Title: Chapter 5. Calculation Problem Areas
1Chapter 5.Calculation Problem Areas
2Chapter 5. Section 1. Introduction
- Learning Objective
- Understand and address those difficult aspects of
rent calculation where errors are most likely to
occur
3Introduction
- In this session, we will focus on the error-prone
components of income and rent determination - Identified in HUDs Policy Development and
Research report, Quality Control for Rental
Assistance Subsidies Determinations - Emphasized in RIM reviews
4Introduction
- Purpose of the chapter
- Identify common errors
- Examine reasons for errors
- Practice the more difficult calculations
- We will not cover every facet of rent calculation
5Introduction
- Review of problem areas
- Employment income
- Training program income
- The earned income disallowance (EID)
- Assets and asset income
- Public housing rent calculation
6References
- Appendix A
- Web Addresses (page A-1)
- Training Program Income Notice (page A-5 through
A-24) - Appendix B
- Regulation Excerpts (page B-1 through B-20)
- PH Occupancy Guidebook Excerpts (page B-21
through B-75)
7Chapter 5. Section 2.Employment Income
8Employment Income
- PDR report found a 68 error rate for families
with earned income (employment income) - 88 for families with more than 1 source of
earned income - Employment income is single strongest predictor
of errors in rent calculation
9Employment Income
- Annual income from employment includes full
amount, before payroll deductions, of - Wages and salaries
- Overtime pay, commissions, fees, tips and bonuses
- Other compensation for personal services
10Employment Income
- Reported income will usually be in amounts over a
period of time that are less than annual (hourly,
weekly, bi-weekly, semi-monthly, monthly, etc.) - Hourly/full time rate X 2080
- Weekly amount X 52
- Semi-monthly amount X 24
- Bi-weekly amount X 26
- Monthly amount X 12
11Verification Issues
- Most errors are caused by lack of adequate
verification - Either PHAs do not obtain third-party employment
verification, or the verification is received but
not used - Rent calculated using pay stubs
- File not documented as to why third party was not
available
12Verification Issues
- Learning Activity 5-1 (Page 5-5)
- Paystubs vs. Employer Statement?
- Purpose Discrepancy Awareness
- Part 1 Calculate annual income using paystubs
(page 5-5 through 5-8) - Part 2 Re-calculate (page 5-8) using third-party
verification completed by employer (page 5-9) - Part 3 Group discussion
13Unreported and Underreported Income
- Some families fail to report or underreport
employment income - One common form of underreporting reporting net
earnings, not gross - Use UIV to identify unreported employment
- Inform applicants and tenants of UIV sources to
be checked - Encourages more accurate reporting
14Sporadic Income
- Temporary, nonrecurring, or sporadic income
(including gifts) is not included in annual
income - Sporadic income is income that is neither
reliable nor periodic
15Sporadic Income Example
- Daniel Morgan receives Social Security
Disability plus works as handyman occasionally - Claims only worked a couple times last year (no
documentation) - Answer the three questions.
16Answer Sporadic Income
- Does this fit description of sporadic income?
- Yes, his earnings fit the category of
nonrecurring, sporadic income
- How do you handle his working income?
- Dont include in annual income
- Tell Mr. Morgan he must report any regular work
or steady jobs he takes
- What type of documentation should the PHA have in
Daniels file to support its decision?
