2024-08133. Methodology for Annual Inflationary Adjustments to Income Calculations in HUD Subsidized Housing Programs

AGENCY:

Office of the Assistant Secretary for Community Planning and Development, Office of the Assistant Secretary for Housing—Federal Housing Commissioner, Office of the Assistant Secretary for Public and Indian Housing, HUD.

ACTION:

Notice; request for comment.

SUMMARY:

The Department of Housing and Urban Development (HUD), through this notice, solicits comment on the Department's proposed methodology for deriving an Inflationary Factor from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This factor will be used to adjust certain values pursuant to a requirement established in the Housing Opportunity Through Modernization Act of 2016 (HOTMA) that such values be adjusted annually by inflation.

DATES:

Comment due date: May 17, 2024. If HUD receives adverse comment that leads to reconsideration of this proposed methodology, then HUD will notify the public via a revised notice following the close of the comment period.

Applicability date: The terms of this notice are applicable to income determinations with an effective date on or after January 1, 2025, unless HUD receives comment that would lead to the reconsideration of its proposed methodology. HUD will publish both the Inflationary Factor and the Revised Amounts in August of each year to be used for the following calendar year.

ADDRESSES:

Interested persons are invited to submit comments on the proposed methodology. Communications must refer to the above docket number and title. There are two methods for submitting public comments:

1. Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at https://www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the author maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make such comments immediately available to the public. Comments submitted electronically through the https://www.regulations.gov website can be viewed by other submitters and interested members of the public. Commenters must follow instructions provided on that site to submit comments electronically.

2. Submission of Comments by Mail. Members of the public may submit comments by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW, Room 10276, Washington, DC 20410-0500. Due to security measures at all federal agencies however, submission of comments by standard mail often results in delayed delivery. To ensure timely receipt of comments, HUD recommends that comments submitted by standard mail be submitted at least two weeks in advance of the deadline. HUD will make all comments received by mail available to the public at https://www.regulations.gov.

Note:

To receive consideration as public comments, comments must be submitted through one of the two methods specified above. Again, all submissions must refer to the docket number and title of the notice.

No Facsimile Comments. HUD does not accept facsimile (Fax) comments.

Public Inspection of Public Comments. All comments and communications properly submitted to HUD will be available for public inspection and copying between 8 a.m. and 5 p.m. weekdays at the above address. Due to security measures at the HUD Headquarters building, an advance appointment to review the public comments must be scheduled by calling the Regulations Division at [phone] (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit https://www.fcc.gov/​consumers/​guides/​telecommunications-relay-service-trs.

Copies of all comments submitted are available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Virginia Sardone, Director, Office of Affordable Housing Programs, Office of Community Planning and Development (CPD), Room 7160, U.S. Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410, [phone]. Rita Harcrow, Director, Office of HIV/AIDS Housing, Office of Community Planning and Development, Room 7248, U.S. Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410, [phone]. The email for CPD programs is [e-mail]. Jennifer Lavorel, Director, Office of Asset Management and Portfolio Oversight Program Administration Office, Office of Multifamily Housing Programs, Room 6180, U.S. Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410, [phone]. Kymian Ray, Director, Public Housing Management and Occupancy Division, Office of Public Housing and Voucher Programs, Room 4210, U.S. Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410, [phone]. Adam Bibler, Director, Program Parameters and Research Division, Office of Policy Development and Research, [phone], for technical information regarding the development of the schedules or the methods used for calculating the inflation factors.

The contact telephone numbers listed are not toll-free numbers. HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit https://www.fcc.gov/​consumers/​guides/​telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION:

I. Terminology and Definitions

HUD defines the following terms for the purposes of this notice:

Adjusted Item. The figure that is to be adjusted for inflation ( e.g., the dependent deduction).

Inflation Index. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).^[1] The CPI-W is published by the U.S. Bureau of Labor Statistics and is available on the following website: https://www.bls.gov/​cpi/​.

Index Value. The number produced as the direct output of the CPI-W on a monthly basis. This number reflects the price of a market basket of consumer goods and services, relative to other points in time measured by the inflation index.

