# IN

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# PUBLIC HOUSING & SECTION 8 RESIDENT-BASED ASSISTANCE

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# Improving Income Integrity Guidance Booklet![](media/image1.emf){width="0.5395833333333333in" height="0.6888888888888889in"}

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![](media/image2.emf){width="2.7840277777777778in"
height="3.6881944444444446in"}

**April 2001**

**Appendix A**

**SECTION 1: INCOME INTEGRITY**

## 

## **A. THE INCOME INTEGRITY PROBLEM**

## 

## The Department of Housing and Urban Development (HUD) has recently been criticized for weakness in its data reporting systems, including data based on the calculation of resident family rent in public and assisted housing. The two main causes of this problem are the under-reporting of income by resident families and Public Housing Agencies (PHAs) and Public Housing Agencies and Owners and Agents (POAs) not granting exclusions and deductions to which resident families are entitled. The results of a recent HUD study showed that more than one-half of resident families paid incorrect rent.

# B. INCOME INTEGRITY IS CRITICAL TO THE FUTURE OF PUBLIC HOUSING

# 

# Solving the income integrity problem is vital for HUD. Not only will accurate rent and income address the finding of material weakness in HUD's Financial Statement, but accurate rent will help achieve HUD's and Congress' goal of using limited housing resources as efficiently as possible. When families pay accurate rent, fraud, waste and abuse are eliminated while increasing the amount of housing assistance to serve eligible families.

# C. RIGHTS AND RESPONSIBILITIES

Income integrity is all about *rights and responsibilities*. In return
for income exclusions, deductions and access to decent, safe and
affordable housing, resident families have the responsibility to provide
accurate and up-to-date income information to their PHAs. PHAs have the
right to efficient allocation of scarce housing dollars but have the
responsibility of ensuring that resident families receive the deductions
and exclusions to which they are entitled.

+-----------------------------------------------------------------------+
| **Resident Rights and Responsibilities**                              |
|                                                                       |
| > · Receive appropriate deductions and exclusions                     |
| >                                                                     |
| > · Receive decent, safe and affordable housing                       |
|                                                                       |
| # · Report all income                                                 |
|                                                                       |
| > · Provide/release income information for income verification (Form  |
| > HUD-9886)                                                           |
+-----------------------------------------------------------------------+

+-----------------------------------------------------------------------+
| ##                                                                    |
|                                                                       |
| ## **PHA Rights and Responsibilities**                                |
|                                                                       |
| > · Provide decent, safe and sanitary housing                         |
| >                                                                     |
| > · Receive accurate income information                               |
| >                                                                     |
| > · Verify resident income                                            |
| >                                                                     |
| > · Ensure residents receive applicable income exclusions and         |
| > deductions                                                          |
+-----------------------------------------------------------------------+

## **SECTION 2: HOW RENT IS DETERMINED**

**A. CALCULATING RENT**

Rent calculation often involves simple subtraction equations to
determine *Annual Income* and *Adjusted Income*. Annual Income is
determined by calculating a family's income minus allowable exclusions.
Adjusted Income is calculated by subtracting allowable deductions from
Annual Income. Annual Income and Adjusted Income function to determine
the rent a family will pay.

### 

### 

### INCOME EQUATIONS

**1. INCOME -- EXCLUSIONS = ANNUAL INCOME**

**2. ANNUAL INCOME -- INCOME DEDUCTIONS = ADJUSTED INCOME**

# The difficulty in calculating Annual Income and Adjusted Income is figuring out the income exclusions and deductions a family can claim.

# B. ANNUAL INCOME, 24 CFR 5.609

# 

# 1. WHAT IS ANNUAL INCOME?

**Annual Income is Anticipated Income:** Annual Income is the income a
family expects to receive in the future. It is the amount of income that
a family expects to receive in the 12 months following certification or
reexamination. For a family receiving a regular source of income, such
as pay from a job or Social Security, calculating Annual Income may be
easy. For a family with members who have seasonal employment (for
example, a landscaper who works in the late spring, summer and early
fall), calculating Annual Income may be more difficult. Below are some
amounts that can be considered as income.

2\. AMOUNTS INCLUDED IN ANNUAL INCOME WITH EXAMPLES

Annual income includes, but is not limited to, the following:

> **Wages and Salaries, 24 CFR 5.609(b)(1):** The full amount, before
> any payroll deductions, of wages and salaries, overtime pay,
> commissions, fees, tips and bonuses, and other compensation for
> personal services.

-   **Examples:** A supermarket clerk's total salary; a waiter's total
    salary and tips; a salesperson's gross salary and commissions

> **Net Business Income, 24 CFR 5.609(b)(2):** The net income from the
> operation of a business or profession. Expenditures for business
> expansion or amortization of capital indebtedness shall not be used as
> deductions in determining net income. An allowance for depreciation of
> assets used in a business or profession may be deducted, based on
> straight line depreciation, as provided in Internal Revenue Service
> regulations. Any withdrawal of cash or assets from the operation of a
> business or profession will be included in income, except to the
> extent the withdrawal is reimbursement of cash or assets invested in
> the operation by the family.

-   **Example:** A landscaper's income after deductions for gas and
    machine maintenance

> **Benefits, 24 CFR 5.609(b)(5) & (6):**

-   24 CFR 5.609(b)(5): Payments in place of earnings, such as
    unemployment and disability compensation, worker\'s compensation and
    severance pay (except as provided in paragraph 24 CFR 5.609(c)(3)).

-   24 CFR 509(b)(6): If the welfare assistance payment includes an
    amount specifically designated for shelter and utilities that is
    subject to adjustment by the welfare assistance agency in accordance
    with the actual cost of shelter and utilities, the amount of welfare
    assistance income to be included as income shall consist of:

-   The amount of the allowance or grant exclusive of the amount
    specifically designated for shelter or utilities; plus

-   The maximum amount that the welfare assistance agency could in fact
    allow the family for shelter and utilities. If the family\'s welfare
    assistance is ratably reduced from the standard of need by applying
    a percentage, the amount calculated under this paragraph (b)(6)(ii)
    shall be the amount resulting from one application of the
    percentage.

> **Income From Assets, 24 CFR 5.609(b)(3):** 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. An allowance for
> depreciation is permitted only as authorized in paragraph (b)(2) of
> this section. 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 net family 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.

-   **Example:** Interest from a savings or checking account.

> **Regular Payments to Family Members, 24 CFR 5.609(b)(4):** The full
> amount of periodic amounts received from Social Security, annuities,
> insurance policies, retirement funds, pensions, disability or death
> benefits, and other similar types of periodic receipts, including a
> lump-sum amount or prospective monthly amounts for the delayed start
> of a periodic amount (except as provided in paragraph (c)(14) of this
> section).

-   **Examples:** All social security payments to any family member; a
    state employee's pension or retirement; a widow's insurance benefit

> **Allowances and Regular Cash Contributions, 24 CFR 5.609(b)(7):**
> Regular and determinable allowances, such as alimony and child support
> payments, and regular contributions or gifts received from
> organizations or from persons not residing in the dwelling.

