24 C.F.R. § 886.116
§ 886.116 Security and utility deposits. (24 CFR Part 886)
Operative Text
(a) An Owner may require Families to pay a security deposit in an amount up to, but not more than, one month's Gross Family Contribution. If a Family vacates its unit, the Owner, subject to State and local laws, may utilize the deposit as reimbursement for any unpaid rent or other amount owed under the Lease. If the Family has provided a security deposit and it is insufficient for such reimbursement, the Owner may claim reimbursement from HUD, not to exceed an amount equal to the remainder of one month's Contract Rent. Any reimbursement under this section shall be applied first toward any unpaid rent. If a Family vacates the unit owing no rent or other amount under the Lease or if such amount is less than the amount of the security deposit, the Owner shall refund the full amount or the unused balance, as the case may be, to the Family. (b) In those jurisdictions where interest is payable by the Owner on security deposits, the refunded amount shall include the amount of interest payable. All security deposit funds shall be deposited by the Owner in a segregated bank account, and the balance of this account, at all times, shall be equal to the total amount collected from tenants then in occupancy, plus any accrued interest. The Owner shall comply with all State and local laws regarding interest payments on security deposits. (c) Families shall be expected to obtain the funds to pay security and utility deposits, if required, from their own resources and/or other private or public sources.
Under 24 CFR Part 886 § 886.116, owners participating in this HUD program may collect a security deposit from assisted families, but the amount cannot exceed one month's Gross Family Contribution. When a family moves out, the deposit may be applied to unpaid rent or other lease obligations, and any shortfall may be claimed from HUD up to one month's Contract Rent. If no amounts are owed—or if the deposit exceeds what is owed—the owner must return the full deposit or the remaining balance to the family, including any interest required by state or local law.
Plain English — not legal advice.
Operators subject to 24 CFR Part 886 § 886.116 generally keep security deposit funds in a dedicated, segregated bank account whose balance at all times reflects the total deposits collected from current residents plus any accrued interest. When a tenancy ends, a compliant operator documents any unpaid rent or lease charges before applying the deposit, and submits a HUD reimbursement claim only for amounts that exceed the deposit and fall within the one-month Contract Rent ceiling. Operators also stay current with all applicable state and local laws governing deposit interest rates, timelines for refunds, and required notices to residents.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
Under 24 CFR Part 886 § 886.116, families in this HUD program have a right to receive a refund of their security deposit—plus any interest owed under state or local law—when they vacate and do not owe rent or other lease charges. If a refund is withheld or reduced, tenants can request an itemized accounting from the owner and compare it against their lease and payment records. Tenants who believe a deposit was improperly withheld may explore options such as contacting a local tenant-rights organization, filing a complaint with the relevant HUD field office, or raising the issue through available state or local administrative channels.
General guidance for tenants — not legal advice for your specific situation. Consult a tenant-rights organization or attorney for advice on your case.
Generated September 4, 2026 — auto-generated, not yet human-reviewed. See /transparency for methodology.
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