Inflationary Factor. The number that reflects the percentage change in the index value from one year to the next.

Revised Amount. The final value(s) published by HUD after the Inflationary Factor and rounding requirements are applied.

Rounding Requirements. For the mandatory deduction for elderly and disabled families, the mandatory deduction for dependents, the threshold for exclusion of earned income of dependent full-time students, and the threshold for exclusion of adoption assistance payments, Revised Amounts will be rounded down to the next lowest multiple of $25. All other Revised Amounts will be rounded to the nearest dollar.

Starting Value. The value of an Adjusted Item for the first year, prior to inflationary adjustment ( e.g., in calendar year 2024, the dependent deduction was set at $480).

Tracking Amount. An intermediate figure in the calculation after the Inflationary Factor is applied but prior to application of rounding requirements.

II. Applicability

This notice applies to the following programs: ^[2]

• Community Development Block Grant Program (CDBG)
• Continuum of Care Program (CoC)
• Emergency Solutions Grant Program (ESG)
• HOME Investment Partnerships Program (HOME)
• HOME Investment Partnerships Program-American Rescue Plan (HOME-ARP)
• Housing Choice Voucher
• Housing Opportunities for Persons With AIDS (HOPWA)
• Housing Trust Fund (HTF)
• Public Housing
• Section 8 Moderate Rehabilitation
• Section 8 Moderate Rehabilitation for Single Room Occupancy (SRO) Dwellings for Homeless Individuals
• Section 8 Project Based Rental Assistance (PBRA)
• Section 202 Project Rental Assistance Contract (PRAC)
• Section 202/162 Project Assistance Contract (PAC)
• Section 236 Non-Insured Projects Subject to Use Agreements (236)
• Section 811 Project Rental Assistance Contract (PRAC)
• Section 811 Project Rental Assistance Demonstration (811 PRA)
• Self-Help Homeownership Opportunity Program (SHOP)
• Senior Preservation Rental Assistance Contract (SPRAC)
• Supportive Housing Program (SHP)

III. Background

Through the Housing Opportunity Through Modernization Act of 2016 (HOTMA),^[3] HUD requires that several values adjust annually for inflation in accordance with an Inflation Index selected by the Secretary. The Revised Amounts will be used by Public Housing Agencies (PHAs), Multifamily Owners (MFH Owners), and CPD grantees during income reviews ^[4] for program applicants and participants, except as otherwise noted below.

Asset Limitation

HOTMA establishes a limitation on the admission and continued program participation of families with assets that exceed $100,000. This amount is to be adjusted annually, rounded to the nearest dollar. (24 CFR 5.618(a)(1)(i), 574.310(f))

Note: The asset limitation does not apply to the 202/811 PRAC, 236, 811 PRA, CDBG, HOME, HOME-ARP, HTF, or SPRAC programs.

Note: Pursuant to Notice PIH 2023-27/Notice H 2023-10,^[5] PHAs/MFH Owners have discretion with respect to the application of the asset limitation at annual and interim reexamination. PHAs/MFH Owners may adopt a written policy of total non-enforcement, full enforcement, or limited enforcement, and may also adopt exception policies. See Notice H 2023-10 for more details.

Threshold for Calculating Imputed Returns on Assets

HOTMA establishes that when the value of net family assets exceeds the threshold of $50,000, any imputed returns on such assets must be calculated when actual income cannot be calculated. This amount is to be adjusted annually, rounded to the nearest dollar. (24 CFR 5.609(a)(2) and (b)(1)).

Threshold for Inclusion of Non-Necessary Personal Property in Assets

As implemented by HUD, HOTMA establishes that when the combined value of all of a family's non-necessary items of personal property does not exceed $50,000, the combined value of all items of non-necessary personal property is excluded from net family assets. This amount is to be adjusted annually, rounded to the nearest dollar. (24 CFR 5.603(b)).

