Housing Opportunity Through Modernization Act (HOTMA): Income and Assets

The Housing Opportunity Through Modernization Act rules changed how public housing agencies count your income, verify your assets, and set your rent in federally assisted housing. The statute is Public Law 114-201, and its most consequential provisions took effect through a 2023 final rule that agencies have been phasing in since January 2024. If you live in public housing or receive a Section 8 voucher, the changes below affect what you pay, what you must report, and how much you can have in the bank without losing your assistance.

How Your Annual Income Is Now Calculated

The biggest mechanical change is retrospective. At your yearly reexamination, your housing agency looks at your actual income from the previous 12 months rather than projecting what you might earn in the coming year. The forward-looking estimate still applies when you first move in or during an interim review triggered by a major income change. Annual recertifications use the backward-looking method, and the agency must account for any interim adjustments that already happened during that 12-month window.¹

Rent based on past earnings tends to be more stable. Under the old system, a projected raise that never materialized could still inflate your rent. Now your rent is anchored to money you actually received.

The 10% Threshold Before Your Rent Changes Mid-Year

Your agency is required to conduct an interim reexamination only when your income increases or decreases by 10% or more of your adjusted income.² Below that, your rent stays the same until the next annual review. Agencies can set a lower threshold in their own policies, but the federal default is 10%.³

There is a more favorable rule for wages. Increases in earned income generally do not count toward the 10% threshold, meaning your rent will not go up mid-year just because you got a raise or picked up extra hours. The increase is captured at your next annual reexamination instead.³ The exception is narrow: if your agency previously lowered your rent through an interim review during the same certification period, earned income increases can be factored back in.

Reporting deadlines are set by each agency rather than a federal standard. If you report a qualifying increase on time, your rent goes up on the first of the month after a 30-day advance notice period. If you miss the deadline, the increase is retroactive to the first of the month after the change occurred, which can produce a lump-sum bill.³ Check your lease or admissions policy for your agency’s specific reporting window.

What Doesn’t Count as Income

HOTMA codifies a long list of exclusions that can lower the number used to calculate your rent. The exclusions most likely to affect a typical household:

Student financial aid. Title IV assistance (Pell Grants, federal student loans) and other scholarships or grants are excluded up to the amount of actual covered costs, meaning tuition, books, supplies, required fees, and room and board charged by the school. Aid left over after covered costs counts as income.⁴
Foster care and kinship payments. Payments for the care of foster children or foster adults, including state kinship and guardianship payments, are fully excluded. The foster child’s own income and assets are also excluded from your family’s calculations.⁵
Adoption assistance. Payments are excluded beyond the dependent deduction amount, and because the deduction covers the base, adoption assistance payments end up excluded in practice.⁵
Earned income of any household member under 18.¹
Income and distributions from 529 plans, Coverdell education savings accounts, and government-funded “baby bond” accounts.¹
Deferred Social Security, SSI, or VA disability payments received as a lump sum or in prospective monthly installments.¹
Health, auto, and workers’ compensation insurance payments for personal or property losses. Civil rights settlements and malpractice judgments that resulted in a family member’s disability are also excluded.¹
Money disbursed to you under a loan agreement.¹

The list is not exhaustive. If your agency is counting income that falls into one of these categories, you have grounds to request a correction.

Asset Cap and Self-Certification

HOTMA added asset restrictions that did not previously exist for most assisted housing participants. Your household is ineligible for public housing or Section 8 if your net family assets exceed an inflation-adjusted cap, set at $105,574 for 2026.⁶ HUD adjusts the figure each January based on the Consumer Price Index.⁷

Retirement accounts held in IRS-recognized plans, meaning IRAs, 401(k)s, and employer pension plans, are excluded from net family assets entirely.⁸ A family with $80,000 in a checking account and $200,000 in a 401(k) would have net family assets of $80,000 for HOTMA purposes.

If your net assets are below $52,787 (the 2026 self-certification threshold), you can declare your asset values with a signed statement rather than producing bank statements or appraisals for every account.⁶ Above that amount, your agency will verify asset values through documentation.

Owning Real Estate While Receiving Assistance

A separate restriction bars assistance for any family that owns residential real estate suitable for the family to live in, provided the family has the legal right to reside there and the legal authority to sell it.⁷ In practice, this catches families who own a home they could move into but are receiving a subsidy elsewhere.

The exceptions cover more situations than most residents realize. You can still qualify if:⁹

You co-own the property with someone outside your household who actually lives there.
You are a victim of domestic violence, dating violence, sexual assault, or stalking.
You are actively selling the property. A real estate listing or contract with an agent satisfies this.
You lack legal authority to sell because ownership is being contested in court, you are in divorce proceedings, or you hold heirs’ property with unresolved fractional ownership.
The property is not suitable because it cannot accommodate a family member’s disability, is too small for your household, would create a geographic hardship for work or school, or is physically unsafe to occupy.
You own a manufactured home and receive assistance to lease the space or lot.

Commercial property you own does not trigger this restriction, since it is not suitable for residential occupancy.

