HUD Provides Guidance on Non-Rent Fees for Subsidized Multifamily Housing Programs

In February 2024, the Department of Housing and Urban Development (HUD) provided guidance on existing policies regarding the fees that owners may and may not charge tenants. None of the guidance is new or reflects any change in HUD regulations. The purpose of the guidance is twofold: (1) to remind owners of the current requirements relative to fees and (2) to seek input from stakeholders on any possible changes to the requirements.

Following is an overview of existing HUD policy regarding fees in addition to rent.

• Application Fees: Owners may not require fees or other costs to accept and process applications. These costs are considered project expenses.
• Charges at Initial Occupancy: Owners may not collect any money from tenants at initial occupancy other than rent and the maximum HUD-allowed security deposit unless they receive HUD approval to do otherwise.
• Pet Deposit: An owner of housing specifically designed for occupancy by the elderly and persons with disabilities may require tenants to pay a refundable pet deposit. The pet deposit applies only to tenants who own or keep cats or dogs in their units. HUD Handbook 4350.3 outlines the maximum amount of the pet deposit that may be charged by an owner on a per-unit basis.
  • An owner may use the pet deposit only to pay reasonable expenses directly attributable to the pet’s presence on the property, including (but not limited to) the cost of repairs and replacements to, and fumigation of, the unit and the cost of animal care facilities. Owners must return the unused portion of a pet deposit to the tenant within a reasonable time after the tenant moves from the property or no longer owns or keeps a pet in the unit.
• Screening Fees: Owners may not charge applicants for costs associated with screening applicants, including screening for criminal history or verifying income and eligibility. Hence, owners must not require applicants to pay credit report charges, charges for home visits, charges to obtain police reports or other costs associated with the above functions. These costs are considered project expenses.
• Security Deposit: Owners may collect a security deposit during the initial lease execution. However, the owner must collect a refundable security deposit at the time of the initial lease execution for the following programs:
  • Section 8 New Construction with an AHAP executed on or after November 5, 1979;
  • Section 8 Substantial Rehabilitation with an AHAP executed on or after February 20, 1980;
  • Section 8 State Agency with an AHAP executed on or after February 29, 1980;
  • Section 202/8;
  • Section 202 PAC;
  • Section 202 PRAC; and
  • Section 811 PRAC.

Owners may collect the security deposit on an installment basis. The security deposit amount established at move-in does not change when a tenant’s rent changes. The amount of the security deposit to be collected is dependent upon:

1. The type of housing program;
2. The date the AHAP or HAP contract for the unit was signed and
3. The amount of the total tenant payment or tenant rent.

The HUD Handbook 4350.3, Figure 6-7, outlines the security deposit amount that may be collected for each program.

When a tenant transfers to a new unit, an owner may:

1. Transfer the security deposit, or
2. Charge a new deposit and refund the deposit for the old unit.

1. Assistance Animals: Owners may not require an applicant or tenant to pay a fee or a security deposit as a condition of allowing the applicant or tenant to keep an assistance animal. However, if an assistance animal causes damage to the unit or common areas of the dwelling, the owner may charge the individual for the cost of repairing the damage if the owner regularly charges tenants for any damage they cause to the premises.
2. Attorney/Legal Costs: There may be no lease provision that the tenant agrees to pay all attorney and other legal costs if the owner brings legal action against the tenant, even if the tenant prevails.  However, as a party to a lawsuit, a tenant may be obligated to pay attorney’s fees or other costs if the tenant loses the suit.
   1. Owners may accept payment of court filing, attorney, and sheriff fees from tenants who wish to avoid or settle an eviction suit provided it is permitted under state and local laws, and the fees appear reasonable and do not exceed the actual costs incurred.
3. Bad Behavior: Owners may not charge tenants for bad behavior, such as foul language, noise, or failure to supervise children.
4. Checks Returned for Insufficient Funds: Owners may impose a fee on the second time, and each additional time thereafter, a check is not honored for payment. The owner may bill a tenant only for the amount the bank charges for processing the returned check.
   1. HUD or a Contract Administrator (CA) may authorize additional charges if such charges are consistent with local management practices and are permitted under state and local law.
   1. Owners of Section 202/8, Section 202 PAC, Section 202 PRAC, and Section 811 PRAC projects may never charge fees for checks returns for insufficient funds.
5. Damages: Whenever damage is caused by carelessness, misuse, or neglect by the tenant, household member, or visitor, the tenant is obligated to reimburse the owner within 30 days of receiving a bill from the owner. The owner’s bill is limited to actual and reasonable costs incurred by the owner for repairing the damages.
6. Facilities & Services: Owners may not charge tenants separately for equipment and services included in the rent. Owners may charge tenants for other services or facilities (e.g., cable TV or use of community space in the project) only if all of the following conditions are met:
   1. Part C of the most recently approved rent schedule includes the services, facilities, and charges.
   1. A schedule of those charges has been posted or distributed to the tenants.
   1. The tenant can use those facilities or services if they are optional.
   1. If not previously authorized, the charges must be approved by HUD before implementation.

Owners may charge for parking only in unsubsidized projects where HUD previously approved it. They may also charge for car heaters in cold climates where parking spaces are equipped with them.

• Infestation Treatment: Owners may not charge a tenant for the extermination cost unless the owner can demonstrate that the tenant’s carelessness or neglect caused the infestation.
• Keys & Lockouts: Owners may charge tenants for answering lock-out calls and providing extra keys. At the time of move-out, the owner may charge the tenant for unreturned keys.
• Late Payment of Rent: Owners may charge a late fee if the tenant has been given at least five calendar days as a grace period to pay the rent. The rent must be received by the fifth day, not postmarked on that day. On the sixth day, the owner may charge a fee not to exceed $5.00 for the period of the first through fifth day that the rent is not paid. After that, the owner may charge a fee of $1.00 per day for each additional day the rent remains unpaid for the month.
  • HUD or CAs may approve a higher initial late fee if (1) it is permitted under state and local laws, (2) it is consistent with local management practices, and (3) the total late charge assessed for the month does not exceed $30.00.

An owner may deduct accrued, unpaid late charges from the security deposit at the time of move-out if such a deduction is permitted under state and local laws. An owner may not evict a tenant for failure to pay late charges.

Owners of Section 202/8, Section 202 PAC, Section 202 PRAC, and Section 811 PRAC projects may never charge late rent payment fees.

• Meals Fee: Owners of properties for the elderly or persons with disabilities for which HUD approved a mandatory meals program before April 1, 1987, may charge a HUD-approved meals fee. The tenants pay such costs, and the fees are not rent.
• Meeting Space for Tenant Organizations: An owner may charge a reasonable fee, approved by HUD, as may normally be imposed for using such facilities in accordance with procedures prescribed by HUD for the use of meeting space.
• Other Charges: Owners may require tenants to pay other charges if:
  • HUD or CA has approved the charges, and
  • The schedule of charges is either:
    • Listed in the lease agreement or
    • Has been distributed to all tenants in accordance with the modification of the lease requirements and procedures listed in paragraph 6-12D of Handbook 4350.3.

HUD’s Office of Multifamily Housing Programs is seeking feedback from stakeholders regarding these policies. Owners and Agents of affected programs may provide comments and feedback to HUD at AssetManagementPolicy@HUD.gov. Responses are due by March 29, 2024.