Article | Details of New HUD Asset Limitation Guidance

HUD issued a revised implementation Notice. See our announcement and a link to the revised document HERE. 

The HOTMA statute introduced limitations on assistance to families that own certain assets. These include when total assets exceed $100,000 (as adjusted) and when a household owns real property that is suitable for occupancy. When HUD published the Joint PIH/MFH HOTMA Implementation Notice in September of 2023, HUD deferred addressing the asset limitations and promised that follow-up guidance on the asset limitations would be issued later. In a revision of the Joint Notice dated February 2, 2024, HUD provided the promised guidance. Here we will summarize this guidance mostly using language drawn directly from the Notice.

Preview | For the Public Housing and Section 8 programs (including project-based rental assistance (PBRA) and Housing Choice Vouchers (HCV), Public Housing Authorities (PHA) and Multifamily Housing (MFH) Owners must deny admission of an applicant if they do not meet the requirements of the asset limitation introduced by HOTMA. PHAs/MFH Owners have discretion for application of the asset limitation at annual and interim reexamination. For reexaminations, denying continued assistance does not apply to PHAs/MFH Owners who establish total nonenforcement policies, as discussed below.
Overview: Asset Limitations | A family is out of compliance with the asset limitation if they have either of the following:

1. Net family assets that exceed $100,000, as adjusted annually for inflation. In determining whether the net family assets for a family exceed $100,000 (as adjusted for inflation), a PHA/MFH Owner may accept a declaration from the family that their net assets do not exceed $50,000 (as adjusted for inflation), without needing to further verify that declaration. For assets disposed of for less than fair market value during the two years preceding the date of application for the program or reexamination, the difference in value between the consideration received and the fair market value must be included in net family assets.
2. Real property that is suitable for occupancy. Families are out of compliance if they have a present ownership interest in, a legal right to reside in, and the effective legal authority to sell a property (based on laws of the state or locality where the property is located) that is suitable for occupancy by the family. However, there are several exemptions to the real property restriction, as discussed in the supplemental information below. In determining whether the family owns real property that would violate this provision, a PHA/MFH Owner may rely upon a self-certification from the family stating that they do not have any present ownership interest in any real property. This applies both at the time of admission and reexamination. A PHA/MFH Owner could use a form that requests certification of the family’s present ownership interest in the property, and also inquire about the family’s legal right to reside in, and the effective legal authority to sell any real property suitable for occupancy by the family. If the family certifies that they do not have any present ownership interest in real property, the PHA/MFH Owner may take that as sufficient to establish that the family qualifies under the real property restriction. However, if the family owns real property, the PHA/MFH Owner must seek third-party verification of the family’s legal right to reside in the property, the effective legal authority to sell the property, and whether the property is suitable for occupancy as a residence. 

Note: Ownership of real property is relevant to the asset limitation in two distinct ways:

• If the family has an ownership interest in real property, that interest may cause the
  family’s net family assets to exceed $100,000 (adjusted for inflation), in which case the
  family violates the asset limitation.
• If the family has a present ownership interest in, a legal right to reside in, and the effective legal authority to sell a property suitable for occupancy by the family as a residence, then the family is out of compliance. There are several exemptions to the real property restriction which identify when a real property ownership interest does not by itself render the family out of compliance with the asset limitation, as discussed below. However, those exemptions do not indicate that such real property is excluded from the calculation of net family assets. Unless the real property is specifically excluded from net family assets in HOTMA [24 CFR § 5.603], it will be included in net family assets. If the value of that real property brings the net family assets above $100,000 (as adjusted for inflation), the family will be out of compliance.

At move-in or when assistance begins | At admission, ownership of net family assets that exceed $100,000 (as adjusted) or ownership of disqualifying real property requires denial of assistance. PHAs/MFH Owners do not have the discretion to not enforce or provide limited enforcement of the asset limitation at admission. For MFH programs only, MFH Owners must enforce the asset limitation at initial certification for families who lost their assistance because they failed to recertify timely or began to pay market rent, remained in the unit, and then lost income, once again requiring assistance. 

