The formula
Total tenant payment (TTP) is the highest of 30% of monthly adjusted income, 10% of monthly gross income, and the PHA’s minimum rent of up to $50. In a few states a welfare-rent figure can also apply. Adjusted income is gross income minus the deductions HUD allows, such as an amount per dependant, a deduction for elderly or disabled households and certain medical and childcare costs.
Gross rent is the contract rent to the owner plus the PHA’s utility allowance for any utilities the tenant pays. The HAP is the lower of the payment standard and the gross rent, minus the TTP. The family’s share is the gross rent minus the HAP, and the rent the tenant pays the owner is the family share minus the utility allowance.
A worked example
A household with $22,000 gross and $18,000 adjusted annual income rents a unit at $1,350 a month, with a $150 utility allowance, in an area where the payment standard for its voucher size is $1,450 and the minimum rent is $50. Thirty percent of monthly adjusted income is $450, which is higher than 10% of monthly gross income ($183) and the minimum rent, so the TTP is $450.
Gross rent is $1,350 + $150 = $1,500. The HAP is the lower of $1,450 and $1,500, minus $450: $1,000, paid by the PHA to the owner. The family share is $1,500 − $1,000 = $500, of which $150 is the utility allowance, so the tenant pays the owner $350. The owner receives $1,350 in total.
The 40% rule at move-in
When a family first moves into a unit, or signs a new lease, and the gross rent is above the payment standard, the family share may not exceed 40% of monthly adjusted income. In the example that limit is $600, and the family share is $500, so the PHA can approve the lease. If the share were higher, the owner would need to lower the rent or the family would need to choose a different unit. After the first lease term the 40% limit no longer applies.
What the owner should check
The PHA must also find the rent reasonable compared with similar unassisted units, and the unit must pass inspection before payments start. Payment standards change, usually once a year, and a family’s share is recalculated at each annual recertification or when their income changes, so the split between tenant and PHA moves over time while the contract rent stays as agreed.
Owners with voucher tenants receive rent from two sources each month. Recording the tenant’s portion and the HAP separately against the same unit is what keeps arrears clear: a missing HAP payment and a missing tenant payment need different follow-up. Rent collection records both against the lease, and tenant management keeps recertification dates on the tenant record.
Rent increases on voucher units
An owner who wants to raise the contract rent must ask the PHA, usually with 60 days’ notice before the lease anniversary, and the new rent must still be reasonable. State notice rules also apply; see how to raise rent legally.
Common questions
How much does Section 8 pay landlords?
The housing authority pays the lower of the payment standard and the gross rent, minus the tenant’s total tenant payment. The tenant pays the rest of the contract rent directly to the owner.
How is the tenant’s share of Section 8 rent calculated?
The total tenant payment is the highest of 30% of monthly adjusted income, 10% of monthly gross income and the minimum rent of up to $50. The tenant pays that amount, less the utility allowance, plus any rent above the payment standard.
What is the 40% rule for Section 8?
At initial occupancy, when the gross rent exceeds the payment standard, the family’s share may not exceed 40% of monthly adjusted income. It applies to the first lease term only.
Where do I find the payment standard and utility allowance?
From the local public housing authority that issued the voucher. Both vary by area, unit size and year.
Done by hand once. Done automatically from now on.
Record the tenant’s share and the housing authority’s payment separately against each lease, so a missing payment is obvious the day it is late.