How Mid-Year Tenant Changes Affect Your Payments
While the annual reexamination provides a predictable, once-a-year adjustment to your tenant’s rent portion and your corresponding Housing Assistance Payment (HAP), the reality of life is that circumstances change. An interim reexamination is an unscheduled review of a family’s income and composition that occurs between these annual reviews.
For an investor, understanding this process is crucial. It is the primary mechanism that can cause your monthly HAP payment to change unexpectedly, either up or down. This process is primarily a transaction between the Public Housing Authority (PHA) and the tenant, but you are a directly affected party.
Common Triggers for an Interim Reexamination
The PHA is required to have policies for conducting these mid-year reviews. While specific procedures are detailed in the PHA’s Administrative Plan, the process is typically triggered by a change in the family’s circumstances.
According to the program guidebook, PHAs must process an interim reexamination whenever one is requested by the family. The most common triggers you will encounter are:
- Changes in Family Income: This is the most frequent cause. It includes a family member losing or gaining a job, getting a significant raise, or a change in benefits like Social Security.
- Changes in Family Composition: This includes events like the birth or adoption of a child, a marriage resulting in a new household member, or an adult child moving out.
The Tenant’s Responsibility to Report
The entire reexamination system hinges on the family’s obligation to report changes. Your tenant is required to notify the PHA of any changes in their income or family size according to the rules and timeframes established by the PHA.
Caution
Failure to report these changes can be grounds for the PHA to terminate the family’s housing assistance. While you, as the owner, are not responsible for enforcing this reporting, knowing that the obligation rests with the tenant provides important context for how the program operates.
Tip
PHAs have flexibility in how they handle interim reexaminations. For example, a PHA may adopt a policy where they only process interim changes that decrease a tenant’s rent portion (which would increase your HAP), but wait until the annual reexamination to process tenant income increases (which would decrease your HAP). Other PHAs may process all changes as they are reported. Check your local PHA’s Administrative Plan to understand their specific policy, as it can directly impact your cash flow predictability.
The Direct Impact on Your HAP Payment
When an interim reexamination is completed, the tenant’s Total Tenant Payment (TTP) is recalculated. Since your HAP payment is directly tied to the TTP, any change will immediately affect your monthly payment from the PHA.
Here are the scenarios you are most likely to encounter:
Scenario 1: Tenant Income Goes UP 🔼… Your HAP Goes DOWN 🔽
If a tenant gets a new job or a raise, their household income increases. This leads to a higher TTP. Since the Gross Rent for your unit remains the same, the PHA’s portion of the payment (HAP) will decrease to offset the tenant’s increased contribution.
Scenario 2: Tenant Income Goes DOWN 🔽… Your HAP May Go UP 🔼
If a tenant loses their job or has their hours cut, their household income decreases. This results in a lower TTP. To ensure the full rent is still paid, the PHA will increase its HAP payment to you to cover the larger portion of the rent. For an investor, this is a key benefit of the program, as it provides a safety net against a tenant’s loss of income.
Scenario 3: Family Composition Changes 👨👩👧👦…
This can be more complex.
- Adding a Member: If a new household member is added with income, the total household income will rise, likely decreasing your HAP payment. The PHA handbook notes that PHAs may use a streamlined process for adding new members, verifying their program eligibility but potentially waiting until the next annual reexamination to verify and include their income.
- A Member Leaves: If an adult member with income moves out, the total household income decreases, which will likely lead to a higher HAP payment for you.
Important
Notification of Rent Changes
The reexamination process culminates in the PHA adjusting the HAP and notifying both you and the tenant of the change. Crucially, the program guidebook states that the PHA must provide the family with at least 30 days’ notice of any increase in the tenant’s payment. For you, this serves as a 30-day warning that your HAP is scheduled to decrease, allowing you to adjust your financial projections accordingly.
Your Bottom Line
As an investor, you do not initiate or conduct the interim reexamination, but you will feel its effects directly in your bank account. The key is to be aware of the process and know what the notifications from the PHA mean.
- Anticipate Fluctuations: Understand that your HAP payment is not fixed for the entire year and can change based on your tenant’s life events.
- Review Notifications: Pay close attention to any “Change in HAP” notices from the PHA. They are your official confirmation of a new payment amount and its effective date.
- Communicate with the PHA: If you receive a HAP payment that is different from what you expected and you haven’t received a notice, it is always a good practice to contact the PHA to ensure you have the most current information.