HUD Proposes Optional Work Requirements and Term Limits for Assisted Housing Residents

On March 2, 2026, the U.S. Department of Housing and Urban Development issued a notice of proposed rulemaking titled Establishing Flexibility for Implementation of Work Requirements and Term Limits (Docket No. FR-6520-P-01, RIN 2501-AE15). If approved, the rule would allow— but not require—Public Housing Agencies (PHAs) and certain multifamily housing owners to condition continued housing assistance on work activity or to set time limits on the duration households can receive assistance. The public comment period ends on May 1, 2026.

The proposal would amend 24 CFR Parts 5, 960, 982, and 983, and it represents one of the most significant proposed changes to the federal assisted housing framework in recent memory. Although adoption would be local and voluntary, the rule would reshape the operating environment for the entire HUD multifamily portfolio and the public housing and voucher systems.

Programs Covered

The proposed flexibilities would apply to four programs:

• The Public Housing program
• The Housing Choice Voucher (HCV) program
• The Project-Based Voucher (PBV) program
• The Project-Based Rental Assistance (PBRA) program under Section 8

HUD estimates that around 750 PHAs and 3,504 owners of HCV, PBV, and PBRA units would implement work requirements or term limits — or both — if the rule is adopted.

Certain special-purpose vouchers are explicitly exempt from both work requirements and term limits, including the HUD-VASH program (Veterans Affairs Supportive Housing), the Family Unification Program when used by youth, and the Foster Youth to Independence program. A PHA administering the HCV Homeownership program may also choose to exempt that program from term limits, due to the existing statutory cap on homeownership assistance and the risk of foreclosure if assistance ends too early.

The Low-Income Housing Tax Credit program is not covered by this rule. However, property owners who combine LIHTC with PBRA should be aware that decisions regarding Section 8 will directly affect resident retention, turnover costs, and compliance with tax credit occupancy rules.

Who May Be Subject to Work Requirements

The proposed rule introduces a new defined term, 'work-eligible,' which refers to a household member aged between 18 and 61, excluding:

• Persons with a disability as defined in 24 CFR 5.403, or the primary caretaker of such an individual;
• Pregnant individuals;
• Primary caretakers of a child under age six or of a temporarily incapacitated individual; and
• Full-time students enrolled in an institution of higher education (subject to a duration determined by the PHA or owner).

A PHA or owner may narrow the definition further — for example, by raising the minimum age or lowering the maximum age — but it cannot expand the age range beyond 18 to 61.

Work Requirement Mechanics

A PHA or owner that chooses to impose a work requirement may require work-eligible adults to engage in qualifying work activities for up to 40 hours per week as a condition for continued assistance. HUD has explicitly set 40 hours as a limit, matching the Fair Labor Standards Act standard for full-time employment. Providers can set a lower threshold.

Qualifying work activities largely mirror Section 407(d) of the Social Security Act and include:

• Unsubsidized employment, including self-employment;
• Subsidized private or public sector employment;
• On-the-job training and work experience;
• Job search and job readiness assistance;
• Community service programs;
• Vocational educational training;
• Education directly tied to employment, or secondary school attendance for those without a high school diploma or equivalent; and
• The provision of childcare to another individual participating in a community service program.

PHAs and owners can identify more qualifying activities. The requirement can be assessed at the individual or family level and may be enforced through annual reexamination or more frequent reporting. Providers will have significant flexibility in creating the verification method — HUD specifically invites comments on whether minimum verification standards should be set.

Term Limits

A PHA or owner that chooses to impose a term limit may end assistance after at least two years. The provider can set a longer period and may have different limits for various programs or locations to match local conditions.

Importantly, term limits must be implemented prospectively. Neither a PHA nor an owner can include the time a family received assistance before the effective date of the adopted policy. Elderly and disabled families are exempt, and a family that exits at a term limit can reapply and re-enter the waiting list.

When a family is within 12 months — and again within 6 months — of its term limit, the provider must send written notice within 30 days of the determination. This notice must include the termination date, the action to be taken, the hardship policy, and the right to a hearing.

