HUD Handbook 4350.3 § 6-15
Collection of the Security Deposit (HUD Occupancy Handbook 4350.3 REV-1 CHG-4)
Operative Text
A. It is recommended the owner collect a security deposit at the time of the initial
lease execution.
B. Security deposits provide owners with some financial protection when a tenant
moves out of the unit and fails to fulfill his/her obligations under the lease.
Additionally, many programs require that owners place security deposits in
interest-bearing accounts and allocate the interest to the tenant. This
requirement varies by programs and depends to a certain extent on state and
local laws.
C. The owner must collect a security deposit at the time of the initial lease execution
for the following properties:
1. Section 8 New Construction with an AHAP executed on or after
November 5, 1979;
2. Section 8 Substantial Rehabilitation with an AHAP executed on or after
February 20, 1980;
3. Section 8 State Agency with an AHAP executed on or after February 29,
1980;
4. Section 202/8;
5. Section 202 PAC;
6. Section 202 PRAC; and
7. Section 811 PRAC.
D. The amount of the security deposit established at move-in does not change when
a tenant’s rent changes.
E. The amount of the security deposit to be collected is dependent upon:
1. The type of housing program;
2. The date the AHAP or HAP contract for the unit was signed; and
3. The amount of the total tenant payment or tenant rent.
*Figure 6-7* outlines the amount of the security deposit the owner may
collect for each of the different programs.
F. The owner must comply with any applicable state and local laws governing the
security deposit.
G. The tenant is expected to pay the security deposit from his/her own resources,
and/or other public or private sources.
H. The owner may collect the security deposit on an installment basis.
I. The security deposit is refundable. (See paragraph 6-18 for more information on
refunding a security deposit.)
J. An applicant may be rejected if he/she does not have sufficient funds to pay the
deposit.HUD Handbook 4350.3 REV-1 CHG-4 § 6-15 establishes the rules governing how and when security deposits are collected in certain federally assisted housing programs. For specific program types—including Section 8 New Construction, Section 202, and Section 811 PRAC properties—owners are required to collect a security deposit at the time the initial lease is signed, while the practice is merely recommended for other programs. The deposit amount is tied to the housing program type, the date the assistance contract was signed, and the tenant's payment obligation, and it does not change if the tenant's rent later changes. Security deposits under this provision are refundable, and owners must also follow any applicable state and local laws on the subject.
Plain English — not legal advice.
Under HUD Handbook 4350.3 REV-1 CHG-4 § 6-15, operators of covered program types—such as Section 202/8, Section 202 PAC, Section 202 PRAC, and Section 811 PRAC properties—are required to collect a security deposit at initial lease execution, not at a later date. Compliant operators determine the correct deposit amount by consulting Figure 6-7 in the Handbook, which maps deposit amounts to program type, contract execution date, and total tenant payment. Operators also ensure they are following any state or local laws that govern security deposit handling, including requirements to hold deposits in interest-bearing accounts where applicable, and they do not adjust the deposit amount when a tenant's rent changes.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
HUD Handbook 4350.3 REV-1 CHG-4 § 6-15 makes clear that security deposits collected in covered federally assisted housing programs are refundable, and tenants are directed to paragraph 6-18 of the same Handbook for details on how refunds are handled. Tenants are generally expected to pay the deposit from personal or other public or private resources, though the provision allows payment on an installment basis, which may be worth discussing with a property manager. Tenants who believe a deposit was collected in an amount inconsistent with program rules, or that applicable state and local deposit laws were not followed, may consider contacting a local tenant-rights organization or filing a complaint with the U.S. Department of Housing and Urban Development.
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 25, 2026 — auto-generated, not yet human-reviewed. See /transparency for methodology.
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