Note for RAD

Families residing in units converting to Section 8 PBRA or PBV through the Rental Assistance Demonstration (RAD) may not be rescreened upon conversion according to the RAD statute. Therefore, RAD families converting to project-based rental assistance (PBRA) or project-based vouchers (PBV) are not subject to the asset limitation provision at conversion. Instead, families residing in units converting under the 1st or 2nd Component of RAD to PBRA (including units originally assisted under the Section 202/811 PRAC program) or PBV will be subject to the PHA/MFH Owner’s discretionary asset limitation policies at their next annual or interim reexamination after conversion, whichever is sooner.
 

Annual and Interim Reexamination [with Owner Discretion] | PHAs/MFH Owners have discretion concerning the application of the asset limitation at annual and interim reexamination. PHAs/MFH Owners may adopt a written policy of total non-enforcement, enforcement, or limited enforcement, or they may also adopt exception policies, as detailed below. Of course, regardless of the policy they adopt, PHAs/MFH Owners must comply with federal fair housing and other civil rights requirements. This includes reasonable accommodation requirements. This obligation applies regardless of whether PHAs/MFH Owners establish enforcement, limited enforcement, or exception policies to the asset limitation at reexamination. For example, this may mean that a PHA/MFH Owner would be required to allow someone to cure their noncompliance or provide more time to demonstrate they have cured their noncompliance before terminating assistance if there was a nexus between the person’s disability and their need to cure or their need for additional time to
demonstrate they have cured their noncompliance. A reasonable accommodation could require delaying the initiation of termination or eviction proceedings for more than the six months built into the basic HOTMA exception to the asset limitation.

Owner discretion option one | Total Non-Enforcement
At annual and interim reexamination, PHAs/MFH Owners may choose not to enforce the asset limitation, if they establish a written non-enforcement policy. PHAs/MFH Owners may establish a total non-enforcement policy for all families at reexaminations, which would mean that they will not initiate termination or eviction proceedings for a family for non-compliance with the asset limitation. 

