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Notice Listings on Phase-In of Flat Rents

Notice Section 1.6.C PBV Resident Rights and Participation

Notice Section 1.7.B PBRA Resident Rights and Participants

Notice Section 1.6.C.3 Phase-in of Tenant Rent Increases

Phase-in of Tenant Rent Increases. If, purely as a result of conversion, the amount a tenant would pay for rent and utilities under the PBV program (the tenant’s TTP) would increase the tenant's TTP by more than the greater of 10 percent or $25, the rent increase will be phased in over 3 or 5 years. To implement this provision, HUD is specifying alternative requirements for section 3(a)(1) of the Act, as well as 24 CFR § 983.3 (definition of “total tenant payment” (TTP)) to the extent necessary to allow for the phase-in of tenant rent increases. A PHA must create a policy setting the length of the phase-in period at three years, five years or a combination depending on circumstances and must communicate such policy in writing to affected residents. For example, a PHA may create a policy that uses a three year phase- in for smaller increases in rent and a five year phase-in for larger increases in rent. This policy must be in place at conversion and may not be modified after conversion.

The method described below explains the set percentage-based phase-in a Project Owner must follow according to the phase-in period established. For purposes of this section “Calculated PBV TTP” refers to the TTP calculated in accordance with regulations at 24 CFR §5.628 and the “most recently paid TTP” refers to the TTP recorded on line 9j of the family’s most recent HUD Form 50058. If a family in a project converting from Public Housing to PBV was paying a flat rent immediately prior to conversion, the PHA should use the flat rent amount to calculate the phase-in amount for Year 1 (the first recertification following conversion), as illustrated below.

Three Year Phase-in:
- Year 1: Any recertification (interim or annual) performed prior to the second annual recertification after conversion – 33% of difference between most recently paid TTP or flat rent and the Calculated PBV TTP
- Year 2: Year 2 Annual Recertification (AR) and any Interim Recertification (IR) prior to Year 3 AR – 50% of difference between most recently paid TTP and the Calculated PBV TTP
- Year 3: Year 3 AR and all subsequent recertifications – Full Calculated PBV TTP⁵²
Five Year Phase in:
- Year 1: Any recertification (interim or annual) performed prior to the second annual recertification after conversion – 20% of difference between most recently paid TTP or flat rent and the Calculated PBV TTP
- Year 2: Year 2 AR and any IR prior to Year 3 AR – 25% of difference between most recently paid TTP and the Calculated PBV TTP
- Year 3: Year 3 AR and any IR prior to Year 4 AR – 33% of difference between most recently paid TTP and the Calculated PBV TTP
- Year 4: Year 4 AR and any IR prior to Year 5 AR – 50% of difference between most recently paid TTP and the Calculated PBV TTP
- Year 5 AR and all subsequent recertifications – Full Calculated PBV TTP

Notice Section 1.7.B.3 Phase-in of Tenant Rent Increases

Phase-in of Tenant Rent Increases. If, purely as a result of conversion, the amount a tenant would pay for rent and utilities under the PBRA program (the tenant's TTP) would increase the tenant's TTP by more than the greater of 10 percent or $25, the rent increase will be phased in over 3 or 5 years. Eligibility for the phase-in is to be determined at the Initial Certification which occurs at the time the household is converted to PBRA. A phase-in must not be applied after the household’s Initial Certification. To implement the phase-in, HUD is specifying alternative requirements for section 3(a)(1) of the Act, as well as 24 CFR § 880.201 (definition of “total tenant payment” (TTP)) to the extent necessary to allow for the phase-in of tenant rent increases. A PHA must create a policy setting the length of the phase-in period at three years, five years, or a combination depending on circumstances and must communicate such policy in writing to affected residents. For example, a PHA may create a policy that uses a three year phase-in for smaller increases in rent and a five year phase-in for larger increases in rent. This policy must be in place at conversion and may not be modified after conversion.
The method described below explains the set percentage-based phase-in a Project Owner must follow according to the phase-in period established. For purposes of this section “Calculated Multifamily TTP” refers to the TTP calculated in accordance with regulations at 24 CFR § 5.628 (not capped at Gross Rent) and the “most recently paid TTP” refers to the TTP recorded on the family’s most recent HUD Form 50059. If a family in a project converting from Public Housing to PBRA was paying a flat rent immediately prior to conversion, the PHA should use the flat rent amount to calculate the phase-in amount for Year 1, as illustrated below.

