5.609(c)(8) (1997).
-
Former 24 C.F.R. §§ 813.106(c)(8) and 913.106(c)(8), at 52 Fed.
Reg. 34,108 (Sept. 7, 1987).
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60 Fed. Reg. 17,388 (Apr. 5, 1995).
-
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).
-
HUD Notice PIH 95-43, "Extension of Notice PIH 92-48, Exclusion of Income
Received under Training Programs."
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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).
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61 Fed Reg. 54,494 (Oct. 18, 1996) (emphasis added).
-
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).
-
HUD Notice PIH 98-2, "Treatment of Income Received from Training Programs"
(Jan. 12, 1998).
-
Id. at 3.
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Id. at 7.
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Id. at 7.
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Id. at 6.
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Id.
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Id.
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Id. at 4.
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Id. at 9.
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Id. at 5.
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42 U.S.C. § 1437a (1994).
-
24 C.F.R. § 5.609(c)(13) (1997).
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Id. at 6; 42 U.S.C. § 1437(a) (1998).
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Id. at 5.
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Id. at 8.
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Id.
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Id.
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Id. at 10.
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