Where the PHA/MFH Owner exercises this discretion to allow families who would otherwise fail to comply with the asset limitation to continue renting their units, the families will continue to qualify for rental assistance. If they adopt a total nonenforcement policy, PHAs/MFH Owners must apply the non-enforcement policy consistently for all families within a program (e.g., if adopted in a PHA’s Admissions and Continued Occupancy Policy, it must apply to all Public Housing families). Any non-enforcement policy must be included in the PHA’s Administrative Plan or ACOP or a MFH Owner’s Tenant Selection Plan. Note: PHAs/MFH Owners who adopt a total non-enforcement policy are still required to calculate net family assets in the manner required by § 5.603, as part of the process of calculating annual income per § 5.609. When calculating net family assets, PHAs/MFH Owners therefore still need to determine whether the family owns real property that must be included in net family assets. However, if they adopt a total non-enforcement policy, they are not required to obtain and verify additional information about owned real property just to determine whether it qualifies for an exemption 
that real property is suitable for occupancy. [24 CFR § 5.618] For example, if a PHA/MFH Owner finds a family owns real property, that real property would need to be included in the calculation of net family assets unless it is specifically excluded by HOTMA at § 5.603, but the PHA/MFH Owner would not need to inquire whether it was suitable for occupancy.
Owner discretion option two | Total Enforcement
PHAs/MFH Owners may choose to enforce the asset limitation at reexamination. PHAs/MFH Owners with an enforcement policy at reexamination must initiate termination or eviction proceedings within six months of the income examination that determined the family was out of compliance. They may delay the initiation of termination or eviction proceedings for noncompliant families for no longer than six months. Any enforcement policy, including the amount of time that a PHA/MFH Owner will delay the initiation of termination or eviction proceedings for noncompliant families, must be included in the PHA’s Administrative Plan or ACOP or a MFH Owner’s Tenant Selection Plan.
Owner discretion option three | Limited Enforcement with Option to Cure
PHA/MFH Owners may adopt a written policy of limited enforcement. This differs from total enforcement of the asset limitation at reexamination in only one respect: all families who are found to be out of compliance at reexamination would be provided the same opportunity to come back into compliance. Families would have up to than six months, depending on the limited enforcement policy that the PHA/MFH Owner adopts, to demonstrate that they have come back into compliance. If the family does demonstrate they have come back into compliance within that period, the PHA/MFH Owner would not initiate termination or eviction proceedings. Limited enforcement policies cannot provide families more than six months to come back into compliance and do not extend the period the PHA/MFH Owner may delay initiation of termination or eviction proceedings; the PHA/MFH Owner may still only delay initiation of termination or eviction proceedings for the family for not more than six months. In the case of a disability-related reasonable accommodation, a family may be afforded more time to comply. If the PHA/MFH Owner has adopted a limited enforcement policy, that policy
must address the timeframe for curing non-compliance. For example, families will have six months to demonstrate they have cured non-compliance with the asset limitation. In establishing a limited enforcement policy, PHAs/MFH Owners may choose to allow an opportunity to cure non-compliance that is less than six months. Any limited enforcement policy, including the amount of time that a PHA/MFH Owner will delay the initiation of termination or eviction proceedings for families who are not compliant, must be included in the PHA’s Administrative Plan or ACOP or a MFH Owner’s Tenant Selection Plan. What families must do to cure non-compliance depends on why they were identified as out of compliance. Families could cure non-compliance by removing prohibited assets — for example, by selling real property or bringing net family assets below $100,000 (as adjusted for inflation). However, the value of assets disposed of for less than fair market value would still be counted in the family’s net family asset total in the two years preceding the date of application for the program or reexamination per long-standing HUD disposed-of asset rules. If the family is non-compliant with the asset limitation because of a present ownership interest in real property, but their net family assets do not exceed $100,000 (adjusted for inflation), they can cure non-compliance by demonstrating that either they no longer own the prohibited asset or that it now qualifies for an exemption, for example, that the family is now offering it for sale. This is so long as the
family’s net family assets do not exceed $100,000 (adjusted for inflation) after such action is taken. It is important to understand that offering real property for sale does not mean that the property can be excluded from the calculation of net family assets). A family with more than $100,000 (as adjusted annually for inflation) in net family assets may bring their assets below the threshold in several ways. The family could purchase something that is not counted among net family assets, such as necessary personal property, such as a car used for everyday transportation. Alternatively, the family may cure non-compliance by moving assets such that
they are no longer counted among net family assets, so long as doing so is not counted as disposing of assets for less than fair market value. In some circumstances, the family may transfer funds into a retirement plan recognized as such by the Internal Revenue Service if the
account is held by a member of the family. An asset moved to a retirement account held by a member of the family is not considered an asset disposed of for less than fair market value. Likewise, the family may be able to move funds into an irrevocable trust for the benefit of someone in the assisted family. When PHAs/MFH Owners have a limited enforcement policy and the family demonstrates they have cured non-compliance, PHAs/MFH Owners must record
the curing of a family’s ineligibility in the family’s file and permit families to remain in the program. The related updates to the family’s income and assets would be processed at the next reexamination, which may be an interim if the family’s circumstances meet the threshold for processing such a reexamination, or it may be the next annual reexamination. 
Owner discretion option four | Exception Policies
At annual and interim reexamination, PHAs/MFH Owners may also establish exceptions to the asset limitation (not at admission or initial certification where the family is being rescreened for assistance). If the PHA/MFH Owner has adopted a written exception policy for reexaminations, then families in the specified exception categories will receive either total non-enforcement or limited enforcement, depending on the exception policy the PHA/MFH Owner has adopted. Families in the specified exception categories would either (a) not be subject to termination or eviction proceedings due to non-compliance with the asset limitation at a reexamination, or (b) they would be provided an opportunity, up to but no longer than six months, to come back into compliance, after which point the asset limitation would be enforced. An exception policy may be combined with a limited enforcement policy for all other families not in the exception categories, as described below. PHAs/MFH Owners are permitted to include more than one exception as part of any exception policy. Exception policies may be based on family type and may take into consideration such factors as age, disability, income, the ability of the family to find suitable alternative housing, and whether supportive services are being provided. All exception policies must comply with fair housing and civil rights laws and requirements. Limited exception policies, which establish an opportunity to cure noncompliance, cannot provide families more than six months to cure these conditions. In the case of a reasonable accommodation, a family may be given more than six months to comply. If they have adopted such a policy, PHAs/MFH Owners must initiate termination or eviction proceedings for families who remain in non-compliance with the asset limitation within six months of the reexamination at which the non-compliance was determined. In establishing a limited exception policy, PHAs/MFH Owners may choose a period of delay that is less than six months. PHAs/MFH Owners may choose to combine a limited enforcement policy (which applies to all families) with an exception policy for families in the specified exception categories. For example, they may adopt a limited enforcement policy that provides all families a window of six months to cure non-compliance with the asset limitation, and they may at the same time adopt an exception policy that provides that the asset limitation will not be enforced at all at annual and interim
reexaminations for families in the exception categories. PHAs/MFH Owners could alternatively adopt a limited enforcement policy for all families that provides a window of less than six months to cure non-compliance, alongside a limited exception policy that allows families in the exception categories a longer period of up to but no longer than six months to cure non-compliance. Any exception policy must be included in the PHA’s Administrative Plan or
ACOP or a MFH Owner’s Tenant Selection Plan. The exception policy must describe whether excepted families are subject to total non-enforcement or limited enforcement.
 