-   **Example:** The regular amount of money a daughter sends her mother
    each month.

> **Armed Forces Pay, 24 CFR 5.609(b)(8):** All regular pay, special pay
> and allowances of a member of the Armed Forces (except as provided in
> 24 CFR (c)(7)).

-   **Examples:** Pay to a spouse serving at sea with the Navy; Salary
    of an Army private in Germany whose child is living with the family.

> **Assets Sold for Less Than Market Value, 24 CFR 5.603(d)(4):** In
> determining net family assets, PHAs or owners, as applicable, shall
> include the value of any business or family assets disposed of by an
> applicant or tenant for less than fair market value (including a
> disposition in trust, but not in a foreclosure or bankruptcy sale)
> during the two years preceding the date of application for the program
> or reexamination, as applicable, in excess of the consideration
> received therefor.

-   **Example:** Selling a house to a family member or friend for \$1
    when the market value is \$25,000.

**3. NEW: ANNUALIZATION OF INCOME: 24 CFR 5.609(d)**

A PHA may now calculate future Annual Income by considering a time
period less than a year if necessary to accurately estimate the resident
family's income.

# C. INCOME EXCLUSIONS: 24 CFR 5.609(c)

**1. WHAT ARE INCOME EXCLUSIONS?**

Some amounts are prohibited from being included in a family's income for
rent determination purposes. These amounts, called exclusions, *are not*
part of Annual Income. Below are some amounts excluded from income:

**2. ANNUAL INCOME EXCLUSIONS AND EXAMPLES**

> **Wages of Family Members Under 18, 24 CFR 5.609(c)(1):** Income from
> employment of children (including foster children) under the age of 18
> years.

-   **Example:** Salary of a 17-year-old, who is neither the head of a
    household or spouse, from working at a fast food restaurant

> **Earnings Over \$480 for Full-time Students Over 18, 24 CFR
> 5.609(c)(11):** Earnings in excess of \$480 for each full-time student
> 18 years old or older (excluding the head of household and spouse).
>
> **Refunds or Rebates of Property Tax on Home. 24 CFR 5.609(c)(15):**
> Amounts received by the family in the form of refunds or rebates under
> State or local law for property taxes paid on the dwelling unit.
>
> **Payments for Student Financial Assistance Paid Directly to the
> Student or Educational Institution, 24 CFR 5.609(c)(6):** The full
> amount of student financial assistance paid directly to the student or
> to the educational institution.
>
> **Lump‑Sum Additions to Family Wealth, 24 CFR 5.609(c)(3):** Lump-sum
> additions to family assets, such as inheritances, insurance payments
> (including payments under health and accident insurance and worker\'s
> compensation), capital gains and settlement for personal or property
> losses (except as provided in paragraph (b)(5) of this section).

-   **Examples:** An inheritance; insurance settlements

> **Lump-Sum Payments of Deferred Benefits, 24 CFR 5.609(c)(14):**
> Deferred periodic amounts from supplemental security income and social
> security benefits that are received in a lump sum amount or in
> prospective monthly amounts.
>
> **Temporary, Non-Recurring, Sporadic Income, 24 CFR
> 5.609(c)(9)**:Temporary, nonrecurring or sporadic income (including
> gifts).
>
> **Amounts Received for Reimbursements of Medical Expenses of Any
> Family Member, 24 CFR 5.609(c)(4):** Amounts received by the family
> that are specifically for, or in reimbursement of, the cost of medical
> expenses for any family member.

-   **Example:** Expenses for prescription drugs.

> **Live in aide income, 24 CFR 5.609(c)(5):** Income of a live-in aide,
> as defined in 24 CFR 5.403
>
> **Adoption Assistance Payments in Excess of \$480 Per Child, 24 CFR
> 5.609(c)(12).**
>
> **Payments to Keep Developmentally Disabled Family Members at Home, 24
> CFR 5.609(c)(16)**: Amounts paid by a State agency to a family with a
> member who has a developmental disability and is living at home to
> offset the cost of services and equipment needed to keep the
> developmentally disabled family member at home.
>
> **Payments Received for the Care of Foster Children or Adults, 24 CFR
> 5.609(c)(2):** Payments received for the care of foster children or
> foster adults (usually persons with disabilities, unrelated to the
> tenant family, who are unable to live alone).
>
> **Special Armed Forces Pay, 24 CFR 5.609(c)(7):** The special pay to a
> family member serving in the Armed Forces who is exposed to hostile
> fire.

-   **Example:** Extra pay received for peace keeping duty in Kosovo.

> **Foreign Government Reparation Payments, 24 CFR 5.609(c)(10):**
> Reparation payments paid by a foreign government pursuant to claims
> filed under the laws of that government by persons who were persecuted
> during the Nazi era.
>
> **Earnings and Benefits From Employment Training Programs Funded By
> HUD, 24 CFR 5.609(c)(8)(i).**

-   **Example**: Stipend for Youthbuild project to help young
    high-school dropouts obtain education, employment skills, and
    meaningful on-site work experience in a construction trade.

> **Incremental Earnings and Benefits from Participation in Qualifying
> State and Local Employment Programs, 24 CFR 5.609(c)(8)(v):**
> Incremental earnings and benefits resulting to any family member from
> participation in qualifying State or local employment training
> programs (including training programs not affiliated with a local
> government) and training of a family member as resident management
> staff. Amounts excluded by this provision must be received under
> employment training programs with clearly defined goals and
> objectives, and are excluded only for the period during which the
> family member participates in the employment training program.

-   **Example:** Department of Labor, Employment Training Administration
    Welfare-to-Work Grant if goals and objectives meet appropriate
    criteria

> **Reimbursement for Out-Of-Pocket Expenses While Attending a Public
> Assisted Training Program, 24 CFR 5.609(c)(8)(iii**): Amounts received
> by a participant in other publicly assisted programs which are
> specifically for or in reimbursement of out-of-pocket expenses
> incurred (special equipment, clothing, transportation, child care,
> etc.) and which are made solely to allow participation in a specific
> program.
>
> **Resident Service Stipend Not To Exceed \$200 For Services to the PHA
> (if PHA Provides), 24 CFR 5.609(c)(8)(iv):** Amounts received under a
> resident service stipend. A resident service stipend is a modest
> amount (not to exceed \$200 per month) received by a resident for
> performing a service for the PHA or owner, on a part-time basis, that
> enhances the quality of life in the development. Such services may
> include, but are not limited to, fire patrol, hall monitoring, lawn
> maintenance, resident initiatives coordination, and serving as a
> member of the PHA\'s governing board. No resident may receive more
> than one such stipend during the same period of time**.**