Threshold for Acceptance of Self-Certification of Assets

HOTMA establishes that a PHA/MFH Owner/CPD Grantee may accept a family's self-certification of net assets when net family assets are equal to or less than $50,000. This amount is to be adjusted annually, rounded to the nearest dollar. (24 CFR 5.618(b)(1), 5.659(e), 92.203(e); 93.151(e); 574.310(e)(3)(ii); 960.259(c)(2), and 982.516(a)(3)).

Threshold for Exclusion of Earned Income of Dependent Full-Time Student

As implemented by HUD, HOTMA establishes an income exclusion of amounts more than $480 for the earned income of a dependent, full-time student. This amount is to be adjusted annually, rounded to the next lowest multiple of $25. (24 CFR 5.609(b)(14)).

Threshold for Exclusion of Adoption Assistance Payments

As implemented by HUD, HOTMA establishes an income exclusion of amounts more than $480 for adoption assistance payments. This amount is to be adjusted annually, rounded to the next lowest multiple of $25. (24 CFR 5.609(b)(15)).

Mandatory Deductions for Elderly and Disabled Families and for Dependents

HOTMA establishes a $525 mandatory deduction from income for elderly and disabled families. This amount is to be adjusted annually, rounded to the next lowest multiple of $25. (24 CFR 5.611(a)(2)).

HOTMA establishes a $480 mandatory deduction from income for dependents. This amount is to be adjusted annually, rounded to the next lowest multiple of $25. (24 CFR 5.611(a)(1))

Note: Mandatory deductions do not apply to the HTF program unless the unit is subject to HUD's regulations found in 24 CFR 93.151(a)(1)-(3) and (f).

HUD will publish both the Inflationary Factor and the Revised Amounts in August of each year on the HUD User website at https://www.huduser.gov/​portal/​datasets/​inflationary-adjustments-notifications.html. Throughout calendar year 2024, these amounts will be the Starting Value determined by the HOTMA statute. As explained in Notice PIH 2023-27/H 2023-10 and a publication in the Federal Register ,^[6] PHAs, MFH Owners, and CPD Grantees may delay compliance with HOTMA and may pick a compliance date as early as January 1, 2024, but no later than January 1, 2025. If a PHA, MFH Owner, or CPD Grantee begins complying with the HOTMA income and assets rule for transactions in 2024, they will use calendar year 2024 Starting Values as described in this Notice. HUD will publish Revised Amounts to be used for all income determinations with an effective date on or after January 1, 2025.

Adjusted item	Starting value, CY 2024
The amount for the eligibility restriction on net family assets	$100,000
The amount for the value of net family assets above which imputed returns may be calculated	50,000
The amount of the combined value of all non-necessary personal property that is excluded from net family assets, if the combined total value does not exceed this amount	50,000
The amount of net assets for which the PHA/MFH Owner/CPD Grantee may accept self-certification by the family	50,000
Income exclusion for earned income of dependent full-time students	480
Income exclusion for adoption assistance payments	480
The amount of the mandatory deduction for elderly and disabled families	525
The amount of the mandatory deduction for a dependent	480

IV. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), published monthly by the Bureau of Labor Statistics (BLS), tracks the average change in prices paid by urban wage earners for consumer goods and services. Monthly Index Values are available for the U.S. City Average or national average, for various geographic areas (regions and metropolitan areas), for national population size classes or urban areas, and for cross-classifications or regions and size classes.

In the final rule implementing Sections 102, 103, and 104 of HOTMA (FR-6057-F-03; February 14, 2023), HUD specified that it would use the CPI-W because of public comments, HUD's belief that it is an accurate measure of inflation to use in making income and asset determinations, and the fact that it would be familiar to many since it is used for the Social Security Administration's (SSA) Cost-of-Living Adjustment.^[7]

CPI-W Index Values can be seasonally adjusted. Seasonal adjustment is a statistical technique that attempts to measure and remove the influences of predictable seasonal patterns from time series data. Seasonally adjusted data are most useful when making current or short-term analyses, to filter out the impact of predictable seasonal variation. In addition, seasonally adjusted data are subject to revision for up to five years.

