How Rent is Determined for the Section 8 Voucher Program

Rent Concepts for the Voucher Program

1. Contract Rent:  This is the owner's requested rent for the unit. The requested Contract Rent cannot exceed what BHA determines to be the reasonable rent when compared to the market. 
 
2. Utility Allowance:  This is the amount that BHA has determined that the tenant will likely pay for utilities based on annual studies in the area.  The more utilities a tenant is responsible for, the higher the allowance becomes.  See the Utility Chart
 
3. Gross Rent:  The Gross rent is the Contract Rent + the Utility Allowance.
 
4. Payment Standard:  The Payment Standard establishes a maximum BHA subsidy.  The BHA sets a Payment Standard for each zip code and unit size, typically close to the median rent.
 
5. Voucher size: This is the size of unit that the family has been determined eligible for by BHA. It is important to confirm the prospective tenant's voucher size, because the applied payment standard will be the smaller of the voucher size or the unit size.

Affordability

When Gross Rent is Less than the Payment Standard the Unit will always be affordable for the Tenant:  If the Gross Rent (Contract Rent + Utility Allowance) is equal to or less than the Payment Standard, the unit will be deemed affordable because the tenant will pay exactly 30% of their income towards rent and utilities. 
 
When Gross Rent is Greater than the Payment Standard, the rent may not be affordable for the tenant:   BHA tenants are not permitted to enter new leases if they will pay more than 40% of their income toward rent and utilities. Therefore, a unit will be deemed unaffordable if the Gross Rent exceeds the Payment Standard by an amount greater than 10% of a prospective tenant's monthly adjusted income. In such cases, the tenant will not be permitted to move in, unless the rent is reduced to an affordable amount.   
 
Check Affordability Online
To better understand whether a prospective tenant can afford your unit, you can use the affordability tool with the prospective tenant.

Rent Must be Reasonable
Please keep in mind, that in addition to being affortable for the tenant, the rent must also be determined reasonable by BHA as compared to the market. 
 
Example Rent Calculation
Approved Contract Rent: $3,200
Utility Allowance: $174
Gross Rent: $3,200 + $174 = $3,374
Unit Size: 4 bedrooms
Voucher Size: 3 bedrooms
Payment Standards for unit's zip code:  4 bedroom -- $3,650  / 3 bedroom -- $3,350
Tenant's Adjusted Monthly Income: $1,000
 
In this example, the prospective tenant is seeking to rent a 4 bedroom unit, however they have only been approved for a 3 bedroom voucher. Therefore, the smaller 3 bedroom payment standard will be applied.
 
The Gross Rent (the requested contract rent plus the anticipated utility allowance) exceeds the applied Payment Standard by $24. Because this overage is less than 10% of the tenant's monthly income, the unit is considered affordable and the tenant can move in.
 
The BHA would pay the unit owner the Payment Standard (the maximum possible subsidy) minus 30% of the tenant's monthly income ($1,000 x 30% = $300). So the monthly BHA payment to the owner would be $3,350 - $300 = $3,050.
 
The tenant is then responsible for paying the owner the remainder of the Contract Rent ($3,200 - $3,050 = $150). In addition to this monthly payment of $150 from the tenant to the owner, it is estimated that the tenant will be responsible for an additional $174 per month in utilities. So, in total, the tenant will pay $324 per month toward rent and utilities, which is 30% of their monthly income ($300), plus the $24 by which the Gross Rent exceeds the Payment Standard.   
 
What Rent Should I Request?  
The rent you request should be the same amount that you would advertise and expect to receive for a market rate tenant.   Please note, if there are other market rate tenants in your building with similar units, the contract rent for the Section 8 unit cannot exceed the contract rent of the similar market rate units.
 

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