Examples | Asset Limitation Exception Policies

• Example Policy 1 | For all families that meet the definition of extremely low income at
  reexamination and are found to be non-compliant with the asset limitation, the PHA/MFH
  Owner will not enforce the asset limitation at reexamination. Such families will not be subject to termination or eviction proceedings due to non-compliance with the asset limitation at reexamination. All other families will be subject to a limited enforcement policy and provided six months to cure noncompliance.
• Example Policy 2 | For all families that meet the definition of extremely low income at
  reexamination and are found to be non-compliant with the asset limitation, the PHA/MFH
  Owner will not enforce the asset limitation at reexamination. Such families will not be subject to termination or eviction proceedings due to non-compliance with the asset limitation at reexamination. All other families will be subject to the enforcement policy.
• Example Policy 3 | Families with an elderly family member or a member with a disability will be given six months to cure their non-compliance with the asset limitation, as stated in the PHA/MFH Owner’s policies. All other families will be subject to a limited enforcement policy and provided four months to cure noncompliance.
• Example Policy 4 | Families with an elderly family member or a member with a disability will be given six months to cure their non-compliance with the asset limitation, as stated in the PHA/MFH Owner’s policies. All other families will be subject to the enforcement policy.

Real Property Determination

At admission and reexamination, if the PHA/MFH Owner is enforcing the asset limitation, including limited enforcement, and a family declares that they have a present ownership interest in real property, then the PHA/MFH Owner must determine whether the property qualifies for [1] an exemption to real property asset restrictions, [2] whether the family lacks a legal right to reside in the real property, [3] whether they lack the effective legal authority to sell the real property, or [4] whether the real property is unsuitable for occupancy. If the PHA/MFH Owner finds that any of these four things are true, then the family’s present ownership interest in real property does not itself mean that the family is out of compliance with the asset limitation. The type of third-party documentation that will be used to verify the disposition of a family’s real property may vary by a family’s circumstances and the locality in which the real property is located.
Special Considerations for Terminating Assistance or Eviction based on the Asset Limitations
Even if PHAs/MFH Owners do not adopt a non-enforcement or limited enforcement policy and/or exception policy, they may delay for a period of up to six months the initiation of termination or eviction of assistance proceedings. They are not required to initiate termination or eviction of assistance proceedings immediately upon determining the family is out of compliance with the asset limitation, nor are they required to begin the proceedings during the six months to have a termination of assistance or eviction completed at the six-month mark.