Three Year Phase-in:
- Year 1: Any recertification (interim or annual) performed prior to the second annual recertification after conversion – 33% of difference between most recently paid TTP or flat rent and the Calculated Multifamily TTP
- Year 2: Year 2 Annual Recertification (AR) and any Interim Recertification (IR) in prior to Year 3 AR – 50% of difference between most recently paid TTP and Calculated Multifamily TTP
- Year 3: Year 3 AR and all subsequent recertifications – Year 3 AR and any IR in Year 3: Full Calculated Multifamily TTP48
Five Year Phase-in
- Year 1: Any recertification (interim or annual) performed prior to the second annual recertification after conversion – 20% of difference between most recently paid TTP or flat rent and the Calculated Multifamily TTP
- Year 2: Year 2 AR and any IR prior to Year 3 AR – 25% of difference between most recently paid TTP and Calculated Multifamily TTP
- Year 3: Year 3 AR and any IR prior to Year 4 AR – 33% of difference between most recently paid TTP and Calculated Multifamily TTP
- Year 4: Year 4 AR and any IR prior to Year 5 AR – 50% of difference between most recently paid TTP and Calculated Multifamily TTP
- Year 5 AR and all subsequent recertifications – Full Calculated Multifamily TTP
Please Note: In either the three year phase-in or the five-year phase-in, once Calculated Multifamily TTP is equal to or less than the previous TTP, the phase-in ends and tenants will pay full Calculated Multifamily TTP from that point forward.

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Questions on Phase-In of Flat Rents

Phase-In for EID Households

Can RAD households who are currently receiving an Earned Income Disregard (EID), receive a rent phase-in at conversion if the household’s monthly rent increases by more than the greater of 10% or $25 purely as a result of the conversion? Section 1.7.B.7 of the RAD Notice states “tenants whose EID ceases or expires after conversion shall not be subject to the rent phase-in provision, as described in Section 1.7.B.3; instead, the rent will automatically be adjusted to the appropriate rent level based upon tenant income at that time.

Yes, RAD households who are currently receiving an EID are eligible to receive a rent phase-in at conversion if the household’s monthly rent increases by more than the greater of 10% or $25 purely as a result of the conversion. Section 1.7.B.7 of the RAD Notice refers to the point in time when the EID ceases or expires. The result is the inclusion of income that was previously disregarded and an increased monthly rent. This increase in monthly rent, which occurs because of the inclusion of the previously disregarded income, is not subject to phase-in and any phase-in that was in effect ceases.

Rent Increase for Flat Rent Tenants

The PHA is concerned that tenants currently paying a flat rent may not be able to handle the rent increase that could result from the TTP. Although the tenant may stay in place, their rent could rise considerably. Will the phasing of rent increases apply in this case?

The flat rents no longer apply after the RAD conversion. Post-conversion, rents will be in accordance with the PBV or PBRA HAP contract. If the resulting rent increase is more than 10%, the RAD phase-in rules would apply

Flat Rent Requirements

If a PHA has received a CHAP award, are they required to comply with the new Public Housing Flat Rent requirements?

Yes, the PHA must comply with the flat rent requirements, until the RAD conversion date.

Calculated Total Tenant Payment (TTP) Cap

The RAD Notice refers to the “calculated” TTP. Is this capped at the RAD gross rent?

No. The calculated TTP is determined only by the household’s adjusted income.

Phase in of Flat Rents after RAD Conversion

My project has a family that is currently paying a “flat rent.” Per PIH Notice 2014-12, PHAs are now required to update these flat rents, where applicable, and offer residents a phase-in of 35% a year. How will this phase-in of flat rents impact the resident when we convert to RAD?

Let’s assume the tenant is now paying $200 in rent but the new amount, under public housing flat rent, is $400. The family’s recertification is July 1. So, the PHA raises the rent in July to $270. Let’s further assume that the project converts in August. The flat rent phase-in "schedule" that a tenant was going to undergo in public housing is now irrelevant. If, at the time of conversion this tenant was paying $270, but the tenant's TTP under section 8 is $500, then the rent will phase in from $270 to $500 over 3 or 5 years (note: the public housing flat rent target of $400 doesn't matter anymore). Since the next recertification would be the following July, the 3-5 year phase in for RAD wouldn't start until July 2015. As a result, the PHA will not run into the problem of a tenant's rent increasing twice in one year.

RAD PBRA Conversion Rent Phase In

We are a PHA converting to PBRA which currently has Flat Rent tenants. Is there some provision in the 50059 to allow us to phase in their rent according to our policy that it not increase by more than $25 per month as a result of conversion? We will need to phase these individuals in for five years.

The 50059 form does not currently have such a provision, but TRACS will allow the phase-in. The RAD team has been advised that "TRACS accepts the 50059 and sends an error message to the owner indicating the rent paid by the tenant does NOT meet 30% of adjusted income. However, it’s not a fatal message error. TRACS 202d will implement a rent override indicator for audit purposes."

Phase-in of Rent Increases

Phase in of rent increases – during phase in period, is the difference between the phased in amount and contract rent covered by subsidy?

Yes.

Phase-In Rents for Zero-HAP

When the PBRA Zero-HAP rent cap results in a rent increase, can we use a phase-in to gradually bring the tenant rent amount up to the cap?

If the implementation of the zero-HAP rent cap results in a rent increase of more than $25 or 25%, then the owner/management agent may apply the 3 or 5 year rent phase in as described in the RAD Notice, paragraph 1.7.B.3.