TN 63 (12-08)
SI 00835.380 Rental Subsidies
A. When to develop a subsidy
Develop for a possible rental subsidy only if:
sequential living arrangement (LA) development shows that someone in the household has rental liability and the value of one-third reduction (VTR) does not apply; and
someone in the household is related as a parent or child to the landlord or landlord's spouse.
SI 00835.005 - Sequential Development of Living Arrangement and In-Kind Support and Maintenance – Flowchart.
B. Definitions of terms used in rental subsidy situations
Most terms used in connection with rental subsidies are defined in SI 00835.020. However, the following definitions are unique to this section.
1. CMRV under rent control
The Current Market Rental Value (CMRV) under rent control is the maximum rent chargeable to the current tenant under the applicable rent control law.
2. Required rent
The required rent is the amount required by a landlord under the terms of the rental agreement, regardless of the source(s) of payment.
3. Rent prepayment
A rent prepayment is a payment that meets the definition of rent and exceeds the monthly required rent. A rental prepayment can offset the amount of a rental subsidy, wholly or in part, depending on the amount.
A child is a natural or adopted child, or a stepchild, regardless of age.
A parent is a natural or adoptive parent, or the spouse of such a parent. If the natural or adoptive parent dies, a surviving step-parent is not considered a parent or spouse of a parent.
6. Rental subsidy
An individual receives in-kind support and maintenance (ISM) in the form of a rental subsidy when the required rent (including a flat fee payment) is less than the amount charged under a business arrangement.
7. Business arrangement
A business arrangement exists when the monthly required rent or flat fee payment equals the CMRV of the residence.
Exception in the Second and Seventh circuits and Texas - In the States of Connecticut, New York, Vermont, Illinois, Indiana, Wisconsin, and Texas, a business arrangement exists when the required rent or flat fee payment equals or exceeds the applicable presumed maximum value (PMV). If the required rent or flat fee payment is less than the PMV, the value of a subsidy is the difference between the required rent or flat fee payment and the lesser of the PMV or the CMRV. For instructions for processing cases in Texas, please see “Rental Subsidies for Residents of Texas Effective May 1, 1996” SI DAL00835.380.
C. Procedure for developing possible rental subsidy
Apply this procedure to both initial claim and posteligibility situations. Follow the steps in sequence.
1. Identify a parent/child relationship
Ask the individual whether anyone in the household (including any member who is temporarily absent) is a parent or child of the landlord or landlord's spouse. Document the response on the Home Ownership and Rental Liability page or on an appropriate form. For guidance on completing the Home Ownership and Rental Liability page see, MS INTRANETSSI 010.012.
If the individual is unwilling or unable to answer, obtain the information from the landlord, the landlord's spouse, or his authorized agent.
If the answer is “no”, determine that a business arrangement exists and there is no rental subsidy.
If the answer is “yes”, go to 2.
2. Contact the landlord
Contact the landlord for information on the required rent, estimated CMRV, and the reason for accepting a reduced rent, if any. See 3, 5, and 7 below for separate instructions even though you ask for all three items via a single request.
3. Obtain the required rent
Obtain information about the amount of the required rent from the landlord and document the file.
If you make contact with the landlord face-to-face or by telephone, explain that rental subsidy can occur when the required rent is less than the amount the landlord would charge other renters. If a rental subsidy exists, explain that we may make either lower payments or none at all.
Record the landlord’s responses to the rental subsidy issue on the Home Ownership and Rental Liability page in MSSICS. Document on the DROC screen in MSSICS (e.g., “CR spoke with landlord and the Home Ownership and Rental Liability page has been updated.”). For guidance on completing the Home Ownership and Rental Liability page see, MS INTRANETSSI 010.012.
When it is not feasible to use DROC, use form SSA-L5061 to document the landlord’s response. For instructions on completing the form, storing, or electronically documenting the information obtained on the SSA-L5061, please see SI 00835.382, “Form SSA-L5061 (Letter to Landlord Requesting Rental Information)”.
