The Impact of HOTMA on Housing and Trust Administration 2024

March 12, 2024

The landscape of housing assistance has undergone a significant transformation with the introduction of the Housing Opportunities Through Modernization Act (HOTMA). This comprehensive guide aims to provide insights into the changes brought about by HOTMA, particularly for those involved in planning for clients in Section 8, 811, and 202 housing. We will delve into the history of Section 8, the major changes introduced by HOTMA, and offer practical tips for advocates and trustees navigating this new terrain.

A Brief History of Section 8 Legislation

Section 8 housing has evolved through various legislative acts over the years:

  • 1937 – United States Housing Act
  • 1968 – Fair Housing Act
  • 1974 – Housing and Community Development Act
  • 2016 – DeCambre v. Brookline Housing Authority decision
  • 2016 – Enactment of the Housing Opportunities Through Modernization Act (HOTMA)
  • 2019 – Proposal of HOTMA rules
  • 2023-4 – Finalization and implementation of HOTMA rules

Response to HOTMA’s Proposed Rules

The proposed regulations under HOTMA initially raised concerns regarding their impact on the use of special needs trusts. The importance of community feedback was highlighted, and comments from organizations like NAELA (National Academy of Elderlaw Attorneys) played a pivotal role in shaping the final rules. HUD’s lack of understanding of how special needs trusts operate led to a significant delay in issuing the final rules.

Major Changes Under HOTMA

HOTMA introduces the first substantial amendments to Section 8 rules in decades, with most rules taking effect on January 1, 2024, and compliance mandated by January 1, 2025. Key sections affected include:

  • 24 CFR 5.603 – Definitions
  • 24 CFR 5.609 – Annual income, including exclusions
  • 24 CFR 6.611 – Adjusted income

These changes are applicable to nearly all HUD housing programs.

The most significant changes for 2024 are as follows:Revisions to “Net Family Assets”

OLD: A general list of property types was counted, including real estate, savings, and investments.
NEW: A simplified blanket statement now defines net family assets as the net cash value of all family-owned assets, unless on the excluded list.

Irrevocable Trusts

OLD: Irrevocable trusts were not considered an asset, and distributions were treated under income rules.
NEW: The description remains the same, but there is no mention of distributions or income rules.

Additional Exclusions

NEW: The list of exclusions has been expanded to include items such as qualified retirement funds, non-residential real estate, civil recoveries for disabilities, and ABLE accounts.

Annual Income

OLD: All monetary amounts that benefit the family were included.

NEW: Only amounts not specifically excluded are considered.

Income from Assets

OLD vs. NEW: The threshold for imputed income from assets has increased from $5,000 to $50,000, with provisions for inflation indexing.

Trust Distributions

OLD: Trust distributions were part of the “net family assets” definition and subject to income rules.

NEW: For irrevocable trusts outside family control, only principal distributions and income distributions for minor healthcare expenses are excluded.

Medical Adjustment

OLD vs. NEW: The threshold for medical expense deductions has increased from 3% to 10% of annual income, potentially raising the rent burden for those with high care costs.

Other Adjustments

Adjustments for dependents and elderly or disabled family members have been indexed for inflation, and new asset limits and hardship waivers have been introduced.

Tips for Advocates and Trustees

Professionals working with clients in assisted housing should be aware of the type of housing, understand income calculations, and monitor eligibility. It may be necessary to amend trusts to manage income effectively. Additionally, using ABLE accounts for income distributions can provide benefits, and exploring other exclusions or alternative housing options may be advantageous.

In conclusion, HOTMA represents a significant shift in housing policy, with implications for trust administration and planning for low-income individuals. By staying informed and proactive, advocates and trustees can navigate these changes to best serve their clients’ needs.