HUD PIH Notice § 2021-27

                                 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                               WASHINGTON, DC 20410-5000


OFFICE OF PUBLIC AND INDIAN HOUSING




                                                     Notice: PIH 2021-27 (HA)
  Special Attention of:
                                                     Issued: September 13, 2021
  Public Housing Agencies
                                                     Expires: Effective until amended, superseded, or
  Regional and Field Office Directors of
                                                     rescinded
  Public Housing
  Regional Administrators                            Cross References: 24 CFR Part 960, 24 CFR Part
  Resident Management Corporations                   903, Notice PIH 2014-12, Notice PIH 2015-13,
                                                     Notice PIH 2017-23



Subject: Updates to Flat Rent Submission Requirements

1. Purpose.

This Notice supersedes and replaces the guidance provided in Notice PIH 2017-23, clarifies
HUD’s interpretation of the statutory amendment related to flat rents, and updates flat rent
exception and extension request requirements, including review criteria for HUD Form 5880.
This Notice also serves as supplemental guidance to the final rule on Streamlining
Administrative Regulations for Public Housing, Housing Choice Voucher, Multifamily
Housing, and Community Planning and Development Programs (81 FR 12354, published on
March 8, 2016), whereby certain Public and Indian Housing regulations were amended,
including 24 CFR 960.

2. Applicability.
This Notice applies to public housing agencies (PHAs) that operate a Public Housing program.
It also applies to families residing in, or applying to, the Public Housing program.

Moving to Work (MTW) PHAs operating a Public Housing program can exercise flexibility and
establish alternative requirements, in accordance with the terms of their respective MTW
Agreement and approved Annual MTW Plan, or in accordance with the terms of the MTW
Operations Notice and approved MTW Supplement to the Annual PHA Plan. If an MTW PHA’s
Annual MTW Plan or MTW Supplement to the Annual PHA Plan does not include alternative
policies regarding flat rent requirements, then the policies set forth in this Notice will apply to
the MTW PHA.


3. Background.

The FY 2014 Appropriations Act required PHAs to establish flat rents at no less than 80 percent
of the applicable Fair Market Rent (FMR), and established rent increase phase-in requirements

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to prevent family rental payments from increasing by more than 35 percent. HUD implemented
these requirements through Notice PIH 2014-12. Through FAQs accompanying Notice PIH
2014-12, HUD provided flexibility to PHAs to phase in all flat rent increases over a three-year
period, including those increases that were 35 percent or less.

The FY 2015 Appropriations Act (Act) maintained the FY 2014 rent increase phase-in
requirements and amended the 2014 Act to require that flat rents be set at no less than the
lower of:
   1. 80 percent of the applicable FMR established under Section 8(c) of this Act; or
   2. At the discretion of the Secretary, 80 percent of such other applicable FMR established
       by the Secretary that the Secretary determines more accurately reflects local market
       conditions and is based on an applicable market area that is geographically smaller than
       the applicable market area used for purposes of the applicable FMR under Section 8(c)
       of this Act (such as the applicable Small Area Fair Market Rent (SAFMR) or
       unadjusted rent).

A PHA may apply for a flat rent amount that is lower than the two options outlined above if:
    The PHA demonstrates, through the submission of a market analysis, that those
      rent options are not reflective of the unit’s market value; and
    HUD agrees with the PHA’s market analysis determination (see Section 5 of this Notice).

HUD implemented the FY 2014 and 2015 Appropriations Act provisions identified above in
24 CFR 960.253(b)(1)-(3).

In accordance with 42 U.S.C. 1437a(a)(2)(A)(ii), PHAs that established and were
administering ceiling rents prior to October 1, 1999, are authorized to continue to administer
ceiling rents in lieu of flat rents, provided such ceiling rents are set at the level required for flat
rents as required by 24 CFR 960.253(d). Further, such PHAs must follow the requirements for
calculating, adjusting, and reporting flat rents when calculating and adjusting ceiling rents. To
improve transparency and accuracy of reporting, PHAs administering ceiling rents may no
longer use line 10c (income-based ceiling rent) on the HUD Form-50058 to report ceiling rents
for any household. Instead, PHAs must use line 10b (flat rent) to report the applicable
maximum rental amount.