PHAs/MFH Owners are encouraged to set policies for the initiation of termination or eviction of assistance proceedings that provide families with adequate opportunity to find new housing. What it means to initiate termination or eviction of assistance proceedings due to noncompliance with the asset limitation will vary by program, as follows:

• Section 8 Project-Based Rental Assistance program, including the Section
  202/8 program. Participants who are not compliant with the asset limitation must
  either pay the contract rent for the unit or vacate the unit after the termination of
  assistance.
• Housing Choice Voucher program. Participants who are not compliant with the
  asset limitations are subject to termination of assistance, but there is no requirement
  that the unit owner initiated eviction because of non-compliance with the asset
  limitation. 
• Public Housing program. Participants who are not compliant with the asset
  limitation are subject to termination of assistance and eviction from the unit if they
  fail to vacate the unit voluntarily. There is no general provision that allows such
  families to remain and pay an alternative rent.
• Section 8 Project-Based Voucher program, participants who are not compliant
  with the asset limitation are subject to termination of assistance. The PHA and owner
  may agree to remove the unit from the HAP contract, at which point the unit becomes
  an unassisted unit, and the owner may choose to allow the family to stay and pay the
  market rent. The owner may charge the family a rent that is below market rate, in
  which case it would be considered a landlord-assisted unit for rent reasonableness
  purposes. When the family subsequently vacates the unit, the unit may be added
  back to the HAP contract. If the project is partially assisted, the PHA and owner may
  substitute a different unit for the unit removed due to the ineligibility of the tenant,
  consistent with the requirements for adding units to the HAP contract. Alternatively,
  if the owner refuses to agree to remove the unit from the HAP contract, the owner
  must evict the family, if they fail to vacate the unit voluntarily. In this case, the owner
  may not enter into a new lease with the now-ineligible family for that PBV-assisted
  unit, and the PBV unit must be leased to an eligible family.
• Section 8 Moderate Rehabilitation program. Participants who are not compliant with the asset limitation are no longer eligible for assistance. 24 CFR § 882.512 expressly allows that families who were eligible at admission but subsequently become ineligible may remain in HAP contract units. However, if the owner fails to have at least 90 percent of the assisted units leased or available for leasing by eligible families, the PHA may reduce the number of units covered by the HAP contract. The PHA will agree to an amendment of the HAP contract to provide for the subsequent restoration of any reduction in units if the PHA determines that the restoration is justified by demand, the owner otherwise has a record of compliance with obligations under the HAP contract, and contract authority is available. PHAs/MFH Owners must follow program procedures for terminating assistance or tenancy. For example, for Public Housing families, when the PHA initiates the eviction and termination process, the PHA must provide a lease termination notice of 30 days unless a state or local law requires a longer notice period, and the family must be provided an opportunity for a hearing under the PHA administrative grievance procedure.

Required Policy Updates to Administrative Plans, ACOPs, and Tenant Selection Plans

• Admission Policies
  PHAs/MFH Owners must establish written screening criteria in their Administrative Plans, ACOPs, or Tenant Selection Plans, as applicable, to prohibit the admission of applicants who own net family assets that exceed $100,000 (as adjusted for inflation) and/or real property that is suitable for occupancy. Policies should indicate the general parameters PHAs/MFH Owners will use when determining whether the location of real property constitutes a geographic hardship.
   
• Reexamination Policies
  Whether a PHA/MFH Owner chooses to adopt a total non-enforcement, enforcement, limited enforcement, and/or exception policy for examinations, that policy and accompanying details must be outlined in the PHA’s ACOP or Administrative Plan or in the MFH Owner’s Tenant Selection Plan (TSP), as applicable. PHAs/MFH Owners must also update their Administrative Plans, ACOPs, or TSPs, as applicable, to indicate when they will initiate termination or eviction proceedings after participant families are determined to be out of compliance with the asset limitation when the PHA/MFH Owner has established either an enforcement policy or policies to permit families to cure their noncompliance. PHAs/MFH Owners must initiate termination or eviction proceedings for families who remain out of compliance with the asset limitation within six months of the reexamination at which the non-compliance was determined. Policies should indicate the general parameters PHAs/MFH Owners will use when determining whether the location of real property constitutes a geographic hardship.

