When the Allowance is More Than the Rent Share: Understanding Utility Reimbursements

In most Section 8 tenancies, the calculation is straightforward: the tenant pays their portion of the rent to you, and the Public Housing Authority (PHA) pays the rest. But a unique situation can arise, especially with very low-income families, that creates an interesting cash flow scenario called a Utility Reimbursement Payment (URP).

While this doesn’t directly change the total revenue you receive, understanding what a URP is and how it works is crucial for maintaining a good relationship with your tenant and understanding the full payment picture.

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Defining a Utility Reimbursement Payment (URP)

A Utility Reimbursement Payment occurs when a family’s calculated Utility Allowance is greater than their Total Tenant Payment (TTP).

Let’s break that down:

• Total Tenant Payment (TTP): This is the minimum amount the family is required to contribute toward their total housing costs, based on their income. For extremely low-income families (such as an elderly person on a small fixed income), the TTP can be very low—sometimes as low as $50 or even $0.
• Utility Allowance: This is the fixed credit the PHA gives the family to help pay for utilities that you, the landlord, do not include in the rent.

When the credit for utilities is more than the family’s entire required contribution, the family is owed the difference. This excess amount is the Utility Reimbursement Payment.

The Calculating Rent and HAP Payments handbook defines it as “the amount by which the HAP exceeds the rent to the owner.”

How a URP Affects Payments to the Owner

This is the most important concept for an investor to grasp. When a URP exists, the Housing Assistance Payment (HAP) sent by the PHA is large enough to cover 100% of your contract rent and still have money left over.

Example Scenario

• Contract Rent: $1,200
• Family’s TTP (their required contribution): $50
• Calculated Utility Allowance (for tenant-paid utilities): $150

How the PHA Distributes the URP

The PHA has two options for paying the URP amount that is left over after paying your full rent:

1. Pay the Family Directly: The PHA sends a check or direct deposit to the family. The family is then expected to use this money to help pay their utility bills.
2. Pay the Utility Supplier Directly: If the PHA has an agreement with the local utility company, it may send the URP directly to the supplier to be credited to the family’s account.

The Calculating Rent and HAP Payments guidebook states that if the PHA chooses this option, it must notify the family of the amount paid on their behalf.

Quarterly Payment Rules for Small URPs

To reduce administrative burden, PHAs have special rules for very small reimbursement amounts.

According to the handbook, if the total URP due to a family is $45 or less per quarter (which is equivalent to $15 or less per month), the PHA is allowed to make the payment quarterly instead of monthly.

The PHA’s policy must state whether these quarterly payments will be made:

• Prospectively: Paid at the beginning of the quarter.
• Retroactively: Paid at the end of the quarter.