- Note in file explaining situation and its
decision - UIV documentation if PHA has access
17Seasonal Employment
- People in some occupations regularly work less
than 12 months per year - School employees
- Agricultural workers
- Construction trades
- There are 2 acceptable calculation methods
18Seasonal Employment
- Method 1 Annualize current income
- Conduct interim reexam when income changes
- Method 2 Calculate anticipated income from all
known sources for the entire year - No interim reexam
- History of income from past years is needed
- Not useful when future income source is unknown
or none
19Seasonal Employment Example
- Marcy Walsh is currently employed as a tile
setter with ABC Construction, earning 1000 per
month - For the last 4 years, she has worked this job for
6 months per year during the construction season - During the other 6 months of each year, she works
part-time at Dominos Pizza, earning 400 per
month
20Calculation Sample Method 1
- Multiply current income (1000/month) times 12
months - 12,000 per year
- When the construction season ends, conduct an
interim reexam - Multiply income from Dominos (400/month) times
12 months - 4800 per year
21Calculation Method 2
- Calculate anticipated income from all known
sources for the entire year - ABC Construction
- 1000 x 6 months 6000
- Dominos Pizza
- 400 x 6 months 2400
- TOTAL 8400
- NOTE There is no interim reexam when Ms. Walsh
changes jobs
22Incorrect Calculation of Method 1
- If the PHA counted only the current income
(1000/month) times the anticipated length of the
job (6 months), annual income would be calculated
as 6000 - Family would pay less than TTP required by
regulations - Common error
23Seasonal Employment
- PHA needs a written policy for this situation
- Policy should be implemented consistently
- Families with seasonal employment should be
informed of policy - If PHA adopts Method 1, family needs to know
interim reexam will be conducted - If PHA adopts Method 2, family needs to know
interim reexam will not be conducted
24Chapter 5. Section 3.Training Program Income
- See Appendix for Training Program Income Notice
(A-5) and CFR (B-15)
25Training Program Income
- HUD-Funded Training Program
- Exclude all amounts received under the training
program
26HUD-Funded Training
- The head of a tenant family receives 500 mo. in
TANF. She enrolls in a HUD-funded training
program operated by the PHA. TANF benefits stop.
She receives 600 mo. while in the training
program. Upon completion, she receives a job at
the PHA earning 700 per month. - What monthly income is counted during training?
- What is counted after completion?
-
- How long is income excluded?
-
None
700 (All)
During training only
27Other Training Program Income
- 5.609(c)(8)(v)
- Exclude all incremental earnings and benefits
resulting from participation in a qualifying
State or local employment training program - includes programs not affiliated with a local
government - no specific employment training programs cited
28Training Program Income
- To qualify, an employment training program must
have clearly defined goals and objectives. - PHAs may adopt written policies that establish
standards for these programs.
29Training Program Income
- Training may include
- Occupational classroom training
- Subsidized on-the-job training
- Basic education
30Training Program Income
- Incremental income
- Increase in total amount of welfare, benefits,
and earnings of family member after enrollment in
training program as compared to income before
enrollment - Only the incremental increase is excluded.
31Training Program Income
- 5.609(c)(8)(v)
- Exclude incremental earnings and benefits only
while the family member participates in the
employment training program
32Example of Other Training Program Income
- A family head receives 400 per month in TANF.
He then enrolls in a qualified State employment
training program and receives 550 per month in
training income. TANF benefits stop. - What income is counted?
-
- How long will income be excluded?
-
400 - the extra 150 is not counted
While he remains in the training program
33Training Program Income Issues
- When new employment is reported, PHA needs to
determine whether employment is part of a
training program - Notice PIH 2001-15 identified frequent errors in
this component - Recommends educating tenants on eligible types of
training programs - Check data-gathering forms for questions
34Chapter 5. Section 4.Earned Income Disallowance
- See Appendix A for Website Address
- For FAQs on EID
35Earned Income Disallowance
- Effective 10/01/99
- Final Rule
- Effective date 4/28/00
- Regulations 24 CFR 960.255
36EID
- The EID calls for the exclusion of increases in
income attributable to new employment or
increased earnings over income received prior to
qualifying for the disallowance. - To qualify for the EID, a family must be
receiving assistance under the PH program. - Applicant families are not eligible for the EID
37EID Qualifications
- Family must experience an increase in annual
income as a result of one of the following 3
events . . .
38Qualifications
- Employment by a family member who
- Was previously unemployed for one or more
years prior to employment - definition includes a person who has earned not
more than could be earned working 10 hrs/week, 50
wks/year, at established minimum wage - OR...
39Earned Income Disallowance
- 2. Increased earnings by a family member
- Whose increased earnings occurred during
members participation in an - economic self-sufficiency program
- job-training program
- The increase in earnings must occur while the
individual is enrolled in the program.
40HUD Definition of Economic Self-Sufficiency
Program
- Any program designed to encourage, assist, train
or facilitate economic independence of assisted
families or to provide work for such families.
