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National HJC Study on HUD Utility Allowances
A bedrock principle in HUD Section 8 apartment buildings across the country is that tenants will pay no more than 30% of their income for rent.  In buildings where tenants pay their own utilities, that means rent is calculated based on a reasonable utility allowance.  Because utility rates change over time, utility allowances (UAs) necessarily have to be regularly updated.  If UAs are not updated and rates go up, tenants end up paying more than 30% of their income for rent.   Unfortunately, a new study reveals that thousands of tenants across the country appear to be in this situation.

In 2009, tenants in a Texas HUD building sought HJC’s help when they realized their UAs had not been adjusted in nearly a decade.  In the course of representing those tenants to both get their UAs updated, and to get compensated for the resulting rent overcharges from previous years, HJC discovered that HUD guidance on updating UAs appeared to be lacking for many properties around the country.  In partnership with the Sargent Shriver National Center on Poverty Law, HJC (then known as HPP) began investigating the issue.  The HPP/Shriver Center report, just issued, reveals an alarming pattern.  For nearly all HUD programs, HUD provides clear direction to landlords that they must regularly apply to HUD to update UAs.  However, there is a large segment of the project-based Section 8 apartment buildings where HUD directions are silent on the issue.  The report includes a survey of the private entities responsible for administering these UAs and many of them believe that as a result of HUD silence, they have no obligation to update UAs.  The report concludes that it appears there are over 4000 HUD multifamily properties where UAs are not regularly updated, which means there may be hundreds of thousands of tenants who have been charged too much rent as a result.  The report concludes that this failure on HUD’s part is not only causing financial harm to very low income households, but that it is also illegal.  HJC and its allies are currently attempting to get HUD Secretary Shaun Donovan to address this important issue.

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UPDATE

As a result of representing a tenant group in Texas (Crowder v. HUD), HJC uncovered a serious flaw in HUD’s administration of Section 8 properties across the country.  In short, HUD’s failure to instruct all Section 8 administrators on the need to regularly update tenant utility allowances has meant that thousands of low income tenants have been overcharged in rent, for years in some cases.  See previous HJC/HPP article and utility allowance report here.

After repeated efforts to get HUD to address this problem, HJC and its partners (the Shriver Center and the National Housing Law Project) finally wrote to HUD Secretary Shaun Donovan on May 19, 2011 and suggested that HUD’s continuing failure to address this serious problem could leave tenants with no other option but to sue HUD.  Although HUD never responded directly to HJC, less than a month later, on June 20, HUD sent out a memo to all Section 8 administrators which for the first time made clear that for all Section 8 projects, utility allowances must be adjusted whenever owners seek rent increases or where utility rates have increased by 10% or more.  See HUD memo.

This policy change will result in increased utility allowances—and therefore lower rents-- for thousands of economically hard pressed HUD tenants across the country.  But two other challenges remain—ensuring that HUD’s new directive gets fully implemented by administrators, and addressing the thousands of tenants who should have retroactive claims for rent overcharges.  HJC and its partners are now attempting to get HUD to address these issues.