**3. NEW EXCLUSIONS IN PHRA**

> **Stipends to Reimburse Residents for Expenses for Serving as Members
> of PHA Governing Board or Commission, Stipends to Reimburse Residents
> for Expenses of Serving as Members of the PHA Governing Board or
> Commission, 24 CFR 5.609(c)(8)(iv)(see above):** The Public Housing
> Reform Act provides that the governing board of a PHA must generally
> contain at least one member who is directly assisted by the PHA (42
> U.S.C. 1437(b)). To support and facilitate implementation of this new
> statutory requirement, HUD is clarifying that the resident service
> stipend exclusion covers amounts received by residents who serve on
> the PHA governing board. HUD is concerned that without this
> clarification, residents may be discouraged from participating.
>
> **Earned Income Disallowance for Public Housing Families, 24 CFR
> 960.255(b) and Persons with Disabilities in Public Housing, Section 8,
> and Other HUD Assisted Housing, 25 CFR 5.617:**
>
> **Initial Twelve Month Exclusion, 24 CFR 960.255(b)(1)/24 CFR
> 5.617(c)(1):** During the cumulative twelve month period beginning on
> the date a member of a qualified family is first employed or the
> family first experiences an increase in Annual Income attributable to
> employment, the PHA must exclude from Annual Income (as defined in
> Sec. 5.609 of this title) of a qualified family any increase in income
> of the family member as a result of employment over prior income of
> that family member.
>
> **Second Twelve Month Exclusion And Phase-In, 24 CFR 960.255(b)(2)/24
> CFR 5.617(c)(2):** During the second cumulative twelve month period
> after the date a member of a qualified family is first employed or the
> family first experiences an increase in Annual Income attributable to
> employment, the PHA must exclude from Annual Income of a qualified
> family fifty percent of any increase in income of such family member
> as a result of employment over income of that family member prior to
> the beginning of such employment.
>
> **Maximum Four Year Disallowance, 24 CFR 960.255(b)(3)/24 CFR
> 5.617(c)(3):** The disallowance of increased income of an individual
> family member as provided in paragraph (b)(1)/(c)(1) or (b)(2)/(c)(1)
> of this section is limited to a lifetime 48 month period. It only
> applies for a maximum of twelve months for disallowance under
> paragraph (b)(1)/(c)(1) and a maximum of twelve months for
> disallowance under paragraph (b)(2)/(c)(2), during the 48 month period
> starting from the initial exclusion under paragraph (b)(1)/(c)(1) of
> this section.

**4. FEDERALLY MANDATED EXCLUSIONS -- PER HUD NOTICE**

> HUD issued a notice in *58 Federal Register 41287, August 3, 1993,* to
> specify additional benefits excluded from income. The benefits
> excluded are listed below:

-   The value of the allotment provided to an individual under the *Food
    Stamp Act*

-   Payments to volunteers under the *Domestic Volunteer Services Act*

-   Payments received under the *Alaska Native Claims Settlement Act*

-   Income derived from certain submarginal land of the United States
    that is held in trust for certain Indian tribes

-   Payments or allowances under DHHS' Low-Income Home Energy Assistance
    Program (LIHEAP)

-   Payments received under programs funded in whole or in part under
    the *Partnership Act*

-   Income derived from the disposition of funds of the Grand River Band
    of Ottawa Indians

-   The first \$2,000 of per capita shares from judgement funds awarded
    by the Indian Claims Commission or the Court of Claims or from funds
    held in trust for an Indian tribe by the Secretary of the Interior

-   Federal scholarships funded under Title IV of the *Higher Education
    Act of 1965*, including awards under the Federal work study program
    or under the Bureau of Indian Affairs student Assistance program

-   Payments received from programs funded under Title V of the *Older
    Americans Act of 1965*

-   Payments received on or after January 1, 1989 from the Agent Orange
    Settlement Fund or any fund established pursuant to the settlement
    in the *In re Agent Orange* product liability legislation.

-   Payments received under *the Maine Indian Claims Settlement Act of
    1980*.

-   Child care arranged or provided under the *Child Care and
    Development Block Grant Act*

-   Earned Income Tax Credit refund payment

In a supplementary Notice *66 Federal Register 4669, April 20,
2001***,** HUD updated and remedied omissions of the exclusions
published in 1993:

-   Payments by the Indian Claims Commission to the Confederate Tribes
    and Bands of the Yakima Indian Nation or the Apache Tribe of the
    Mescalero Reservation.

-   The first \$2000 of income received by individual Indian derived
    from interests or trust or restricted land,

-   Any allowance paid under provisions of *38 U.S.C. 1805* to a child
    suffering from spina bifida who is the child of a Vietnam Veteran.

-   Any amount of crime victim compensation that the applicant (under
    the *Victims of Crime Act*) receives through crime victim assistance
    (or payment or reimbursement of the cost of such assistance) as
    determined under the *Victims of Crime Act* because of the
    commission of a crime against the applicant.

**5. EXCLUSION FOR CENSUS TAKERS: Notice PIH 2000-1 (HA)**

HUD has excluded the amounts earned by temporary Census employees for
determining income in the Department's assisted housing programs. Terms
of employment may not exceed 180 days for the purposes of the exclusion.

**D. DEDUCTIONS: 24 CFR 5.611**

Deductions are amounts that are subtracted from a family's Annual Income
to produce Adjusted Income. There are two types of deductions: mandatory
and permissive

**1. MANDATORY DEDUCTIONS, 24 CFR 5.611(a):**

-   \$480 for each dependent including full-time students or persons
    with disability, 24 CFR 5.611(a)(1)

-   \$400 for any elderly family or disabled family, 24 CFR 5.611(a)(2)

-   The sum of the following to the extent the sum of the following
    exceeds 3% of income:

-   Unreimbursed medical expenses of any elderly family or disabled
    family, 24 CFR 5.611(a)(3)(i)

-   Unreimbursed reasonable attendant care and auxiliary apparatus
    expenses for disabled family member(s) to allow family member(s) to
    work. 24 CFR 5.611(a)(3)(ii)

-   Any reasonable child care expenses necessary to enable a member of
    the family to be employed or to further his or her education, 24 CFR
    5.611(a)(4)

**2. PERMISSIVE DEDUCTIONS (Public Housing Only), 24 CFR 5.611(b)**

PHAs may adopt additional deductions, called Permissive Deductions, from
Annual Income. PHAs must establish a written policy for such deductions.
Examples of Permissive Deductions include:

1.  Excessive travel expenses not exceeding \$25 per family per week,
    for employment- or education-related travel

2.  An amount of any family earned income, established at the discretion
    of the PHA, which may be based on\--

3.  all earned income of the family;

4.  the amount earned by particular members of the family;

5.  the amount earned by families having certain characteristics; or

6.  the amount earned by families or members during certain periods or
    from certain sources.

#### **E. DETERMINING RENT: 24 CFR 5.628**

# RENT EQUATIONS:

**1. 30% x MONTHLY ADJUSTED INCOME**

**OR**

**2. 10% x MONTHLY ANNUAL INCOME**

The rent a family will pay is the highest of the following amounts:

-   30% of the family's monthly Adjusted Income;

-   10% of the family's monthly Annual Income; or

-   Welfare rent or welfare payments from agency to assist family in
    paying housing costs

F.  **OTHER PROVISIONS OF PHRA AFECTING INCOME DETERMINATION**

**AND RE-EXAMINATION**

Income is not the only factor determining rent. Other factors include:

> **Minimum Rent:** Rent can never be less than a minimum amount or
> minimum rent set between \$0 and \$50.
>
> **Flat Rent (Public Housing only), 24 CFR 960.253(b):** Flat rent
> fixes rent at a certain amount so that it does not increase as income
> increases. Flat Rent is rent based on the market rent charged for
> comparable units in the private unassisted rental market. It is equal
> to the estimated rent for which the PHA could promptly lease the
> public housing unit after preparation for occupancy.
>
> **Welfare Sanctions, 24 CFR 5.615**: The dollar amount by which the
> family's welfare benefits were reduced by a TANF agency because of
> fraud or noncompliance is included in Annual Income.

