The Housing Opportunity Through Modernization Act was recently unanimously passed by Congress and was signed into law by President Obama on July 29. The act makes a number of reforms to public and low income housing programs that are intended to simplify procedures and create greater flexibility in housing programs to make them more effective and expand opportunities for low income housing residents.
Arguably the biggest change for residents of public housing is that the new act imposes an asset cap in order to be eligible for public housing. Under previous law, only the income from assets affected public housing eligibility. In general, those with net assets above $100,000 or above or people who already own a suitable residence will be ineligible for public or low income housing.
This asset cap does, however, have a number of exemptions. Retirement accounts, settlements or awards from actions that resulted in a serious disability to a member of a household, 529 education savings accounts, and trust funds, such as Special Needs Trusts, that no family member has control over are all exempt from the asset limit. Distributions from a trust, however, will be considered income unless those distributions were for medical expenses for a minor.
There are a number of smaller changes in how income is calculated that affect what rent public housing residents pay and residents’ overall eligibility for public housing.
In public housing, rent is generally capped at the higher of 30 percent of adjusted income or 10 percent of gross income. Under the act, for those households with an elderly or disabled head-of-household, the standard deduction rises from $400 to $525. Additionally, the standard deduction will be inflation-adjusted in future years. The deduction for dependents remains at $480 per dependent in a household, but that figure will also now be adjusted for inflation in future years. In terms of medical expenses, the point at which households can deduct medical and care expenses rises from 3 to 10 percent of income.
In terms of income and general eligibility for public housing, the new act also makes significant changes. Under the old law, eligibility was only required to be checked when public housing was first applied for. Any further checks were left to local housing authorities. Under the new law, if household income reaches 120 percent of median income for the area and remains at that level for two years, then the housing authority is required to act. The housing authority must either end the household’s tenancy within six months or charge the family the higher of fair market rate for their residence or the cost to the government to maintain the residence.