4. SMALLER GEOGRAPHICAL AREA FMRs.

If a PHA does not believe the 80 percent FMR is reflective of its local market conditions (flat
rent setting Option 1), it may use a HUD-established FMR that is based on an area
geographically smaller than the effective FMR published in the Federal Register to determine
the minimum flat rent amount (flat rent setting Option 2).

To satisfy Option 2, PHAs may use the applicable Small Area Fair Market Rent (SAFMR),
which HUD will publish annually on its website, available at:
http://www.huduser.org/portal/datasets/fmr/smallarea/index.html

For some areas for which HUD does not publish a SAFMR, HUD will permit PHAs to use 80
percent of the unadjusted rent to satisfy Option 2, which HUD will publish annually on its
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website.1

While 80 percent of the unadjusted rent will always be lower than 100 percent of the FMR, it
may or may not be lower than 80 percent of the FMR. Therefore, PHAs should assess all
available options when setting its flat rent rates:
    1. 80 percent of the FMR; or
    2. 80 percent of the SAFMR (or if a SAFMR is not available, 80 percent of the unadjusted
       rent).
PHAs are not permitted to establish any other smaller geographical FMRs, different from these
two options. For areas where HUD has not determined a SAFMR or an unadjusted rent, PHAs
must set rents at no less than 80 percent of the FMR, or apply for an exception flat rent
pursuant to the requirements of Section 5 of this Notice.


5. EXCEPTION FLAT RENTS


5a. When a Flat Rent Exception is Required.
HUD only requires flat rent exception requests when PHAs are setting flat rents at an amount
that is lower than the lesser of the following (less utility allowances, if applicable):
     1. 80 percent of the FMR, or
     2. 80 percent of the SAFMR (or if a SAFMR is not available, 80 percent of the unadjusted
         rent).
PHAs do not need to submit exception requests to set flat rents at or above 80 percent of the
FMR or SAFMR, or if the SAFMR is not available, 80 percent of the unadjusted rent.
The flat rent exception request process is for a PHA that wishes to base its flat rents on specific
market conditions supported by a market analysis. PHAs do not need to submit a request to
HUD in order to use the FMR, SAFMR, or unadjusted rent to set flat rents in accordance with
Sections 3 and 4 of this Notice. However, PHAs are encouraged to maintain the justification
locally for all flat rent amounts. If the flat rent amount is set above 80% of the FMR, PHAs are
encouraged to maintain whatever records are appropriate documenting their rent levels.

1 The unadjusted rent is the FMR estimated directly from the American Community Survey

(ACS) source data that HUD uses to calculate FMRs before HUD applies its state non-
metropolitan minimum rent policy. HUD maintains a minimum FMR policy within the Housing
Choice Voucher (HCV) program in response to numerous public concerns that FMRs in rural
areas were too low to operate the HCV program successfully. The policy establishes the FMRs at
the higher of the local FMR or the State-wide average FMR of non-metropolitan counties,
subject to a ceiling rent cap. The rationale for having a state minimum FMR is that some low-
income, low-rent non-metropolitan counties have ACS-based FMR estimates that appear to be
below long-term operating costs for standard quality rental units and raise concerns about
housing quality. State minimum FMRs have been set at the respective statewide population
weighted median non-metropolitan rent level, but are not allowed to exceed the U.S. median
non-metropolitan rent level.
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FMRs can be found at https://www.huduser.gov/portal/datasets/fmr.html. Review the FMR for
the applicable fiscal year. To find the unadjusted rent use the Data tab and click on the current
fiscal years excel spreadsheet titled “Unadjusted Rents – Only For Use In Setting Public
Housing Flat Rents”.
5b. Flat Rent Exception Request Timeframes and Key Dates.
HUD updates and posts new FMRs annually. Typically, the final FMR rates for the current
fiscal year are effective on or around October 1. PHAs may access FMR rates here:
https://www.huduser.gov/portal/datasets/fmr.html.

From the effective date of the current fiscal year’s FMRs, PHAs have 90 days to either
implement new FMR-based flat rents or submit an exception request. In a typical year, this
would mean that a PHA will have until December 31 to either update its flat rents based on the
new FMRs or submit an exception request.2 In the event that a PHA submits an incomplete flat
rent exception request or incomplete supporting market analysis, HUD will provide that PHA
with two opportunities to cure deficiencies before disapproving the request.

