Zoe Alvarez
Whether you subtract or add utility allowances to unadjusted rents depends on several factors. The utility allowance is typically subtracted from the rental payment, but it can also be added to the contract rent to arrive at the gross rent. If utilities are not included in the rent but are the responsibility of the resident, a utility allowance for reasonable utility consumption must be subtracted from the rent. The Public Housing Agency (PHA) determines the utility allowance amount to cover reasonable utilities, and it does not include telephone, cable, and internet utilities. If the utility costs are greater than the permitted monthly rental amount, the household should receive a utilities reimbursement.
| Characteristics | Values |
|---|---|
| When to subtract utility allowances | When utilities are not included in the rent but are the responsibility of the resident |
| Who subtracts utility allowances | Local Public Housing Authority (PHA) |
| Who is eligible for utility allowances | Program participants who are responsible for paying their own utilities |
| What happens if utility costs exceed the monthly rental amount | The household must be reimbursed for the difference |
| What happens if utility costs are less than the allowed monthly rental amount | The rent must be reduced by the cost of utilities |
| What utilities are covered | Electric, gas, oil, water, sewer, and garbage |
| What utilities are not covered | Telephone, cable, and internet |
| How much renters are expected to pay | A maximum of 30% of monthly income on rent |
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What You'll Learn
Utility allowances are subtracted from rents
The utility allowance is added to the contract rent to calculate the gross rent. However, when determining the tenant's portion of the rent, the utility allowance is subtracted from the gross rent. This means that the tenant's rent payment is reduced by the cost of the utility allowance. For example, if the gross rent is $1374, including a utility allowance of $71, the tenant may only pay $1232 towards rent. This calculation ensures that tenants are not burdened with the full cost of utilities on top of their rent obligations.
It's worth noting that the utility allowance may not always be accurately reflected in the tenant's rent portion. Some landlords may not fully understand the program rules, leading to confusion. Additionally, the numbers on the utility allowance chart provided by the housing program may not match the actual utility costs incurred by the tenant. Tenants should carefully review their lease agreements and consult with their housing workers to clarify any discrepancies.
While utility allowances are generally subtracted from rents, there may be instances where the gross rent exceeds the payment standard. In such cases, tenants may end up paying more towards utilities or rent and utilities combined. To avoid this, tenants can consider finding units where the rent plus utilities are equal to or less than the payment standard. Alternatively, landlords can adjust the rent to be lower or include all utilities to ensure that tenants do not bear excessive costs.
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Rent calculations for RRH programs
The US Department of Housing and Urban Development (HUD) offers permanent supportive housing (PSH) and transitional housing (TH) rental assistance programs for households experiencing homelessness. The Rapid Re-Housing (RRH) projects under these programs provide tenant-based rental assistance and supportive services for short-term (up to three months) and medium-term (4–24 months).
RRH programs must follow the standards set by their Continuums of Care (CoC) for determining the amount or percentage of rent payable by each participant. The CoC Program Interim Rule outlines the specific requirements of RRH, including the need to annually re-evaluate whether participants require assistance. RRH projects are not subject to the occupancy charge and rent contribution requirements outlined in Section 578.77 of the CoC Program Interim Rule.
The amount of rent owed by the program participant is calculated using the family's annual income less allowable deductions. If utilities are not included in the rent but are the responsibility of the resident, a utility allowance for reasonable utility consumption must be subtracted from the rent. If the cost of utilities is less than the permitted monthly rental amount, the rent must be reduced by the utility cost. On the other hand, if the utility cost exceeds the permitted monthly rental amount, the household should receive a utility reimbursement.
It is important to note that telephone, internet, and cable television expenses are ineligible for utility allowances. Additionally, RRH participants are required to meet with a case manager at least once a month and should have access to various supportive services to help them maintain long-term housing stability.
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Utility costs covered by HUD
The US Department of Housing and Urban Development (HUD) has a system of utility allowances to keep assisted housing affordable for lower-income households. HUD defines the Total Resident Payment for "rent" to include both shelter and the costs for reasonable amounts of utilities. The amount that a Public Housing Authority (PHA) determines is necessary to cover the resident's reasonable utility costs is the utility allowance. Utility allowances can range from less than $10 to over $200 per month for a resident household, depending on the PHA, the number of utilities and uses covered, and the dwelling unit and/or household size.
