How to Properly Apply the HUD Minimum Rent Requirements

Owners participating in HUD Multifamily Housing Programs (MFH) are sometimes unsure of exactly how to apply HUD’s minimum rent rules. HUD occupancy regulations require all households (except those with hardship exemptions) to pay a monthly rent of at least $25 [HUD Handbook 4350.3, par. 5-26(D)]. The minimum rent does not apply to Section 202 PAC, Section 202 PRAC, Section 811 PRAC, RAP, Rent Supplement, Section 221(d)(3) BMIR, or the Section 236 program.

            When implementing the minimum rent rule, there are four basic requirements that owners must follow:

  1. Deduct the utility allowance (UA) from the minimum rent. The “minimum rent” is the “total tenant payment,” which is rent plus the UA [4350.3, par. 5-26(D)(2)]. For example, assume a UA for a two-bedroom unit of $100. 30% of the resident’s adjusted income is $15.  The minimum rent is $25. $25 minus $100 = $75; the owner will send a utility reimbursement check of $75 to the tenant.
  2. Do not impose a minimum rent if a household is eligible for a hardship exemption. Households qualify for the exemption if they have a “financial hardship.” 4350.3, par. 5-26(D)(3) states that a household qualifies for the exemption if they “would be evicted if the minimum rent requirement was imposed.” Any household that cannot afford the minimum rent – for any reason – could be evicted. So, any household that cannot pay the minimum rent is exempt. HUD rules provide four specific circumstances for the exemption:
    1. The household lost eligibility for – or is awaiting an eligibility determination for – a federal, state, or local assistance program;
    2. The household would be evicted if the minimum rent was imposed;
    3. The household’s income has decreased because of changed circumstances, including the loss of employment; or
    4. A death has occurred in the household.
  3. Households may not be evicted while the request for a hardship exemption is being considered. During this period of time, the minimum rent must be suspended. If a hardship is temporary, the household is exempt from minimum rent for 90-days but will have to repay the back rent. At the end of the 90-day period, the household must pay the minimum rent, retroactive to the initial date of the suspension [4350.3, par. 5-26(D)(3)(b)(2)].

Only households subject to minimum rent are eligible for hardship exemptions. Other households unable to pay rent due to income reductions should request an interim recertification.