TMS 2000 Section 8 Help Centre...

Pre-12/3/1999 40 Percent Limitation and Related Issues (information superceeded - effective 12/3/1999)

Last Revised: November 5, 1999

Created: October 13, 1999

Copyright 1999 by Custom Computer Systems, Inc. All rights reserved

Important Note:

On November 3, 1999 HUD published in the Federal Register guidance that supersedes the information discussed herein. Such guidance, however, will not be effective until 12/3/1999. Until that time, the information contained below still applies!

Overview

Before we delve to deeply into this issue – let me point out that this issue is likely to affect most if not all Section 8 programs at one time or another. Our initial response here has been – well – overwhelming. While you might guess this limitation will affect your ability to house zero and very low income tenants – to our amazement – we have seen it prevent an elderly couple with as high as $15,000 annual income from being housed (see discussion under Other Conflicts to be aware of below).

What the Law Says

Subtitle C titled “Section 8 Rental and Homeownership Assistance” of Section 545 of Public Law 105-276 passed by the 105th Congress (More commonly known as the QHWRA Act) contains a provision at Section 545(a)(o)(3) as follows:

“(3) 40 PERCENT LIMIT. – At the time a family initially receives tenant-based assistance under this section with respect to any dwelling unit, the total amount that a family may be required to pay for rent may not exceed 40 percent of the monthly adjusted income of the family.”

That’s nice – but what does it really mean?

Families that have to pay more than 40 percent of their monthly income for their portion of rent and utilities cannot be housed without breaking a federal law passed by the 105th Congress.

While the term “monthly rent” is self explanatory (equates to line 9d. of the HUD-50058 form as revised 10/1999), the term “total amount that a family may be required to pay for rent” is not. Per review of documentation at the HUD website and MTCS forums – the total amount that a family pays includes utilities (equates to line 12t. of the HUD-50058 form as revised 10/1999).

Per our observation, this is affecting the many many more Housing Authorities than perhaps originally expected.

How does TMS 2000 help?

At the completion of a given rent calculation – if the result is in violation of the 40 Percent Limitation – You are notified via a big red screen and the calculation cannot be completed. As a result – a MTCS record will not be created and thus – will not be submitted to MTCS.

Remember – to do so – is in violation of federal law. As such, TMS 2000 will not let you complete or submit such a calculation.

When is the test applied?

At present – the test is applied anytime the tenant first moves to a unit. This can be a new move-in - or - if the tenant simply moves across the street! The test is only applied when the tenant changes their unit. As such, the test is NOT APPLIED after initial move-in – unless the tenant changes unit.

There is much discussion at the HUD web site indicating that the wording will be changed in the future to only apply the test at upon move-in. Keep checking back.

What can I do?

If the family has no income – it appears that little can be done. Even if the Minimum TTP is waived – utilities will be a factor.

If the family has income – yet still does not qualify – the following may help:

See if owner will reduce rent or look for less expensive unit
Consider raising payment standards.

I am told that some authorities – in order to process tenants affected by this provision – are processing them as a “Interim Examination” or other non-move-in type of transaction in order process those tenants for whom the authority has already committed.

Other Conflicts to be aware of

The relationship between gross rents and the payment standard can make a difference. In one instance – we observed – an elderly couple with approximately $15,000 of income did not pass the test. The problem was two-fold. First – the payment standards were low, and second – the couple qualified for a 1-bedroom unit but were moving to a two-bedroom unit.
This provision appears to be in conflict with the requirement that you house 75% of your new admissions from applicants whose family income falls at or below 30 percent of the area’s median income. Effectively – by this provision – we have thrown out any zero-income families.