While HUD is reviewing a PHA’s flat rent exception request or any supplemental
information, the PHA may continue to utilize its current flat rent schedule. PHAs must receive
written HUD approval to utilize an exception flat rent prior to implementing the new
exception flat rent rates.

An approved exception request will remain in effect until the end of the 90-day period
commencing upon the effective date of HUD’s Final Fiscal Year FMRs or the date on which a
PHA updates and makes effective its flat rent schedule based on that fiscal year’s FMRs,
whichever comes first.

The PHA must update its flat rents to the approved flat rent exception amount after the date of
HUD’s approval. Thereafter, the PHA may immediately apply the exception flat rent amount to
intakes and reexaminations. However, the PHA must apply the approved exception flat rent
amount to all intakes and reexaminations that take effect 60 days or more after HUD’s approval
date.

Below is a sample timeline of a typical flat rent exception request submission cycle, including
an extension.

      Sample Exception Flat Rent Submission                    Example Dates
  HUD publication of FMRs          Timeline                      10/1/2021

2 A PHA or other interested party may request a HUD reevaluation of its FMRs, as provided for

under Section 8(c)(1)(B) of the U.S. Housing Act, as amended by the Housing Opportunity
Through Modernization Act (HOTMA). HUD will review FMR reevaluation requests and
supporting data, and following the reevaluation, will post revised FMRs with an accompanying
Federal Register notice stating the revised FMRs are available. For areas affected by a request
for an FMR reevaluation, the 90-day flat rent implementation timeframe described in Section 7
of this Notice will commence upon the effective date of the revised FMRs.
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  Flat Rent Exception Request Submitted                     Before 12/31/2021
  Rent Exception Request Approved                             During FY22
  PHA Submits Extension                                     Before 12/31/2022
  Flat Rent Exception Extended                               Until 12/31/2023
  PHA submits a new Flat Rent Exception Request             Before 12/31/2024

5c. Process to Submit a New Flat Rent Exception Request.
PHAs who request an exception flat rent must send an email to
flatrentexceptionrequests@hud.gov with the following information attached:
               1. HUD Form 5880 “Flat Rent Market Analysis Summary”
               2. If applicable, any local market related justifications.

See Section 5e. of this Notice for market analysis requirements.

5d. Process to Extend a Previously Approved Flat Rent Exception Request.

If HUD approved a PHA’s flat rent exception request from a previous fiscal year, the PHA
may request an extension of this approval under the following circumstances:
     The PHA requests an extension of the exact rents as previously approved by HUD;
     The market study accompanying the previously approved request is no more
      than two years old;
     The market conditions remain unchanged; and
     The PHA submits the extension request to HUD no later than 90 days after the
      effective date of the final FMRs published by HUD (typically December 31 of that
      calendar year).

PHAs may request an exception flat rent extension by sending an email to
flatrentexceptionrequests@hud.gov with the following information attached:
    1. A copy of the previous HUD approval letter
    2. The Form 5880 submitted in the previously approved request, that is no more
        than 2 years old;
    3. A letter signed by the executive director that includes:
            a. A request for the previously approved flat rents be extended.
            b. The date of the previous market study.
            c. The flat rent schedule to be extended.
            d. A certification that the market conditions remain unchanged.

Please note, HUD will not approve extension requests that include changes or
additions to previously approved exception flat rents.

If during the two-year renewal period the PHA becomes aware of a change in local
market conditions that would impact the market (e.g., a major employer enters or
leaves the area, significant private sector redevelopment), the PHA must either:
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   1. Discontinue the use of the current flat rent exception and implement a flat rent that
      is at least equal to the lower of 80 percent of the FMR or 80 percent of the SAFMR
      (or if no SAFMR is available, 80 percent of the unadjusted rent), or
   2. Conduct a new market analysis and submit a new flat rent exception request to
      HUD for approval (if the PHA selects this option, it may continue to use the
      current flat rent exception amounts until HUD issues its decision).

