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Social Security Income Guidance for Applicants at HUD & LIHTC Properties
Has any of you been challenged with the verification and calculation of Social Security (SS) or Supplemental Security Income (SSI) when working with an applicant or tenant who collects or might be entitled to collect these benefits? You would think that this type of income would be easy to verify and calculate, but some of you may be surprised with this month's article that there are challenges when dealing with this type of income for HUD, LIHTC or a combination of both.
Years ago, the Social Security Administration (SSA) announced it would stop providing Property Managers third party verifications. As a result, Property Managers have to rely on documentation provided by applicants to verify SS and SSI income to determine income eligibility and/or tenant rent. Annual award letters provided by an applicant can be utilized to verify gross Social Security benefits for the applicable year. For example, the award letter recipients received in 2014 stating 2015 benefits can be utilized for certifications effective in 2015. SSA letters are good for the full year because they are not dated and they are provided after a COLA or no COLA has been announced. If an SSA letter is dated, it is likely due to a change in benefits. SSI verifications must be dated within 120 days of the effective date since SSI benefits can change.
A relatively new tool is available for applicants to obtain a current verification. Applicants may create an account at www.ssa.gov and obtain an instant copy of their SSA award letter. Applicants may also call the SSA at 1-800-772-1213 to request a benefits verification letter.
One of the eligibility factors for receiving SSA benefits is reaching retirement age. Persons can receive Social Security retirement benefits as early as age 62, but benefits will be lower than waiting until full retirement age. Full retirement age had been 65 for many years; however, beginning with people born in 1938 or later, that age gradually increases until it reaches 67 for people born after 1959. That being said, how should a Property Manager deal with a 62-year-old applicant who claims that he/she does not receive Social Security benefits? To ensure due diligence, we highly recommend that non-receipt of SS benefits be verified as follows. The applicant would have to log in to www.ssa.gov and, if they have not already done so, create a username and password to obtain instant verification of benefits. Not only does the website provide instant verification of SSA benefits, it also verifies pending claims and verifies non-receipt of SSA benefits. This tool has proven to be invaluable in the housing industry.
Here is an example of the verification to prove non-receipt:
In the unfortunate instance of a deceased family member, it is important to note SSA's eligibility guidelines for Survivorship Benefits. Certain family members may be eligible to receive monthly benefits, including:
Property Managers may not always know if there is a deceased family member where the applicant is eligible to receive Survivor Benefits and some applicants receiving Survivors Benefits may not realize that these benefits are counted towards household income. If your checklist does not specifically ask the question of Survivor Benefits, some instances that may require further inquiry include:
When a grandparent is receiving benefits on behalf of a dependent household member, the income needs to be included as household income even if the grandparent will not reside in the unit. For example, parents of two dependents are deceased and the children reside with their grandfather, who is divorced and applying for an apartment. The grandfather is the representative payee for Survivor Benefits for one child. The absent grandmother is the representative payee for the second child. Survivor benefits for both children are included in household income even though the representative payee will not reside with the household.
Supplemental Security Income (SSI) is a Federal income supplement program funded by general tax revenues (not Social Security taxes). SSI gives cash assistance to people with limited income and resources who are age 65 or older, blind or disabled. Children with disabilities can receive SSI benefits as well. SSI is an income source that can fluctuate based on other household income. Currently, the max monthly benefit for SSI is $733 monthly for an individual and $1100 for a couple.
Many states supplement the Federal SSI benefit with additional payments. This makes the total SSI benefits levels higher in those states. More information about State SSI can be found at https://www.socialsecurity.gov/ssi/text-benefits-ussi.htm.
Sometimes, Property Managers receive award letters that suggest an applicant has unreported income. Since SSI fluctuates based on household income, award letters are helpful since they typically provide information on how the monthly benefit was calculated. If an applicant discloses that his/her sole source of income is SSI, yet they are not receiving the full $733 for SSI, the Property Manager should obtain more information.