41HUD Definition of Economic Self-Sufficiency
Program
- Economic self-sufficiency programs can include
- job training
- employment counseling
- work placement
- basic skills training
- education
- English proficiency
- workfare
- financial or household mgmt
- apprenticeship
- activity necessary for work
OR...
42EID Qualifications
- 3. New employment or increased earnings by a
family member who has received TANF benefits or
services within past 6 months - No minimum amount if TANF is received in form of
monthly maintenance - If TANF is received in form of one-time payments,
wage subsidies, or transportation assistance,
total received over 6 month period must be at
least 500
43EID Initial 12-Month Exclusion
- During initial 12 month exclusion period
- Exclude the full amount of increase in income
attributable to employment or increased earnings - Initial full exclusion period begins on the date
qualified family member is - employed or
- first experiences increase in income due to
employment - Initial full exclusion extends for a total of 12
cumulative months (dont have to be consecutive
months)
44Determining The Incremental Increase
- Determine the annual income of the EID-qualified
person prior to the qualifying change (earned
and/or unearned) - Calculate the annual income of the EID-qualified
person after the qualifying change - The difference is the incremental increase
45Example 1
- Mary Jones had 4000 in TANF benefits at the time
she became employed. She is earning 12,400 at
her new job, and her TANF benefits have stopped. - How much is the incremental increase?
46Example 1 Think it Through
- TANF 4000
- Empl ___0
- Total 4000
- TANF 0
- Empl 12,400
- TOTAL 12,400
Did we exclude all of her earned income?
No
How much did we exclude?
8400
Why didnt we exclude the 12,400?
Only the amount which exceeds the baseline is
excluded
47Example 2
- John Smith had no income at the time he became
employed at 12,400 per year. - How much is the incremental increase?
48Example 2 Think it Through
- Other Inc 0
- Empl ___0
- Total 0
- Other Inc 0
- Empl 12,400
- TOTAL 12,400
Did we exclude all of his earned income?
Yes
How much did we exclude?
12,400
Why?
The baseline is zero
49EID Second 12-Month Exclusion and Phase-In
- Exclusion is reduced to 50 of the increase
attributable to employment or increased earnings - Second 12 month exclusion period begins after
qualified family member has received 12
cumulative months of full exclusion - Phase-in period extends for a total of 12
cumulative months (not needed to be consecutive
months)
50EID Maximum 4 Year Disallowance
- 4 year lifetime maximum disallowance period
- Starts at beginning of initial exclusion period
and ends exactly 48 months later - No exclusion may be given after this lifetime
limit has been reached
51EID Maximum 4 Year Disallowance
- EID regulations call for a maximum of 12
cumulative months for each of the two exclusion
periods - Thus, an individual can max out after receiving
the EID for only two years - 12 consecutive full-exclusion months followed by
- 12 consecutive phase-in exclusion months
52EID Issues
- Remember, the disallowance does not apply for
purposes of admission to the PH program - To ensure that every PH tenant who is eligible
for EID receives it and it is calculated
properly, PHA must consider - 1. How will you document what evidence will
you provide - A. That the family is a qualified family?
- B. The income exclusion in the familys file?
53EID Issues
- 2. How will you track the number of months
income has been excluded and when the exclusion
must end?
54EID Issues
- Tracking can be complex
- In an ideal world, a person who qualifies for the
EID will receive - The full exclusion for 12 consecutive months
- The phase-in exclusion for the next 12
consecutive months - Tracking would be easy
55In an Ideal World
Count all income
100 of increase
50 of increase
56EID Issues
- Tracking
- In reality, the exclusion may stop and start more
than once, making it a challenge to figure out
how much to disallow when there is a break during
an exclusion period.
57Reality may be.
9 months
6 months
9 months
100
50
50
100
Its over
58EID Issues
- Tracking
- Or . . . The four-year maximum may be reached
before the full 12 months of phase-in (or even
initial full exclusion) have been used up.
