1 Rent Calculation Caleb Kopczyk, PHRS US Department of Housing and Urban Development
2 Goals At the end of the day, what will we be able to know and do? Know the elements of annual income Understand the verification process Calculate and verify deductions from annual income Increase understanding of rent calculation process
3 Agenda and Format Agenda Income Asset Income Annual Income Adjusted Income Deductions EID Rent Calculation PH HCV Format Open Discussion General Overview
4 Asset Income 24 CFR 5.609(a)(4): Annual income also means amounts derived (during the 12-month period) from assets to which any member of the family has access (b)(3): Annual income includes, but is not limited to Interest, dividends, and other net income of any kind from real or personal property. Expenditures for amortization of capital indebtedness shall not be used as deductions in determining net income Any withdrawal of cash or assets from an investment will be included in income, except to the extent the withdrawal is reimbursement of cash or assets invested by the family. Where the family has assets in excess of $5,000, annual income shall include the greater of the actual income derived from all net family assets or a percentage of the value of such assets based on the current passbook savings rate, as determined by HUD.
5 Asset Income What does this mean? If the family has an asset which they can access, it is counted whether they receive the interest/dividends or not Asset income is based on what the family receives on the investment, not on what they put in If the cash value of the investments is greater than $5,000, either the actual income derived or 2% (passbook rate) will be counted, whichever is greater
6 Asset Income Additionally PHAs must determine the cash value of assets in come cases since this may affect their rent calculation The cash value is equal to the market value minus the expense to convert the asset to cash: Cash Value=Market Value- Expenses
7 Income Income includes all wages, salaries, overtime pay, commissions, fees, tips, bonuses, net income from operation of a business or profession, net income from real or personal property (assets), interest, dividends, social security payments, annuity payments, insurance policies, retirement funds, pensions, disability or death benefits, periodic receipts, unemployment, worker s compensation, severance pay, welfare assistance, child support, regular contributions and gifts, all regular and special pay of a member of the Armed Forces
8 Income Rule of Thumb If it cannot be excluded, it is income! See 24 CFR 5.609, PH Occupancy Guidebook pp , HCV Guidebook pp to 5-16 (Included)
9 Wages/Salaries Third Party Verification Required for New Employment! Use of at least two pay stubs is acceptable for documenting income (likely better than employer provided 3 rd party documentation). What should be verified? Start date Termination date Pay frequency Pay rate Anticipated pay increases Year-to-date earnings Bonuses Overtime
10 Self Employment What should be verified? Net income (gross income expenses) Withdrawal of cash or assets except to the extent it is a reimbursement of cash or assets invested by the family Expenditures for business expansion or amortization of capital indebtedness which are not deducted from the gross income Allowance for depreciation of assets used in business or profession based on straight line depreciation
11 Social Security, Welfare, Unemployment, or Pension Benefits Social Security and SSI use EIV information unless disputed and supported by documentation. Unemployment reported to EIV by SWA, if disputed, tenant should contact SWA and provide PHA with written correspondence regarding their attempts to correct information. Private Pensions not reported to EIV, attempt 3 rd Party, but statements provided to the tenant by the financial firm are acceptable.
12 Child Support Benefits Not available in EIV What must be verified? Amount of payment Whether payments are currently being received
13 Verification Standards for Income/Assets EIV UIV (Other) Written 3 rd Party Written Third Party Verification Form Oral Third Party Tenant Declaration