HUD proposes to use non-seasonally adjusted Index Values to calculate the Inflationary Factor. Unadjusted index values are often used for escalation purposes and measure the change in the actual prices consumers pay for goods and services. Since HUD will be using the same three months from one year to the next, non-seasonally adjusted values can better estimate longer term price movements. The SSA Cost-of-Living Adjustment also uses seasonally unadjusted data from the CPI-W.

HUD proposes to compare an average of three months of CPI-W index values from one year to the next, to calculate the Inflationary Factor. The SSA Cost-of-Living Adjustment also uses three months of CPI-W data, so following suit will make HUD's method more familiar and accessible. An average of three months of data is more likely than a one-month snapshot to represent durable trends, and it is more likely than a longer average to reflect current economic circumstances.

HUD proposes to calculate one national Inflationary Factor. Use of a national average is preferred in light of administrative difficulties that would arise from having a variety of different regional inflationary factors. Again, the SSA Cost-of-Living Adjustment uses national CPI-W data, which will make HUD's inflationary adjustments methods more familiar and accessible.

HUD proposes to make no adjustment but to hold the Revised Amounts fixed when the percentage change in the CPI-W from one year to the next shows no increase or a decrease. This aligns with the SSA Cost-of-Living Adjustment. It also ensures that assisted families are not harmed by increases in rents or a lower asset limitation during an economic downturn. As the SSA does, HUD would subsequently restart upward adjustments only when the CPI-W has recovered fully, to avoid adjustments that would outpace inflation generally over the long term. (See sample calculation #3 in section VI.)

V. Methodology for Calculating the Inflationary Factor and Revised Amounts

Calculating the Inflationary Factor

HUD proposes to determine the annual Inflationary Factor for the coming calendar year by calculating the change (if any) in the CPI-W from the average for the second quarter (April, May, and June) of the prior year to the average for the second quarter in the current year. The average in the CPI-W for the second quarter of each year will be calculated by averaging the monthly unadjusted CPI-W index values for that year. Data from the second quarter of the year will be used so that HUD can publish Revised Amounts before PHAs, MFH owners, and CPD grantees need to use such Revised Amounts for income calculations that will have effective dates in the next calendar year.

Step 1: Average unrounded CPI-W Index Values for April, May, and June of current year.

Current Year Average Index Value = (April Index Value + May Index Value + June Index Value)/3

Step 2: Average unrounded CPI-W Index Values for April, May, and June of prior year.

Prior Year Average Index Value = (April Index Value + May Index Value + June Index Value)/3

Step 3: Subtract the prior three-month average Index Value from the current three-month average Index Value and divide by the prior year average Index Value × 100 to find the Inflationary Factor (percentage).

Inflationary Factor = ((Current Year Average−Prior Year Average)/Prior Year Average) × 100

Example Calculation of the Inflationary Factor

Total and Average Year-Over-Year CPI-W Index Values for the Second Quarter

Month	Prior year index value (all items, unadjusted)	Current year index value (all items, unadjusted)
April	261.237	284.575
May	263.612	288.022
June	266.412	292.542
3-month total	791.261	865.139
3-month Average	263.754	288.380

((288.380−263.754)/263.754) × 100 = 9.3

In this example calculation, there has been a 9.3 percent increase. (An inflationary factor could be presented as 1.093. When that inflationary factor is multiplied by the value that needs to be adjusted, the product will reflect that 9.3 percent increase. For ease of calculation, the percentage change will be converted back to decimal form, and added to or subtracted from 1, to provide the Inflationary Factor for the formulas below.)

Calculating the Tracking and Revised Amounts

Once the Inflationary Factor is determined, the Revised Amounts for the coming calendar year are determined in two steps. First, the Inflationary Factor is applied to the figure to be adjusted. Second, the appropriate rounding requirements are applied to determine the new Revised Amount.