59Or.Reality may be
9 months
3 months
2 months
100
50
100
Its over
60EID Issues
- Complexity of the regulation contributes to rent
determination errors - Per HUDs PDR report
- Difficulty in tracking exclusion periods
- PHA needs standardized system
61EID Issues
- Calculation of incremental increase
- May necessitate conducting interim reexams
throughout phase-in period - Regardless of PHAs interim policy
- To simplify matters, PHA may align reexam date to
coincide with the beginning of the phase-in
period - Best source for answers
- RHIIP www.hud.gov/offices/pih/programs/ph/rhiip/f
aq.cfm - EID www.hud.gov/offices/pih/phr/about/ao_faq.cfm
62Earned Income Disallowance
- Learning Activity 5-2
- EID Calculation
- Read the case study
- Part 1 Calculate the prequalifying income and
the exclusion amount and wages for EID member - Parts 2-4 Recalculate for changes
63Answers Baseline Income
- Katies prequalifying (baseline) income is
- 5,000
64Part I, Step 1
Step 1 Calculate EID family members exclusion
amount.
9,500
A. Earned income of EID family member
B. Other income of EID family member
C. Total annual income of EID family member (A B)
D. Prequalifying income of EID family member
E. Full exclusion (C - D, but no more than A)
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
5,000
14,500
5,000
9,500
65Part I, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f)
9,500
9,500
0
66Part I, HUD 50058
Form HUD-50058
7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income Exclusions 7f. Income after exclusions (7d minus 7e)
Katie 1 N
Katie 1 W
7g. Total
5,000
5,000
9,500
9,500
0
5,000
67Part 2, Step 1
Step 1 Calculate EID family members exclusion
amount.
9,500
A. Earned income of EID family member
B. Other income of EID family member
C. Total annual income of EID family member (A B)
D. Prequalifying income of EID family member
E. Full exclusion (C - D, but no more than A)
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
2,000
11,500
5,000
6,500
68Part 2, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f)
9,500
6,500
3,000
69Part 2, HUD 50058
Form HUD-50058
7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income Exclusions 7f. Income after exclusions (7d minus 7e)
Katie 1 N
Katie 1 W
7g. Total
2,000
2,000
9,500
6,500
3,000
5,000
70Part 3, Step 1
Step 1 Calculate EID family members exclusion
amount.
9,500
A. Earned income of EID family member
B. Other income of EID family member
C. Total annual income of EID family member (A B)
D. Prequalifying income of EID family member
E. Full exclusion (C - D, but no more than A)
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
6,000
15,500
5,000
9,500
71Part 3, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f)
9,500
9,500
0
72Part 3, HUD 50058
Form HUD-50058
7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income Exclusions 7f. Income after exclusions (7d minus 7e)
Katie 1 N
Katie 1 W
7g. Total
6,000
6,000
9,500
9,500
0
6,000
73Part 4, Step 1
Step 1 Calculate EID family members exclusion
amount.
9,500
A. Earned income of EID family member
B. Other income of EID family member
C. Total annual income of EID family member (A B)
D. Prequalifying income of EID family member
E. Full exclusion (C - D, but no more than A)
F. 50 exclusion during phase-in period, if applicable (E x 0.50)
6,000
15,500
5,000
9,500
4,750
74Part 4, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f)
9,500
4,750
4,750
75Part 4, HUD 50058
Form HUD-50058
7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income Exclusions 7f. Income after exclusions (7d minus 7e)
Katie 1 N
Katie 1 W
7g. Total
6,000
6,000
9,500
4,750
4,750
10,750
76EID Calculation Chart Learning Activity 5-2
77Applying the EID Rules
- In this section, well walk you step-by-step
through an in-depth example of the complexities
that can arise in the application of the EID
rules.
78Challenges for PHA Management
- Since EID is a statutory requirement and a major
source of rent errors, management must take
seriously the responsibility of ensuring that
staff can apply the EID rules correctly. - Rectifying a failure to provide this benefit when
a family is entitled to it can be costly for a
PHA. So can providing excess subsidy!
