Until changes were made to federal law, a public housing tenant’s rent was 30% of the tenant’s annual adjusted income. “Annual income” for federal housing programs is defined at 24 C.F.R. § 5.609. Most public housing tenants are still charged rent based on 30% of their income.

Although rent may be reduced if a tenant’s income decreases, a reduction is not allowed if the income loss is due to welfare work sanctions. A rent reduction may not be withheld until the welfare department notifies the PHA in writing that the loss of income was due to work sanctions and until the tenant has a chance for a grievance. If the loss of welfare arises from the exhaustion of time limits or occurs because the tenant could not find a job despite compliance with the welfare agency’s requirements, the tenant must be allowed the rent reduction.1  A tenant may also request an exemption to minimum rent if one is applicable.

When computing rent, you should closely scrutinize the deductions and exclusions at 24 C.F.R. §§ 5.603–.634 (especially sections 5.609 and 5.611). Check to see if the PHA gave the proper credits or deductions for medical expenses; childcare expenses; allowances for elderly, disabled, or minor family members; training income; and earned income exclusions. Because there are so many deductions and exclusions and HUD knows PHAs make many mistakes, there is a movement to change the way rents are calculated. This movement is called “Rent Simplification.”

Under the current rent rules, a public housing tenant’s rent is calculated in the following way:

STEP 1— Compute all non-exempt income for the entire family for the year to get annual income.

STEP 2 — Subtract all eligible deductions for the family to get adjusted income.

STEP 3 — Divide the adjusted income figure by 12 to get a monthly adjusted income.

STEP 4 — Multiply the monthly adjusted income by 30% if the family pays income-based rent.

This is how much the family pays for its share of rent if the family does not pay its own utilities. If the family pays for its own utilities, go to STEP 5:

STEP 5 — Subtract the utility allowance that the PHA uses for the family’s bedroom size and utility type from the number in STEP 4.2

It can be very costly for a low-income tenant whose rent is not calculated correctly. The most commonly missed deductions are for childcare and medical expenses.

• 142 U.S.C. § 1437j(d)(2).
• 2See Haywood v. Chi. Hous. Auth., 212 F. Supp. 3d 735 (N.D. Ill. 2016) (holding that an applicant had a private right of action to challenge a public housing authority’s determination that an applicant cannot fully deduct utility payments made to a third-party provider from the rent computation).

Childcare expenses may be deducted from a tenant’s annual income if the childcare is needed so that a member of the household can work. Even if there are other members of the household available to watch the child, this deduction can still be taken. Receipts or other documentation from the childcare provider may be requested. Check your local PHA’s administrative plan any documentation requirements.

For example, suppose that Mary is a public housing tenant making $800 per month at her minimum wage job. She lives in a unit where she does not pay for any of her own utilities. She has two children ages 3 and 6. She pays childcare expenses of $75 per week.

Rent computed without the childcare expense deduction:

Annual Income:	$800 x 12 =	$9,600
Minor Deductions:	$480 x 2 =	$960
Adjusted Income:	$9,600 - $960 =	$8,640
Adjusted Monthly Income (AMI):	$8,640 / 12 =	$720
Rent at 30% of AMI:	$720 x .30 =	$216

Rent computed with the childcare expense deduction saves Mary $97 per month:

Annual Income:	$800 x 12 =	$9,600
Minor Deductions:	$480 x 2 =	$960
Childcare Deductions:	$75 x 52 =	$3,900
Adjusted Income:	$9,600 - $960 - $3,900 =	$4,740
Adjusted Monthly Income (AMI):	$4,740 / 12 =	$395
Rent at 30% of AMI:	$395 x .30 =	$119

Families are eligible for a medical expense exclusion from their annual income, and a medical expense deduction from their adjusted annual income. It is important to remember the difference between these two provisions.

The exclusion states that money received specifically for, or in reimbursement of, medical expenses are excluded from annual income.1

After annual income is calculated, the medical expense deduction only applies if the annual expected medical expenses exceed 3% of the tenant’s annual income. The deduction is the difference between the expenses and 3% of the annual income.2  Note that on January 1, 2024 certain changes go into effect pursuant to the Housing Opportunity Through Modernization Act (HOTMA). 24 CFR 5.611 will be changed to raise the threshold for the medical expense deduction to 10%. This change will be phased in over time.