Deductions From Your Income

Before your agency applies the rent formula (typically 30% of adjusted income), it subtracts mandatory deductions from your annual income. HOTMA updated the amounts and tied several to annual inflation adjustments.

Dependent deduction: $500 per dependent for 2026, up from the original $480 base.⁶
Elderly or disabled family deduction: $525, adjusted annually by the Consumer Price Index.¹⁰
Medical and disability-related expenses (elderly and disabled families only): unreimbursed health care costs and disability-related expenses are deductible only to the extent they exceed 10% of annual income, up from the old 3% threshold.¹⁰

The jump from 3% to 10% is the single change most likely to raise rents for elderly and disabled households with moderate medical costs. If your annual income is $20,000, you previously needed just $600 in unreimbursed medical expenses before the deduction started. Now you need $2,000.

Hardship Exemptions

Families who face higher rents because of the new rules can request hardship relief. There are two categories for medical and disability expenses, and a separate exemption for childcare.

Medical and Disability Expense Hardships

The first category provides phased-in relief for families who were already receiving a medical expense deduction under the old 3% threshold as of January 1, 2024. If that describes your household, you may be eligible for transitional relief that cushions the shift to 10%.¹⁰

The second category covers broader financial hardship. You must show that your unreimbursed health and medical expenses exceed 5% of your annual income and that you cannot pay your rent because of the loss or reduction of the deduction.¹¹ Each agency sets its own process for demonstrating inability to pay rent, so ask your housing specialist what documentation they expect.

Childcare Expense Hardships

If your eligibility for the childcare expense deduction is ending, you can request a hardship exemption to keep the deduction for up to 90 days. You need to show that you cannot pay your rent without it and that the childcare expense is still necessary even though the qualifying condition (like employment or education) has changed.¹¹ Your agency can extend the exemption in additional 90-day periods at its discretion. You must receive written notice of the exemption’s start and end dates.

Over-Income Limits for Public Housing

Section 103 of HOTMA introduced a rule that did not previously exist. If your household income exceeds 120% of the Area Median Income for your area, you are considered over-income. Your agency begins tracking from the point it identifies the excess, and if your income stays above 120% for 24 consecutive months, you face one of two outcomes.¹²

Your agency must either charge you an alternative rent or begin the process of ending your tenancy. The alternative rent is the higher of the fair market rent for a similarly sized unit in your area or the amount of the monthly operating and capital fund subsidy HUD provides for your unit. Either way, the amount will be significantly more than income-based rent. If your agency offers you the alternative rent and you decline, it must terminate your tenancy within six months.¹²

Once you sign an alternative rent lease, you are no longer a public housing program participant. You lose access to resident councils, HUD utility allowances, and other benefits restricted to program participants. If your income later drops back below the low-income threshold, you would need to reapply through the regular admissions process.¹² The over-income rule applies to public housing; Housing Choice Voucher families are not subject to this specific 120% AMI test.

Whether Your Agency Has Switched Yet

Rollout has been uneven. HUD originally allowed public housing agencies and multifamily owners to set their own compliance dates between January 1, 2024, and January 1, 2025. In September 2024, HUD announced that agencies should not implement the income and asset provisions by the January 2025 deadline because HUD’s own reporting systems were not ready.¹³ Multifamily owners received a separate delay pushing their deadline to July 1, 2025. For Community Planning and Development programs that also use HUD income rules, the compliance date has been extended to January 1, 2027.¹⁴

Different agencies are at different stages. Some early adopters have been using HOTMA income calculations since early 2024, while others have not yet made the switch. If your agency has not informed you of changes to your rent calculation or asset reporting obligations, it may still be operating under pre-HOTMA rules. Your housing specialist can confirm which rules currently apply to your household.

1
eCFR. 24 CFR 5.609 – Annual Income
2
U.S. Department of Housing and Urban Development. Highlights of Final Rule Implementing Sections 102, 103, 104 of HOTMA
3
HUD Exchange. HOTMA Interim Income Reexaminations Resource Sheet
4
HUD Exchange. HOTMA Student Financial Assistance Resource Sheet
5
HUD Exchange. Income and Income Exclusions Resource Sheet
6
HUD User. 2026 HUD Inflation-Adjusted Values
7
eCFR. 24 CFR 5.618 – Restriction on Assistance to Families Based on Assets
8
U.S. Department of Housing and Urban Development. HOTMA Net Family Assets
9
U.S. Department of Housing and Urban Development. PIH 2023-27 HOTMA (Revision 3)
10
eCFR. 24 CFR 5.611 – Adjusted Income
11
HUD Exchange. HOTMA Hardship Exemptions Resource Sheet
12
U.S. Department of Housing and Urban Development. PIH 2023-03 Over-Income Limits for Public Housing Families
13
Federal Register. Housing Opportunity Through Modernization Act Implementation of Sections 102, 103, and 104 Extension
14
Federal Register. Housing Opportunity Through Modernization Act Implementation of Sections 102 and 104 Further Extension