1
Chapter 5.Calculation Problem Areas
2
Chapter 5. Section 1. Introduction
Learning ObjectiveUnderstand and address those difficult
aspects of rent calculation where errors are most likely to occur
3
Introduction
• In this session, we will focus on the error-prone components of income and rent determination– Identified in HUD’s Policy Development and
Research report, “Quality Control for Rental Assistance Subsidies Determinations”
– Emphasized in RIM reviews
4
Introduction
• 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
5
Introduction
• Review of problem areas:– Employment income– Training program income – The earned income disallowance (EID)– Assets and asset income– Public housing rent calculation
6
References
• 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)
7
Chapter 5. Section 2.Employment Income
8
Employment Income
• PD&R 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
9
Employment 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
10
Employment 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
11
Verification 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
12
Verification 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
13
Unreported 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
14
Sporadic Income
• Temporary, nonrecurring, or sporadic income (including gifts) is not included in annual income
• Sporadic income is income that is neither reliable nor periodic
15
Sporadic 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.
16
Answer: 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?– Don’t 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 Daniel’s file to support its decision?– Note in file explaining situation and its decision– UIV documentation if PHA has access
17
Seasonal 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
18
Seasonal 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”
19
Seasonal 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 Domino’s Pizza, earning $400 per month
20
Calculation: 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 Domino’s ($400/month)
times 12 months– $4800 per year
21
Calculation: Method 2
• Calculate anticipated income from all known sources for the entire year– ABC Construction:
$1000 x 6 months = $6000– Domino’s Pizza
$ 400 x 6 months = +$2400– TOTAL: $8400
• NOTE: There is no interim reexam when Ms. Walsh changes jobs
22
Incorrect 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
23
Seasonal 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
24
Chapter 5. Section 3.Training Program Income
See Appendix for Training Program Income Notice (A-5) and CFR (B-15)
25
Training Program Income
• HUD-Funded Training ProgramExclude all amounts received under the
training program
26
HUD-Funded TrainingThe 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
27
Other 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
28
Training 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.
29
Training Program Income
• Training may include– Occupational classroom training – Subsidized on-the-job training – Basic education
30
Training 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.
31
Training Program Income
• 5.609(c)(8)(v)– Exclude incremental earnings and benefits
only while the family member participates in the employment training program
32
Example 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
33
Training 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
34
Chapter 5. Section 4.Earned Income Disallowance
See Appendix A for Website Address
For FAQs on EID
35
Earned Income Disallowance
• Effective 10/01/99
• Final Rule– Effective date 4/28/00
• Regulations: 24 CFR 960.255
36
EID
• 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
37
EID Qualifications
• Family must experience an increase in annual income as a result of one of the following 3 events . . .
38
1. 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…...
Qualifications
39
2. Increased earnings by a family member:– Whose increased earnings occurred
during* member’s participation in an:• economic self-sufficiency program• job-training program
* The increase in earnings must occur while the individual is enrolled in the program.
Earned Income Disallowance
40
HUD 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.
41
HUD 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 workOR……...
42
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
EID Qualifications
43
• 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 (don’t have to be consecutive months)
EID Initial 12-Month Exclusion
44
Determining 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
45
Example #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?
46
Example 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?
How much did we exclude?
Why didn’t we exclude the $12,400?
No
$8400
Only the amount which exceeds the baseline is excluded
47
Example #2
• John Smith had no income at the time he became employed at $12,400 per year.
• How much is the incremental increase?
48
Example 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?
How much did we exclude?
Why?
Yes
$12,400
The baseline is zero
49
• 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)
EID Second 12-Month Exclusion and Phase-In
50
• 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
EID Maximum 4 Year Disallowance
51
EID 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
52
• 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 family’s file?
EID Issues
53
2. How will you track the number of months income has been excluded and when the exclusion must end?
EID Issues
54
EID 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
55
In an Ideal World
1212 2424 3636 4848
100% of increase
100% of increase
50% of increase
50% of increase
Count all incomeCount all income
1212 2424
56
EID 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.
57
Reality may be….
9 months9 months 6 months6 months 9 months9 months
100%100%
100%100% 50%50%50%50%
It’s over…It’s over…
1212 2424 3636 4848
58
EID 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.”
