Understanding Income Determination Methods in the HOME Program
The new final HOME regulation maintains specific income targeting requirements that necessitate accurate income determination for participating families. This article outlines the various methods and requirements for determining annual income under the HOME program’s final regulation, effective February 5, 2025.
Federal and State Subsidized Housing Units
For HOME-assisted rental units that receive Federal or State project-based rental subsidies, participating jurisdictions must defer to the existing income determination processes:
- The public housing agency’s determination
- The owner’s determination
- The rental subsidy provider’s determination
Tenant-Based Rental Assistance
When families receive Federal tenant-based rental assistance (such as housing choice vouchers) and apply for or live in HOME-assisted rental units, participating jurisdictions can (but are not required to) accept the rental assistance provider’s income determination.
Standard Income Determination Methods
Participating jurisdictions must follow specific procedures for calculating annual and adjusted income for all other cases. The process includes several key components:
Documentation Requirements
For tenants in HOME-assisted housing without HOME tenant-based rental assistance, jurisdictions can use any of these methods:
- Examining at least two months of source documents (wage statements, interest statements, unemployment compensation statements). This method must be used to determine initial income. This method is also required every sixth year of the affordability period if the affordability period is ten years or more. In intervening years, the following methods may be used:
- Obtaining a written statement from the family regarding income and family size, with a certification of accuracy
- Securing a written statement from a government program administrator that verifies the family’s annual income and size
Jurisdictions must examine at least two months of source documentation for homeowners receiving rehabilitation assistance, homebuyers, and recipients of HOME tenant-based rental assistance.
Income Definitions
Participating jurisdictions must choose one of two definitions when determining income eligibility:
- Annual income as defined in §§ 5.609(a) and (b). This is the Section 8 definition of income and will be used by most PJs.
- Adjusted gross income as defined by IRS Form 1040 series
Important note: Jurisdictions must maintain consistency by using only one definition per HOME-assisted program or rental housing project.
Income Calculation Considerations
Family Composition and Income Projection
When calculating family income, jurisdictions must:
- Project the prevailing rate of income at the time of eligibility determination.
- Include income from all household members except live-in aides and foster children/adults.
- Exclude income derived from the HOME-assisted project.
- Allow families to certify net family assets below the threshold for imputing income ($51,600 in 2025).
Timing Requirements
Income determinations are valid for six months. If more than six months elapse between the initial determination and the provision of HOME assistance, family income must be reexamined. Note how this timeframe differs from most other programs, which limit the age of income verifications to 120 days.
Adjusted Income Calculations
Participating jurisdictions must calculate adjusted income in three specific scenarios:
- For families receiving tenant-based rental assistance
- For tenants living in Low HOME Rent units subject to particular provisions.
- For over-income tenants requiring rent recalculation
Special Considerations
Participating jurisdictions are not required to calculate adjusted income independently for units assisted by federal or state project-based rental subsidy programs. Instead, they should accept the determination made by the public housing agency, owner, or rental subsidy provider under that program’s rules.
This comprehensive framework ensures consistent and accurate income determination across HOME program participants while providing flexibility to accommodate various housing assistance scenarios.
Special Requirements for Small-Scale Rental Housing
A small-scale rental project is a rental housing project comprising no more than four units. This includes single and scattered projects, as long as the total number of units does not exceed four. The definition is intended to provide flexibility and reduce administrative burdens for smaller rental housing developments while ensuring compliance with HOME program requirements.
For small-scale housing, the final rule provides exceptions to the requirement for annual re-examinations of tenant income. Instead of annual re-examinations, tenant income must be re-examined according to the following schedule:
- Initial income determination must be conducted using source documents or a written statement from a government administrator.
- Triennial income re-examinations: Tenant income must be re-examined every three years during the affordability period.
- Sixth-year re-examination: A complete income re-examination using source documents must be conducted every sixth year of the affordability period.
- Additional re-examinations for projects with longer affordability periods:
- Year 9: For projects with a period of affordability greater than 5 years.
- Year 12: For projects with a period of affordability greater than 10 years.
- Year 15: For projects with a period of affordability of 20 years.
- Year 18: For projects with a period of affordability of 20 years.
These exceptions aim to reduce the administrative burden on participating jurisdictions and owners while ensuring compliance with HOME program requirements.