If the individual lives in Connecticut, New York, or Vermont (Second Circuit), or Illinois, Indiana, or Wisconsin (Seventh Circuit) or Texas see 4; otherwise, go to 5.
For more information on storing forms electronically, refer to GN 00301.322 “Retention of Paper Material After Faxing into Either the eDIB folder or Claims Folder using NDRed”.
4. Make a determination for Second or Seventh Circuit cases or Texas
For residents of the Second and Seventh Circuits or Texas, determine that there is no rental subsidy if the required rent equals or exceeds the applicable PMV. No further development is needed.
If the required rent is less than the PMV, go to 5.
NOTE: For residents of Texas, please refer to “Rental Subsidies for
Residents of Texas Effective May 1, 1996” – SI DAL00835.380.
5. Obtain the estimated CMRV
Contact an appropriate source for information about the current market rental value (CMRV) for the shelter:
Landlord - Using the same procedure as in SI 00835.380C.3. in this section, contact the landlord for an estimate of the CMRV. Accept whatever estimate the landlord gives you and document the file as stated in subsection 3. (first bullet).
Other knowledgeable source - If the landlord is unable or unwilling to provide a CMRV estimate, contact another knowledgeable source (e.g., a real estate firm or rental management agency) dealing with similar neighborhoods to obtain the CMRV for similar shelter.
Provide the source with an explanation of rental subsidy as described in 3. (first bullet) in this section; and
Document the landlord’s response using the instructions provided in 3. (second and third bullet) in this section.
6. Compare the required rent with the CMRV
If the required rent equals or exceeds the CMRV, determine that there is no rental subsidy. No further development is needed.
If the required rent is less than the CMRV go to 7.
7. Find the reason for reduced rent
Obtain the landlord's statement about the reason for accepting a reduced rent, following SI 00835.380C.3. in this section.
If the landlord’s reason is:
rent control, obtain a copy of the most recent rent control document showing the maximum amount of rent chargeable to the tenant. If the landlord is charging that amount, determine that no rental subsidy exists;
that the tenant performs services in return for shelter, go to
SI 00835.390 “Food or Shelter that is Remuneration for Work but is Not Wages”;
that excludable public housing assistance makes up the difference between the CMRV and the amount the household must pay, see SI 00830.630 “Federal Housing Assistance”; or
none of the above, or if the landlord is unable or unwilling to provide a reason, go to 8.
8. Determine the amount of rental subsidy
General - If the required rent is less than the CMRV, subtract the amount of required rent from the CMRV to determine the rental subsidy.
Exception - For residents of the Second and Seventh Circuits, determine the amount of rental subsidy by subtracting the amount of required rent from the lesser of the applicable PMV or the CMRV.
9. Identify additional development
If there is any indication of prepayment, see SI 00835.380E in this section. For computation of the subsidy’s AV if the individual rebuts the PMV, go to SI 00835.380F.
D. Procedure for developing rental prepayments
Use this procedure when there is an indication of rental prepayment. For any given month, apply the prepayment first to any part of the required rent not paid separately. Unless the prepayment is designated, use any remaining prepayment to offset the subsidy for that month.
1. Verifying the required rent and the CMRV
Verify the required rent and CMRV using SI 00835.380C.3. and 5. above unless there is current information in file (i.e., obtained within the last 4 months).
RATIONALE: A prepayment or increase in payment may indicate an increase in the CMRV or required rent.
2. Month(s) covered by prepayment
Apply the prepayment to the months and in the amounts designated by the payer. To compute the actual value (AV) of any rental subsidy in the prepayment period, see SI 00835.380E.4. Substitute “designated prepayment” for “prepayment” in Step 1.
If the prepayment is undesignated, determine the month in which the individual made the prepayment. Treat that month as the first month of the prepayment period and go to SI 00835.380E.2. or 3, as appropriate, to compute the length of the prepayment period and the AV of any rental subsidy in that period.