 While HUD is not requesting this information, PHAs may consider reviewing the U.S. Housing
 Market Conditions Market-at-a-Glance report to make a market continuity determination. The
 Market-at-a-Glance for the counties and metropolitan areas are based on data from the Bureau of
 Labor Statistics and American Community Survey data from the U.S. Census Bureau. Some
 adjustments are made by HUD field economists based on regional information. The Market-at-a-
 Glance reports can be found here: https://www.huduser.gov/portal/ushmc/mag.html


5e. Market Analysis Content and Justifications
In order to demonstrate the need for an exception flat rent, PHAs are required to submit a
market analysis that demonstrates the value of the unit. The PHA may not request an exception
flat rent that is lower than the demonstrated market value of the unit. 3
A market analysis must be submitted using HUD Form 5880 “Flat Rent Market Analysis
Summary”, which can be accessed at
https://www.hud.gov/sites/dfiles/OCHCO/documents/5880.xlsx. Training for how to use the
tool can be accessed at https://youtu.be/jpGUicpzVTM.
A Flat Rent Exception Request must include:
1. “Flat Rent Market Analysis Summary”, HUD Form 5880. The form must:
   a.   Be submitted in the Excel file format.
   b.   Include three distinct, unsubsidized market rate comparable units per bedroom size.
   c.   Identify utility amounts paid by the PHA, tenant, and market rate unit, as applicable.
   d.   Include applicable FMR, SAFMR, and Unadjusted Rents on lines 35 & 36.
2. Local market related justifications, as applicable. HUD strongly encourages that units
    included in the market study be similar in amenities and general conditions. If it is necessary
    to include units that are substantially different, the study should demonstrate or provide
    information as to why other units that are comparable are not available. If the market
    analysis includes the following elements, then a reasonable brief explanation related to the
    local market conditions must be submitted.
        a. Joint Submissions.
           HUD will permit PHAs from neighboring cities or within the same county with a
           shared executive director to submit a joint exception flat rent request. The
           justification should include information that explains how there is no substantive
           difference between the PHAs’ rental and employment markets.

3 For example, if the market analysis determines that the value of the PHA unit is $500, then the

flat rent exception request for that unit should be set at $500 (not 80 percent of $500).
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           For example, a PHA may provide a justification explaining that the two cities
           included in the joint submission are five miles apart from one another and each
           within commuting distance of a regional warehouse that employs residents of both
           populations.
       b. Comparable Using Different Bedroom Sizes.
           Generally, comparable units should use market comparables of the same bedroom
           size. HUD will make exceptions for this when there are no market rate
           comparable units for a specific bedroom size in a local market.
           For example, for a 0-bedroom unit, a PHA may use a 1-bedroom unit and make an
           adjustment. The justifications may include an explanation that the rural community
           surrounding the PHA is mostly comprised of single-family homes and there are no 0-
           bedroom units/studios available for rent.
       c. Amenity Adjustments greater than 25% of Actual Rent.
           Any adjustment that is more than 25% of the comparable unit’s actual rent must
           include a reasonable justification that is based on local market conditions. The
           justifications are to include market specific explanations of how the adjustment
           was made using local data.
           For example, If the actual rent of a comparable unit is $600 and it has an adjustment
           for ‘Year Built/Renovated’ that is $150 or greater, a PHA may provide a justification
           explaining that PHA units at a specific development have not been renovated in 20
           years as compared to other market rate units in the area, which are more modern.

These criteria are meant to assist PHAs in developing a commonsense approach to valuing a
unit and as a means to streamlining reviews by HUD. It remains important to note that HUD
places a high priority on accurate rent determinations and requires that such determinations be
performed in a documented, reasonable, and consistent manner. To the extent possible, rent
valuation should be based on rents paid for similar units in the same general rental market that
are similar in terms of the overall quality of housing services provided. In certain cases, rental
markets may consist of neighboring towns and cities. Any procedures or documentation used
should reflect this approach.

5f. Disapproved Flat Rent Exception Requests.