For example, an SSI award letter reflects the benefit is $643 and reflects the following:
Your Income Other Than Your SSI
Income you receive in February 2015 affects your payment for February 2015 through April 2015
Income from interest, dividends, rents or royalties $110.00
By law, we don't count $20.00 of above income $ -20.00
Total income we count $ 90.00
It is necessary for Property Managers to verify this potential income and determine whether or not it needs to be included as anticipated household income.
Another example is when an applicant originally discloses SSI at the time of Application and then later, during the Interview process, discloses that he/she no longer receives SSI and has no income/assets. Property Managers should obtain a current award letter to determine whether benefits have ceased permanently or temporarily. If benefits are temporarily suspended, it may be due to unreported income or assets and it is necessary for Property Managers to investigate further.
Oftentimes, SSI benefits are reduced as a result of a prior overpayment. For both the HUD and LIHTC programs, management is required to use the amount after the deduction as household income. However, Property Managers need to go one step further and verify the overpayment balance to determine how long the reduced benefit will last. Anticipated changes need to be factored when calculating anticipated income. If the overpayment will be satisfied within the next 12 months, the Property Manager needs to calculate the number of months at the reduced rate and the number of months at the gross benefit and use the total as household income.
The SSA has confirmed that recipients will not receive a Cost of Living Adjustment in 2016. Therefore, Social Security benefits will not increase effective January 1, 2016. At this time, it appears Medicare premiums will not be adjusted for the majority of Medicare beneficiaries. Medicare premiums may increase for those with higher income levels ($85,000 per year for individuals or $170,000 per year for married Medicare beneficiaries).
When an applicant discloses receipt of SSA benefits and also claims to have no assets, Property Managers should dig a little more. In March 2013, a law went into effect requiring all SSA recipients who were not receiving benefits through direct deposit to sign up and register for a Direct Express Debit Card. Direct Express Debit Cards are considered assets. In rare circumstances, Treasury may grant an exception; therefore, Property Managers should obtain a statement from applicants who still receive paper checks.
On November 18, 2015, HUD released a memo (Notice H2015-12) that amended the definition of "tuition". Well, it didn't actually amend the definition of the word "tuition"; what it did change was the detail involved in financial reporting of student tuition and how that detail is interpreted. In this memorandum, HUD clarifies that expenses for room and board, books, supplies, and other such fees cannot be included in the number reported as "tuition". However, required fees that are part of the student's course of study should be considered part of tuition - this can include individual fees such as athletic fee, writing laboratory fee, student center fee, science laboratory fee, and technology fees.
Whenever owners and managers of HUD-financed and subsidized housing verify the tuition of household members, the verification form must clarify that the amount requested for "tuition" cannot include any fees or expenses related to attending an institution of higher education. Examples of these expenses include but are not limited to, room and board, books, supplies, meal plans, transportation and parking, student health insurance plans, and other non-fixed sum charges. In short, the amount reported for tuition should be confined to the definition used by the Department of Education, which defines tuition as the amount of money charged to students for instructional services which may be charged per term, per course, or per credit, as well as required fees such as writing and lab fees.
Whatever verification form or information provided by the institution of higher education must clarify:
The major impact of these changes will relate to financial aid that is counted as income, which previously would not include required fees as part of tuition, and now these fees will be included in the total amount of tuition. HUD provides an example that illustrates a household member who pays $5000.00 in tuition, plus $1000.00 in required fees, and receives $7000.00 in financial aid. Previously, the amount counted as income would have been $2000.00 (difference of $7000 and $5000), but now the additional $1000.00 in required fees will be considered tuition, and, therefore, the household member income will only be $1000.00.
It is recommended that you either notify all households of this change or notify any households who could possibly be subject to a future rent adjustment due to this rule change. Of course, if the tenant rent would increase as the result of this new change, the household does not need to complete an Interim Recertification unless the change results in more than $2400.00 per year in increased income. If the change would result in a tenant decrease in rent, the tenant can apply for an interim recertification immediately (to take effect after the information has been verified).
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