Follow Four Dos & Don'ts When Applying Minimum Rent Rules

HUD occupancy regulations require all households living at Section 8 sites to pay a monthly rent of at least $25, unless the household qualifies for an exemption [HUD Handbook 4350.3, par. 5-26(D)]. This minimum rent doesn’t apply to Section 202 PAC, Section 202 PRAC, Section 811 PRAC, RAP, Rent Supplement, Section 221(d)(3) BMIR, or Section 236 programs.

Here are four tips to keep in mind when applying HUD’s minimum rent requirements to households at your site.

DO Deduct Any Utility Allowance from Minimum Rent

The word “rent” in “minimum rent” refers to the “total tenant payment.” This is the amount the household must pay toward rent and utilities. This means that the household won’t necessarily be expected to pay you a minimum of $25. Rather, the household’s minimum rent is really $25 minus any utility allowance [HUD Handbook 4350.3, par. 5-26(D)(2)].

For example, suppose a site’s utility allowance for a one-bedroom unit is $15. A minimum rent household living in that unit would pay $10 ($25 minus the $15 utility allowance).

In some cases, the minimum rent is less than the utility allowance. This results in a utility reimbursement. For example, a site’s utility allowance for a two-bedroom unit is $75. So a minimum rent household in a two-bedroom unit would get a utility reimbursement of $50 ($25 minus the $75 utility allowance= -$50). In other words, the owner sends the household a check each month for $50 ($75-$25) as a utility reimbursement. And the household doesn’t pay any tenant rent to the owner.

DO Use Hardship Exemptions to Minimum Rent

Households qualify for a minimum rent exemption if they’re unable to pay due to “financial hardship.” In general, this means that a household’s income is so low that it can’t afford to pay even the $25 minimum rent. HUD rules say that any household that “would be evicted if the minimum rent requirement was imposed” qualifies for the exemption [HUD Handbook 4350.3, par. 5-26(D)(3)]. Because any household that can’t afford to pay the minimum rent, for whatever reason, can be evicted for nonpayment of rent, this essentially means that any household qualifies for the exemption if it can verify that it can’t afford the minimum rent.

In addition to this broad standard, HUD rules also state specific circumstances that may explain why the household won’t be able to or—for those who have been paying minimum rent—can no longer afford to pay the minimum rent. These circumstances are that:

• The household lost eligibility for—or is awaiting an eligibility determination for—a federal, state, or local assistance program;
• The household would be evicted if the minimum rent requirement was imposed;
• The household’s income has decreased because of changed circumstances, including the loss of employment; or
• A death has occurred in the household [HUD Handbook 4350.3, par. 5-26(D)(3)(a)].

When evaluating a household’s request for an exemption, you should consider whether any of these circumstances apply. The financial hardship exemptions are the only exemptions to the minimum rent requirement.

DON'T Evict Households While Determining Eligibility for Hardship Exemptions

Once a household requests a hardship exemption, you must suspend the minimum rent. And you must not evict the household for nonpayment of rent while you determine whether a hardship exists.

If you determine that the hardship is temporary, the household is exempt from paying the minimum rent for 90 days (but will eventually have to repay the back rent). Households whose circumstances are expected to last for 90 days or less qualify for short-term exemptions. You must temporarily suspend their minimum rent obligations for 90 days. At the end of the 90-day period, the household is responsible for paying the minimum rent, retroactive to the initial date of the suspension [HUD Handbook 4350.3, par. 5-26(D)(3)(b)(2)]. In other words, the household must repay the total amount of suspended rent at the end of the 90-day period, subject to a reasonable repayment schedule. You can’t evict the household for nonpayment during these 90 days either.

DON'T Give Hardship Exemptions to Households Paying More than Minimum Rent

The hardship exemptions don’t apply to households that are paying more than the minimum rent. If these households are having trouble paying their rent, the solution is a rent reduction, not a hardship exemption. These households should request interim recertification in appropriate circumstances, such as a decrease in household income or an increase in medical expenses or household size.