Supportive Services Requirement

Any PHA or owner that implements a work requirement or sets a term limit must provide supportive services to assist families in preparation. These services can be delivered directly or through a partner organization and may include referrals to workforce development programs, childcare, transportation, education, job training and placement, financial literacy, substance use and mental health services, and case management.

Notably, HUD states that HCV administrative fees and PBRA project funds cannot be used to pay for supportive services. HUD has indicated that it will issue additional guidance on acceptable funding sources. This is a significant operational issue for owners considering adoption — the supportive services obligation is a regulatory requirement, but it carries no new funding.

Provider Eligibility and Procedural Requirements

Only a PHA that is not in receivership and not designated as a troubled performer under PHAS, SEMAP, or the Small Rural PHA Assessment may choose either flexibility. For PBRA owners, the property must not be in default of its HAP contract and must have a satisfactory Management and Occupancy Review.

Work requirement and term limit policies must be formally adopted and reflected in the PHA's Administrative Plan (for HCV/PBV), the Admissions and Continued Occupancy Policy (for Public Housing), or the owner's Tenant Selection Plan (for PBRA). PHA-level policies must go through the 24 CFR Part 903 process, including Resident Advisory Board review, a public hearing, and public comment. Before implementation, every affected family must receive at least three months' written notice.

All adopted policies must include a hardship policy with a grievance procedure and be applied consistently within a covered project, development, or voucher type.

HUD's Justification

HUD bases its proposal on the self-sufficiency and local flexibility requirements of the 1937 Housing Act. The preamble references Department data showing that in 2024, about 43 percent of non-elderly, non-disabled households (excluding single adults with young children) receiving HUD rental assistance had no income from wages. HUD also cites congressional testimony indicating that 81 percent of current public housing and voucher recipients, excluding the elderly and disabled, are expected to spend more than five years on assistance, with a significant portion likely to remain for over 15 years. The agency relies on the Moving to Work demonstration as its main evidence, highlighting employment and earnings improvements at MTW PHAs such as Charlotte, Champaign County, Chicago, and San Bernardino.

Practical Implications for Owners, Agents, and Investors

The proposal raises a set of immediate planning questions:

• For PBRA owners, the economics of turnover are crucial. Unit turn costs, potential vacancy loss, and the unfunded supportive services obligation make widespread adoption unlikely without a state mandate or local cost-sharing mechanism.
• For property owners with layered financing — especially PBRA/LIHTC combinations — decisions on adoption will directly influence compliance with tax credit continuous occupancy and next-available-unit rules, and may impact investor risk assessments regarding resyndication and exit.
• For management companies, any adopted policy must include updated tenant selection plans, lease riders, written hardship policies, verification protocols, staff training, and grievance procedures.
• For PHAs in states that have enacted or may enact work-requirement statutes (Arkansas and Wisconsin are specifically cited in the preamble), the rule is likely to resolve the current federal-state compliance tension and speed up adoption.

Comment Period and Next Steps

The public comment period ends on May 1, 2026. Comments can be submitted online at www.regulations.gov under Docket No. FR-6520-P-01 or sent by mail to the Regulations Division, Office of General Counsel, U.S. Department of Housing and Urban Development, 451 7th Street SW, Room 10276, Washington, DC 20410-0500.

Owners, syndicators, management agents, and state housing finance agencies with portfolios in the covered programs should review the proposal carefully and consider whether to submit formal comments — especially on the verification burden, the unfunded supportive services obligation, the three-month notice period, and how the term limits interact with layered compliance programs.

A.J. Johnson Consulting Services, Inc. will continue monitoring the rulemaking process and will publish additional analysis as the rule moves toward finalization.

A.J. Johnson Consulting Services, Inc. offers compliance consulting, training, file review, and opinion services across the entire range of federal affordable housing programs, including LIHTC, HUD multifamily, HOME, and USDA Rural Development. For questions about this proposed rule or to schedule a portfolio review, please contact the firm.