After HUD receives and reviews a flat rent exception request, HUD will respond with the
results of its review and provide PHAs two opportunities to cure deficiencies or provide
additional information. A PHA must respond in writing no later than 30 days after receiving
HUD’s notification of the insufficient submission. The response should include any new
information the PHA believes is necessary to supplement the original submission. While
awaiting the results of HUD’s review of the additional information, the PHA may continue to
utilize its current flat rent schedule. If the PHA cannot provide sufficient information to justify
the exception after two requests for additional information, HUD will deny the flat rent
exception request. If the PHA’s exception request is denied, the PHA must immediately revise
its flat rent rates using an applicable FMR product (per Section 3 and 4 of this Notice) and the

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updated flat rent rates must be applied to any intake or reexamination that takes effect 60 days
after the denial date.

6. FMRs AND UTILITY PAYMENTS

FMRs are gross rent estimates that cover the rent plus the cost of all necessary utilities regardless
of who actually pays the utilities. Although the inclusion of utilities in the FMR is an accurate
estimate of the cost of renting a unit in a particular area, their inclusion for purposes of setting
Public Housing flat rents may lead to families paying more in gross rent if the rent is not adjusted
to reflect utility payments that are the family’s responsibility. Specifically, families that pay a flat
rent for Public Housing units and that pay their own utilities would pay more in gross rent (i.e.,
rent plus utilities) than a family in a similarly situated unit where the PHA pays the utilities.

To address this issue when establishing flat rents, PHAs must consider who is responsible for
direct utility payments to the utility company and provide for a utility allowance as
necessary. Such utility allowances must be established consistent with the requirements of 24
CFR 960.253(b)(4) and 24 CFR 965, Subpart E.

Flat rents are always inclusive of utilities. In the case of a flat rent set using the FMR, utilities
should be subtracted before setting the rent. The formula to calculate an FMR-based flat rent is

( FMR [or SAFMR , Unadjusted Rent ( UR) as applicable] x 80%) −
Utility Allowance (UA). If a PHA sets an exception flat rent using a market study, then the
market study takes into account and adjusts for the value of utilities. The cost of utilities is
included in the flat rent.

For example, if a PHA has a flat rent of $500 per month and a utility allowance for that size
unit is $75, then:
         a. The FMR based flat rent would be $500 (FMR x 80%) minus the utility allowance
            ($500-$75), resulting in the final flat rent amount of $425.
         b. The flat rent derived from a market study would be $500.

7. FLAT RENT POLICIES – HOW TO COMPLY ON AN ANNUAL BASIS

In order to comply with the flat rent requirements annually, no later than 90 days after the
effective date of new FMRs or SAFMRs published by HUD, the PHA must:
   1. Compare the current flat rent amount to the applicable FMR and SAFMR/unadjusted
       rent. If the PHA is in compliance with this the law, no further steps are necessary:
           a) If the flat rent is at least equal to the lower of:
                         i. 80 percent of the FMR, or

                        ii. 80 percent of the SAFMR (or if no SAFMR is available,
                            80 percent of unadjusted rent).
           b) If the current flat rent is less than the lower of Option A or Option B above, the
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               PHA must set flat rents at no less than 80 percent of the lower of the 80 percent
               FMR or 80 percent SAFMR/80 percent unadjusted rent, subject to the utilities
               adjustment in Section 6 of this Notice, or the PHA may request an exception
               flat rent pursuant to the requirements of Section 5 of this Notice;
   2. Update the flat rent policies in the Admissions and Continued Occupancy Policies
       (ACOP) as necessary;
   3. Permit the family to choose between the flat rent amount and the income-based rent for
       all new admissions; and
   4. Offer the updated flat rent amount at the next annual rent option for families that are
       current Public Housing residents and permit the family to choose between the flat rent
       amount and the income-based rent, subject to the phase-in requirements in Section 8
       of this Notice.

For those PHAs with an approved flat rent exception request, the PHA must update its flat rents
to the approved flat rent exception amount immediately after approval for all intake and
reexamination activities. The PHA may apply the approved flat rent exception amount
immediately to intakes and reexaminations, and must apply it to any intake or reexamination
that takes effect 60 days or more after the approval date.