In 2024, the first year an inflationary adjustment will be calculated, HUD will take the starting values for all inflation-adjusted figures (as determined by statute, see Section III) and multiply by the Inflationary Factor determined by the CPI-W. The product is the Tracking Amount, an intermediate step in the calculation. Next, the relevant rounding requirements are applied to the Tracking Amount, to determine the Revised Amount that must be used for the coming calendar year. All figures to be adjusted will be rounded to the nearest dollar, except the dependent deduction (24 CFR 5.611(a)(1)), the elderly or disabled family deduction (24 CFR 5.611(a)(2)), and the income exclusions described in 24 CFR 5.609(b)(14) and (15), which will be rounded down to the next lowest multiple of $25, as required by statute.

Step 1: Starting Value × (1 + Inflationary Factor) = Tracking Amount

Step 2: Rounding Requirement Applied to Tracking Amount = Revised Amount

HUD proposes to use the following formula for calculating Tracking and Revised Amounts for all years after the first year of adjustment:

Step 1: Prior-Year Tracking Amount × (1 + Inflationary Factor) = Current Tracking Amount

Step 2: Rounding Requirement Applied to Current Tracking Amount = Revised Amount

HUD has determined that this method will track inflation over time better than available alternatives. At Step 1, HUD will multiply the Tracking Amount from the prior year by the Inflationary Factor determined by the CPI-W, to determine the current Tracking Amount. A method that instead started from the Prior-Year Revised Amount in Step 1 could inadvertently prevent any inflationary increases for the dependent deduction, the elderly or disabled family deduction, or the income exclusions tied to the dependent deduction level, even after years of persistent high inflation. This is partly because this alternative method would round the deductions and other figures more than is necessary, preventing all but the most extraordinary inflationary increases. (See sample calculation #5 in Section VI for further discussion.) Next, the relevant rounding requirements are applied to the current Tracking Amount, to determine the Revised Amount that must be used for the coming calendar year.

VI. Sample Calculations for the Inflationary Factor and Revised Amounts

Below is a series of sample calculations to illustrate HUD's proposed methodology, including calculating both the Inflationary Factor and the Revised Amounts. The sample series is intended to illustrate how HUD proposes to calculate the Revised Amounts under different circumstances, including positive, negligible, and negative changes in prices year-over-year.

Sample 1: Calculating the Revised Amount for the Elderly/Disabled Family Deduction in 24 CFR 5.611(a)(2): Positive Percentage Change in Average Year-Over-Year Index Values

Total and Average Year-Over-Year CPI-W Index Values for the Second Quarter

Month	Prior year index value	Current year index value
April	261.237	284.575
May	263.612	288.022
June	266.412	292.542
3-month total	791.261	865.139
3-month Average	263.754	288.380

In this sample, the Elderly/Disabled Family Deduction has yet to be adjusted for inflation, so at the outset it is set at the starting value of $525.

Step 1—Calculate Inflationary Factor:

((288.380−263.754)/263.754) × 100 = 9.3 percent or 1.093

Step 2—Determine the Tracking Amount for the Elderly/Disabled Family Deduction:

$525 × (1 + 0.093) = $573.83

Step 3—Apply rounding requirement to the Tracking Amount to determine the new Revised Amount:

HOTMA requires that the elderly/disabled family deduction be rounded down to the next lowest multiple of $25. Rounding to the next lowest multiple of $25 from $573.83 requires rounding to $550. The Elderly/Disabled Family Deduction is adjusted from $525 to $550. Here is how the inflationary factor of 9.3 percent would be applied to all other figures that required adjustment that year:

Adjusted item	Starting value	Inflationary factor	Tracking amount	Rounding requirement	Revised amount
The amount for the eligibility restriction on net family assets	$100,000	1.093	$109,300	To the nearest dollar	$109,300
The amount for the value of net family assets above which imputed returns may be calculated; The amount of the combined value of all non-necessary personal property that is excluded from net family assets, if the combined total value does not exceed this amount; The amount of net assets for which the PHA/MFH Owner/CPD Grantee may accept self-certification by the family	50,000	1.093	54,650	To the nearest dollar	54,650
The amount of the mandatory deduction for a dependent; Income exclusion for earned income of dependent full-time students; Income exclusion for adoption assistance payments	480	1.093	524.64	To the next lowest multiple of $25	500

