What HOTMA Means For You
Summarizing the Housing Opportunity Though Modernization Act for Section 8 and Section 9 Public Housing
Iziah Thompson
It has been seven years since President Obama signed the Housing Opportunity Through Modernization Act (HOTMA) into law on July 29, 2016. HOTMA introduced a massive set of changes and reforms to various federal housing programs, including the Department of Housing and Urban Development (HUD) assistance programs like the Section 8 Housing Choice Voucher Program (HCV) and Section 9 Public Housing Program. It wasn’t until May of 2023 that HUD finally released all of the rules that dictate the implementation and settle questions on the interpretation of HOTMA, explaining how it changes the rules and laws that public housing and voucher administrators and households have to follow.
Because the law was so expansive, HUD released the rules in multiple steps and spread out the dates that they go into action across a number of years. The most recent release held provisions that changed the verification and calculation of income along with some changes to who would be allowed to live in public housing and voucher household unit. Other provisions in the law immediately went into effect. The first release, in 2018, implemented one portion of HOTMA that required an income limit for residents already living in public housing for the first time. It was followed by a proposed rule in 2019 that:
- Changed requirements related to Section 8 and Section 9 Public Housing income reviews;
- Modifies the continued occupancy standards of Public Housing residents; and
- Set maximum asset limits for program eligibility and continued assistance in the programs.
Because the first release has been around for five years now, this memo will mainly cover the May 2023 final implementation of 2019’s proposed rules and briefly list the rest of the changes that have been law for some time now.
May 2023 Final Rule Summary
This Final Rule covered some of the implementation of Sections 102, 103, and 104 of HOTMA. All changes go into effect on January 1st, 2024, unless otherwise stated.
Income Verification Changes for Section 8 voucher administrators and Public Housing Authorities (PHAs) like NYCHA
1. When people apply for HUD Programs like Section 8 Vouchers and Section 9 Public Housing, they can now use income eligibility for other means-tested programs as proof that they're eligible for rental assistance.
Key points:
- This change includes income determinations from means-tested Federal programs including:
- LIHTC
- WIC
- the SSI program
- TANF block grants
- Medicaid
- SNAP assistance
- EITC
- HOME and other HUD programs
NYCHA and HPD can use other agencies’ income determination, if HUD has included it on the list above or if HUD has established a memorandum of understanding (MOU) with said agency.[1] Furthermore, HUD has clarified that PHAs may use income determinations received through “established data sharing agreements”, potentially allowing NYCHA and HPD to work with City and State agencies to end the time intensive and burdensome process of providing income documents to multiple agencies.
2. When PHAs verify how much a resident makes after large changes in income, they no longer have to use HUD’s system for digital verification system known as EIV.
Key Points:
- PHAs are now only required to use the Electronic Income Verification (EIV) Search at annual reexaminations, and not at interim reexaminations.
- Prior to this change, EIV was required at interim reexaminations.
- HUD also noted that if a PHA or owner makes a mistake overcharging a family, they must refund the excess rent and in the case of undercharge, the family will not be held liable for the underpaid rent.
Income Calculation Changes
3. PHAs must use income from the past year when calculating incomes for annual reviews, instead of projecting what a resident might make in the future.
Key points:
- PHAs are no longer required to project long-term income for annual reviews. They will also no longer be required to carry out more frequent ones.
- They still must carry out and take into account interim reexaminations as required, but annualizing income is now eliminated and simply put, the last 12 months of income, from the point of the income determination, is all that is needed for an annual review.
- Interim reexaminations are now triggered by increases or decreases in income of 10%.
4. Families “over income” for 24 consecutive months are no longer public housing residents, but PHAs may allow them to continue living in their unit.
Key points:
- HUD is leaving it up to PHAs to either force “over-income” families out of public housing or allow them to pay a higher rent in order to stay in their unit.
- Families making 120% of AMI for 24 consecutive months can no longer:
- Participate in public housing resident councils
- Participate in programs only for public housing families
- Receive a utility allowance from PHAs.
- PHAs will still have to provide reasonable accommodations for individuals with disabilities.
- In NYC, the over income threshold limit is $169,440 for a family of four.
- Rents for these families will be the higher of either:
- the FMR in NYC (which is between $2,170 for a one-bedroom and $3,316 for a four bedroom); and
- the per unit monthly subsidy amount (which ranges from $343.96 to $1,554.53 in NYCHA developments)
- NYCHA decided to provide these families with a new lease and remain in Public Housing.[2] Family will receive three notices that their income is too high to remain in the public housing program.
5. Most disability payments that allow a family member with any type of disability to live at home are not counted as income.
Key points:
- The point of this change is to ensure that payments being used to keep a family member who has any disability (not just a developmental disability) can continue living at home. Most importantly, the exclusion isn’t confined to those payments that offset the cost of services or equipment.
- This only applies to family members living in the assisted unit.