59
Or…….Reality may be
9 months9 months 3 months3 months
100%100%100%100% 50%50%
It’s over…It’s over…
2 months2 months
1212 2424 3636 4848
60
EID Issues
• Complexity of the regulation contributes to rent determination errors– Per HUD’s PD&R report
• Difficulty in tracking exclusion periods– PHA needs standardized system
61
EID Issues
• Calculation of “incremental increase”– May necessitate conducting interim reexams
throughout phase-in period• Regardless of PHA’s 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/faq.cfm– EID: www.hud.gov/offices/pih/phr/about/ao_faq.cfm
62
Earned 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
63
Answers: Baseline Income
• Katie’s prequalifying (baseline) income is:
• $5,000
64
Part I, Step 1
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
Step 1: Calculate EID family member’s
exclusion amount.
$ 9,500$ 5,000$14,500$ 5,000$ 9,500
65
Part I, Step 2
G. EID family member’s earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)
$ 9,500
$ 9,500
$ 0
Step 2: Determine EID family member’s wages after exclusion.
66
Part 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
67
Part 2, Step 1
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
Step 1: Calculate EID family member’s
exclusion amount.
$ 9,500$ 2,000$11,500$ 5,000$ 6,500
68
Part 2, Step 2
G. EID family member’s earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)
$ 9,500
$ 6,500
$ 3,000
Step 2: Determine EID family member’s wages after exclusion.
69
Part 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
70
Part 3, Step 1
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
Step 1: Calculate EID family member’s
exclusion amount.
$ 9,500$ 6,000$15,500$ 5,000$ 9,500
71
Part 3, Step 2
G. EID family member’s earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)
$ 9,500
$ 9,500
$ 0
Step 2: Determine EID family member’s wages after exclusion.
72
Part 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
73
Part 4, Step 1
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)
Step 1: Calculate EID family member’s
exclusion amount.
$ 9,500$ 6,000$15,500$ 5,000$ 9,500$ 4,750
74
Part 4, Step 2
G. EID family member’s earnings (HUD-50058, 7d)
H. Exclusion (E or F, as applicable) (HUD-50058, 7e)
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)
$ 9,500
$ 4,750
$ 4,750
Step 2: Determine EID family member’s wages after exclusion.
75
Part 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
76
INCOME BEFORE NOW (Part 1)
Part 2 Part 3 Part 4
Wages 0 9500 9500 9500 9500 Alimony 5000 5000 2000 6000 6000 TOTAL 5000
(Baseline) 14,500 11,500 15,500 15,500
MINUS BASELINE
5000 5000 5000 5000
EXCLUSION 9500 6500 10,500 9500
10,500 9500 x 50%
4750
EID Calculation Chart:Learning Activity 5-2
77
Applying the EID Rules
• In this section, we’ll walk you step-by-step through an in-depth example of the complexities that can arise in the application of the EID rules.
78
Challenges 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!
79
Challenges 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
80
Challenges 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 family’s EID benefit as
time passes and family circumstances change
81
Purpose 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
82
In-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)
83
In-Depth Example
• Franklin Family Scenario (page 5-36)
84
In-Depth Example
• For each scenario, we will follow these 3 steps:
1. Calculate the EID exclusion amount
2. Calculate the family member’s wages after exclusion
3. Complete Form HUD-50058 entries
85
Part I, Step 1
A. Earned income of EID family member 8,450B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 11,050D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 6,370F. 50% exclusion during phase-in period, if applicable
(E x 0.50)N/A
Step 1: Calculate EID family member’s
exclusion amount.
86
Part I, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 8,450
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 6,370
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)2,080
Step 2: Determine EID family member’s wages after exclusion.
87
Part I, HUD 50058
88
Part 2, Step 1
A. Earned income of EID family member 13,520B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 16,120D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 11,440F. 50% exclusion during phase-in period, if applicable
(E x 0.50) N/A
Step 1: Calculate EID family member’s
exclusion amount.
89
Part 2, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 13,520
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 11,440
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)2,080
Step 2: Determine EID family member’s wages after exclusion.
