Use of HUD Handbook for Calculating Household Income

Q My company has used Section 4350.3 of the HUD Handbook to calculate household income at the Section 8 sites we manage. We’re about to start managing our first tax credit sites. Should we also use the Handbook to calculate household income at these sites?

A Yes. Even though HUD doesn’t administer the tax credit program, the tax credit law requires owners and managers to use the HUD Handbook 4350.3 for calculating household income at a tax credit site. Although the Handbook contains nine chapters, all you need to familiarize yourself with are parts of Chapters 2, 3, and 5. These sections deal with keeping units open to the general public and calculating and verifying household income.

Chapter 2 (Civil Rights and Nondiscrimination Requirements). The tax credit rules make clear that if any units at your site aren’t “for use by the general public,” those units aren’t eligible for tax credits. To comply, your units must be “rented in a manner consistent with housing policy governing non-discrimination, as evidenced by…the HUD Handbook.” You can find this policy in Chapter 2 of the Handbook.

Section 1 of this chapter gives an overview of key civil rights laws—such as the Age Discrimination Act of 1975—that might apply to your tax credit site. Section 2 outlines the Fair Housing Act’s (FHA) nondiscrimination requirements. Section 3 says what you must do to make your site accessible under both the FHA and Section 504 of the Rehabilitation Act of 1973. Section 504 applies to tax credit sites only if they get federal funding, which means that much of the material in Section 3 of this chapter might not apply to your site. Finally, Section 4 states your responsibilities if you get a discrimination complaint and alerts you to HUD’s right to conduct compliance reviews.

Chapter 3 (Eligibility for Assistance and Occupancy). You must follow Paragraph 3-6(E) (Income Limits and Family Size), which details who must be counted as members of your low-income households. You must also follow the requirement that all adult household members sign forms authorizing you to verify their incomes [Handbook 4350.3, par. 3-11(A)(2)]. The rest of this chapter doesn’t apply to tax credit sites.

Chapter 5 (Determining Income and Calculating Rent). Sections 1 and 3 of this chapter set out the rules you must follow for calculating and verifying income. But you should ignore the references to allowable deductions that appear in these sections. You must also consult Appendix 3 (Acceptable Forms of Verification), and Exhibits 5-1 (Income Inclusions and Exclusions) and 5-2 (Assets).

You can ignore Sections 2 and 4 of this chapter. Section 2 doesn’t apply because it concerns adjusted income, which doesn’t come into play when calculating household income at tax credit sites. Section 4 gives rent calculation rules that don’t apply to tax credit sites. Although you must charge low-income households at your tax credit site restricted rents, the tax credit program has its own rules you must follow for determining the correct rent.