8. FLAT RENT INCREASE PHASE-IN REQUIREMENTS

If an existing flat rent tenant’s rental payment prior to any applicable adjustments for utilities
payments increases by more than 35 percent as a result of changes to the flat rent amount, the
increase must be phased-in such that a family does not experience an increase in their rental
payment of more than 35 percent.
In order to determine how to phase-in increases in rental payments, PHAs must on a case-
by-case basis, at the family’s next annual rent option, compare the updated flat rent amount
applicable to the unit to the rent that was being paid by the family immediately prior to the
annual rent option:
    1. If the new flat rent amount would not increase a family’s rental payment by more than
       35 percent, the family may choose to pay either the updated flat rent amount or the
       previously calculated income-based rent;
    2. If the PHA determines that the updated flat rent amount would increase a household’s
       rental payment by more than 35 percent, the family may choose to pay the phased-in
       flat rent amount resulting from the flat rent impact analysis or the previously calculated
       income-based rent.

Example 1 – Flat Rent Increase Does Not Require Phase-In

The Gordon family is currently paying the flat rent amount of $350 per month, rather than the
income-based rent of $500. When the Gordon family meets with the PHA to discuss rent
options for the upcoming year, the PHA informs the Gordon family that the flat rent amount has
increased to $450 per month. Because the increase in the flat rent amount does not represent an
increase of more than 35 percent from the Gordon’s previous rental payment amount, they have
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the option to pay the new flat rent amount of $450 or pay the income-based rent of $500. The
Gordon family chooses to pay the new flat rent amount of $450.

Initial Flat Rent: $350
New Flat Rent: $450

Family Rent Increase Impact Analysis:
    Initial         New Flat Rent     Impact Analysis       Income-Based             New
   Household          amount            (HR x 1.35)             Rent               Household
     Rent
     $350               $450              $472.50               $450                 Rent
                                                                                     $450


Example 2 – Flat Rent Increase Requires Phase-In
The Jones family is currently paying the flat rent amount of $500 per month. When the Jones
family meets with the PHA to discuss rent options, the PHA tells the family that the flat rent
amount has increased to $700. However, the PHA tells the family that the family’s flat rent
payment would only increase to $675 because flat rent changes must be phased-in as necessary
to ensure that the family’s existing rental payment does not increase by 35 percent or more
annually. The family has the option to pay either the $675 per month, or an income-based rent of
$800 per month based on the most recent examination of the Jones’ family income. The Jones
family chooses to pay the flat rent amount of $675.

Initial Household Rent: $500
New Flat Rent: $700
New Household Rent: $675

At the next annual rent option meeting between the Jones family and the PHA, the PHA informs
the Jones family that the flat rent amount has increased to $750 per month due to an increase in
the FMR. Because the new flat rent amount represents less than a 35 percent increase from the
previous rental payment, the Jones family has the option to pay the new flat rent amount of $750
or the income-based rent amount of $800 based on the most recent examination of family income
and composition. The Jones family chooses to pay the new flat rent amount of $750.

Initial Household Rent: $675
New Flat Rent: $750
New Household Rent: $750

Family Rent Increase Impact Analysis:

   Year         Initial        New Flat Rent     Impact Analysis     Income-Based          New
               Household         Amount            (HR x 1.35)           Rent            Household
     1           Rent
                 $500              $700               $675               $800              Rent
                                                                                           $675
     2           $675              $750              $911.25             $800              $750


9. ANNUAL REVIEW OF RENT OPTIONS
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HUD regulations at 24 CFR 960.253(a) require PHAs to annually give families the option to
choose between paying the flat rent or the income-based rent and stipulate that PHAs may not
give families the option more than once per year, except in the case that the family has chosen
the flat rent and experiences a financial hardship. Further, 24 CFR 960.253(e) stipulates that
PHAs provide sufficient information to allow a family to make an informed choice regarding
rent options. PHAs must provide at least the following information:

       The PHA’s policies on switching the type of rent due to financial hardship; and
       The dollar amount of the flat rent and the income-based rent.
For families who choose to pay flat rents, PHAs are provided the flexibility not to conduct income
reexaminations annually. HUD regulations at 24 CFR §960.253(e)(2) and §960.257(a)(2) provide
that for families that chose to pay flat rents PHAs must conduct reexaminations of family income
at least once every 3 years, not annually. In years when a PHA does not conduct a full
reexamination of family income, PHAs are not released from the requirement to give the family
the option of paying the flat rent or the income-based rent as calculated from the most recent
examination of family income and composition.