For example, suppose that Mary is a grandmother with disabilities raising two minor grandchildren in public housing. Her income is $862 per month in disability benefits. Over the next year, she projects to have unreimbursed medical expenses of approximately $200 per month for doctor co-pays, prescription copays, medical transportation, and health insurance (for which over $100 a month is often withheld from Social Security payments).

Rent computed without the medical expense deduction:

Annual Income:                                    $862 x 12 = $10,344

Disability Deduction:                           $400

Minor Deductions:                               $480 x 2 = $960

Adjusted Income:                                 $10,344 - $400 - $480 = $8984

Adjusted Monthly Income (AMI):    $5384/12 = $749

Rent at 30% of AMI:                            $449 x .30 = $225

Rent computed with the medical expense deduction:

Annual Income:                                   $862 x 12 = $10,344

Disability Deduction:                         $400

Minor Deductions:                             $480 x 2 = $960

Medical Expenses:                              $200 x 12 = $2400

3% of Gross Income:                          $10,344 x .03 = $310

Medical Deduction:                            $2400 - $310 = $2,090

Adjusted Income:                                $10,344 - $400 - $480 - $2,090 = $7,374

Adjusted Monthly Income (AMI):    $7,374/12 = $614.50  

Rent at 30% of AMI:                            $614.50 x .30 = $184.35

• 124 C.F.R. § 5.609(c)(4).
• 224 C.F.R. § 5.611(a)(3).

Changes to federal law now allow rents to be set at levels other than the traditional 30% of adjusted income. The law requires PHAs to impose minimum rents of up to $50 per month. Hardship exemptions are allowed; grounds include a household’s inability to pay the minimum rent due to a loss of government assistance, a household’s facing eviction due to an inability to pay the minimum rent, and other reasons as determined by the PHA.

PHAs are required to notify households of the possible exemptions and to suspend charging minimum rents to households that request an exemption. If there is long-term (i.e., over 90 days) hardship, an exemption should be granted. If the hardship is only temporary, the PHA should offer the tenant a reasonable repayment plan for any suspended rents or missed payments.1

PHAs can also opt to charge a rent based upon the “rental value” of the unit instead of the tenant’s income. This type of rent is called a “flat rent.” A tenant is given an annual choice to either pay a flat rent or an income-based rent. PHAs must advise tenants in writing of the amount of the income-based rent and the flat rent. If a flat rent is chosen and the resident has a loss of income, the resident can request a switch to income-based rent.2  Tenants paying a flat rent cannot receive a utility allowance.3

• 142 U.S.C. § 1437a(a)(3); 24 C.F.R. § 5.630.
• 224 C.F.R. § 960.253(f).
• 324 C.F.R. § 960.253.

A public housing tenant’s income is recertified annually at which time rent is also recalculated. If a tenant’s income changes between annual recertifications, the tenant typically must report this to the PHA within 10 days of the change. At that point an interim recertification may take place. If the change decreases the household income, the reduced rent becomes effective the next calendar month. So, if a decrease is reported in May, the new rent is effective in June. If the change increases household income, the change in rent becomes effective two months later. So, if the increase is reported in May, the new tenant portion is effective in July.

Public housing residents are currently entitled to an earned income disallowance (also known as an earned income disregard) in certain instances where they begin working after a year of functional unemployment. During the first year of having earned income, their income is completely excluded. During the second year, 50% of their earned income is excluded.1

Note that on January 1, 2024, certain changes go into effect pursuant to the Housing Opportunity Through Modernization Act (HOTMA). Under the new rules, PHAs are only required to conduct interim reexaminations if income change will cause the family’s adjusted annual income to increase or decrease by 10%. PHAs may not consider any increase in the earned income of a family between annual reexaminations, except that the PHA may establish a written policy allowing it to consider increases in earned income if the PHA has previously processed an interim reexamination for a decrease.2  Also note that the earned income disallowance described above is being phased out from 2024-2030 under HOTMA. The change will be reflected in the new version of 24 C.F.R. § 960.255 that takes effect January 1, 2024.

• 124 C.F.R. § 960.255.
• 224 C.F.R. § 960.257(b).