E. Procedure for computing the actual value (AV) of the rental subsidy
Select the applicable method below to determine the actual value of an individual's or couple's portion of a rental subsidy. Document the file.
In all of the subsections below, for residents of the Second and Seventh Circuits and Texas, substitute the applicable PMV for the CMRV if the PMV is lower.
1. No prepayment
Use the following method if there is no prepayment involved.
NOTE: If the case is processed in MSSICS, the computation of rental subsidy is done by MSSICS.
Enter monthly CMRV
Subtract monthly required rent
An arrearage does not affect the monthly required payment.
Enter the difference
AV of subsidy to household.
Divide by number in household
Enter the result
AV to each household member. For an individual, go to 8. For an eligible couple, go to 6.
Multiply by 2
AV of subsidy to couple.
Enter lesser of AV or applicable PMV
Amount to charge for subsidy.
2. Undesignated prepayment/no monthly rental payment
When any household member makes an undesignated prepayment but no household member makes a monthly payment, use the following method:
Divide the prepayment by the CMRV. The result is the number of whole months for which there is no rental subsidy.
If the division in a. above does not result in an even number of whole months:
multiply the decimal remainder by the CMRV to arrive at the amount of rent prepaid for the final month of the prepayment period;
subtract the greater of the prepayment remainder amount or the required rent from the CMRV; and
proceed as in steps 4-8 of the chart in 1. above.
EXAMPLE: A household consists of an eligible individual and one other person living in an apartment that is owned by the eligible individual's son.
The apartment has a CMRV of $200 and the required rent is $100.
In April, the eligible individual makes a single undesignated payment of $650; the household makes no other rent payment until September.
Dividing the $650 prepayment by the $200 CMRV gives us 3.25 months of prepayment. Therefore, the household does not receive any rental subsidy for 3 full months (April, May, and June).
Multiplying the $200 CMRV by the .25 remainder yields a $50 prepayment applicable to July, the fourth month.
Subtracting the greater of the prepayment remainder ($50) or the required rent ($100) from the $200 CMRV results in a $100 subsidy.
Dividing the $100 subsidy by the 2 household members results in $50 AV of the subsidy to the eligible individual.
Because this is less than the PMV, we charge $50 as the subsidy.
3. Undesignated prepayment/monthly required rental payment
If any household member makes an undesignated prepayment and there is also payment of the monthly required rent, use the following method:
Divide the prepayment by the amount of the rental subsidy being charged (i.e., the difference between the CMRV and the required rent). The result is the number of months for which there is no subsidy.
If the division in a. above does not result in an even number of whole months:
multiply the decimal remainder by the rental subsidy to arrive at the amount of rent prepaid for the final month of the prepayment period;
subtract the rent prepaid for the final month from that month's rental subsidy; and
proceed as in steps 4 - 8 of the chart in 1. above.
4. Worksheet for a designated prepayment or prepayment plus changes in rent factors
Use of the following worksheet is optional. You may use it in any rental prepayment situation, selecting applicable entries. You are likely to find it most helpful in those situations where, in addition to a prepayment, there is a change in the CMRV, the required rent, or the amount paid on a recurring basis.
WORKSHEET FOR MO/YR /
Enter the prepayment
You may use a dollar product from first bullet in this section at SI 00835.380F.2.b. or F.3.b., or the 7.b. remainder below.
Add any other payment
Enter the total
Month's rental payment.
Enter the required rent
Enter the CMRV
Subtract the greater of the amounts in 3 or 4
Enter the difference
If the difference is positive, this is the AV of subsidy to household. Go to 8.
If the difference is negative, there is no subsidy for month. Enter the amount as a positive figure at 1 and repeat for as many months as needed to produce zero or a positive balance.
Divide 7a. balance by the number in the household
Enter the result
AV to each household member.
For an individual, go to 12. For an eligible couple, go to 10.