# TIME FRAME FOR RE-EXAMINATION OF RENT:

#  24 CFR 960.257 and 24 CFR 982.516

Family income must be checked at the time the family enters the program
and must be re-examined at least annually. For families who choose flat
rents, the PHA must conduct re-examination of family composition at
least annually and family income at least once every three years. If a
family experiences a change in income or circumstances, it may request a
reexamination of income.

# SECTION 3: VERIFYING INCOME

##### A. IDENTIFICATION

A basic element of income verification is a resident's proof of
identification. An important identification document is a resident's
Social Security number. Social Security numbers are required for each
family member six years of age and above for the purposes of income
verification. If the family member does not have a Social Security
number, the PHA may require another document in its place or some
certification with the family member's name and the reason the
individual does not have a Social Security number. The individual may be
required to obtain a Social Security number.

Documents verifying Social Security number can also be required. Such
documents include:

-   A driver's license

-   An identification card issued by federal, state or local agency;
    employer or trade union or medical insurance company

-   An earnings statement or payroll stubs

-   Bank statements

-   IRS Form 1099

-   Benefit award letters from government agencies

-   Unemployment or retirement benefit letters

-   Life insurance policy

-   Court records such as real estate, tax notices, marriage and
    divorce, judgement or bankruptcy records

-   Other documents that the PHA determines are evidence of a valid
    Social Security number

Documents created by or at the request of family members are not
typically accepted for certification or reexamination purposes. Such
documents can include business cards, identification cards purchased
from stores or copies of Social Security cards. Other unacceptable
documents are those with little or no value to identification
verification like club memberships or library cards.

# B. PROOF OF INCOME SUPPLIED BY THE RESIDENT FAMILY

#### PHAs check or verify resident family income in several ways. One of the more important means is to use information supplied by the family. PHAs may require that families supply them with documents to help determine family rent. The type of documents required may depend on the type of income that is being reported. To follow are types of income and the documents useful to prove the amount of income the family received.

+-----------------------+----------------------------------------------+
| > **Type of Income**  | #### **Example of Proof**                    |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### C                | #### Canceled checks                         |
| hild Support Payments |  and award letters if original and unaltered |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### Ce               | #### The certificates of deposit showing ba  |
| rtificates of Deposit | lance, interest rate and term of the deposit |
+-----------------------+----------------------------------------------+

+-----------------------+----------------------------------------------+
| > **Type of Income,   | #### **Example of Proof**                    |
| > Con'd.**            |                                              |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### Earn             | #### Ta                                      |
| ed Income Tax Credits | x forms. PHAs review this documentation care |
|                       | fully since tax forms can be easily altered. |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### E                | #### Award letters showing the scholarsh     |
| ducation Scholarships | ip's purpose, amount and dates of the awards |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #                     | #### Paystubs or earnings                    |
| ### Employment Income | statements. The PHA may require several pays |
|                       | tubs covering a certain time period. PHAs wi |
|                       | ll usually not accept photocopies of paystub |
|                       | s, actual checks in place of the stub and a  |
|                       | stub that does not show the employer's name, |
|                       |  total earnings and pay rate and pay period. |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### IRA and O        | #### Th                                      |
| ther Retirement Funds | is income should be verified with original d |
|                       | ocuments from a bank or the retirement fund. |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| ##                    | #### Original insurance do                   |
| ## Insurance Policies | cuments including information on current val |
|                       | ue, penalties for surrendering the policy an |
|                       | d the rate of interest earned on the policy. |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### Real Property    | #### Tax as                                  |
|                       | sessment information, mortgage documents inc |
|                       | luding current principal due and current int |
|                       | erest rate and leases if the property is bei |
|                       | ng rented out. Expenses should be documented |
|                       |  with receipts and IRS Form 1040 Schedule E. |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### Regular Gifts    | #### Checks receive                          |
|                       | d by family are an acceptable form of proof. |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### Savings          | #### Passbooks and bank                      |
| and Checking Accounts |  statements. PHAs may require several bank s |
|                       | tatements covering a certain period of time. |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### Savings Bonds    | #### The original bond itself.               |
+-----------------------+----------------------------------------------+

+-----------------------+----------------------------------------------+
| > **Type of Income,   | #### **Example of Proof**                    |
| > Con'd.**            |                                              |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### S                | #### Tax F                                   |
| elf-Employment Income | orms are usually required for proof of incom |
|                       | e from self employment. If a family member i |
|                       | s self employed, the PHA may require IRS for |
|                       | ms and documents like Form 1099 or Form 1040 |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### Stoc             | ####                                         |
| ks, Bonds, Treasury B | Actual Instruments or a monthly statement fr |
| ills and Mutual Funds | om the broker are acceptable forms of proof. |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### TANF             | #### Usually PHAs verify this income wi      |
|                       | th the proper government agency. PHAs must o |
|                       | btain a written verification form from the a |
|                       | ppropriate welfare agency (see PIH 2000-11). |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| #### Unem             | #### Canceled checks                         |
| ployment Compensation | and award letters if original and unaltered. |
+-----------------------+----------------------------------------------+
| ####                  | ####                                         |
|                       |                                              |
| ####                  | #### Award let                               |
|  Workers Compensation | ters if they clearly state the pay rate and  |
|                       | period over which the payments will be made. |
+-----------------------+----------------------------------------------+

# C. PROOF OF QUALIFICATION FOR DEDUCTIONS

For families to claim income deductions, PHAs may require documents
proving entitlement to those deductions. Different deductions may
require different forms of proof.

+-----------------------+----------------------------------------------+
| > **Type of           | > **Example of Proof**                       |
| > Deduction**         |                                              |
+=======================+==============================================+
| > Child Care Expenses | > Receipts or paid invoices signed by the    |
|                       | > childcare provider. A letter or statement  |
|                       | > signed by the childcare provider can also  |
|                       | > serve as proof.                            |
+-----------------------+----------------------------------------------+
| > Dependents          | > Birth certificates can prove that a child  |
|                       | > is under the age of 18, but not that the   |
|                       | > child is a family member. Custody,         |
|                       | > adoption papers or other legal court       |
|                       | > documents can serve as verification that   |
|                       | > the minor lives with the guardian          |
+-----------------------+----------------------------------------------+
| > Handicapped         | > Receipt for care costs signed by health    |
| > Assistance Expenses | > care provider and copies of payment        |
|                       | > agreements showing costs or payment plan   |
|                       | > for medical equipment.                     |
+-----------------------+----------------------------------------------+
| > Medical Expenses    | > Medical insurance premiums should be       |
|                       | > verified with receipts, cancelled checks   |
|                       | > or pay stubs. Receipts for payments to     |
|                       | > physicians and live in aides can also      |
|                       | > prove medical costs. PHAs will generally   |
|                       | > be suspicious of handwritten receipts.     |
+-----------------------+----------------------------------------------+

**D. COMMON MISTAKES MADE BY RESIDENTS AND PHAS**

**IN REPORTING AND DETERMINING INCOME**

-   **Required Income Information Not Provided/Obtained:**

-   **Residents:** Residents may not be aware of what amounts should be
    included in income. For example, a family member may not report
    overtime pay even though this should be included in income.

