How Is Rent Calculated for HUD Housing: Income and Deductions

Rent in HUD-assisted housing is calculated as a percentage of what you earn, and for most households that works out to roughly 30 percent of monthly adjusted income. Your local Public Housing Agency (PHA) runs the numbers using a federal formula that weighs your gross income, subtracts specific deductions, and factors in what you pay for utilities. The same underlying logic applies whether you live in public housing or use a Housing Choice Voucher (Section 8), though the voucher program adds a few extra moving parts.

The Formula Behind Your Rent

HUD calls the monthly amount you owe your Total Tenant Payment, or TTP. To find it, the PHA compares four figures and charges you the highest, rounded to the nearest dollar:

30 percent of your monthly adjusted income (gross income minus allowable deductions, divided by 12).
10 percent of your monthly gross income.
The welfare rent, if your public assistance includes a designated housing portion.
The minimum rent set by your PHA, up to $50 in public housing and the voucher program.

For most families, the 30 percent figure wins and becomes the rent.¹ A quick example: if your household’s annual adjusted income is $18,000, your monthly adjusted income is $1,500, and 30 percent of that is $450. That $450 is your TTP, assuming it beats the other three figures.

What Counts as Income

The PHA looks at all gross income you and other adult household members (18 and older) expect to receive over the next 12 months, plus unearned income received on behalf of any minors.² That includes:

Wages, salaries, tips, overtime, and self-employment earnings.
Social Security, SSI, disability, unemployment, and pension payments.
TANF or other welfare.
Regular, recurring financial support from people outside the household.

Note the word “anticipated.” The PHA projects forward from your current situation. Start a new job the week of your recertification and they will estimate a full year of that paycheck, even though you have only received one.

What Doesn’t Count

Several income sources are excluded from the calculation, and missing one of these can cost you real money each month.

Earnings of children under 18.
Foster care and kinship care payments.
Most student financial aid covering tuition, books, supplies, and room and board, whether from a government source, a registered nonprofit, or the school itself. Work-study and teaching fellowship earnings usually do count.
One-time or irregular gifts, like holiday or birthday money.
Lump-sum retroactive Social Security, SSI, or VA disability payments.
Distributions from 529 and Coverdell education savings accounts.

The regulation lists many more exclusions, from VA aid-and-attendance payments to amounts set aside under a Plan to Attain Self-Sufficiency.² If you receive anything unusual, ask your PHA whether it qualifies before your recertification.

Deductions That Lower Your Adjusted Income

After totaling your gross income, the PHA subtracts mandatory deductions to arrive at adjusted income. This is where households often leave money on the table.

Dependent deduction: $500 per dependent for 2026, covering minor children, full-time students, and household members with disabilities.³
Elderly or disabled family deduction: $550 for 2026 if the head of household, spouse, or co-head is 62 or older or has a disability.³
Medical expenses, for elderly or disabled families only: unreimbursed medical costs that exceed 10 percent of annual income. The Housing Opportunity Through Modernization Act (HOTMA) raised this threshold from 3 percent to 10 percent effective January 1, 2024.⁴⁵
Reasonable childcare expenses that allow a family member to work or attend school.⁴

The dependent and elderly/disabled deductions are adjusted for inflation each year, so check HUD’s current figures at your next recertification.

How Utilities Change the Math

If you pay some or all of your utilities directly instead of having them included in your rent, the PHA assigns a utility allowance based on typical costs for your unit size and local rates. That allowance is subtracted from your TTP to arrive at what you actually pay the landlord.

For households with very low income, the utility allowance can exceed the TTP. When that happens, the PHA pays you the difference as a utility reimbursement. Reimbursements of $45 or less per quarter can be paid quarterly, but the PHA must have a hardship policy for tenants who need more frequent payment.⁶ In public housing, the reimbursement may go directly to the utility company on your behalf.

Vouchers Work a Little Differently

With a Housing Choice Voucher, you rent from a private landlord and the PHA covers part of the cost. The pivot point is the payment standard, a dollar amount the PHA sets for each bedroom size based on local fair market rents. The payment standard has to fall between 90 and 110 percent of HUD’s published fair market rent for the area.⁷

If the unit’s gross rent (rent plus utilities) is at or below the payment standard, your share equals your TTP. If gross rent runs higher, you pay your TTP plus the overage out of pocket.⁸ Picking a unit priced well above the payment standard can eat through a family’s budget fast.

