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The Income and Assets Test for Section 8 Housing

By Jessica Steinberg, Esq.

Section 8 vouchers are a federally-funded type of public housing assistance that subsidizes the cost of private market rentals. They are a lifeline for the families fortunate enough to obtain them and often present the only means of finding affordable housing. This article will discuss how a family’s income and assets, including lump sum awards, affect eligibility for the Section 8 program. The article will also explore the impact of income and assets on the amount of rent a Section 8 recipient can expect to contribute each month to his or her landlord.


To be eligible for the Section 8 voucher program, a family’s gross annual income must be less than 80% of the area median income.1 Each Public Housing Authority (PHA), the local agency that administers the Section 8 program, must adopt preferences for families who earn at or below 30% of the area median income and target these families for priority admission to the program.2

With a Section 8 voucher, a family must typically contribute 30% of its adjusted annual income toward rent each year.3 This is called the total tenant payment (TTP). Annual income is defined as "all earnings," and includes employment wages, public benefits, and disbursements from any investments or pension plans.4 The adjusted annual income is computed by reducing the family’s gross annual income by any applicable standard deductions for seniors, persons with disabilities and dependent children.5

Example: Each month a senior citizen receives $600 in Supplemental Security Income (SSI) and $200 from her deceased husband’s pension plan. Her gross annual income is $9600. As head of household, she receives a standard $400 annual income deduction.6 Therefore, her adjusted annual income is $9200. She can expect to pay approximately $230 per month in rent.


Families seeking admission to the Section 8 program do not have to comply with any general limitation on the amount and type of assets they can own. However, a portion of a family’s assets will count toward the "annual income" determination and, in some circumstances, may affect eligibility and total tenant payment.7

Assets less than $5000: If a family’s net assets are worth less than $5000, all income derived from the assets is counted toward "annual income."8 A family’s Section 8 eligibility is affected only if income earned from the asset places the family over 80% of the area median income. A family’s total tenant payment will increase by 30% of the income derived from the asset. In other words, income from an asset is treated exactly the same as employment wages. PHAs will not take into account the value of the actual asset; if the family does not receive any income, it will not affect the Section 8 voucher.

Example: Jim holds a Section 8 voucher and pays $150 each month in rent. Last year, his mother passed away and bequeathed him $3500 in stocks. From these stocks, he earned a $360 end-of-year dividend (equal to $30 per month). Jim will now have to pay an additional $10 per month toward rent.

Assets greater than $5000: If a family’s net assets are worth more than $5000, the family must count toward annual income the greater of either (1) all income derived from the assets, or (2) a percentage of the total value of the assets based on the passbook savings rate, as determined by the U.S. Department of Housing & Urban Development (HUD) each year.9 The PHA will never count the full cash value of the asset toward annual income.

Example: A husband and wife establish a $20,000 trust. Each year, the couple receives a $1000 disbursement from the trust. The HUD passbook savings rate is 3%. The couple’s annual income of $1000 from the trust exceeds $600, which is 3% of the total value of the trust. Therefore, the PHA will count $1000 toward annual income. However, if the couple decides to reinvest the $1000 in the trust, it will not count as income. In that case, $600 will count toward the couple’s annual income instead.

Lump-Sum Awards

Whether a lump sum award counts as annual income, and consequently affects Section 8 eligibility and TTP determination, depends on the type of lump sum payment and how the recipient utilizes it. Lump sum additions to a family’s assets, including inheritance, insurance payments, capital gains, and settlement for personal or property loss, are excluded from the calculation of the family’s annual income.10 If the lump sum award falls within one of these categories, no portion of the payment counts toward annual income. The result is different, however, if the family disposes of the lump sum award for less than fair market value. In this case, the family will automatically have to count a percentage of the lump sum asset as annual income for 2 years following the transfer, determined by the HUD passbook savings rate.11

Example: Jane is awarded $15,000 for personal injuries sustained in a car accident. She gave $5000 to her son, and spent $200 in transaction fees to make the transfer. The passbook savings rate is 3%. The cash value of the asset transferred for less than fair market value is $4800. Jane must count as annual income 3% of $4800, or $144 per year for 2 years following the transfer.

Lump sum payments that an individual receives in lieu of regular earnings, such as unemployment, worker’s compensation, and severance pay, are counted as annual income and affect both Section 8 eligibility and a recipient’s TTP in exactly the same way as income derived from assets.12


Unlike other public benefits programs, Section 8 eligibility and a recipient’s TTP is determined almost exclusively by a family’s income, including income derived from assets, and not by the cash value of the total sum of the family’s assets. With the right planning, individuals and families can build their assets and plan for the future, while not placing in jeopardy their continued participation in the Section 8 program.

Jessica Steinberg, Esq., is a staff attorney and Equal Justice Works fellow at the Legal Aid Society of San Mateo County.

  1. 24 CFR §: 982.201(b)(1); 24 CFR §: 5.603(b)
  2. 24 CFR §: 982.201(b)(2), Housing Choice Voucher Program Guidebook, Section 5.2., Income Limits,
  3. 24 CFR §: 5.628(a)(1)
  4. 24 CFR §: 5.609
  5. 24 CFR §: 5.611(a); Voucher Guidebook, Section 5.5, Adjusted Income
  6. See Id. for a full list of standard deductions
  7. See Voucher Guidebook, Exhibit 5-3, Summary of Asset Inclusions and Exclusions, for a complete list of what counts as an asset.
  8. Voucher Guidebook, Section 5.4, Determining Income from Assets
  9. Id.
  10. Voucher Guidebook, Exhibit 5-2, Income Exclusions (3)
  11. Voucher Guidebook, Section 5.4, Determining Income from Assets
  12. Voucher Guidebook, Exhibit 5-2, Income Inclusions (5)