-   **PHAs:** PHAs may be relying on incomplete information when
    determining income. More substantial information can be obtained
    through resident interviews.

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-   **Changes in Income Not Reported/ Noted:**

-   **Residents:** Income can change throughout the year after
    certification. For example, a child moving away from the family
    could reduce TANF benefits. If this happens, a resident family may
    seek income reexamination. If residents do not obtain income
    reexamination, they might pay more rent than is necessary.

-   **PHAs:** PHAs should inform residents which changes should be
    reported as well as how and when they could be reported.

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-   **Changes in the Family Membership Not Reported/Requested:**

-   **Residents:** Some families fail to note changes in the number of
    family members. An increase in dependents can trigger deductions and
    exclusions.

-   **PHAs:** PHAs should inform residents about these deductions and
    exclusions and request residents report changes in family
    membership.

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-   **Not Reporting\\Noting Medical Deductions:**

-   Some families miss out on exclusions or deductions because they do
    not track, document and or report medical expenses.

-   PHAs sometimes do not request or account for these costs as
    deductions.

**APPENDIX 1**

**CHECKLIST FOR CERTIFICATION OR REEXAMINATION**

**Identification:**

\_\_\_\_Social Security numbers

\_\_\_\_Documents verifying Social Security number

> \_\_\_Driver's license
>
> \_\_\_Identification card issued by federal state or local agency
>
> \_\_\_Identification card issued by employer or trade union
>
> \_\_\_Identification card issued by medical insurance company
>
> \_\_\_Earnings statement or payroll stubs
>
> \_\_\_Bank statements
>
> \_\_\_IRS Form 1099
>
> \_\_\_Benefit Award letters from government agencies
>
> \_\_\_Unemployment benefit letters
>
> \_\_\_Retirement benefit letter
>
> \_\_\_Life insurance policy

\_\_\_Court records such as real estate, tax notices, marriage and
divorce, judgment or bankruptcy records

\_\_\_Other documents that the PHA determines are evidence of a valid
Social Security number

# Proof that individuals are members of family

\_\_\_\_Birth certificates

\_\_\_\_Marriage certificates

\_\_\_\_If pregnant, laboratory reports or certified letter from doctor
confirming pregnancy

\_\_\_\_Copies of award of custody

\_\_\_\_Divorce, Support Payment, TANF documents

\_\_\_\_Bank statements showing joint accounts

\_\_\_\_Current leases showing household names

\_\_\_\_Federal tax returns showing dependents

# APPENDIX 2

# SOURCES OF INFORMATION ON INCOME DETERMINATION

# LEGISLATION

-   QUALITY HOUSING AND WORK RESPONSIBILITY ACT OF 1998, Public Law
    105-276, 112 Stat. 2518 which amended the United States Housing Act
    of 1937, 42 United States Code (U.S.C.) 1437, *et seq.*

-   PRIVACY ACT, 5 U.S.C. 552a

# REGULATIONS

-   GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS, 24 CFR Part 5.

-   ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING, 24 CFR Part 960.

-   CHANGES TO ADMISSION AND OCCUPANCY REQUIREMENTS IN THE PUBLIC
    HOUSING AND SECTION 8 HOUSING ASSISTANCE PROGRAMS; Final Rule, 65
    Federal Register (FR) 16692, March 29, 2000; 24 Code of Federal
    Regulations (CFR) 880 et. al.

# 

# ANNUAL INCOME 65 FR 16717, 24 CFR 5.609

-   ANNUAL INCOME, EXAMPLES OF 24 CFR 5.609(c)

-   ANNUALIZATION OF INCOME 24 CFR 5.609(d)

-   CERTIFICATION AND REEXAMINATION 24 CFR 960.257, 24 CFR 982.516

# DEDUCTIONS 24 CFR 5.611

#### DETERMINING RENT 24 CFR 5.628

#### EXCLUSIONS 24 CFR 5.609(d)

-   FLAT RENT 65 FR 16727; 24 CFR 960.253(b)

-   INCOME BASED RENT 65 FR 16726-16727; 24 CFR

> 960.253(c)(2) and (3)

-   PERMISSIVE DEDUCTIONS 65 FR 16717, 24 CFR 5.611(b)

-   RESIDENT RENT, SEC. 8 & PHA 65 FR 16719, 24 CFR 5.634

# NOTICES

## EXCLUSION FOR CENSUS TAKERS Notice PIH 2000-1 (HA), January 3, 2000.

-   FEDERALLY MANDATED EXCLUSIONS Notice 58 FR 41287, August 3, 1993

> Notice 66 FR 4669, April 20, 2001

-   GUIDANCE ON ESTABLISHING

> COOPERATION AGREEMENTS FOR
>
> ECONOMIC SELF-SUFFICIENCY
>
> BETWEEN PUBLIC HOUSING
>
> AGENCIES (PHAS) AND TEMPORARY
>
> ASSISTANCE TO NEEDY FAMILIES
>
> (TANF) AGENCIES Notice PIH 2000-11 (HA), May 9, 2000

4.  **STUDIES**

#### QUALITY CONTROL FOR RENTAL ASSISTANCE SUBSIDIES DETERMINATIONS, Interim Report, HUD, Office of Policy Development and Research, March 2001

#### ASSISTED HOUSING QUALITY CONTROL, HUD, Office of Policy Development and Research, April 1996

**APPENDIX 3**

**RESOURCES FOR RESIDENTS ON INCOME, RENT, AND HUD POLICIES**

**Public and Indian Housing Information and Resource Center (IRC)**

**1-800-955-3323**

**HUD Offices of Public Housing within Field Offices**

**Internet Sites:** Note that many public libraries provide free
Internet access

-   HUD's Client Information and Policy System (HUDCLIPS) at
    *http://www.hudclips.org/*

-   Access to HUD laws, regulations, notices, and handbooks

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-   Multi-family Tenant Characteristic System (MTCS) Web Site at
    *http://www.hud.gov/pih/systems/mtcs/pihmtcs.html*

-   Information on families in public housing and Section 8

-   Resident Characteristics report available to the public

**APPENDIX 4**

**HUD'S INCOME AND RENT DETERMINATION POLICIES**

**PUBLIC HOUSING AND SECTION 8 TENANT-BASED ASSISTANCE PROGRAMS**

**EXCERPTS FROM APPLICABLE REGULATIONS**

This appendix includes excerpts of HUD regulations that govern the
determination of income for the public housing and Section 8
tenant-based assistance programs*. These excerpts were prepared for
educational purposes only. The U.S. Government Printing Office will
prepare a codified version of the regulations. The official rule will
appear in the Code of Federal Regulations.*

**[Annual income]{.underline}. 24 CFR s. 5.609 as amended by "Changes to
Admission and Occupancy Requirements in the Public Housing and Section 8
Housing Assistance Programs; Final Rule, 65 FR 16692, March 29, 2000.**

\(a\) Annual income means all amounts, monetary or not, which:

\(1\) Go to, or on behalf of, the family head or spouse (even if
temporarily absent) or to any other family member; or

\(2\) Are anticipated to be received from a source outside the family
during the 12-month period following admission or annual reexamination
effective date; and

\(3\) Which are not specifically excluded in paragraph (c) of this
section.