The 40 Percent Cap When You First Move In

To keep families out of overpriced units at the outset of a lease, HUD sets a ceiling: when you first lease a unit or move to a new one, your family share (your portion of rent plus the utility allowance) cannot exceed 40 percent of your monthly adjusted income. The PHA will not approve a unit that would put you over that line.⁹

The cap only matters when gross rent is above the payment standard, and it only applies at the start of a lease. Once you are in the unit, later rent increases or drops in your income can push your share past 40 percent, and HUD will not step in.

The Flat Rent Choice in Public Housing

Public housing tenants have an option many never use. Once a year, the PHA must let you choose between income-based rent (the 30-percent formula) and a flat rent tied to the unit’s market value.¹⁰ Flat rent is set at no less than 80 percent of the area’s fair market rent for the unit size, though the PHA can request a lower figure from HUD when a market analysis supports it.

For a household whose income recently jumped, flat rent can sometimes be cheaper because it stays fixed regardless of income changes during the year. The PHA is required to show you both amounts at your annual recertification.

Minimum Rent and Hardship Exemptions

Even with very low or no income, you can be charged a minimum rent of up to $50 per month in public housing and the voucher program. For other Section 8 programs, the minimum is fixed at $25.¹¹

If paying the minimum would create real financial hardship, you can request an exemption. The PHA must grant it if:

You have lost eligibility for, or are waiting on a decision about, a federal, state, or local assistance program.
Your income has dropped because of changed circumstances such as job loss.
There has been a death in the family.
You would face eviction because you cannot pay the minimum.

Once you request a hardship exemption, the PHA has to suspend the minimum rent the following month while it reviews your case. In public housing, the PHA cannot evict you for nonpayment of the minimum during a 90-day review window. If the hardship is long-term, the exemption stays in place as long as the hardship does.¹²

When Rent Gets Recalculated

Your PHA has to review your income, assets, and household composition at least once a year. That annual recertification decides whether your rent goes up, down, or holds steady for the next 12 months.¹³

Between annual reviews, an income change can trigger an interim reexamination. Under current rules, if your adjusted income rises or falls by 10 percent or more, the PHA must run an interim reexamination and adjust your rent. Smaller changes are handled at the PHA’s discretion; some set a lower trigger, but 10 percent is the default.¹⁴

Report income changes promptly. Not disclosing an income increase is a lease violation and can lead to a repayment agreement covering the subsidy HUD overpaid on your behalf; where the PHA finds the omission intentional, it can end in termination of assistance or a fraud referral. Reporting a drop quickly works in your favor, since your rent gets reduced sooner instead of waiting for the next annual review.

One boundary worth noting on the eligibility side: HOTMA also created an asset limit. A family is out of compliance if net assets exceed $100,000 (adjusted annually for inflation) or the family owns real property suitable for occupancy, though the value of a primary residence you currently live in is not counted.⁵ The limit is mandatory for applicants, and PHAs have discretion over how to enforce it for current participants. It affects whether you can stay in the program, not the rent formula itself.

1
eCFR. 24 CFR 5.628 – Total Tenant Payment
2
eCFR. 24 CFR 5.609 – Annual Income
3
HUD User. 2026 HUD Inflation-Adjusted Values
4
eCFR. 24 CFR 5.611 – Adjusted Income
5
U.S. Department of Housing and Urban Development (HUD). PIH 2023-27 HOTMA Implementation Notice
6
eCFR. 24 CFR 5.632 – Utility Reimbursements
7
eCFR. 24 CFR 982.503 – Payment Standard Areas, Schedule, and Amounts
8
U.S. Department of Housing and Urban Development (HUD). Payment Standards
9
U.S. Department of Housing and Urban Development (HUD). Calculating Rent and Housing Assistance Payments
10
eCFR. 24 CFR 960.253 – Choice of Rent
11
eCFR. 24 CFR 5.630 – Minimum Rent
12
eCFR. 24 CFR 5.630 – Minimum Rent
13
U.S. Department of Housing and Urban Development (HUD). Exhibit 7-1 – Sample Annual Recertification
14
HUD Exchange. HOTMA Interim Income Reexaminations Resource Sheet