Beatrice Lang
The Section 8 Housing Choice Voucher program provides participants with a utility allowance (UA) to offset tenant-paid utility costs. This includes electricity, natural gas, water, and sewer. Fair Market Rents (FMRs) are used to determine the maximum rental rate that can be agreed upon in a lease document, and they include all major utilities, such as electricity. The Housing and Urban Development Act of 1970 introduced federal programs to address the high percentage of income spent on housing by moderate-income households, which led to the creation of Section 8.
Section 8 Housing Choice Voucher Program
| Characteristics | Values |
|---|---|
| Purpose | To provide participants with a utility allowance (UA) to offset tenant-paid utility costs |
| Utilities Included | Electric, natural gas, water/sewer, etc. |
| Calculation | The amount of contract rent requested for a unit and utility allowance are added together and cannot exceed the Payment Standard for the applicable bedroom size of the voucher |
| Fair Market Rents (FMRs) | Amounts (rents plus utilities) for medium-quality apartments of different sizes in a particular community |
| FMR Calculation | Based on a standard quality rent from the five-year American Community Survey and a recent mover adjustment |
| FMR Adjustments | CPI adjustment and a trend factor adjustment (HUD's expected rental rate growth) |
| Included in FMRs | Major utilities (heat, electricity, etc.), but excludes telephone, cable, satellite television, and internet service |
| Excluded from FMRs | Telephone, cable, satellite television, and internet service |
| Landlord Participation | Voluntary in most areas, but some states prohibit source-of-income discrimination, including against Section 8 voucher holders |
| Voucher Amounts | Vary depending on city or county, size of unit, and other factors |
| Voucher Recipient Timeline | Typically, two to four months to secure housing that meets HUD standards; otherwise, vouchers are lost, and reapplication is required |
| Wait Lists | Can range from 10 to 20 years, with many local programs closed to new applicants |
| Voucher Amount Basis | Fair Market Rents (FMRs) set by HUD |
| Small Area Fair Market Rents (SAFMRs) | A recent program that refines FMR calculations to the zip code level in major metropolitan areas |
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What You'll Learn
Utility allowance (UA)
If utilities are not included in the rent but the tenant is responsible for paying them, a utility allowance for reasonable consumption must be deducted from the rent. This allowance is intended to cover the reasonable cost of utility consumption. If the cost of utilities is less than the permitted monthly rental amount, the rent must be reduced by the cost of utilities. On the other hand, if the cost of utilities is greater than the permitted monthly rental amount, the household should receive a utilities reimbursement.
CoC recipients must use their local Public Housing Authority’s (PHA) schedule of utility allowances. The PHA determines the schedule of allowances based on the reasonable cost of utilities in the area. This schedule is used to calculate the utility allowance for each tenant.
Tenants who are responsible for paying their utilities are eligible to receive a utility allowance. If the tenant's rent contribution or maximum occupancy charge amount is less than the utility allowance, the landlord must provide a utility reimbursement to the tenant. This ensures that tenants are not burdened with excessive utility costs.
It is important to note that telephone, internet, and cable television are not considered eligible utilities for the allowance. Only essential utilities such as electricity, gas, water, and sewer are typically included in the utility allowance calculation. The specific utilities included may vary depending on local regulations and the PHA's guidelines.
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Fair Market Rents (FMRs)
FMRs serve as a reference for determining payment standards in rental assistance programs. The Public Housing Agency (PHA) sets a payment standard that falls between 90% and 110% of the FMR. For tenants receiving housing vouchers, they are generally required to contribute 30% of their monthly adjusted gross income towards rent and utilities. If the unit rent exceeds the payment standard, the tenant is responsible for covering the additional amount.
FMRs are calculated for specific geographic areas, including metropolitan areas and their ZIP Codes. In certain designated areas, Small Area Fair Market Rents (SAFMRs) are used to set Section 8 Housing Choice Voucher payment standards. SAFMRs provide a more localized calculation, ensuring that rental assistance amounts reflect the specific market conditions within a metropolitan area.
The Department of the Treasury's Emergency Rental Assistance Program utilizes FMRs as a payment guideline. Grantees can receive assistance up to the maximum applicable FMR or SAFMR, even if they do not have documentation of their actual rent paid. This ensures that households can access support to meet their rental payment obligations, promoting housing stability and accessibility.
FMRs are an essential tool for ensuring equity in the rental market and providing assistance to those who need it. By regularly updating FMRs based on current market data, HUD strives to keep rental assistance programs responsive to changing market conditions, benefiting both tenants and landlords. FMRs play a crucial role in promoting fair and accessible housing opportunities for individuals and families across the country.