- This change excludes payments from State Medicaid managed care systems and in-home supports — and other similar payments from States not connected to Medicaid — from being counted as family income.
6. HUD clarifies “non-reoccurring income”, which doesn’t count towards a family’s net annual income for purposes of determining eligibility or rent.
Key points:
- Generally, this rule intends to direct PHAs to exclude income sources that a family cannot rely upon to pay for a family’s housing needs. These include:
- Temporary work on the Decennial Census
- Stimulus or tax credit payments
- Tax refunds
- Gifts for special occasions, like birthdays and holidays.
- HUD has specified that day laborer, independent contractor, and seasonal worker income will still be included in a family’s income calculation.
- Any lump sum additions to a family’s assets are not to be included as income. Examples include lottery winnings, civil action recoveries, inheritances and insurance payouts (including those from personal property loss).
- The rule clarifies that civil rights settlements or judgments, whether resolutions are structured settlements or lump-sum payments, do not count toward a family’s income. This exclusion includes funds from litigation or other actions, such as conciliation agreements, voluntary compliance agreements, consent orders, other forms of settlement agreements, or administrative or judicial orders under:
- the Fair Housing Act;
- Title VI of the Civil Rights Act;
- Section 504 of the Rehabilitation Act (Section 504);
- The Americans with Disabilities Act; or
- Any other civil rights or fair housing statute or requirement.
7. Student Aid doesn’t count toward income for the purposes of eligibility and rent calculation.
Key points:
- This change directs PHAs and owners to exclude forms of student assistance and some income from a family’s income calculation, including Federal Pell Grants, Teach Grants, Federal Work- Study Programs, Federal Perkins Loans, among others.
- This applies even if the assistance the student receives is more than the cost of tuition and fees. However, Congress usually includes language in their budget which forces PHAs to count any amount of student financial assistance in excess of the costs of tuition, fees, and other charges towards a family’s income. Therefore, the extent to which student aid is excluded from the income calculations will be a year-by-year decision. Though Congress has included this language for a decade.
8. Retirement Accounts are not income until they are drawn upon.
Key points:
- Income received from any account under an IRS-recognized retirement plan, including individual retirement arrangements (IRAs), employer retirement plans, and retirement plans for self-employed individuals are no longer included in a family’s income calculation since they cannot be used to help a family pay for housing.
- However, any payments from these accounts at the time they are received by the family do count as income, including periodic pension payments.
- Funds that go into a family’s Family Self Sufficiency (FSS) account — a program that provides workforce and financial training and allows additional income to be saved by a voucher and public housing family instead of going towards rent — are also not counted towards income, though, they do count towards assets.
Family Definition Changes
9. Foster and Homeless or at-risk Youth are now eligible for public housing and Section 8.
Key points:
- This change expands the definition of “family” to include youth who are between the ages of 18 and 24, who have either left foster care or will leave foster care within 90 days, and who are homeless or at risk of becoming homeless at age 16 or older.
- By expanding this definition, an individual who fits these criteria is now eligible to lease a unit under the programs.
10. HUD clarifies foster child and adult definitions
- Foster adults (ex. a live-in aid) and foster children are eligible members of the household, but their income or assets are not counted towards family income or assets.
- In the case when a child is temporarily away from the home because of placement in foster care, the child will be considered a member of the family. And if an assisted family temporarily housed this foster child and counted the child as a member of their family, then the child would be considered a family member of two assisted families at the same time.
Assets Changes
11. Personal property and FSS are not counted towards a family’s assets.
Key points:
- This change alters the definition of a family’s net assets to exclude any “necessary” personal property. (HUD guidance on this is forthcoming.)
- PHAs are to continue to only note assets if a family has unnecessary property that is valued at more than $50,000 in total, adjusting for inflation. (Families with assets below $50,000 can self-certify their net family assets.)
- Federal tax refunds or refundable tax credits are also excluded from asset calculation for a 12-month period after they are received.
- FSS accounts no longer count toward a family’s assets.
- What counts as an asset is important because family’s with have more than $100,000 in assets, adjusted annually for inflation cannot stay in HUD funded rental units.
Other Information
Apart from the changes in this final rule, here are some key provisions and changes introduced by HOTMA in the statute or in earlier regulatory releases:
Income
- In terms of income calculation:
- Increased the adjusted income deduction for households with elderly heads of households (or spouses) or those with a disability to $525, with an inflation adjustment.
- Increased the threshold by which health, medical care and auxiliary apparatus expenses must exceed annual income before they can be deducted from 3% to 10% of annual income. (This change is phased-in over 24 months for families currently receiving the deduction).
- Allowed PHAs to provide a hardship relief deduction for those with sudden and acute medical expenses.
- Allowed fixed income families to only recertify once every three years.
- Eliminated the earned income disregard, which allowed families on welfare and who were dealing with unemployment to not have their rent increased after having a certain amount of income growth.
