x Utility Allowance and Rent Changes - Spectrum Enterprises


Utility Allowance and Rent Changes

It’s that time of year when Public Housing Authorities often re-evaluate their utility allowances and publish new ones. If this is the method used at your property for utility allowances be sure to call and ask if new allowances have gone into effect.

 1.42-10 Utility allowances states in paragraph (c)(1) that “in general, if at any time during a building’s extended use period (as defined in section 42(h)(6)(D)), the applicable utility allowance for units changes, the new utility allowance must be used to compute gross rents of the units due 90 days after the change.”

Utility allowances don’t often decrease. If they increase you must review the gross rents of all units and potentially decrease tenant rents if tenant rent plus utility allowance equal a figure greater than you maximum allowable gross rent. You cannot wait until the next annual certification. You cannot wait until the next lease renewal. You aren’t increasing rents, you’re decreasing them. Whatever lease restrictions you may have regarding increasing rents during the lease term don’t apply to rent decreases. You cannot charge more than the maximum allowable gross rents, period.

Owners sometimes interpret the need for owners to review at least once during each calendar year the basis on which utility allowances have been established as meaning it is only necessary to update allowances once a year. However, that same sentence goes on to say “and must update the applicable utility allowance in accordance with paragraph (c)(1) of this section”.

 Written by Lois Churchill, Spectrum Enterprises

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