Sample 2: Calculating the Revised Amount for the Elderly/Disabled Family Deduction in 24 CFR 5.611(a)(2): Insufficient Positive Percentage Change in Average Year-Over-Year Index Values

Total and Average Year-Over-Year CPI-W Index Values for the Second Quarter

Month	Prior year index value	Current year index value
April	261.237	266.462
May	263.612	268.884
June	266.412	271.740
3-month total	791.261	807.086
3-month Average	263.754	269.029

In this sample, the Elderly/Disabled Family Deduction has yet to be adjusted for inflation, so at the outset it is set at the starting value of $525.

Step 1—Calculate Inflationary Factor:

((269.029−263.754)/263.754) × 100 = 2.0 percent or 1.02

Step 2—Determine the Tracking Amount for the Elderly/Disabled Family Deduction:

$525 × (1 + 0.02) = $535.50

Step 3—Apply rounding requirement to the Tracking Amount to determine the new Revised Amount:

HOTMA requires that the elderly/disabled family deduction be rounded to the next lowest multiple of $25. Rounding to the next lowest multiple of $25 from $535.50 requires rounding to $525. The Elderly/Disabled Family Deduction remains at $525.

Note that while the 2 percent inflationary factor is not sufficient to increase the Elderly/Disabled Family Deduction in this year, because of the relevant rounding rules requiring the figure will be rounded to the next lowest multiple of $25, other inflation-adjusted figures will be increased. For example, if the amount for the eligibility restriction on net family assets had been $100,000, it would be increased to $102,000.

Adjusted item	Starting value	Inflationary factor	Tracking amount	Rounding requirement	Revised amount
The amount for the eligibility restriction on net family assets	$100,000	1.02	$102,000	To the nearest dollar	$102,000
The amount for the value of net family assets above which imputed returns may be calculated; The amount of the combined value of all non-necessary personal property that is excluded from net family assets, if the combined total value does not exceed this amount; The amount of net assets for which the PHA/MFH Owner/CPD Grantee may accept self-certification by the family	50,000	1.02	51,000	To the nearest dollar	51,000
The amount of the mandatory deduction for a dependent; Income exclusion for earned income of dependent full-time students; Income exclusion for adoption assistance payments	480	1.02	489.60	To the next lowest multiple of $25	480 (no adjustment).

Sample 3: Calculating Revised Amount for the Elderly/Disabled Family Deduction in 24 CFR 5.611(a)(2): Negative Percentage Change in Average Year-Over-Year Index Values

Total and Average Year-Over-Year CPI-W Index Values for the Second Quarter

Month	Prior year index value	Current year index value
April	284.575	278.884
May	288.022	282.262
June	292.542	286.691
3-month total	865.139	847.837
3-month average	288.380	282.613

In this sample, the Elderly/Disabled Family Deduction has yet to be adjusted for inflation, so at the outset it is set at the starting value of $525.

Step 1—Calculate Inflationary Factor:

((282.613−288.380)/288.380) × 100 = −2.0 percent or 0.98

Step 2—No Adjustment Made:

Because this would result in a decrease, HUD will not make an adjustment and will publish the Revised Amount as unchanged from the prior year. The Revised Amount for the coming year will be $525. HUD will hold the Revised Amount constant until the CPI-W average exceeds its previous high, to ensure that subsequent increases to Revised Amounts do not outpace inflation in recovery years.