Supplemental Information | Issues Relating to Real Property

Exemptions to the Real Property Restriction in the Asset Limitation
The real property restriction does not apply to the following:

• Any property for which the family is receiving assistance for a manufactured home owned by a family who receives assistance to lease the space or lot in which it is located [24 CFR
  § 982.620].
• Any property for which the family is receiving assistance under the
  Homeownership Option. [24 CFR Part 982 and 24 CFR § 5.618(a)(1)(ii)(A)].
• Any property jointly owned by a family member and another individual who does not live with the family but who resides at the jointly owned property. [24 CFR § 5.618(a)(1)(ii)(B)].
• Any property owned by a family that includes a person who is a victim of domestic violence, dating violence, sexual assault, or stalking, as those terms are defined by HUD VAWA regulations in 24 CFR Part 5 (Subpart L). For example, if the victim is a minor, the real property limitation does not apply to any property owned by the victim’s parent or guardian. When a family requests an exemption from the real property limitation on this basis, the PHA/MFH Owner must accept self-certification and follow the confidentiality and documentation-request requirements established at VAWA regulations and law [24 CFR § 5.2007. See also 24 CFR § 5.618(a)(1)(ii)(C)]
• Any property that the family is offering for sale. Documentary evidence of the sales process could include, for example, a contract with a real estate agent or a current real estate listing. [24 CFR § 5.618(a)(1)(ii)(D)]

Suitability of Real Property for Occupancy
A property will be considered suitable for occupancy unless the family demonstrates that the real property meets one of the following five conditions [24 CFR § 5.618(a)(2)]:

1. The property cannot meet the disability-related needs of all members of the family (e.g., does not meet physical accessibility requirements, family has disability-related need for additional bedrooms, family needs proximity to accessible transportation). Documentary requirements to establish disability-related needs must comply with applicable fair housing and other civil rights requirements.
2. The property is not sufficient for the size of the family. A PHA/MFH Owner’s occupancy standards may be used for such a determination. 
3. The property is geographically located so it creates a hardship for the family. For example, the distance or commuting time between the property and the family’s place of work or school would be a hardship for the family. However, distance or commute time to school/work are not exhaustive examples of hardships based on location. Through written policies, PHAs/MFH Owners may set parameters on what constitutes such a hardship, but they must consider the specific circumstances of the family, including information provided by the family, in making a geography-based hardship decision.
4. The property is not safe to reside in because of its physical condition. For example, the property’s physical condition poses a risk to the family’s health and safety and the condition of the property cannot be easily remedied. Unsafe property conditions could include external circumstances or environmental factors outside the control of the family. The property may be deemed unsuitable for occupancy if the alterations that would be needed to make it safe to live in are unaffordable by the low-income family.
5. The family does not have the legal right to reside in the property.

Right to Reside | The real property restriction applies only when the family has the legal right to reside on the property. A family's right to legally reside in a property may be dependent on state and local law. The family may own real property that cannot legally reside in. For example, the family may own commercial property, such as a convenience store or other retail store, which cannot be occupied as a residence by the family. Families who claim they lack the legal right to reside in the real property must provide proof to support their claim. What constitutes sufficient evidence will vary by circumstance.
Authority to Sell the Real Property | The real property restriction applies only when the family has the effective authority to legally sell the property, based on the local or state laws where the property is located. There may be several reasons why a family does not have this legal authority. For example, when families are contesting ownership of a property in court, or an individual is in divorce proceedings, they may be unable to sell the property until the legal proceedings conclude. Someone who owns inherited property may not have the authority to sell until another heir's claims to partial ownership have been settled. Families who claim they lack the legal authority to sell the real property must provide proof to support their claim. What constitutes sufficient evidence will vary by circumstance. For example, a divorce pleading or complaint may demonstrate that divorce proceedings are in process. 

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