79Challenges for PHA Staff
- Staff may be puzzled or confused by the results
of correctly applying the EID rules such as
families with these circumstances - Family who has significant increase in earned
income without having any increase in rent - Family who has decreases in other income with no
equivalent decreases in rent
80Challenges for PHA Staff
- Other confusing areas
- Explaining to families why their rent is going up
or down as a result of the EID rules - Difficulty tracking a familys EID benefit as
time passes and family circumstances change
81Purpose of Effective Tracking System
- Public housing residents must benefit only for
the number of months for which they qualify - PHA does not become liable for excess subsidy
82In-Depth Example
- Franklin Family
- One member will become eligible for EID and will
progress through two 12 month exclusion periods - Case study will help us track the two exclusion
periods as well as the 4-year maximum benefit
period - Time is divided into 4 12-month blocks
- See time lines (page 5-35)
83In-Depth Example
- Franklin Family Scenario (page 5-36)
84In-Depth Example
- For each scenario, we will follow these 3 steps
- Calculate the EID exclusion amount
- Calculate the family members wages after
exclusion - Complete Form HUD-50058 entries
85Part I, Step 1
Step 1 Calculate EID family members exclusion
amount.
A. Earned income of EID family member 8,450
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 11,050
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 6,370
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
86Part I, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 8,450
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 6,370
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 2,080
87Part I, HUD 50058
88Part 2, Step 1
Step 1 Calculate EID family members exclusion
amount.
A. Earned income of EID family member 13,520
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 16,120
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 11,440
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
89Part 2, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 13,520
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 11,440
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 2,080
90Part 2, HUD 50058
91Part 3, Step 1
Step 1 Calculate EID family members exclusion
amount.
A. Earned income of EID family member 10,140
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 12,740
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 8,060
F. 50 exclusion during phase-in period, if applicable (E x 0.50) N/A
92Part 3, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 10,140
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 8,060
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 2,080
93Part 3, HUD 50058
94Part 4, Step 1
Step 1 Calculate EID family members exclusion
amount.
A. Earned income of EID family member 10,140
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 12,740
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 8,060
F. 50 exclusion during phase-in period, if applicable (E x 0.50) 4,030
95Part 4, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 10,140
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 4,030
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 6,110
96Part 4, HUD 50058
97Part 5, Step 1
Step 1 Calculate EID family members exclusion
amount.
A. Earned income of EID family member 0
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 2,600
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 0
F. 50 exclusion during phase-in period, if applicable (E x 0.50) 0
98Part 5, Step 2
Step 2 Determine EID family members wages after
exclusion.
G. EID family members earnings (HUD-50058, 7d) 0
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 0
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 0
99Part 6 Annual Reexams
- For the Franklin familys next 3 annual
reexaminations, there is no change in family
circumstances. - June 1, 2005
- June 1, 2006
- June 1, 2007
100Part 7, Step 1
Step 1 Calculate EID family members exclusion
amount.
A. Earned income of EID family member 17,680
B. Other income of EID family member 2,600
C. Total annual income of EID family member (A B) 20,280
D. Prequalifying income of EID family member 4,680
E. Full exclusion (C - D, but no more than A) 15,600
F. 50 exclusion during phase-in period, if applicable (E x 0.50) 7,800
101Part 7, Step 2
Step 1 Calculate EID family members exclusion
amount.
G. EID family members earnings (HUD-50058, 7d) 17,680
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 7,800
I. EID family members earned income after exclusions (G H) (HUD-50058, 7f) 9,880
102Part 7, HUD 50058
103Part 7 After Exclusions End
104Chapter 5. Section 5.Assets and Asset Income
105Assets and Asset Income
- Value of assets may affect familys annual income
- PHA must
- Identify assets
- Verify market value of asset
- Convert from market to cash value
106Assets and Asset Income
- To determine cash value of asset, start with the
fair market value. Then subtract - Any expenses involved in converting assets to
cash - Broker fees
- Legal fees
- Settlement costs
- Penalty for early withdrawal
- Any money owed on the asset, such as the mortgage
balance
107What Assets Include
- Savings and checking accounts
- PHAs establish policies for determining value of
accounts - May elect to count current balances or average
balances for a given period (2 months, 6 months,
etc.)