\(4\) Annual income also means amounts derived (during the 12-month
period) from assets to which any member of the family has access.

\(b\) Annual income includes, but is not limited to:

\(1\) [The full amount, before any payroll deductions, of wages and
salaries]{.underline}, overtime pay, commissions, fees, tips and
bonuses, and other compensation for personal services;

\(2\) [The net income from the operation of a business or
profession]{.underline}. Expenditures for business expansion or
amortization of capital indebtedness shall not be used as deductions in
determining net income. An allowance for depreciation of assets used in
a business or profession may be deducted, based on straight line
depreciation, as provided in Internal Revenue Service regulations. Any
withdrawal of cash or assets from the operation of a business or
profession will be included in income, except to the extent the
withdrawal is reimbursement of cash or assets invested in the operation

by the family;

\(3\) [Interest, dividends, and other net income]{.underline} of any
kind from real or personal property. Expenditures for amortization of
capital indebtedness shall not be used as deductions in determining net
income. An allowance for depreciation is permitted only as authorized in
paragraph (b)(2) of this section. 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 net family 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;

\(4\) [The full amount of periodic amounts received from Social
Security, annuities, insurance policies, retirement funds]{.underline},
pensions, disability or death benefits, and other similar types of
periodic receipts, including a lump-sum amount or prospective monthly
amounts for the delayed start of a periodic amount (except as provided
in paragraph (c)(14) of this section);

\(5\) [Payments in lieu of earnings]{.underline}, such as unemployment
and disability compensation, worker\'s compensation and severance pay
(except as provided in paragraph (c)(3) of this section);

\(6\) [Welfare assistance]{.underline}. If the welfare assistance
payment includes an amount specifically designated for shelter and
utilities that is subject to adjustment by the welfare assistance agency
in accordance with the actual cost of shelter and utilities, the amount
of welfare assistance income to be included as income shall consist of:

\(i\) The amount of the allowance or grant exclusive of the amount
specifically designated for shelter or utilities; plus

\(ii\) The maximum amount that the welfare assistance agency could in
fact allow the family for shelter and utilities. If the family\'s
welfare assistance is ratably reduced from the standard of need by
applying a

percentage, the amount calculated under this paragraph (b)(6)(ii) shall
be the amount resulting from one application of the percentage;

\(7\) [Periodic and determinable allowances]{.underline}, such as
alimony and child support payments, and regular contributions or gifts
received from organizations or from persons not residing in the
dwelling;

\(8\) [All regular pay, special pay and allowances of a member of the
Armed Forces]{.underline} (except as provided in paragraph (c)(7) of
this section).

\(c\) Annual income does not include the following:

\(1\) [Income from employment of children]{.underline} (including foster
children) under the age of 18 years;

\(2\) [Payments received for the care of foster children or foster
adults]{.underline} (usually persons with disabilities, unrelated to the
tenant family, who are unable to live alone);

\(3\) [Lump-sum additions to family assets]{.underline}, such as
inheritances, insurance payments (including payments under health and
accident insurance and worker\'s compensation), capital gains and
settlement for personal or property losses (except as provided in
paragraph (b)(5) of this section);

\(4\) [Amounts received by the family that are specifically for, or in
reimbursement of, the cost of medical expenses for any family
member]{.underline};

\(5\) [Income of a live-in aide]{.underline}, as defined in Sec. 5.403;

\(6\) [The full amount of student financial assistance]{.underline} paid
directly to the student or to the educational institution;

\(7\) [The special pay to a family member serving in the Armed Forces
who is exposed to hostile fire]{.underline};

\(8\)

\(i\) [Amounts received under training programs funded by
HUD]{.underline};

\(ii\) [Amounts received by a person with a disability that are
disregarded for a limited time for purposes of Supplemental Security
Income eligibility]{.underline} and benefits because they are set aside
for use under a Plan to Attain Self-Sufficiency (PASS);

\(iii\) [Amounts received by a participant in other publicly assisted
programs which are specifically for or in reimbursement of out-of-pocket
expenses]{.underline} incurred (special equipment, clothing,
transportation, child care, etc.) and which are made solely to allow
participation in a specific program;

\(iv\) [Amounts received under a resident service stipend]{.underline}.
A resident service stipend is a modest amount (not to exceed \$200 per
month) received by a resident for performing a service for the PHA or
owner, on a part-time basis, that enhances the quality of life in the

development. Such services may include, but are not limited to, fire
patrol, hall monitoring, lawn maintenance, resident initiatives
coordination, and serving as a member of the PHA\'s governing board. No
resident may receive more than one such stipend during the same period
of time;

\(v\) [Incremental earnings and benefits resulting to any family member
from participation in qualifying State or local employment training
programs]{.underline} (including training programs not affiliated with a
local government) and training of a family member as resident management
staff. Amounts excluded by this provision must be received under
employment training programs with clearly defined goals and objectives,
and are excluded only for the period during which the family member
participates in the employment training program;

\(9\) [Temporary, nonrecurring or sporadic income]{.underline}
(including gifts);

\(10\) [Reparation payments]{.underline} paid by a foreign government
pursuant to claims filed under the laws of that government by persons
who were persecuted during the Nazi era;

\(11\) [Earnings in excess of \$480 for each full-time student 18 years
old or older]{.underline} (excluding the head of household and spouse);

\(12\) [Adoption assistance payments in excess of \$480 per adopted
child]{.underline};

\(13\) \[reserved\].

\(14\) [Deferred periodic amounts from supplemental security income and
social security]{.underline} benefits that are received in a lump sum
amount or in prospective monthly amounts.

\(15\) [Amounts received by the family in the form of refunds or rebates
under State or local law for property taxes paid on the dwelling
unit]{.underline};

\(16\) [Amounts paid by a State agency to a family with a member who has
a developmental disability and is living at home]{.underline} to offset
the cost of services and equipment needed to keep the developmentally
disabled family member at home; or

\(17\) [Amounts specifically excluded by any other Federal
statute]{.underline} from consideration as income for purposes of
determining eligibility or benefits under a category of assistance
programs that includes assistance under any program to which the
exclusions set forth in 24 CFR 5.609(c) apply. A notice will be
published in the Federal Register and distributed to PHAs and housing
owners identifying the benefits that qualify for this exclusion. Updates
will be published and distributed when necessary.

