Section 8 Changes: Income Rules, Asset Cap, and NSPIRE

The Housing Opportunity Through Modernization Act, known as HOTMA, brings the biggest set of Section 8 changes in decades. If you have a Housing Choice Voucher or are applying for one, HOTMA rewrites how your income is calculated, caps how much your household can own in assets, changes when you must report income changes between annual reviews, and replaces the old inspection checklist with a new safety-focused standard. The final rule took effect January 1, 2024, but housing agencies have until January 1, 2027, to fully implement the income and asset provisions.¹ The new inspection standard, NSPIRE, must be in place for voucher programs by February 1, 2027.²

Your local agency may already be operating under HOTMA, or it may still be transitioning. Ask your caseworker where things stand before your next recertification.

How HOTMA Changes Your Income Calculation

Voucher participants typically pay about 30% of adjusted income toward rent, so every change to the income math changes what you actually pay each month.

The Elderly and Disabled Family Deduction Went Up

If someone in your household is 62 or older or has a disability, the family gets a flat deduction from annual income. HOTMA raised it from $400 to $525 at launch and now adjusts it for inflation each year. For 2026, the deduction is $550.³ The increase is automatic going forward.

The Medical Expense Threshold Jumped from 3% to 10%

This one hurts some families. Elderly and disabled households used to deduct medical and disability-related expenses that exceeded 3% of annual income. HOTMA raises the threshold to 10%. On a $15,000 income, you used to start deducting after $450 in medical costs; now you need to hit $1,500. Families with moderate medical bills may lose the deduction entirely unless a hardship exemption applies.

New Categories of Income That Don’t Count

HOTMA expands the list of money that housing agencies must ignore when setting your rent. The categories most families run into include:

Foster care payments, kinship care payments, guardianship payments, and tribal kinship payments⁴
Student financial aid for tuition, books, supplies, room, and board at accredited institutions⁴
Money recovered through lawsuits or settlements tied to a family member’s disability
Insurance payouts from health, motor vehicle, and workers’ compensation policies for personal or property losses
All earned income of household members under 18, including foster children
Distributions and earnings from 529 plans, Coverdell accounts, and government-funded “baby bond” accounts⁴

The practical effect is that a one-time insurance settlement or a teenager’s part-time paycheck won’t push your rent share up. This list isn’t exhaustive; the full rule at 24 CFR 5.609(b) has additional categories.

The Earned Income Disallowance Is Gone

Under the old rules, certain families with disabilities could shelter a portion of new wages from rent calculations for up to two years through the earned income disallowance. HOTMA eliminated the legal authority for that program.⁵ Families already enrolled as of December 31, 2023, can finish their remaining benefit period, but no new participants are accepted.

Hardship Exemptions That Soften the Transition

HUD built two hardship protections into HOTMA. If either could apply to your family, raise the issue with your caseworker before your recertification rather than after.

The Medical Expense Phase-In

Families who were already receiving a medical expense deduction under the 3% threshold as of January 1, 2024, don’t jump straight to 10%. The threshold phases in:⁶

In year one, you deduct expenses exceeding 5% of income.
In year two, the threshold rises to 7.5%.
After 24 months, the full 10% applies.

Families still facing hardship after the phase-in ends can apply for a separate Category 2 exemption, which drops the threshold back to 5% for 90-day renewable periods.⁶ The agency can keep extending that relief in 90-day increments as long as the hardship continues.

Childcare Expense Exemption

Childcare costs normally only count as a deduction if they let a family member work, look for work, or attend school. HOTMA adds an exemption for families who still need childcare but aren’t currently employed or in school. To qualify, you must already be receiving the childcare deduction and show that losing it would make your rent unaffordable.⁷ Situations that fit include a parent on temporary disability or on family medical leave with no other adult in the household able to provide care. The exemption runs 90 days and can be renewed if the hardship persists.

The New $100,000 Asset Cap

Before HOTMA, the voucher program had no hard limit on family wealth. Now there is one. Families with net assets over $100,000 (adjusted annually for inflation) are ineligible, and the agency checks at both initial application and every annual recertification.⁸

What Doesn’t Count Toward the Cap

A long list of assets is excluded, so many families hold less in countable wealth than they might assume:⁸

Retirement accounts, including IRAs, 401(k)s, 403(b)s, and other IRS-recognized plans
529 plans, Coverdell accounts, ABLE accounts, and government-funded “baby bond” accounts
Non-necessary personal property (recreational vehicles, collectibles, expensive jewelry) as long as the combined value stays under $50,000, adjusted for inflation⁹
Necessary personal property such as your car, clothing, and furniture
Family Self-Sufficiency escrow accounts and federal tax refunds or refundable credits received in the past 12 months
Legal settlements tied to a family member’s disability

The retirement exclusion matters most in practice. A family with $80,000 in a 401(k) and $30,000 in checking has only $30,000 in countable assets, well below the cap.

Self-Certification Under $52,787

If your net assets sit at or below $52,787 (the 2026 figure, adjusted yearly), the agency can accept a signed self-certification of your asset totals rather than requiring bank statements or third-party verification.³ Above that threshold, documentation is required.

