Take Proper Steps When Terminating Over-Income Households' Assistance

Do you have households at your site that were eligible for housing assistance when they moved in but aren’t anymore? These are households whose income has increased enough that they’re no longer eligible for assistance because they can now afford to pay the gross rent. The HUD Handbook dictates specific steps you must take in this situation. By taking these simple steps, you can avoid doing any further recertifications for over-income households.

HUD says that if an interim or annual recertification shows that a household is over-income, you must send the household a notice terminating its assistance. The household may continue to live at your site as a market-rate household. But you must be sure to follow HUD’s notice requirements when terminating assistance. If you don’t, the household could claim that the termination was invalid.

To help you handle this situation the right way, we’ll explain HUD notice requirements. We’ll give you a Model Letter: Send Notice to Terminate Over-Income Households’ Assistance, which you can adapt for use at your site. And we’ll also tell you how to notify HUD that you’ve terminated a household’s assistance.

Send Assistance Termination Notice

HUD says you must stop billing for assistance if an annual or interim recertification determines that the household has an increased ability to pay the full contract rent, meaning that the household’s income has risen to the level that it can afford to pay the applicable gross rent specified in your assistance contract [HUD Handbook 4350.3, par. 8-5(C)]. When terminating assistance, the owner increases the household’s rent to market rent (or contract rent) and, where applicable, makes the assistance available to another member [HUD Handbook 4350.3, par. 8-6(A)(1)].

When you’ve verified that a household is over-income, you must give the household advance notice in writing that you’ll be terminating its assistance and increasing the household’s rent [HUD Handbook 4350.3, par. 8-5(A)(2)]. It’s important to note that when providing this notice to a member with a disability, it must be in a form accessible to the member, such as in Braille or audio form for a member with a vision impairment.

According to HUD, the notice should be served by both sending a letter by first-class mail, properly stamped and addressed and including a return address, to the household at the unit address; and delivering a copy of the notice to any adult person answering the door at the unit. If no adult answers the door, the person serving the notice may place it under or through the door, or affix it to the door [HUD Handbook 4350.3, par. 8-6(A)(4)].

The date on which the notice is deemed received by the household is the later of the date the first-class letter is mailed or the date the notice is properly given [HUD Handbook 4350.3, par. 8-6(A)(5)]. However, service of the notice is deemed effective once the notice has been both mailed and hand-delivered [HUD Handbook 4350.3, par. 8-6(A)(5)].

What to Say

The written notice should include:

• The specific date the assistance will terminate;
• The reason(s) for terminating assistance;
• The amount of rent the tenant will be required to pay;
• Notification that if the tenant fails to pay the increased rent, the owner may terminate tenancy and seek to enforce the termination in court; and
• The tenant has a right to request, within 10 calendar days from the date of the notice, a meeting with the owner to discuss the proposed termination of assistance [HUD Handbook 4350.3, par. 8-6(A)(3)].

Your notice should first state the facts of the situation. Explain that the household is now over-income and ineligible for HUD assistance.

Next, reassure the household that it doesn’t have to leave its unit or the site. Explain that it must now pay the full rent for its unit because HUD will no longer be making assistance payments. Also, you can mention the good news that the household will no longer have to comply with HUD’s certification requirements.

Then invite the household to an informal hearing with you if members wish to discuss the notice—and spell out that the household’s assistance will terminate if it doesn’t request a meeting.

Terminating a household’s assistance doesn’t terminate the household’s lease before the end of the lease term. But when the lease term does expire, you may offer the household whatever form of lease you wish. You no longer have to use the HUD Model Lease, although many sites continue to use a modified version.

Submit Termination Record on TRACS

To alert HUD to the termination of assistance, you’ll need to submit a Termination Record, known as a MAT 65, to TRACS. When submitting the Termination Record, you must enter one of four codes that indicate the reason for the assistance termination.

When termination is due to an increase in income, the proper code is TTP. The other codes cover termination for failing to submit citizenship documents (TC), not recertifying on time (TR), and tenant refusing to transfer as agreed or giving false certification information (TF).

If Household Again Needs Assistance

According to HUD, an owner may reinstate a tenant’s terminated assistance if the original termination of assistance was not due to fraud but rather due to a tenant’s failure to recertify or a tenant’s increased ability to pay.

To be reinstated, the member must be eligible for assistance. In other words, based on the income and rent calculation, the member would pay less than market rent and assistance must be available for the unit.