\(d\) Annualization of income. If it is not feasible to anticipate a
level of income over a 12-month period (e.g., seasonal or cyclic
income), or the PHA believes that past income is the best available
indicator of expected future income, the PHA may annualize the income
anticipated for a shorter period, subject to a redetermination at the
end of the shorter period.

**[Adjusted income]{.underline}. 24 CFR s. 5.611 as amended by "Changes
to Admission and Occupancy Requirements in the Public Housing and
Section 8 Housing Assistance Programs; Final Rule, 65 FR 16692, March
29, 2000.**

Adjusted income means annual income (as determined by the responsible
entity) of the members of the family residing or intending to reside in
the dwelling unit, after making the following deductions:

\(a\) [Mandatory deductions]{.underline}. In determining adjusted
income, the responsible entity must deduct the following amounts from
annual income:

\(1\) \$480 for each dependent;

\(2\) \$400 for any elderly family or disabled family;

\(3\) The sum of the following, to the extent the sum exceeds three
percent of annual income:

\(i\) Unreimbursed medical expenses of any elderly family or disabled
family; and

\(ii\) Unreimbursed reasonable attendant care and auxiliary apparatus
expenses for each member of the family who is a person with
disabilities, to the extent necessary to enable any member of the family
(including the member who is a person with disabilities) to be employed,
but this allowance may not exceed the earned income received by family
members who are 18 years of age or older who are able to work because of
such attendant care or auxiliary apparatus; and

\(4\) Any reasonable child care expenses necessary to enable a member of
the family to be employed or to further his or her education.

\(b\) [Permissive deductions -- for public housing only]{.underline}.
For public housing only, a PHA may adopt additional deductions from
annual income. The PHA must establish a written policy for such
deductions.

**[Choice of rent]{.underline}. 24 CFR 960.253 as amended by "Changes to
Admission and Occupancy Requirements in the Public Housing and Section 8
Housing Assistance Programs; Final Rule, 65 FR 16692, March 29, 2000.**

(a) Rent options.

\(1\) Annual choice by family. Once a year, the PHA must give each
family the opportunity to choose between the two methods for determining
the amount of tenant rent payable monthly by the family. The family may
choose to pay as tenant rent either a flat rent as determined in
accordance with paragraph (b) of this section, or an income-based rent
as determined in accordance with paragraph (c) of this section. Except
for financial hardship cases as provided in paragraph (d) of this
section, the family may not be offered this choice more than once a
year.

\(2\) Relation to minimum rent. Regardless of whether the family chooses
to pay a flat rent or income-based rent, the family must pay at least
the minimum rent as determined in accordance with Sec. 5.630 of this
title.

(b) Flat rent.

\(1\) The flat rent is based on the market rent charged for comparable
units in the private unassisted rental market. It is equal to the
estimated rent for which the PHA could promptly lease the public housing
unit after preparation for occupancy.

\(2\) The PHA must use a reasonable method to determine the flat rent
for a unit. To determine the flat rent, the PHA must consider:

\(i\) The location, quality, size, unit type and age of the unit; and

\(ii\) Any amenities, housing services, maintenance and utilities
provided by the PHA.

\(3\) The flat rent is designed to encourage self-sufficiency and to
avoid creating disincentives for continued residency by families who are
attempting to become economically self-sufficient.

\(4\) If the family chooses to pay a flat rent, the PHA does not pay any
utility reimbursement.

\(5\) The PHA must maintain records that document the method used to
determine flat rents, and also show how flat rents are determined by the
PHA in accordance with this method, and document flat rents offered to
families under this method.

(c) Income-based rent.

\(1\) An income-based rent is a tenant rent that is based on the
family\'s income and the PHA\'s rent policies for determination of such
rents.

\(2\) The PHA rent policies may specify that the PHA will use percentage
of family income or some other reasonable system to determine
income-based rents. The PHA rent policies may provide for depositing a
portion of tenant rent in an escrow or savings account, for imposing a
ceiling on tenant rents, for adoption of permissive income deductions
(see Sec. 5.611(b) of this title), or for another reasonable system to
determining the amount of income-based tenant rent.

\(3\) The income-based tenant rent must not exceed the total tenant
payment (Sec. 5.628 of this title) for the family minus any applicable
utility allowance for tenant-paid utilities. If the utility allowance
exceeds the total tenant payment, the PHA shall pay such excess amount
(the utility reimbursement) either to the family or directly to the
utility supplier to pay the utility bill on behalf of the family. If the
PHA elects to pay the utility supplier, the PHA must notify the family
of the amount of utility reimbursement paid to the utility supplier.

\(d\) Ceiling rent. Instead of using flat rents, a PHA may retain
ceiling rents that were authorized and established before October 1,
1999, for a period of three years from October 1, 1999. After this three
year period, the PHA must adjust such ceiling rents to the level
required for flat rents under this section; however, ceiling rents are
subject to paragraph (a) of this section, the annual reexamination
requirements, and the limitation that the tenant rent plus any utility
allowance may not exceed the total tenant payment.

\(e\) Information for families. For the family to make an informed
choice about its rent options, the PHA must provide sufficient
information for an informed choice. Such information must include at
least the following written information:

(1) The PHA\'s policies on switching type of rent in circumstances of
    financial hardship, and

\(2\) The dollar amounts of tenant rent for the family under each
option. If the family chose a flat rent for the previous year, the PHA
is required to provide the amount of income-based rent for the
subsequent year only the year the PHA conducts an income reexamination
or if the family specifically requests it and submits updated income
information. For a family that chooses the flat rent option, the PHA
must conduct a reexamination of family income at least once every three
years.

\(f\) Switch from flat rent to income-based rent because of hardship.

\(1\) A family that is paying a flat rent may at any time request a
switch to payment of income-based rent (before the next annual option to
select the type of rent) if the family is unable to pay flat rent
because of financial hardship. The PHA must adopt written policies for
determining when payment of flat rent is a financial hardship for the
family.

\(2\) If the PHA determines that the family is unable to pay the flat
rent because of financial hardship, the PHA must immediately allow the
requested switch to income-based rent. The PHA shall make the
determination within a reasonable time after the family request.

\(3\) The PHA policies for determining when payment of flat rent is a
financial hardship must provide that financial hardship include the
following situations:

\(i\) The 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;

\(ii\) The family has experienced an increase in expenses, because of
changed circumstances, for medical costs, child care, transportation,
education, or similar items; and

\(iii\) Such other situations determined by the PHA to be appropriate.

**[Self-sufficiency incentives -- Disallowance of increase in annual
income]{.underline}. 24 CFR 960.255 as amended by "Changes to Admission
and Occupancy Requirements in the Public Housing and Section 8 Housing
Assistance Programs; Final Rule, 65 FR 16692, March 29, 2000.**

\(a\) Definitions. The following definitions apply for purposes of this
section.

Disallowance. Exclusion from annual income.

Previously unemployed includes a person who has earned, in the twelve
months previous to employment, no more than would be received for 10
hours of work per week for 50 weeks at the established minimum wage.