108What Assets Include
- Accessible amount of trusts available to family
- Stock, bonds, money market funds
- Equity in real property, other capital
investments - Retirement savings accounts
109What Assets Include
- Contributions to company retirement/pension funds
- Before retirement, count only amounts family can
withdraw without retiring or quitting - After retirement, count regular periodic payments
as income
110What Assets Include
- Assets held in the name of more than one person
that allow unrestricted access - Lump sum receipts which are retained and
verifiable - Inheritances, capital gains, lottery winnings
- Social security SSI lump sum payments
111What Assets Include
- Personal property held as investment
- gems, jewelry
- coin collections
- Surrender value of life insurance policies
112Assets Disposed of For Less Than Fair Market Value
- Imputed Assets Assets disposed of within two
years prior examination or reexamination for less
than fair market value -
113Assets Disposed of For Less Than Fair Market Value
- Cash value of an imputed asset is the difference
between the actual cash value of the asset and
the amount received for it - Example Home market value
- 155,000
- Fees incurred 5,000
- Actual Cash value 150,000
- Amount received 100,000
- Imputed Cash Value 50,000
114Assets Disposed of For Less Than Fair Market Value
- PHA can establish a minimum threshold for
counting assets disposed of for less than fair
value - Threshold of 1,000 would be reasonable
115Assets Disposed of For Less Than Fair Market Value
- Generally NOT considered are those assets
disposed of due to - divorce or separation
- bankruptcy
- foreclosure
- PHA should develop applicant/tenant certification
form for verifying assets disposed of for less
than fair market value
116Assets Disposed of For Less Than Fair Market Value
- Learning Activity 5-3 Assets disposed of for
less than fair market value (page 5-50)
117Income from Assets
- Market value of asset
- is used to determine anticipated income from
asset - Formula to determine anticipated income from
interest bearing accounts - Market value x interest rate anticipated
income - What is the market value of a 4,000 savings
account?
118Income from Assets
- Learning Activity 5-4
- Interest Income from Assets (page 5-52)
119Section 6 Assets
Edith
1
Savings
400 x .023
400
9
400
9
028
0
9
120Imputed Asset Income
- Income that would be received from an asset if it
were converted to cash and the cash were placed
in a savings account earning a HUD-determined
passbook rate. - The cash value of an asset is used to determine
the imputed income from the asset.
121Imputed Asset Income
- Remember, when calculating the cash value of an
asset, PHAs must take into account the expenses
involved in converting the asset to cash such as - Penalties for early withdrawal
- Broker or legal fees
- Closing costs (for real estate)
122Imputed Asset Income
- Imputed asset income comes into play on the HUD
50058 only when the total cash value of all
assets is greater than 5000.
123Imputed Asset Income
- When total cash value of all assets is 5000 or
less, use the actual income from assets
124Imputed Asset Income
- If the total cash value of all assets exceeds
5,000 must use the greater of - actual income from assets
- imputed income from assets (HUD passbook rate
times total cash value of all assets)
125Assets and Asset Income
- Learning Activity 5-5
- Assets and Asset Income (page 5-56)
126Section 6 Assets
Edith
1
Savings
400
9
6000 x .020
Stocks
6000-480
5520
120
Edith
1
5920
129
.0225
133
133
127What Assets Do Not Include
- Necessary items of personal property such as
furniture and automobiles - Assets not accessible to the family
- Interest in Indian Trust lands
128Asset Issues
- Staff should know that market value is used to
calculate actual income on certificate of
deposits and other instruments that carry a
penalty for early withdrawal - Cash value is used to determine imputed asset
income only if total cash value of all assets
exceeds 5000
129Asset Issues
- The actual anticipated income from an
interest-bearing asset (savings account) is based
on the interest rate actually paid by the bank or
other institution where the account is located. - The HUD-determined passbook rate is not used to
determine actual income. - The HUD-determined passbook rate is used only to
determine imputed interest on assets totaling
more than 5000.
