The Impact of the Final Rule on Income and Rent Determination Requirements in Public and Assisted Housing

Yves S. Djoko

Impact

As with the articles in this issue, this introduction reflects the views of the authors and does not necessarily reflect the views of the U.S. Department of Housing and Urban Development.

Applicant or tenant failure to correctly report income in U.S. Department of Housing and Urban Development (HUD)-assisted housing programs may result in overpayment or underpayment of housing assistance. To mitigate the issue, HUD issued a final rule on rent and income determination in assisted housing. Assuming the rule is 100-percent effective in eliminating earned-income–based rent errors, if no oversubsidized tenants left in response to rent increases based on correct determination of earned income, then the net transfer to new tenants would be about $480 million a year, resulting in about 92,000 new tenants served. At the other extreme, if all households that were oversubsidized due to earned-income error left HUD-assisted housing in response to rent corrections under the rule, the transfer to new tenants would amount to about $1.72 billion a year (a figure that includes the subsidies they are properly entitled to under the law), resulting in about 337,000 new tenants served. The rule is unlikely to be 100-percent effective, however. The corrective actions of income and rent discrepancies may not necessarily lead to a reduction in subsidy; they could, in fact, lead to an increase in program funding needed to maintain the number of households served by the program if formerly oversubsidized households withdraw from the programs and are replaced by households with incomes still lower than theirs.