Inspections
- Allowed Section 8 HCV tenants to move into a unit that failed an inspection due to a non-life-threatening Housing Quality Standards (HQS) violations, while the issue is being corrected. (Prior to this change, tenants could not move into a unit that failed inspection, even if the violation was minor.)
- Allowed Section 8 HCV tenants to move into a unit prior to an HQS inspection if, in the last 24 months, the unit has passed another comparable inspection.
- Explicitly banned evictions that resulted from a loss of subsidy due to HQS violations — meaning that if a landlord allows their property to fall into disrepair and HUD withholds rent payments in order to compel the landlord to fix the issues, the tenant cannot be evicted for nonpayment.
- Allowed PHAs to provide two months of subsidy to help families relocate as a result of HQS noncompliance. (The funds must come from what would have been owed to the owner had they been compliant.)
- Required the PHA to give a public housing unit preference to a family that loses a unit due to HQS noncompliance.
- Allowed PHAs to lengthen the timeframe for correcting HQS deficiencies 24 hours for life-threatening and 30 days for others, with discretion to lessen the time frame within PHAs controls.
Eligibility
- Deemed any family ineligible to enter or remain in HUD assisted housing if they:
- have more than $100,000 in assets, adjusted annually for inflation
- own a home
- unless the home is being purchased with a voucher, the family includes a person who is a victim of domestic violence, or the family is selling the home.
“Project-Basing” Vouchers
- Allowed PHAs to use 20% of their regular Section 8 vouchers for “project-based vouchers”, tying them to units instead of to families
- Allowed PHAs to use 10% (on top of the 20% expansion) of its vouchers to provide units for:
- families formerly experiencing homelessness, veterans, persons with disabilities, and the elderly; or
- in regions where the regular tenant-based vouchers are difficult to use.[3] (Most of NYC’s ZIP codes fit this description.)
- Allowed PHAs to use project-based vouchers in the greater of either 25% of a project’s units (assisted or unassisted) or 25 units per development, unless:
- the project provides 100% supportive and/or elderly housing; or
- they are located in a region where the regular tenant-based vouchers are difficult to use.
- Allowed PHAs to project-base 40% for projects with elderly and supportive housing (not counting the 20%):
- located in low-poverty census tracts (poverty rate of 20% or less); and
- in areas where vouchers are difficult to use.
- Extended the maximum term length of the initial PBV contract (and contract extension) from 15 years to 20 years.
- Allowed PHAs to attach vouchers to units in which the PHA has an ownership interest or control without following a competitive process.
Other
- Allowed PHAs to grant a 120% FMR exception payment standard as a reasonable accommodation of a tenant with a disability (without HUD approval).
- Allowed owners and PHAs to adjust rents based on an operating cost adjustment factor, which accounts for increases in electricity, fuel oil, natural gas, employee benefits, employee wages, goods/supplies/equipment, insurance, property tax, and water/sewer/trash.
- Allowed PHAs to attach assistance (project-based vouchers) to structures in which the PHA has an ownership interest or control without following a competitive process.
- Expanded the eligibility for the Family Unification Program (FUP) to 24 years old and extended the duration of the program to 36 months. The program also applies to foster youth who have not yet left, but plan to leave foster care within 90 days. The FUP program provides rental assistance to low-income families working to regain custody and youth at risk of homelessness.
- Altered how HUD published FMRs and changed the public input process for FMRs.
- Allowed PHAs to choose to continue to use the existing payment standard for existing tenants in the case that FMRs decrease.
- Allowed PHAs to use up to 20% of Operating Funds for Capital Fund activities. For example, a PHA could use operating fund dollars on roof repairs at a development.
- Replacement Reserve Account Regulations
- Allowed PHAs to deposit funds from the Capital Fund into a replacement reserve, an account that can be drawn on for larger systemic building fixes. (limited to the amount needed to meet its capital needs).
- Allowed PHAs to transfer more than 20% of Operating Funds when first establishing the replacement reserve.
- Allowed HUD to establish a maximum replacement reserve level that is below the amount determined by the PHA to meet its capital needs. (HUD is required to establish PHA accounting and reporting requirements for replacement reserve funds.)
This summary covers the most relevant changes to the Section 8 and Section 9 Public Housing programs made by HOTMA. To see a more complete list of changes as well as a side-by-side comparison with the law pre-HOTMA see the Center on Budget and Policy Priorities’ (CBPP) Comparison Table.
Notes
1. HUD is prioritizing MOUs with the Social Security Administration and the Veterans’ Administration. MOU release and further guidance are forthcoming.
2. NYCHA, Statement for Significant Amendment Regarding Over-income NYCHA Households , 2019, https://www.nyc.gov/assets/nycha/downloads/pdf/Over-Income-HOTMA.pdf
3. Areas where vouchers are difficult to use are defined as ZIP codes where the rental vacancy rate is less than 4 percent or 90 percent of the Small Area FMR (SMFMR)) is more than 110 percent of the metropolitan FMR.