In order for PHAs to comply with the requirements to review rent options annually with families,
and to provide families with sufficient information to make an informed choice, PHAs must do
the following:

At initial occupancy, or in any year where a current program participating family is paying the
income-based rent:
    1. Conduct a full examination of family income and composition at the first annual rent
         option (Year 1);
    2. Inform the family of the flat rent amount and the rent amount determined by
         the examination of family income and composition;
    3. Inform the family of the PHA’s policies on switching rent types due to financial hardship;
         and
    4. Apply the family’s rent decision at the next lease renewal.

At the second and third annual rent options, for families that choose to switch from
income-based rent to pay the flat rent:
    1. PHAs may, but are not required to, conduct a full examination of family income and
        composition for the second and third annual rent options. If a PHA chooses not to
        conduct an examination of family income for these annual rent options, PHAs must use
        the income information from the examination of family income and composition from
        the first annual rent option;
    2. PHAs must inform the family of the updated flat rent amount, and the rent amount
        determined by the most recent examination of family income and composition;
    3. PHAs must inform the family of the PHA’s policies on switching rent types due
        to financial hardship; and
    4. PHAs must apply the family’s rent decision at the next lease renewal.

For the purpose of conducting the rent option meeting for a family that has paid the flat rent

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for the previous 3 years, and for which the PHA has not conducted a re-examination of family
income and composition in the last 3 years, the PHA must complete a full re-examination of
family income and composition in order to update the income-based rent amount.

PHAs are reminded that the flat rent amount a family pays is not locked in for the three-year
period. Instead, the PHA must revise the flat rent amount from year to year based on changes to
the FMR. Families currently paying the flat rent amount must be offered the choice between the
updated flat rent amount, and the previously calculated income-based rent.

10. FLAT RENT REPORTING

PHAs are required to report the amount of a flat rent and any ceiling rent to be charged to a
household on line 10b of the form HUD-50058, as outlined in Section 3 of this Notice. As per
the requirements of Section 6 of this Notice, PHAs must consider whether households are
responsible for any utility expenses for a unit when establishing the flat rent for a unit. In the
case that a household is responsible for paying for utilities, PHAs should report the amount
of such utility allowance on line 10e of the form HUD-50058.

11. FLAT RENTS AND LOW-INCOME HOUSING TAX CREDIT PROPERTIES

For Low-Income Housing Tax Credit (LIHTC) Public Housing units, it is possible that the
minimum flat rent amount may exceed the LIHTC maximum rent. In other cases, the HUD
minimum flat rent may be less than the LIHTC maximum rent. In the event that these
amounts conflict, PHAs should set flat rents so as not to exceed the LIHTC maximum rent.

Example 1: LIHTC Maximum Rent is Lower than 80 Percent of HUD’s FMR
    80 percent of HUD’s FMR for a 1-bedroom unit is $450
    The LIHTC maximum rent is $400
    The PHA should set its LIHTC Public Housing flat rents at $400

Example 2: 80 Percent of HUD’s FMR is Lower than LIHTC Maximum Rent
    80 percent of HUD’s FMR for a 1-bedroom unit is $400
    The LIHTC maximum rent is $450
    The PHA should set its LIHTC Public Housing flat rents at no less than $400 and
     no greater than $450

Example 3: Exception Flat Rent is Lower than LIHTC Maximum Rent and 80 Percent
of HUD’s FMR
     80 percent of HUD’s FMR for a 1-bedroom unit is $400
     The LIHTC maximum rent is $450
     The PHA has a HUD-approved flat rent exception request of $375
     The PHA should set its LIHTC Public Housing flat rents at $375

12. CONTACT INFORMATION
If you have questions regarding this Notice, please contact the Public Housing Management and
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Occupancy Division Flat Rent Review Team at: flatrentexceptionrequests@hud.gov.

13. PAPERWORK REDUCTION ACT
The information collections referenced in this Notice have been approved by OMB pursuant to
the Paperwork Reduction Act under, OMB# 2577-0220 and OMB# 2577-0226.




                                                     ___________/s/___________________
                                                     Dominique Blom
                                                     General Deputy Assistant Secretary
                                                     for Public and Indian Housing




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