25October2014

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How Much Rent Can I Charge?

How Much Rent Can I Charge?

Key Terms

  • Contract Rent. The total rent that you charge for a unit.
  • Gross Rent. The sum of your contract rent and the utility allowance that the Housing Authority of the County of Alameda (HACA) credits to the family.
  • Payment Standard. The maximum monthly assistance payment in HACA's jurisdiction for the sum of (1) the contract rent you charge the assisted family; and (2) the utility allowance that HACA credits to the family.
    Payment standards are set by HACA based on rental market information updated annually by the U.S. Department of Housing and Urban Development (HUD).  HACA updates payment standards, at least, annually.
    Payment standards ARE used to determine how much of the rent is paid by HACA, and how much by the family. Payment standards do NOT determine or limit what you can charge for your unit. As described below, the maximum contract rent you can charge is based on the reasonable rent for the unit and the family's income.
  • Reasonable Rent. Gross rent that is no more than the gross rent for comparable unassisted units in the area of the unit proposed to be assisted.
  • Tenant's Portion. The monthly rent payed directly to you by the tenant.
  • Utility Allowance. The amount that HACA determines is necessary to cover the cost of essential utilities for which the tenant is responsible, and for a stove or refrigerator provided by the family.  The utility allowance does not include the cost of telephone or cable services.

How much rent can I charge?

What you can charge (the contract rent) is based on two factors:

  • The reasonable rent for your unit; and
  • The family's income.

The gross rent for your unit (i.e., the sum of your contract rent and the utility allowance that HACA credits to the family) has to be reasonable--that is, no more than the gross rent for comparable unassisted units in the area of the unit proposed to be assisted.  In addition, if the unit is in a multi-unit building, you can charge no more for it than what you charge for comparable unassisted units in the building.  HACA determines rent reasonableness by inspecting your unit and, then, comparing its rent to that of, at least, two comparable unassisted units in your unit's area.

In addition to being reasonable, the gross rent for your unit has to be affordable by the tenant.  For an initial contract (that is, HACA's first Section 8 HCVP contract with you on behalf of this family in this unit), the total of the tenant's portion (that is, the monthly rent payed directly to you by the tenant) and the utility allowance can be no more than 40%of the family's income.  The 40% requirement does not apply if the tenant already in the unit is a current participant in the Section 8 HCVP.

How much of the rent do I get from HACA?  How much from the tenant?

To determine HACA's payment to you, HACA:

  1. Calculates the gross rent (i.e., the sum of your contract rent and the utility allowance that HACA credits to the family).
  2. Calculates 30% of the family's income.1
  3. Subtracts 30% of the family's income from the lesser of the payment standard or the gross rent.2

The difference between 30% of the family's income and the lesser of the payment standard or the gross rent is HACA's monthly payment to you.  The family pays you the remainder.  (The family is also responsible for the full security deposit.  HACA does not pay any portion of it.)

 

Example

HACA's payment standard for a 2-BR unit in Hayward is $1,377.  Assume that your unit is vacant, and that you're asking $1,400 for it.   To not make the example more complex, also assume that your contract rent of $1,400 includes all essential utilities.  That is, the family is not, separately, responsible for the cost of any essential utilities.  Consequently, there is no separate utility allowance.  In this example, since the contract rent includes all essential utilities, the contract rent and the gross rent are the same, i.e., $1,400.

  1. After inspecting your unit and comparing its gross rent to that of, at least, two comparable unassisted units in your unit's area, HACA has determined that $1,400 is a reasonable rent.
  2. HACA has calculated 30% of the family's income to be $412.  As a result, HACA's monthly payment to you is $965.  (Since the $1,377 payment standard is less than the $1,400 gross rent for your unit, HACA subtracted $412 from $1,377 ($1,377 - $412 = $965).  In this example, on the first of each month, HACA's payment to you would be $965.
  3. The tenant's portion would be $435, the difference between your $1,400 contract rent and HACA's payment to you of $965 ($1,400 - $965 = $435).
  4. Since your unit is vacant, this would be the initial contract on it for the family.   Consequently, HACA has to determine whether the family's tenant's portion exceeds 40% of its income.  In this example, HACA has determined that the tenant's portion of $435 does not exceed 40% of the family's income.
Based on items 1 through 4 above, your rent of $1,400 is both reasonable and  affordable to the family.  HACA can enter into a Section 8 HCVP contract with you for this unit on behalf of the family.  HACA's monthly payment to you on behalf of this family would be $965.


1 In limited circumstances, alternate formulas may apply.

2 As required by HUD regulations, HACA subtracts 30% of the family's income from the lesser of the payment standard or the gross rent regardless of whether this is an initial contract and the family is willing and allowed by regulations to have a total tenant's portion (that is, the tenant's rent payment directly to you) and the utility allowance up to 40% of the family's income.

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