Navigating the Reexamination Process
Once your property is leased and the Housing Assistance Payments (HAP) are flowing, the tenancy enters a managed lifecycle. The most important, recurring event in this cycle is the annual reexamination. Think of this as the program’s yearly “true-up” process—a mandatory review that ensures the subsidy amount aligns with the tenant’s current circumstances.
For you as an investor, this process is not something to be anxious about; it is a predictable part of the business model. Understanding how it works is key to forecasting your income and managing your Section 8 investment effectively.
The Purpose of the Annual Review
The core purpose of the annual reexamination is to maintain the integrity of the Housing Choice Voucher (HCV) program. The Public Housing Authority (PHA) is required by HUD to re-verify a family’s status at least once every 12 months to ensure they are receiving the correct level of assistance.
From an investor’s standpoint, this process directly recalibrates the two most important figures in your monthly revenue stream:
- The Total Tenant Payment (TTP): The portion of the rent paid directly by the tenant.
- The Housing Assistance Payment (HAP): The portion of the rent paid to you by the PHA.
The reexamination focuses primarily on two key areas:
- Family Income and Assets: The PHA must verify all sources of income for every adult member of the household to recalculate the family’s TTP.
- Family Composition: The PHA confirms who is living in the unit. Changes in family size can impact the family’s voucher size, which in turn can affect the Payment Standard used in the HAP calculation.
The Timeline: When to Expect the Reexamination
According to the handbook, the PHA must conduct a reexamination for every family at least once every 12 months. To keep this process organized and predictable, most PHAs schedule the effective date of the annual reexamination to align with the anniversary of the family’s HAP contract.
Tip
A best practice is to mark your calendar for the month preceding the anniversary of your HAP contract. This is typically when the PHA will be working with the tenant to gather their information, and it allows you to anticipate any potential adjustments to your HAP payment for the anniversary month.
For example, if a family’s lease and HAP contract began on May 15th, 2023, their first annual reexamination must be effective no later than May 1st, 2024. This ensures the 12-month window is never exceeded.
The Process: What Happens During the Review
While the reexamination is a process between the PHA and the tenant, you are a key interested party who is notified of the outcome. Here’s a breakdown of the components reviewed:
Step 1: Family Reporting
The tenant is required to supply any information requested by the PHA for the review. This includes providing documentation for income, assets, and expenses, and signing a release of information consent form (HUD-9886).
Step 2: Income Verification
The PHA uses the information provided, along with third-party verification systems like the Enterprise Income Verification (EIV) system, to confirm all household income.
Step 3: Family Composition Review
The PHA updates the family composition to determine the correct voucher size. If the family has decreased in size, their voucher size may be reduced, which would lower the Payment Standard used for the HAP calculation.
Step 4: Allowance and Standard Check
The PHA also verifies that the Utility Allowance and Payment Standard being used for the family are correct based on the current unit size, voucher size, and PHA schedules.
The Outcome: Direct Impact on Your HAP Check
This is the most critical part for an investor. The entire reexamination process culminates in a potential change to the payment split. The math is straightforward:
| Tenant Income Change | Tenant Payment (TTP) | HAP Payment to You |
|---|---|---|
| Increases ↑ | Increases ↑ | Decreases ↓ |
| Decreases ↓ | Decreases ↓ | Increases ↑ |
Important
The annual reexamination does not change the total rent for your unit. It only adjusts the portion paid by the tenant versus the portion paid by the PHA. Requesting a rent increase is a separate process that you must initiate, which is then subject to its own rent reasonableness review.
Once the reexamination is complete, the PHA must provide you and the tenant with written notification of any changes to the HAP and the tenant’s rent portion. This ensures you are officially informed before the new payment amounts take effect.
Streamlined Process for Fixed-Income Tenants
The handbook outlines a helpful, streamlined process for certain tenants, which creates even greater predictability for investors.
Note
For families where at least 90% of their income comes from fixed sources (like Social Security or pensions), the PHA is permitted to conduct a full income verification only once every three years.
In years two and three of this cycle, the PHA will simply adjust the tenant’s fixed income by the official Cost of Living Adjustment (COLA) instead of conducting a full review. For you, this means that for tenants on fixed income, you can expect very stable, predictable, and only slightly adjusted HAP payments for a full three-year period, enhancing the stability of your investment.