Zero Income Households – Steps Recommended for Management

Zero income households are an area of both concern and irritation for affordable housing managers (such households can only exist in units that receive rental assistance). Applicants or existing households sometimes claim to have no income from any source. When this happens, managers have every right – in fact they have a duty – to be skeptical. During management reviews, HUD auditors take a very hard line on such households and carefully scrutinize such claims. If HUD determines that an owner/agent (O/A) has not been diligent in determining potential income, HUD may require that the owner reimburse the government for excess subsidy.

There are five important steps that should be taken by management anytime a household claims to have no income.

1. It is possible that a household may end up with a zero-income certification due to excluded income and/or deductions from gross income. Families may also have zero income for temporary periods. Many applicants will be totally unfamiliar with the HUD definition of income and may actually believe they have no income. It is the job of a professional housing manager to inform all applicants that all income must be reported, and to provide examples of what counts as income. Exhibit 5-1 of HUD Handbook 4350.3 may be used in providing such examples. Applicants should be informed of all income that may be included for HUD purposes. However, I do not recommend reviewing the list of excluded income with applicants. Require that they provide all sources of income, and then decide what types of income may be excluded. It is especially important to remind prospects that money other than employment must be counted, including government benefits and family gifts.
2. Ask members how they plan to make ends meet – how will they survive from day-to-day?
   1. How will expenses such as food, transportation, and toiletries be covered? Remind them that food stamps provide only food and are not accepted for other necessary items of daily living. Even doing this will not keep some households from claiming no income. They may claim to get gifts on an as-needed basis from friends and family.
   2. In this case, managers should complete a current expense analysis in a spreadsheet.
   3. Require that the household list all current expenses, determine the status of each expense, and compare this to the reported income. Any discrepancies must be resolved.
3. Send verification forms to government agencies. Have a policy that requires that these additional levels of verification be requested for all households reporting zero income and explain this policy to the applicant.
   1. This policy should require that no-income claims be verified with several agencies, including the Social Security Administration and local welfare agencies, including child support agencies.
   2. Management should maintain a list of the most common sources of government payments and use that list to collect information on any adult household member who claims no income.
   3. To avoid discrimination claims, make sure verification forms are sent to each agency for anyone claiming no income.
4. If no income is found, and if the property is federally assisted (e.g., HUD or Rural Development), perform a re-interview of the household at least every 90-days.
   1. A court case (Thompson v. Housing & Redevelopment Authority of Duluth, October 2013) upheld the right of an owner to conduct monthly recertification meetings of a zero-income household.
      1. The housing authority had approved the resident’s application and issued a voucher, subject to its rule that voucher recipients claiming no income must appear in person each month to recertify their zero income status.
      2. The resident repeatedly failed to appear at monthly recertification meetings, requested many schedule changes, failed to appear at rescheduled meetings, and attempted to recertify by mail. The resident had argued that the monthly meetings were an “impossible burden.”

• The court stated that the fact that the resident appeared in person on two occasions demonstrated that doing so was not “impossible” in a legal sense. The court indicated that while the burden may have been “heavy,” it was not impossible, and therefore the decision to terminate the resident’s voucher was not arbitrary.

1. The court also stated that accurate reporting of financial data is a legitimate objective of federal housing policy.
2. The housing authority argued that in-person interviews may enhance accuracy because a recipient is less likely to lie when face-to-face with a housing authority representative and because the representative can ask follow up questions to test the recipients veracity and credibility.

5. Require household members to sign affidavits certifying that they are not employed and have no income, including a statement regarding how household expenses are met.
   1. This statement should be made under penalty of perjury.

Finally, remember to keep a record of all actions taken during the interview process, and be able to show that the procedures are applied consistently to all applicants reporting zero income.