Owning a Home You Could Live In

Separate from the dollar cap, HOTMA adds a flat disqualifier. If any household member owns residential property suitable for the family to occupy, the family is ineligible for a voucher.⁸ “Suitable” means the property has working utilities and meets local codes. Exceptions exist where returning would be unsafe, including domestic violence situations.

When You Have to Report Mid-Year Income Changes

Your rent is officially recalculated once a year at recertification. Between those reviews, HOTMA sets a clear trigger for mid-year adjustments.

The 10% Threshold

You must report income changes that exceed 10% of your previously reported income. On a $20,000 income, that means any change of more than $2,000, up or down. Smaller fluctuations don’t require reporting or a rent adjustment, so ordinary paycheck variation won’t shake your rent every month.

Timing Controls When Your Rent Decrease Starts

HOTMA doesn’t set a single national deadline for how fast you must report a qualifying change. Each housing agency writes its own reporting timeframe into policy.¹⁰ The timing of your report controls when a rent decrease takes effect:

Report on time under your agency’s policy, and the lower rent begins on the first of the month after the income change occurred.¹⁰
Report late, and the lower rent doesn’t start until the first of the month after the agency finishes processing the reexamination.

That gap has a real dollar cost. Lose your job in March, report it in June, and you may have paid three months at the old, higher rate with no reimbursement. Some agencies allow retroactive reductions in policy, but none is required to. No rent change of any kind can be applied retroactively to a date before January 1, 2024.¹⁰ Ask your agency for its written deadline and its retroactive policy before you need them.

The 10% threshold cuts both ways. It protects you from constant adjustments over small changes, but a significant raise still has to be reported.

NSPIRE Replaces the Old Inspection Standards

HUD is retiring the old Housing Quality Standards and replacing them with NSPIRE, the National Standards for the Physical Inspection of Real Estate. Voucher programs must comply by February 1, 2027, though agencies can adopt NSPIRE earlier.² The new framework focuses inspections on safety hazards and creates one uniform standard across federal housing programs.

Carbon Monoxide and Smoke Alarm Rules

NSPIRE requires carbon monoxide alarms in any unit with fuel-burning appliances, a fuel-burning fireplace, a forced-air furnace, or a location within one story of an attached private garage. The alarms must be installed near each bedroom.¹¹ Consistent CO detection was not required under the old rules.

Smoke alarm placement is also more specific. Every unit needs at least one working smoke detector on each level, inside each bedroom, and within 21 feet of any bedroom door. If a detector outside a bedroom is separated from the living area by a door, an additional detector is required on the living-area side.¹²

24-Hour Fix for Life-Threatening Problems

NSPIRE sorts inspection failures by severity. Life-threatening deficiencies in an occupied unit, such as missing carbon monoxide alarms, exposed wiring, or non-functional heat in winter, must be corrected within 24 hours. If the landlord misses the deadline, the housing agency is required to suspend, reduce, or terminate the housing assistance payment until the problem is fixed.¹³ For tenants, that payment cutoff is the leverage that turns a safety complaint into a fast repair.

What to Do Before Your Next Recertification

Ask your caseworker whether HOTMA rules are already in effect at your agency or when the switch will happen. Look at your assets with the exclusions in mind; retirement accounts, education savings, ABLE accounts, and everyday personal property likely put you well under the $100,000 cap even if your total balance sheet looks higher. If your household has an elderly or disabled member with significant medical costs, ask specifically about the medical phase-in and the Category 2 hardship exemption so you don’t lose protection by default.

Keep documentation of any income change and report it under your agency’s written deadline. On the housing side, if your unit lacks a carbon monoxide alarm or the smoke detectors aren’t placed to NSPIRE’s rules, raise it now instead of waiting for the next inspection.

1
U.S. Department of Housing and Urban Development. The Housing Opportunity Through Modernization Act of 2016
2
Federal Register. Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE) Extension of NSPIRE Compliance Date for Housing Choice Voucher, Project-Based Voucher, and Section 8 Moderate Rehabilitation Programs
3
U.S. Department of Housing and Urban Development. 2026 HUD Inflation-Adjusted Values
4
eCFR. 24 CFR 5.609 – Annual Income
5
U.S. Department of Housing and Urban Development. PIH HOTMA Section 102 and 104 Implementation FAQs
6
HUD Exchange. Hardship Exemptions Resource Sheet
7
HUD Exchange. HOTMA Resident Fact Sheet – Health, Medical, and Childcare Deductions
8
U.S. Department of Housing and Urban Development. HOTMA Net Family Assets
9
HUD Exchange. HOTMA Resident Fact Sheet – Asset and Real Property Limitations
10
HUD Exchange. Interim Income Reexaminations Resource Sheet
11
U.S. Department of Housing and Urban Development. NSPIRE Standard – Carbon Monoxide Alarm
12
U.S. Department of Housing and Urban Development. NSPIRE Standard – Smoke Alarm
13
U.S. Department of Housing and Urban Development. NSPIRE Final Standards