130Asset Issues
- PHA staff should be reminded that
- All assets count, regardless of their value
- Assets may have a cash value and produce no
actual income - There is no maximum asset limit for applicants or
tenants - PHA may not pass cost of asset verification to
families - Bank verifications
- Appraisals
131Chapter 5. Section 6.PH Rent Calculation
132Definitions
- Tenant rent is the amount payable monthly by the
family as rent to the PHA - Total tenant payment (TTP) is the amount the
tenant pays toward rent plus any utility
allowance - Utility reimbursement is the amount, if any, by
which the utility allowance for the unit exceeds
the familys TTP - Not used for a family paying flat rent
133Income-Based Rent
- Tenant rent is the TTP minus the utility
allowance - If the utility allowance exceeds the TTP, the PHA
must pay the excess amount either to the family
or directly to the utility supplier on behalf of
the family - Must notify the family of the amount paid to the
utility supplier
134Ceiling Rents
- PHAs with ceiling rents that were authorized and
established before 10/1/99 were allowed to retain
them until 10/1/02 - After that, PHAs were required to adjust ceiling
rents to the level required for flat rents - Ceiling rents subject to
- Annual reexamination requirements
- Limitation that tenant rent plus utility
allowance may not exceed TTP - Tenant rent will be the lower of the TTP or the
ceiling rent minus any utility allowance
135Flat Rents
- For each public housing unit, a PHA must
establish a flat rent based on the market rent
charged for comparable units in the unassisted
rental market - PHA must use a reasonable method to determine
flat rent, taking into consideration - Location, quality, size, unit type, age of unit,
amenities, housing services, maintenance and
utilities provided by the PHA
136Flat Rents
- Example if a comparable unit rents for 400 and
the PHA pays utilities averaging 50 a month, PHA
should use 450 as the flat rent - Flat rent encourages self-sufficiency
137Flat Rents
- PHA must maintain records that
- Document method used to determine flat rents
- Show how flat rents are determined in accordance
with this method - Document flat rents offered to families under
this method - For family that chooses flat rent, the PHA must
conduct a reexamination at least once every three
years - If family chooses flat rent, there is no utility
allowance
138Ceiling Rents and Flat Rents
- A PHA may have ceiling rents and flat rents at
the same time - Ceiling rents are a function of the formula-based
rent - When the PHA establishes ceiling rents, the
family is charged the lesser of the TTP or the
ceiling rent - The PHA will determine the lesser, and then gives
the family the choice of the formula rent or
the flat rent
139Family Choice of Rent
- PHAs must give families choice between
income-based rent and flat rent once a year - PHAs must provide families with enough
information to make an informed choice,
including - PHAs policies on switching type of rent in case
of financial hardship - Dollar amount of tenant rent for family under
each option
140Family Choice of Rent
- If family chooses flat rent one year, a PHA is
required to provide the amount of income-based
rent for the subsequent rent only under either of
the following conditions - It is the year the PHA is conducting an income
reexamination - The family requests the information and submits
updated income information
141Family Choice of Rent
- For a family that chooses flat rent, the PHA must
conduct a reexamination of family income at least
once every three years - The PHA must conduct a reexamination of family
composition at least annually
142Switching Because of Hardship
- A PHA must adopt written policies for determining
when payment of flat rent is a hardship for a
family
143Switching Because of Hardship
- Policies must include the following situations as
well as any others the PHA determines
appropriate - Family has experienced a decrease in income
because of changed circumstances, including loss
or reduction of employment, death in the family,
or reduction in or loss of earnings or other
assistance - Family has experienced an increase in expenses
for medical costs, child care, transportation,
education, or similar items
144Switching Because of Hardship
- A family paying flat rent may at any time request
a switch due to financial hardship - If the PHA determines that the family is unable
to pay flat rent because of financial hardship,
PHA must immediately allow the switch to
income-based rent - The PHA must make a determination within a
reasonable time after the request
145Switching Because of Hardship
- When establishing policies, a PHA should indicate
the time frame in which family must notify the
PHA of a financial hardship and the need to
switch rent options - The PHA should be able to act within 30 days
- Includes verifying the financial hardship
- Once a family switches to income-based rent
because of financial hardship, the family must
wait until its next annual reexamination to
switch back
146Learning Objective
- Understand and address those difficult aspects of
rent calculation where errors are most likely to
occur