Qualified family. A family residing in public housing:

\(i\) Whose annual income increases as a result of employment of a
family member who was unemployed for one or more years previous to
employment;

\(ii\) Whose annual income increases as a result of increased earnings
by a family member during participation in any economic self-sufficiency
or other job training program; or

\(iii\) Whose annual income increases, as a result of new employment or
increased earnings of a family member, during or within six months after
receiving assistance, benefits or services under any state program for
temporary assistance for needy families funded under Part A of Title IV
of the Social Security Act, as determined by the PHA in consultation
with the local agencies administering temporary assistance for needy
families (TANF) and Welfare-to-Work (WTW) programs. The TANF program is
not limited to monthly income maintenance, but also includes such
benefits and services as one-time payments, wage subsidies and
transportation assistance\--provided that the total amount over a
six-month period is at least \$500.

\(b\) Disallowance of increase in annual income.

\(1\) Initial twelve month exclusion. During the cumulative twelve month
period beginning on the date a member of a qualified family is first
employed or the family first experiences an increase in annual income
attributable to employment, the PHA must exclude from annual income (as
defined in Sec. 5.609 of this title) of a qualified family any increase
in income of the family member as a result of employment over prior
income of that family member.

\(2\) Second twelve month exclusion and phase-in. During the second
cumulative twelve month period after the date a member of a qualified
family is first employed or the family first experiences an increase in
annual income attributable to employment, the PHA must exclude from
annual income of a qualified family fifty percent of any increase in
income of such family member as a result of employment over income of
that family member prior to the beginning of such employment.

(2) Maximum four year disallowance. The disallowance of increased income
    of an individual family member as provided in paragraph (b)(1) or
    (b)(2) of this section is limited to a lifetime 48 month period. It
    only applies for a maximum of twelve months for disallowance under
    paragraph (b)(1) and a maximum of twelve months for disallowance
    under paragraph (b)(2), during the 48 month period starting from the
    initial exclusion under paragraph (b)(1) of this section.

\(c\) Inapplicability to admission. The disallowance of increases in
income as a result of employment under this section does not apply for
purposes of admission to the program (including the determination of
income eligibility and income targeting).

\(d\) Individual Savings Accounts. As an alternative to the disallowance
of increases in income as a result of employment described in paragraph
(b) of this section, a PHA may choose to provide for individual savings
accounts for public housing residents who pay an income-based rent, in
accordance with a written policy, which must include the following
provisions:

\(1\) The PHA must advise the family that the savings account option is
available;

\(2\) At the option of the family, the PHA must deposit in the savings
account the total amount that would have been included in tenant rent
payable to the PHA as a result of increased income that is disallowed in
accordance with paragraph (b) of this section;

\(3\) Amounts deposited in a savings account may be withdrawn only for
the purpose of:

\(i\) Purchasing a home;

\(ii\) Paying education costs of family members;

\(iii\) Moving out of public or assisted housing; or

\(iv\) Paying any other expense authorized by the PHA for the purpose of
promoting the economic self-

sufficiency of residents of public housing;

\(4\) The PHA must maintain the account in an interest bearing
investment and must credit the family with the net interest income, and
the PHA may not charge a fee for maintaining the account;

\(5\) At least annually the PHA must provide the family with a report on
the status of the account; and

\(6\) If the family moves out of public housing, the PHA shall pay the
tenant any balance in the account, minus any amounts owed to the PHA.

**[Family income and composition: Regular and interim
reexaminations]{.underline}. 24 CFR 960.257 as amended by "Changes to
Admission and Occupancy Requirements in the Public Housing and Section 8
Housing Assistance Programs; Final Rule, 65 FR 16692, March 29, 2000.**

(a) When PHA is required to conduct reexamination.

\(1\) For families who pay an income-based rent, the PHA must conduct a
reexamination of family income and composition at least annually and
must make appropriate adjustments in the rent after consultation with
the family and upon verification of the information.

\(2\) For families who choose flat rents, the PHA must conduct a
reexamination of family composition at least annually, and must conduct
a reexamination of family income at least once every three years.

\(3\) For all families who include nonexempt individuals, as defined in
Sec. 960.601, the PHA must determine compliance once each twelve months
with community service and self-sufficiency requirements in subpart F of
this part.

\(4\) The PHA may use the results of these reexaminations to require the
family to move to an appropriate size unit.

\(b\) Interim reexaminations. A family may request an interim
reexamination of family income or composition because of any changes
since the last determination. The PHA must make the interim
reexamination within a reasonable time after the family request. The PHA
must adopt policies prescribing when and under what conditions the
family must report a change in family income or composition.

\(c\) PHA reexamination policies. The PHA must adopt admission and
occupancy policies concerning conduct of annual and interim
reexaminations in accordance with this section, and shall conduct
reexaminations in accordance with such policies. The PHA reexamination
policies must be in accordance with the PHA plan.

**[Family information and verification]{.underline}. 24 CFR 960.259 as
amended by "Changes to Admission and Occupancy Requirements in the
Public Housing and Section 8 Housing Assistance Programs; Final Rule, 65
FR 16692, March 29, 2000.**

(a) Family obligation to supply information.

\(1\) The family must supply any information that the PHA or HUD
determines is necessary in administration of the public housing program,
including submission of required evidence of citizenship or eligible
immigration status (as provided by part 5, subpart E of this title).
\`\`Information\'\' includes any requested certification, release or
other documentation.

\(2\) The family must supply any information requested by the PHA or HUD
for use in a regularly scheduled reexamination or an interim
reexamination of family income and composition in accordance with HUD
requirements.

\(3\) For requirements concerning the following, see part 5, subpart B
of this title:

\(i\) Family verification and disclosure of social security numbers;

\(ii\) Family execution and submission of consent forms for obtaining
wage and claim information from State Wage Information Collection
Agencies (SWICAs).

\(4\) Any information supplied by the family must be true and complete.

(b) Family release and consent.

\(1\) As a condition of admission to or continued assistance under the
program, the PHA shall require the family head, and such other family
members as the PHA designates, to execute a consent form (including any
release and consent as required under Sec. 5.230 of this title)
authorizing any depository or private source of income, or any Federal,
State or local agency, to furnish or release to the PHA or HUD such
information as the PHA or HUD determines to be necessary.

\(2\) The use or disclosure of information obtained from a family or
from another source pursuant to this release and consent shall be
limited to purposes directly connected with administration of the
program.

\(c\) PHA responsibility for reexamination and verification. (1) The PHA
must obtain and document in the family file third party verification of
the following factors, or must document in the file why third party
verification was not available:

\(i\) Reported family annual income;

\(ii\) The value of assets;

\(iii\) Expenses related to deductions from annual income; and

\(iv\) Other factors that affect the determination of adjusted income or
income-based rent.

**APPENDIX 5**

**AUTHORIZATION FOR THE RELEASE OF INFORMATION/**

**PRIVACY ACT NOTICE**

**HUD-9886**

**Improving Income Integrity Guidance Booklet**

**Prepared by**

**Johnson, Bassin & Shaw, Inc.**

**for the**

**U.S. Department of Housing and Urban Development**

**April 2001**