In HUD affordable rental housing programs, public housing agencies (PHAs) and Owner/Agents are required to include projected income from assets when determining a family’s Annual Income for eligibility and rent calculation. HUD has a special rule that must be applied 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.
Despite declining interest rates, HUD’s Office of Multifamily Housing used the same imputed interest rate (2%) for over 20 years. Finally, in October of 2014, HUD published Notice H 2014-15 acknowledging that the imputed interest rate did not reflect the then-current reality and adjusted it to 0.06% effective February 1, 2015 for all programs subject to HUD Handbook 4350.3 REV-1. HUD also announced its intention to tie the rate to the current passbook rate and stated that changes would be made on an annual basis. A second notice (H 2016-01) was published on January 19, 2016 announcing that the imputed interest rate would remain the same. Since then, no additional notices have been published. For the multifamily housing industry, the imputed interest rate, also known as the passbook rate, remains at 0.06%. (Note: HUD Handbook 4350.3 REV-1 has not been updated to reflect the change to 0.06%. The 4350.3 still lists the rate as 2.0%.)
Public Housing and Housing Choice Vouchers
For those who manage a Public Housing or a Housing Choice Voucher program, the applicable guidance is a little different. HUD’s Office of Public and Indian Housing published Notice PIH 2012-29 on June 21, 2012. This notice gives PHAs 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.
Currently the Savings National Rate is 0.09% so PHAs are allowed to use passbook rates from 0.0% to 0.84%.