How Is Income Calculated for Section 8 Housing?

How Are Allowable Assets Determined?

In U.S. Department of Housing and Urban Development (HUD) affordable rental housing programs, owners and public housing agencies must determine annually a family’s income for eligibility. Included in the calculation is projected income from assets. 

Here’s the difference between assets and income.

The government has a specific definition of income that it uses to determine a household's or an individual's eligibilty to receive certain benefits.

Assets themselves are not counted as income. But any income that an asset produces is normally counted when determining a household's income eligibility.

A family's income and assets, if they produce income, are determined annually to decide eligibility for Section 8 housing.

The (HUD) defines assets as "items of value that may be turned into cash." Necessary personal property items—clothing, furniture, cars, a wedding ring (or other jewelry not held as an investment)—do not qualify as assets, even though they could be sold for cash.

Some forms of payment are generally considered assets, such as a lump sum from an inheritance, insurance settlement, or proceeds from the sale of a house or apartment. The difference is the delivery method: Periodic payments would be counted as income. If a tenant living in a tax credit property won a lawsuit and was awarded compensation, for instance, they could choose between a structured settlement and a lump-sum payment. The lump sum would count as an asset; the periodic payments must be regarded as income.

Counting Assets

There's a big difference in the impact of an asset versus income on household eligibility. If a tenant has any assets, the property manager will need to know the value of those assets as well as the amount of income they produce, if any.

The manager must then add up the value of all household assets. If the total is $5,000 or less, then the actual income these assets produce is what's counted. If the total is greater than $5,000, there's an additional calculation to perform. The manager must multiply the value of an asset by .02 (reflecting the current HUD passbook savings rate of 2%) to determine the "imputed income." As of April 2021, the Savings National Rate was .06% so managers are allowed to use passbook rates from 0.0% to 0.81%.

If the total value of all household assets is greater than the actual income from the household's assets, it's used instead. There is one exception to this rule: If a tenant is receiving below-market interest rate (BMIR) assistance, no imputed income is calculated.

Let's say the Smith household has one asset in the form of a savings account with $5,000. The Jones household also has a savings account, with $6,000. The property manager would count $0 as income from assets for the Smith household and $120 as income from assets for the Jones household (that is, 2% of $6,000).

Key takeaways

  • The government has a specific definition of income that it uses to determine eligibility to receive certain benefits.
  • There's a big difference in the impact of an asset compared with income on household eligibility.
  • Periodic payments are treated as income, although the same money taken in a lump sum, would be considered an asset.

Special Cases

Applicants for low-income apartments at a tax credit property should be sure to point out if they don't actually own an asset that they may appear to own. HUD requires managers to not count assets that aren't "effectively owned" by an applicant, even if those assets are in that person's name. This is the case if the asset (and any income it earns) accrues to the benefit of someone else who isn't part of the household and that person is responsible for the income taxes incurred on income generated by the asset.

Finally, if a tenant shares ownership of an asset with other people not part of the household, then the manager should normally prorate that tenant's share (a similar concept to prorating rent). For example, if Jane has equal ownership of a rare coin collection estimated to be worth $3,500 and held for investment purposes with her brother, then Jane's 50% interest in the collection would be counted as $1,750.

The Bottom Line

The definitions of assets and income are key to determining eligiblity for benefits such as subsidized housing, such as tax-credit properties.

Owners and public housing agencies must adhere to specific rules when determining the value of assets and income. 

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. U.S. Department of Housing and Urban Development. "Chapter 5. Determining Income and Calculating Rent." Page 1.

  2. U.S. Department of Housing and Urban Development. "Housing Choice Vouchers Fact Sheet."

  3. U.S. Department of Housing and Urban Development. "Chapter 5. Determining Income and Calculating Rent." Page 23.

  4. Federal Deposit Insurance Corporation. "Weekly National Rates and Rate Caps—Weekly Update."

  5. U.S. Department of Housing and Urban Development. "Chapter 5. Determining Income and Calculating Rent." Page 20.

  6. Federal Deposit Insurance Corporation. "Fact Sheet for HUD Assisted Residents." Page 2.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.