The FY14 Appropriations Act changed the standard for setting the public housing “flat rent” option. On May 19, HUD issued Notice PIH 2014-12 providing interim guidance to implement the new standard. Current law requires public housing residents to have the choice annually of either paying an “income-based rent” or a “flat rent” that is not based on a household’s income. The purpose of the flat rent option is to reduce the economic pressure on higher-income tenants to move out of public housing as their income increases.
If a household chooses to pay an income-based rent, then its rent is 30% of their adjusted income or 10% of its gross income, whichever is higher. Before the FY14 Appropriations Act, the law defined a flat rent as one based on “the rental value” of the apartment, which was based on the market rent of a comparable, private, unassisted housing unit. The FY14 Act now requires a new base for flat rents. As of June 1, 2014, the flat rent must be no less than 80% of the Fair Market Rent (FMR) for the area in which the public housing agency (PHA) is located. The FY14 Act also phases in any flat rent increase greater than 35%.
Existing regulations [24 CFR 960.235(a)] require PHAs to annually give households the option to choose between paying income-based rent or flat rent. The regulation also stipulates that PHAs may not offer the option more than once per year, except if a flat rent household experiences a financial hardship. The Notice states that PHAs should begin applying the new flat rent standard by October 31, 2014 for new applicants as well as for existing residents on their annual rent option date.
The Notice explicitly states that if a PHA must increase the flat rent standard in order to comply with the new statutory requirement, the increase is considered a significant amendment to the PHA Annual Plan. For “non-qualified” PHAs, those that administer more than 550 combined units of public housing and vouchers, a significant amendment triggers obligations to obtain Resident Advisory Board (RAB) input, review, and comment, as well as broad public notice and a public hearing regarding the increase to flat rents. For “qualified” PHAs, those that administer 550 or fewer combined units of public housing and vouchers, a significant amendment merely requires the increased flat rent to be considered during the annual PHA Plan public hearing.
To expedite the significant amendment process, the Notice provides PHAs with HUD-approved significant amendment language that a PHA may use to conduct public hearings. If this language is used, HUD will consider the significant amendment approved. If a PHA chooses not to use the HUD-approved language, then it must wait for HUD approval.
HUD will consider a non-qualified PHA in compliance with the new provision if it has initiated a process to amend its Annual PHA Plan by June 1, 2014. A qualified PHA will be considered in compliance if it has initiated the public hearing process by June 1, 2014.
HUD will begin rulemaking within six months. When that process begins, HUD will seek input from stakeholders, including feedback regarding the potential impact on residents.
Notice PIH 2014-12 is at: http://1.usa.gov/1tJZAvJ