The utilities for which allowances may be provided include electricity, natural gas, propane, fuel oil, wood or coal, and water and sewage service, as well as garbage collection. The functions or end-uses covered by an allowance may include space heating, water heating, cooling, refrigeration, lighting, or appliances. If utilities are not included in the rent but are the responsibility of the resident, a utility allowance for reasonable utility consumption must be subtracted from the rent. If the cost of utilities is less than the permitted monthly rental amount, the amount of rent must be reduced by the cost of utilities. If the cost of utilities is greater than the permitted monthly rental amount, the household should receive a utilities reimbursement.
Whether a household receives an allowance for a given utility service depends on the way the utilities are metered. Utilities can be metered in one of three ways: master-metered, check-metered, and individually metered. Allowances are provided for check-metered or individually metered utilities, but not for master-metered utilities. A master meter measures consumption for the building as a whole, rather than for individual dwelling units or households. Where utilities are master-metered, the PHA pays the local utility company for utilities used, and the utility costs are included in the basic rent levels established by the PHA, with no separate allowance provided.
In some cases, the utility allowance is added to the contract rent (the amount on the lease) to get the gross rent. If the gross rent (payment standard plus utility allowance) is above the payment standard, 30% is deducted from the payment standard. So, in essence, every dollar the gross rent exceeds the payment standard will come out of the tenant's pocket.
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Utility allowance reimbursements
When tenants are responsible for paying their own utilities, they are typically eligible for a utility allowance, which is subtracted from their rental payments. This allowance is determined by the Public Housing Agency (PHA) and covers essential utilities such as electricity, gas, water, sewer, and garbage. It's important to note that telephone, cable, and internet utilities are generally not included in the utility allowance.
The utility allowance is added to the contract rent to calculate the gross rent. However, when determining the tenant's portion of the rent, the utility allowance is subtracted from their share. This calculation ensures that tenants are not overburdened by utility costs. For example, if a tenant's rent portion is $400 and they have a utility allowance of $71, they would only pay $329 to the landlord.
In some cases, the gross rent, which includes both the rent and the utility allowance, may exceed the payment standard. In such instances, the tenant may end up paying more than their calculated share, either towards utilities or rent and utilities combined. To address this, landlords can adjust the rent to be lower or include all utilities in the rent to avoid additional costs for tenants.
It's worth mentioning that utility allowance reimbursements are also relevant for Continuum of Care (CoC) recipients. They should refer to their local PHA schedule of utility allowances and ensure that their lease agreement clearly states their responsibility for utility payments. If utility costs exceed the monthly rental amount, households are entitled to reimbursement for the difference, as outlined in relevant notices and procedures.
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Calculating utility allowance
The Office of Policy Development and Research (PD&R) has developed the HUD Utility Schedule Model (HUSM) to provide a consistent basis for calculating utility allowances. The HUSM is a web application that uses correlations and regression techniques to calculate allowances for end-uses, as specified on form HUD-52667 (Allowances for Tenant-Furnished Utilities and Other Services). This model is primarily based on the 2009 Residential Energy Consumption Survey (RECS) dataset published by the Energy Information Administration (EIA) of the Department of Energy (DoE).
To calculate the utility allowance, one must first determine the gross rent, which is the sum of the contract rent (the amount on the lease) and the utility allowance. If the gross rent exceeds the payment standard, then the tenant's contribution is calculated by deducting 30% from the payment standard. This means that any amount by which the gross rent exceeds the payment standard will be paid out of pocket by the tenant.
For example, let's assume the payment standard for a one-bedroom apartment in a particular area is $1303. If the landlord charges $1300 in rent and the utility allowance is $71, the gross rent would be $1371 ($1300 + $71). Since the gross rent exceeds the payment standard, the tenant's contribution would be calculated as $912.10 ($1303 - 30%). Therefore, the tenant would need to pay an additional $71 out of pocket ($1371 - $912.10 = $458.90, of which $71 is their portion of the utility allowance).
It is important to note that the utility allowance is not always subtracted from the rent. According to HUD guidelines, if the cost of utilities is less than the permitted monthly rental amount, the rent should be reduced by the cost of utilities. However, if the cost of utilities is greater than the permitted monthly rental amount, the household should receive a utility reimbursement. This ensures that tenants are not penalised for utility costs that exceed their reasonable consumption.
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Frequently asked questions
A utility allowance is the cost of a reasonable amount of utilities such as electric, gas, oil, water, sewer, and garbage. Telephone, cable, and internet utilities are not included.
Yes, if the program participant is responsible for paying their own utilities, they are entitled to a utility allowance. The utility allowance is typically subtracted from the rental payment.
You can calculate the utility allowance by referring to a utility allowance chart provided by your housing worker or found online. If you don't have access to a utility chart, you can estimate utility costs based on the number of bedrooms.
If utility costs exceed the monthly rental amount, the household must be reimbursed for the difference.
