For more than a decade, Congress has considered proposals to change the income and rent calculation policies governing the primary federal rental assistance programs. The current policies base families' eligibility for assistance on their incomes and their contributions toward their rent on a share of their adjusted incomes. The income-based eligibility system is meant to ensure that limited federal subsidies go to those families that most need them. The income-based rent structure is intended to ensure that low-income families pay rent that is "affordable" to them, with affordability currently defined as 30% of family income. The process of calculating families' incomes and, subsequently, their rent contributions, involves a system of inclusions, exclusions, imputations, and deductions. While the current, rather complicated system is designed to ensure that the most accurate estimate of family income is calculated and that families' financial circumstances are fully captured, it can also lead to confusion among recipients as well as difficulties for local program administrators. This report provides answers to some of the most common questions about the income and rent policies in federal rental assistance programs, including questions about where these policies came from and how they compare to other federal assistance programs that serve the same or similar purposes or populations. It is intended to help answer commonly asked questions, as well as provide information to policymakers seeking to understand and evaluate proposed changes to the current system. This report discusses the five main Department of Housing and Urban Development (HUD) programs that subsidize rents for low-income families. Together, these programs serve more than 4 million families and make up well over three-quarters of HUD's budget. These rental assistance programs are Public Housing —housing developments owned and operated by local Public Housing Authorities (PHAs) for which the federal government provides capital and operating assistance; Section 8 Housing Choice Vouchers (HCVs) —rent subsidies that tenants can use to subsidize their rents in the private market housing of their choice; Section 8 project-based rental assistance —subsidies provided directly to private owners of multifamily housing to subsidize the rents of specific units; Section 202 Supportive Housing for the Elderly —multifamily housing developments owned by private nonprofit organizations for which the federal government provides capital grants and project-based rental assistance; and Section 811 Supportive Housing for Persons with Disabilities —similar to Section 202, but serves persons with disabilities. Three of the five programs—Section 8 project-based rental assistance, Section 202, and Section 811—provide project-based rental assistance to private owners of multifamily housing properties. Throughout this report, we refer to these three programs as the "project-based programs." Project-based rental assistance subsidizes tenant rents in specific rental units; often, all units in a building receive rental assistance. Project-based assistance differs from both public housing and Section 8 HCVs; public housing developments receive federal operating subsidies rather than direct rental assistance, while HCVs are tenant-based, meaning that tenants may use the vouchers to find housing of their choice in the private market from landlords willing to accept them. Each of the five programs discussed in this report is governed by the same statute and regulations regarding tenant eligibility and rent (although there may be some variation in HUD guidance and handbooks). The statute that establishes eligibility and rent determination is 42 U.S.C. Section 1437a, and the regulations are at 24 C.F.R. Part 5, Subpart F (§5.601 et. seq.). This report does not directly address eligibility for a number of other assisted housing programs. For example, there are several HUD programs, such as the Homeless Assistance Grants, the Housing Opportunities for Persons with AIDS program, and the HOME Investment Partnerships program, that provide grant funding that can be used to provide rental assistance, but rules and regulations may be different. And non-HUD programs, such as the Department of Agriculture Rural Housing Service rental assistance programs and the Low Income Housing Tax Credit, also have different policies for eligibility and assistance. For more information about other programs and a brief summary of how their eligibility rules compare to the rules of the five programs addressed in this report, see the section entitled " Comparisons ." Finally, this report does not address eligibility for two HUD legacy rental assistance programs from the 1960s and 1970s where units have largely been converted to Section 8 project-based rental assistance. These are the Rental Assistance Program (RAP) and the Rent Supplement program. Eligibility for HUD's five main rent assistance programs is based on family income, their citizenship or immigration status, and, in some cases, other characteristics. It is important to note that even though a family may be eligible for assistance, they are not guaranteed to receive it. Housing assistance programs are not entitlements, thus, due to funding limitations, they serve only roughly one in four eligible households. Families wishing to receive assistance are generally placed on waiting lists. The statute establishing eligibility for HUD rent assistance programs uses the term "family" to describe the entity that is eligible for assistance. In regulation, family is defined broadly to include, but is not limited to (regardless of actual or perceived sexual orientation, gender identity, or marital status) the following: A single person; A group of persons residing together, and such group includes, but is not limited to elderly families—those where the head of household (including cohead), spouse, or sole member is age 62 or older; near-elderly families—those where the head of household (including cohead), spouse, or sole member is at least age 50, but younger than 62; disabled families—those where the head of household (including cohead), spouse, or sole member has a disability as defined by statute; families in which two or more elderly or near-elderly individuals or persons with disabilities live together; and families in which an elderly person, near-elderly person, or person with a disability lives together with one or more people who are "determined under the public housing agency plan to be essential to their care or well-being." The term "household" is also used occasionally in the statute (for example, the statute refers to "heads of household" or "household income"), and is defined in regulation to include a family and any necessary live-in aid. However, since the term family is used most often in describing eligibility, we use that term instead of "household" throughout this report. Unlike some other federal assistance programs, the five housing programs discussed in this report do not use the federal poverty level as the basis for eligibility. Instead, income eligibility for housing assistance is generally based on a percentage of local area median income (AMI). Each year, HUD reports area median incomes for metropolitan statistical areas and nonmetropolitan counties. HUD then establishes three income limits based on a percentage of these area median incomes. Whether a family qualifies for assistance varies by program. The three income limits are Low-Income —families who have incomes at or below 80% of area median income; Very Low-Income —families who have incomes at or below 50% of area median income; or Extremely Low-Income —families who have incomes at or below the greater of 30% of area median income or the federal poverty level. According to the authorizing statute, families are initially income eligible for the HUD rental assistance programs if they are low-income. For the Section 8 HCV program, families must also be very low-income, have previously received assistance, or meet other criteria established by the Secretary of HUD. Section 202 and Section 811 properties funded after 1990 are available only to elderly residents and persons with disabilities who are very low-income. In the case of the project-based programs, owners may, with HUD's permission, admit some families with incomes above the low-income limit if they are having difficulty leasing all of their units. In addition to setting basic income eligibility standards, the authorizing statutes for several housing assistance programs require that some share of the assistance be set aside for, or targeted to, families with the lowest incomes. In the Section 8 HCV program, PHAs must provide 75% of all vouchers issued each year to families who are extremely low-income. PHAs and owners must provide 40% of all public housing and Section 8 project-based rent-assisted units made available each year to families who are extremely low-income. For Section 8 project-based rent-assisted properties, depending on the date the project became available, most assistance has to be provided to families that are very low-income; only a limited percentage of units may be leased to families with incomes above the very low-income standard. Circumstances may occur where families living in assisted housing who were once eligible for assistance see their incomes increase to the point where they exceed the income eligibility standards. At that point, families are considered "over-income." The statute governing HUD's rental assistance programs does not directly address the treatment of over-income families. Instead, HUD has adopted regulations that govern what occurs when family incomes increase. In the case of public housing, the PHAs that administer the program are not required to evict over-income families, but they are permitted to do so. In the case of the Section 8 HCV program, families no longer qualify for assistance when their incomes increase to the point that they no longer mathematically qualify for a subsidy (when 30% of the family income is equal to the rent). At that point, the family can continue in the program receiving no subsidy for up to six months. In the case of project-based rental assistance, families are considered to have an "increased ability to pay" when, similar to the HCV program, their incomes increase to the point that they no longer qualify for a subsidy. Owners must terminate assistance to those families with an increased ability to pay, although a family's assistance may be reinstated if their income declines again.