HUD Notice Sets HOTMA Over-Income Limit

HUD published a Federal Register notice on July 26 announcing the method it will use to determine the over-income limit of 120% of the area median income (AMI) as required by the “Housing Opportunity Through Modernization Act of 2016” (HOTMA). The methodology is unchanged from that proposed in a November 29, 2016 notice (see Memo, 12/5/16).

HOTMA became law on July 29, 2016 (see Memo, 7/18/16). One of the law’s many provisions established a 120%-of-AMI household income limit for public housing residents. After a household’s income exceeds 120% of AMI for two consecutive years, a public housing agency (PHA) must either terminate the household’s tenancy within six months of the household’s second income determination or charge the household rent equal to the greater of the Fair Market Rent (FMR) or the amount of their unit’s operating and capital subsidy. HOTMA allows HUD to adjust the over-income limit due to local construction costs, unusually high or low household incomes, vacancy rates, or rental costs.

The November 2016 notice proposed establishing the over-income limit based on an area’s very low income (VLI) level, which is 50% of AMI for most areas. Multiplying the VLI level by 2.4 matches 120% of AMI in most cases. This formula is now implemented through the July 26, 2018 notice. HUD will publish over-income limits by household size for each locality every year.

When a PHA determines that a household’s income exceeds the over-income limit during an annual or interim income reexamination, the PHA must document the household’s income in order to compare it with the household’s income the following year. If the household’s income exceeds the over-income limit one year later, the PHA must notify the household in writing that, if their income still exceeds the over-income limit 12 months later, the household will be subject to the PHA’s over-income policy. The slate is cleared if an over-income household’s income falls below the over-income limit before the two-year mark.

A PHA’s over-income policy must be included in its Admission and Continued Occupancy Policy (ACOP) and must state whether over-income households will be terminated or whether they will be required to pay as rent the greater of the FMR or unit subsidy. The notice indicates that HUD will issue a proposed rule providing guidelines for setting over-income policies and for determining an over-income household’s rent if it is to be based on the unit operating and capital subsidy.

HOTMA also requires PHAs to submit an annual report indicating how many households are over-income and how many are on the public housing waiting list. HUD will issue a notice regarding this reporting requirement.

NLIHC signed on to a comment letter submitted by the Housing Justice Network (HJN) in response to the November 2016 proposed methodology. The July 2018 notice includes HUD’s responses to comments. HUD did not accept any of HJN’s recommendations, such as:

  • Increase the income limit based on an area’s vacancy rate.
  • Increase the income limit for larger households.
  • Increase the income limit for a household with a young adult family member beginning to work.
  • Eliminate the 5% cap on changes to the over-income limit in expensive rental markets.
  • Provide an explicit exemption to over-income limits for households participating in self-sufficiency programs.

The July 26, 2018, Federal Register notice is at: