When projecting Annual Income to determine eligibility and tenant rent for the HUD affordable housing programs, PHAs and Owner/Agents must consider imputed income from the assets when the combined total of all family assets exceeds $5,000.
The rule states:
When net family assets are more than $5,000, annual income includes the greater of the following:
- Actual income from assets; or
- A percentage of the value of family assets based on the current passbook savings rate as established by HUD. This is called imputed income from assets.
HUD Handbook 4350.3 REV-1 Par. 5-7F. pg. 5-27
The actual interest rate used differs depending on whether your housing program falls under HUD’s Office of Multifamily Housing (MF) or Office of Public and Indian Housing (PIH).
Office of Multifamily Housing
Despite declining interest rates, HUD’s Office of Multifamily Housing had used the same imputed interest rate (2%) for over 20 years. Notice H 2014-15 changed that by announcing a new rate of 0.06% effective February 1st, 2015 for all programs subject to the HUD Handbook 4350.3 REV-1. This notice also announced that the Office of Multifamily Housing would begin tying the rate to the national average passbook savings rate provided by the Federal Deposit Insurance Corporation (FDIC)* and that the rate would be updated annually through the issuance of a HUD Housing Notice.
*Note: The FDIC calculates this rate on a weekly basis by simply averaging the rates used by U.S. depository institutions.
A second notice (H 2016-01) was published on January 19, 2016 announcing that the imputed interest rate would remain the same; however, since then no further action has been taken to update the rate. For the Multifamily Housing Industry, the imputed interest rate, also known as passbook rate, remains at 0.06%.
Note that the HUD Handbook 4350.3 REV-1 has not been updated to reflect the 2015 change. Par. 5-7F, pg. 5-27 still lists the rate at 2.0% but be careful to use the correct rate of 0.06%, unless it is changed by a future HUD Notice.
Office of Public and Indian Housing
Programs that fall under the Office of Public and Indian Housing use different guidance. According to Notice PIH 2012-29, published on June 21, 2012, Public Housing Agencies have the authority to set their own imputed interest (passbook) rate as long as it meets the following criteria:
- The passbook rate must be within 75 basis points (plus or minus .75 percent) of the Savings National Rate in effect at the time the PHA establishes the passbook rate.
- The PHA should review its passbook rate at least annually to determine if it is still within the appropriate range.
As of March 1, 2021, the Savings National Rate is 0.05% so PHAs are allowed to use passbook rates from 0.0% to 0.80%. It is important to note that this is a decrease in the rate which has been as high as 0.09% in recent years. PHAs who maximize their rate need to evaluate it annually to be sure they are not out of compliance. NCHM recommends keeping documentation in your files showing when you evaluated and set the rate to prove that it met the requirements when it was set. In other words, you are under no obligation to reduce the rate to meet the requirement if you evaluated it within the most recent 12 months.
To obtain the current rate and the history of the rate, please visit: https://www.fdic.gov/regulations/resources/rates/
If you are one of many PHAs that are using the Rental Assistance Demonstration Program (RAD) to convert your Public Housing units to either Project-Based Vouchers (PBV) or Project-Based Rental Assistance (PBRA), be mindful that PBV falls under the Office of Public and Indian Housing and PBRA falls under the Office of Multifamily Housing. If you are converting Public Housing to PBRA, you will now need to use the Multifamily Imputed Interest Rate of 0.06%.