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Housing and Urban Development Act of 1970
The Housing and Urban Development Act of 1970 was enacted against a backdrop of civil unrest and a push for greater funding and support for urban areas. The Act built on the Housing and Urban Development Act of 1968, which had provided significant funding for public housing and encouraged new forms of public housing design. The 1970 Act introduced the federal Experimental Housing Allowance Program (EHAP) and the Community Development Corporation, and it authorized larger outlays for housing subsidy programs and rent supplements for moderate-income households.
The 1970 Act is also notable for its role in the creation of the Section 8 Program, which aims to increase housing choices for very low-income households by making privately-owned rental housing more affordable. Under Section 8, tenants typically pay about 30% of their income for rent, with the remainder subsidized by federal funds. The program initially included three subprograms: New Construction, Substantial Rehabilitation, and the Existing Housing Certificate Program. Over time, additional subprograms were introduced, including the Moderate Rehabilitation Program in 1978, the Voucher Program in 1983, and the Project-based Certificate Program in 1991.
The number of units a local housing authority can subsidize under Section 8 is determined by Congressional funding. Housing authorities select eligible families from their waiting lists, place them in housing from a master list of available units, and determine the rent tenants will pay. The housing authority then signs a lease with the private landlord and covers the difference between the tenant's rent and the market rate for a similar-sized unit.
The Section 8 Program has been subject to various rules and amendments over the years. For example, housing authorities are responsible for performing regular building maintenance and leasing functions, as well as annually reviewing tenants' incomes to determine eligibility and rent calculations. While Section 8 has faced challenges, such as long waiting lists and closed applications in some localities, it remains a crucial program for providing housing assistance to low-income families.
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Asset test
Section 8 is a federal housing program designed to help low-income households afford rent. While the program does not limit your assets, it does consider any income generated by those assets when determining eligibility and rent amounts. This includes “imputed income from assets”, where HUD may add income even if the tenant does not receive interest income, such as from a bank account. This is calculated using HUD's "Passbook Savings Rate".
There is, however, an asset test for new applicants seeking rental assistance for the first time. The Housing Opportunity Through Modernization Act (HOTMA) established asset limits of $100,000 in net household assets and/or ownership of real property suitable for residence. Multifamily owners and PHAs have the discretion not to enforce these limits during a resident's annual or interim re-examination, with options for total non-enforcement, full enforcement, limited enforcement, or exception policies.
It's important to note that Section 8 renters tend to stay for longer periods, and the program involves extensive inspections and bureaucracy. The rent amount is determined based on a tenant's income, with landlords receiving a payment from the government to cover a portion of the rent, typically about 70%. Fair Market Rents (FMRs) dictate the maximum rental rate and include major utilities like electricity but exclude telephone, cable, and internet services.
Additionally, lump-sum payments, such as lottery winnings or inheritances, can be considered assets if deposited into a bank account or invested, as they would generate interest income. In such cases, if the total assets are $5,000 or more, HUD will compare this amount to the annual income and determine eligibility and rent based on the greater value.
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Payment Standard
The payment standard for Section 8 vouchers is based on Fair Market Rents (FMRs), which are determined by the US Department of Housing and Urban Development (HUD). FMRs refer to the maximum rental rates that landlords can charge for Section 8 units, including all major utilities such as heat and electricity. These rates are calculated using data from the five-year American Community Survey, recent mover adjustments, CPI adjustments, and trend factor adjustments, which account for expected rental rate growth.
The FMRs serve as a reference for setting the payment standard for Section 8 vouchers. The specific payment standard may vary depending on the city or county, size of the unit, and other factors. The Housing Authority calculates the payment standard by adding the contract rent requested for a unit to the utility allowance. This total amount must not exceed the payment standard for the corresponding bedroom size of the voucher.
The utility allowance provided under the Section 8 Housing Choice Voucher program helps offset tenant-paid utility costs, including electricity, natural gas, and water/sewer. By including utilities in the calculation of housing assistance, the payment standard aims to ensure that tenants can afford the total cost of renting a unit.
It's important to note that landlord participation in the Section 8 program is voluntary in most areas. However, some states and municipalities have laws prohibiting source-of-income discrimination, including against individuals using Section 8 vouchers. Voucher recipients typically have a limited time frame, such as two to four months, to find suitable housing that meets HUD standards.
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Frequently asked questions
Section 8 is a housing voucher program that provides rental assistance to low-income individuals and families.
The Section 8 voucher program covers the difference between the tenant's rent and the market rate for a similar-sized unit. It also includes a utility allowance to offset tenant-paid utility costs such as electricity, natural gas, and water/sewer.
FMRs are calculated based on gross rental rates for medium-quality apartments of different sizes in a particular community. They include all major utilities, such as heat and electricity, but exclude telephone, cable, satellite television, and internet service.
You can apply for a Section 8 voucher through your local Public Housing Agency (PHA). The application process may vary depending on your location, and there may be wait lists for vouchers. It is important to contact your local PHA for specific information on the application process and requirements.