Adjusted item	Starting value	Inflationary factor	Tracking amount	Rounding requirement	Revised amount
The amount for the eligibility restriction on net family assets	$100,000	0.98	No adjustment	To the nearest dollar	$100,000
The amount for the value of net family assets above which imputed returns may be calculated; The amount of the combined value of all non-necessary personal property that is excluded from net family assets, if the combined total value does not exceed this amount; The amount of net assets for which the PHA/MFH Owner/CPD Grantee may accept self-certification by the family	50,000	0.98	No adjustment	To the nearest dollar	50,000
The amount of the mandatory deduction for a dependent; Income exclusion for earned income of dependent full-time students; Income exclusion for adoption assistance payments	480	0.98	No adjustment	To the next lowest multiple of $25	480

Sample 4: Calculating Revised Amounts for Net Family Assets in 24 CFR 5.609 (Value Cap for Imputing Net Family Assets, Value Cap for Exclusion of Non-Necessary Personal Property) and 24 CFR 5.618 (Value Cap for Self-Certification of Net Family Assets): Positive Percentage Change in Average Year-Over-Year Index Values

Total and Average Year-Over-Year CPI-W Index Values for Second Quarter

Month	Prior year index value	Current year index value
April	285.121	289.641
May	285.002	288.991
June	272.542	289.564
3-month total	842.665	868.196
3-month average	280.888	289.399

In this sample, the amount for the value of net family assets above which imputed returns may be calculated, the value of the combined total non-necessary personal property that may be excluded from net family assets, and the amount of net assets for which the PHA/MFH Owner/CPD Grantee may accept self-certification by the family have yet to be adjusted for inflation, so at the outset all are set at the starting value of $50,000.

Step 1—Calculate Inflationary Factor:

((289.399−280.888)/280.888) × 100 = 3.0 percent or 1.03

Step 2—Determine the Tracking Amounts for the Value Cap for Imputing Net Family Assets, Value Cap for Exclusion of Non-Necessary Personal Property, and the Value Cap for Self-Certification of Net Family Assets:

$50,000 × 1.03 = $51,500

Step 3—Apply rounding requirement to determine the new Revised Amount:

HOTMA requires that the value caps for imputing net family assets, the exclusion of non-necessary personal property, and self-certification of net family assets must be rounded to the nearest dollar. The new Revised Amounts would increase from $50,000 to $51,500.

Adjusted item	Starting value	Inflationary factor	Tracking amount	Rounding requirement	Revised amount
The amount for the eligibility restriction on net family assets	$100,000	1.03	$103,000	To the nearest dollar	$103,000.
The amount of the mandatory deduction for elderly and disabled families	525	1.03	540.75	To the next lowest multiple of $25	$525 (no adjustment).
The amount of the mandatory deduction for a dependent; Income exclusion for earned income of dependent full-time students; Income exclusion for adoption assistance payments	480	1.03	494.40	To the next lowest multiple of $25	$480 (no adjustment).

Sample 5: Calculating Revised Amounts for Dependent Deduction in 24 CFR 5.611(a)(1): Subsequent Years of Inflationary Adjustments

This sample compares how calculations are made in the first year with how calculations are made in subsequent years of inflationary adjustment. It demonstrates three consecutive calculations of inflationary adjustment for the dependent deduction. In the first year, there is an inflationary factor of 4 percent; in the second year, there is a factor of 3.5 percent; and in the third year, there is a factor of 3.9 percent.

First Year:

Total and Average Year-Over-Year CPI-W Index Values for Second Quarter

Month	Prior year index value	Current year index value
April	280.111	291.315
May	280.557	291.779
June	281.672	292.939
3-month total	842.340	876.033
3-month average	280.780	292.011

In the first year of calculation, the Dependent Deduction has yet to be adjusted for inflation, so at the outset it is set at the starting value of $480.

Step 1—Calculate Inflationary Factor:

((292.011−280.780)/280.780) × 100 = 4.0 percent or 1.04

Step 2—Determine the Tracking Amount for the Dependent Deduction:

$480 × 1.04 = $499.20

Step 3—Apply rounding requirement to determine the new Revised Amount:

HOTMA requires that the dependent deduction must be rounded to the next lowest multiple of $25. Because $499.20 would round to $475, which is lower than the current level of $480, HUD would make no adjustment to the dependent deduction. The Revised Amount for the coming calendar year would remain $480.