14 No 3 rd Party Verification Possible? Document why!
15 Adjusted Annual Income Consists of: Annual Income, minus $480 per Dependent Deduction, minus $400 Elderly/Disabled Deduction, minus Unreimbursed medical expenses for elderly/disabled family beyond 3% threshold, minus Unreimbursed reasonable attendant care and auxiliary apparatus expenses for family member with disabilities to the extent necessary to allow family member to be employed, not to exceed earned income, beyond 3% threshold, minus Reasonable childcare expenses which enable family member to work or pursue education, minus PH Permissible Deductions, minus EID
16 Dependent Deduction What is it? Gives an allowance of $480 per dependent, disabled family member, or full-time student How is it calculated? Number of dependents X $480 Verification Minor family member documentation demonstrating family member is a minor Disabled family member documentation demonstrating family member is disabled Full-time student current enrollment status letter
17 Elderly/Disabled Family Deduction What is it? Family whose head, spouse, or sole member is disabled or over 62 years old receives a $400 deduction How is it calculated? Eligible Family X $400 Verification EIV Disability verification form completed by medical professional Birth Certificate
18 Medical Expense Deduction What is it? Beyond 3% of annual income, elderly/disabled families may deduct the amount of unreimbursed medical expenses Verification Eligible expenses IRS Publication 502 Verification from medical providers Tenant provided documents
19 Disability Expense Deduction What is it? Beyond 3% of annual income, the attendant care or apparatus which allows a family member to work Verification Typically tenant documents due to Health Insurance Portability and Accountability Act of 1996 (HIPAA)
20 Calculating Medical/Disability Expense Deduction Medical Expenses Only Unreimbursed Medical Expenses 3% of Annual Income Disability Expenses Only Unreimbursed Disability Expenses 3% of Annual Income
21 Calculating Medical/Disability Expense Deduction The 3% threshold amount must only be counted once in considering medical/disability expense deductions Disability assistance deductions must be calculated before medical deductions since it is limited by amount person works
22 Childcare Deduction Family is eligible if childcare expenses for children 13 and under that are incurred to allow a family member to work, actively seek work, or pursue education Deduction amount may not be greater than employment income Family may not be denied solely because a family member could take care of the children Verification Actively seeking employment verify with W-2/Welfare to Work program; tenant provided statement Employed Wage income Pursue education enrollment verification
23 PH Permissible Deductions What are they? Allows PHAs to construct their own allowable deductions, so long as they are affordable to the PHA
24 Formerly Titled: Earned Income Disregard (EID) Now: Self-Sufficiency Incentives Disallowance of increase in annual income
25 Self-Sufficiency Incentives Disallowance of increase In annual income The regulation can be found at 24 CFR this pertains to Section 8 programs; for persons with disabilities only The regulation can be found at 24 CFR pertains to Public Housing;
26 Self-Sufficiency Incentives are applicable to these programs: Public Housing Section 8 Voucher Program HOME Investment Partnership Program Supportive Housing Program Housing Opportunities for Persons with AIDS
27 EID Rent in any of these programs usually increases when a resident s income increases. With the self-sufficiency incentive, rent is not increased for the first 12 months after the person income increases due to work. Only 50% of the income increase is counted in calculating rent for the second 12 months.
28 Example: Sam s old income (not working) Supplemental Security Income (SSI) check of $674 Sam s new income when working Wages of $300 + SSI of $566 + $ Sam how has $ more income each month. Usually, his rent would increase by about $58 due to his overall increase in income. However, if Sam is eligible for the Self-sufficiency incentive, there is no increase in his rent for the first 12 months that he has this income. In the second 12 months, only 50% or $96.25 of his income increase would be included in figuring his rent increase.
29 Rent Calculation Low-Rent Public Housing Housing Choice Voucher Program
30 Public Housing Rent Calculation Annual Income: $25, Adjusted Annual Income: $19, Utility Allowance: $30.00 Income-based Rent 1 Monthly Income (Annual Income/12): $2, % of Monthly Income (Line 1 X 0.10): $ Monthly Adjusted Income (Adjusted Income/12): $1, % of Monthly Adjusted Income (Line 3 X 0.30): $ Welfare Rent (if applicable): NA 6 Minimum Rent: $ Ceiling Rent (if applicable): NA 8 Total Tenant Payment (Highest of Lines 2, 4, 5, 6, 7): $ Utility Allowance: $ Income-based Tenant Rent (Line 8 minus Line 9): $462.50
31 HCV Rent Calculation Example 1 Gross Rent = Payment Standard Example 2 Gross Rent > Payment Standard Example 3 Gross Rent < Payment Standard
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