90
Part 2, HUD 50058
91
Part 3, Step 1
A. Earned income of EID family member 10,140B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 12,740D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 8,060F. 50% exclusion during phase-in period, if applicable
(E x 0.50) N/A
Step 1: Calculate EID family member’s
exclusion amount.
92
Part 3, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 10,140
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 8,060
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)2,080
Step 2: Determine EID family member’s wages after exclusion.
93
Part 3, HUD 50058
94
Part 4, Step 1
A. Earned income of EID family member 10,140B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 12,740D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 8,060F. 50% exclusion during phase-in period, if applicable
(E x 0.50)4,030
Step 1: Calculate EID family member’s
exclusion amount.
95
Part 4, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 10,140
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 4,030
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)6,110
Step 2: Determine EID family member’s wages after exclusion.
96
Part 4, HUD 50058
97
Part 5, Step 1
A. Earned income of EID family member 0B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 2,600D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 0F. 50% exclusion during phase-in period, if applicable
(E x 0.50)0
Step 1: Calculate EID family member’s
exclusion amount.
98
Part 5, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 0
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 0
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)0
Step 2: Determine EID family member’s wages after exclusion.
99
Part 6: Annual Reexams
• For the Franklin family’s next 3 annual reexaminations, there is no change in family circumstances.– June 1, 2005– June 1, 2006– June 1, 2007
100
Part 7, Step 1
A. Earned income of EID family member 17,680B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 20,280D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 15,600F. 50% exclusion during phase-in period, if applicable
(E x 0.50)7,800
Step 1: Calculate EID family member’s
exclusion amount.
101
Part 7, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 17,680
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 7,800
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)9,880
Step 1: Calculate EID family member’s
exclusion amount.
102
Part 7, HUD 50058
103
Part 7: After Exclusions End
104
Chapter 5. Section 5.Assets and Asset Income
105
Assets and Asset Income
• Value of assets may affect family’s annual income
• PHA must:– Identify assets– Verify market value of asset– Convert from market to cash value
106
Assets 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
107
What 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.)
108
What Assets Include
• Accessible amount of trusts available to family
• Stock, bonds, money market funds• Equity in real property, other capital
investments• Retirement savings accounts
109
What 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
110
What 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
111
What Assets Include
• Personal property held as investment– gems, jewelry – coin collections
• Surrender value of life insurance policies
112
Assets 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
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Assets 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 itExample: Home market value =
$ 155,000
– Fees incurred 5,000
Actual Cash value $150,000
- Amount received 100,000
Imputed Cash Value $ 50,000
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Assets 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
115
Assets 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
116
Assets Disposed of For Less Than Fair Market Value
• Learning Activity 5-3: Assets disposed of for less than fair market value (page 5-50)
117
Income 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?
118
Income from Assets
• Learning Activity 5-4:
• Interest Income from Assets (page 5-52)
119
Section 6: Assets
Edith 1 Savings 400 x .023 400
400 9028
09
9
120
Imputed 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.
121
Imputed 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)
122
Imputed 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.
123
Imputed Asset Income
• When total cash value of all assets is $5000 or less, use the actual income from assets
124
Imputed 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)
125
Assets and Asset Income
• Learning Activity 5-5:
• Assets and Asset Income (page 5-56)
126
Section 6: Assets
Edith 1 Savings 400
5920 129.0225
133133
9Edith 1 Stocks 6000-480 5520 120 6000 x .020
127
What 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
128
Asset 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
129
Asset 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.
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Asset 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
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Chapter 5. Section 6.PH Rent Calculation
132
Definitions
• 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 family’s TTP– Not used for a family paying flat rent
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Income-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
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Ceiling 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
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Flat 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
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Flat 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
137
Flat 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
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Ceiling 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
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Family 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:– PHA’s policies on switching type of rent in
case of financial hardship– Dollar amount of tenant rent for family under
each option
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Family 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
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Family 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
142
Switching Because of Hardship
• A PHA must adopt written policies for determining when payment of flat rent is a hardship for a family
143
Switching 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
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Switching 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
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Switching 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
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Learning Objective
• Understand and address those difficult aspects of rent calculation where errors are most likely to occur
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