Second Year:

Total and Average Year-Over-Year CPI-W Index Values for Second Quarter

Month	Prior year index value	Current year index value
April	291.315	301.511
May	291.779	301.991
June	292.939	303.192
3-month total	876.033	906.694
3-month average	292.011	302.231

Step 1—Calculate Inflationary Factor:

((302.231−292.011)/292.011) × 100 = 3.5 percent or 1.035

Step 2—Determine the Tracking Amount for the Dependent Deduction:

In the second year of calculation, HUD will start with the Tracking Amount from the prior year ($499.20), which is equivalent to the product of the starting value and all inflationary factors determined to date.

$499.20 × 1.035 = $516.67

Step 3—Apply rounding requirement to determine the new Revised Amount:

HOTMA requires that the dependent deduction must be rounded to the next lowest multiple of $25. $516.67 must be rounded down to $500. The Revised Amount for the coming calendar year is increased from $480 to $500.

Third Year:

Total and Average Year-Over-Year CPI-W Index Values for Second Quarter

Month	Prior year index value	Current year index value
April	301.511	313.270
May	301.991	313.769
June	303.192	315.016
3-month total	906.694	942.055
3-month average	302.231	314.018

Step 1—Calculate Inflationary Factor:

((314.018−302.231)/302.231) × 100 = 3.9 percent or 1.039

Step 2—Determine the Tracking Amount for the Dependent Deduction:

In the third year of calculation, HUD will start with the Tracking Amount from the prior year ($516.67), which is equivalent to the product of the starting value and all inflationary factors determined to date.

$516.67 × 1.039 = $536.82

Step 3—Apply rounding requirement to determine the new Revised Amount:

HOTMA requires that the dependent deduction must be rounded to the next lowest multiple of $25. $536.82 must be rounded down to $525. The Revised Amount for the coming calendar year is increased from $500 to $525.

During this hypothetical four-year period, there has been an 11.8 percent increase in the average CPI-W index value (from 280.780 to 314.018). Likewise, there has been an 11.8 percent increase in the Tracking Amount (from $480 to $536.82). In that time, the dependent deduction has increased by 9.4 percent (from $480 to $525). If instead of this method, HUD were to begin the second- and third-year calculations with the rounded Revised Amount from the previous year, the dependent deduction would not increase at all.

VII. Findings and Certifications Environmental Impact

This notice sets forth rate determinations and related external administrative requirements and procedures that do not constitute a development decision affecting the physical condition of specific project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), this notice is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

VIII. Paperwork Reduction Act

This notice does not impact the information collection requirements already submitted to the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In accordance with the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number. The OMB control number associated with this collection is 2502-0587.

Damon Y. Smith,

General Counsel.

Footnotes

1.  HUD established in the HOTMA Final Rule (88 FR 9600; Feb. 14, 2023) that the Department will use the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the Inflation Index. See the HOTMA Final Rule for a detailed discussion on why HUD chose the CPI-W. https://www.federalregister.gov/​documents/​2023/​02/​14/​2023-01617/​housing-opportunity-through-modernization-act-of-2016-implementation-of-sections-102-103-and-104#h-167.

2.  When a grantee in CPD programs has a choice in applying a definition of annual income under their program regulations and the grantee chooses the definition in 24 CFR 5.609, then the grantee is subject to the applicable requirements in 24 CFR 5.609, 24 CFR 5.611, and 24 CFR 5.618 as revised by the HOTMA final rule.

3.  Public Law 114-201.

4.  Income reviews and their requirements are defined in HUD's program regulations found in 24 CFR 5.609; 891.105; 891.410; 891.610; 960.257; 982.516; 92.203; and 93.151.

5.  Notice PIH 2023-27/Notice H 2023-10, “Implementation Guidance: Sections 102 and 104 of the Housing Opportunity Through Modernization Act of 2016 (HOTMA).” Originally issued September 29, 2023. Reissued February 2, 2024. These notices are substantively identical.

6.   https://www.federalregister.gov/​documents/​2023/​12/​08/​2023-27026/​housing-opportunity-through-modernization-act-implementation-of-sections-102-103-and-104-extension.

7.  See 42 U.S.C. 415 for the SSA Cost-of-Living Adjustment formula.