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Final Rule Published Finalizing HUD Fast Act Provisions

HUD published a Final Rule finalizing the regulatory language to implement the FAST Act provisions contained in the December 2017 interim rule. This final rule includes one modification to the interim rule, which clarifies when non-fixed income sources are not required to be verified.

Brief Background of the Rule

On December 12, 2017, HUD published an Interim Final Rule. This new rule amends regulatory language that applies to Public Housing, Housing Choice Voucher Program, and Project-Based Rental Assistance Programs. The purpose of the rule is to implement the FAST Act and modify previously issued streamlining regulations to bring these regulations into alignment. Additionally, this rule expands previous streamlining regulations relating to asset verification and utility reimbursements to also cover multi-family housing programs.

Specifically, this Interim Final Rule amended regulations as it relates to the following:

  • Asset Verification
  • Utility Allowance Reimbursements
  • Triennial Income Verification

HUD’s Interim Final Rule Implementing the Fast Act

On December 12, 2017, HUD published an Interim Final Rule. This new rule amended regulatory language that applies to Public Housing, Housing Choice Voucher Program, and Project-Based Rental Assistance Programs. HUD issued the rule to implement the FAST Act and modify previously issued streamlining regulations to bring these regulations into alignment. Additionally, this rule expands previous streamlining regulations relating to asset verification and utility reimbursements to also cover multi-family housing programs.  The implementation of this rule has been delayed until March 12, 2018.

Specifically, this Interim Final Rule amended regulations as it relates to the following:

  • Asset Verification
  • Utility Allowance Reimbursements
  • Triennial Income Verification

Changes to Asset Verification Procedures

This Interim Final Rule reduces the burden of verifying household assets when determining a household’s income upon recertification.

The rule reduces this burden by permitting owners/agents to verify a household’s assets every three years as opposed to every single year. In the intermediate years (years 2 and 3 after a full third-party income certification has been conducted), the owner may choose to “verify” assets by accepting a self-certification from a household declaring that the household has net assets equal to or less than $5,000.

Third-party asset verification must be obtained every 3 years.

Example: Asset Self-Certification

Initial Certification:

The Barnaby household moved in on 6/1/18. At the time of move-in, the household has only one asset, a checking account with a value of $200.  As this is the initial certification, the checking account must be verified.

1st Recertification

When completing their recertification due 6/1/19, the Barnaby household declares that their only asset is a checking account with a value of $350.00. Since the Barnaby household declared that the net value of assets is less than $5,000, third-party verification of the checking account is not required.

2nd Recertification

When completing their recertification due 6/1/20, the Barnaby household declares that their only asset is a checking account with a value of $450.00. Since the Barnaby household declared that the net value of assets is less than $5,000, third-party verification of the checking account is not required.

3rd Recertification

When completing their recertification due 6/1/21, the Barnaby household declares that their only asset is a checking account with a value of $550.00. Even though the Barnaby household declared that the net value of assets is less than $5,000, third-party verification of the checking account is required.  

Utility Reimbursements

This Interim Final Rule also reduces the burden of issuing small utility reimbursements to tenants who receive project-based rental assistance. Utility reimbursements are necessary when the utility allowance exceeds the household’s total tenant payment. Now, owners/agents can make utility reimbursements on a quarterly basis if the reimbursement is $15 or less per month ($45 per quarter).

Owners who implement this new option will have to create policies to address financial hardships encountered by residents affected by this change.

Example: Utility Reimbursement

A utility allowance for a unit is $100 a month. For a tenant with a Total Tenant Payment of $90.00, the utility reimbursement would be $10.00 per month. Since the monthly utility reimbursement is $15 or less, the owner can distribute the utility reimbursement quarterly as opposed to monthly.

Streamlined Income Verification of Fixed Income Sources

This Interim Final Rule also reduces the burden of verifying fixed income sources when determining a household’s income upon recertification.

The rule reduces this burden by permitting owners/agents to verify a household’s fixed income every three years as opposed to every single year. In certain circumstances detailed below, an owner/agent is not required to verify non-fixed income sources in years 2 and 3 after a full third-party income certification has been conducted.

Full third-party recertification must still be completed every 3 years.

Fixed Income (re)Defined

Periodic payments at reasonably predictable levels from one or more of the following sources:

  • Social Security, Supplemental Security Income, Supplemental Disability Insurance.
  • Federal, state, local, or private pension plans.
  • Annuities or other retirement benefit programs
  • Insurance policies
  • Disability or death benefits
  • Other similar types of periodic receipts.
  • Any other source of income subject to adjustment by a verifiable COLA or current rate of interest.

Fixed Income Triennial Verification

Using this verification method, when completing recertifications in the intermediate years,  a household’s income from the fixed source can be determined by applying a verified cost of living adjustment (COLA) or a rate of interest to the fixed source.  In the intermediate years, a household’s income is calculated by adjusting existing income with cost-of-living-adjustment (COLA) factors.

What is the 90% Threshold Test?

For households whose fixed income represents 90% or more of the household’s total gross income, the owner is not required to adjust non-fixed income sources. However, the owner may still choose to verify and update the non-fixed income sources.

Example: A Household Does Meet the 90% Threshold

Thomas and Jerry reside in a unit and receive project-based rental assistance. They moved in on 9/1/2017, at which time a full certification was conducted. 

  • Thomas received $11,000 a year from Social Security Benefits.
  • Jerry received $10,000 in Social Security Benefits.
  • Jerry also works part-time seasonally and earned $2,000 a year.
  • The gross annual household income totaled $23,000.

To meet the 90% threshold test, 90% of the total gross household income or $20,700 would need to be from a fixed income source(s).  $23,000 X 90% =$20,700. 

Since the fixed income received by this household totals $21,000, this household meets the 90% threshold test.

When the household’s first recertification is completed for 6/1/18, their fixed income source can be determined without verification. First, the fixed income source can be determined by applying the verified COLA to both Thomas and Jerry’s benefit income.  Next, the non-fixed income source (Jerry’s wages of $2,000) is not required to be verified.

For households whose fixed income represents less than 90% of the total gross household income, the owner must verify non-fixed income sources.

Example: Does Not Meet 90% Threshold

Josh and Mary reside in a unit and receive project-based rental assistance. They moved in on 6/1/2017, at which time a full certification was conducted. 

  • Josh received $15,000 a year from Social Security Benefits.
  • Mary works part-time and earned $5,000 a year.
  • The gross annual household income totaled $20,000.

 To meet the 90% threshold test, 90% of the total gross household income, or $18,000, would need to be from a fixed income source(s).

$20,000 X 90% =18,000. 

Since the fixed income received by this household is only $15,000, this household does not meet the 90% threshold test.

This means that when the household’s first recertification, due 6/1/2018, is being completed, the fixed income source can be determined by applying the verified COLA to Josh’s benefit income; however, Mary’s wages must be third-party verified.

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