Calculating Income
Various properties utilize differing methods of calculating the income of applicants for affordable housing. Much depends on the particular program under which a property is operated. The most common set of requirements used in calculating income for households in New Jersey is the Uniform Housing Affordability Controls (UHAC), however, these requirements do not apply to certain programs which are governed by the federal government. Below, you will find a general outline of the method which is used to calculate income by many programs which we administer.
1. To calculate income, we use the current gross income of the applicant and project that income over the next 12 months. “Current gross income” and household composition are determined at the time that the Final Application is submitted. Once submitted, whether it be complete or not complete, the household composition and the sources and types of income may NOT be modified. In the event that the applicant changes their household composition and/or their employment or other circumstances after the submission of the final application, the new circumstances would be considered only after a re-submission of a Preliminary Application. The Waiting List policies and procedures would apply upon receipt of the Preliminary Application. Occupancy is determined pursuant to N.J.A.C. 5:80-26.4. Larger households may be considered under certain circumstances, contingent upon the landlord’s occupancy standards (for rentals), as well as state and local regulations.
2. Income includes, but is not limited to, wages, salaries, tips, commissions, alimony, regularly scheduled overtime, pensions, social security, unemployment compensation, TANF, verified regular child support and alimony, disability, net income from business or real estate, and income from assets such as savings, certificates of deposit, money market accounts, mutual funds, stocks, bonds and imputed income from non-income producing assets, such as equity in real estate. Regular receipt of financial gifts and support are also counted as gross annual income.
3. Assets not earning a verifiable income shall have an annual imputed interest income using a current average annual savings interest rate (currently .40%). Assets not earning income include present real estate equity. Applicants owning real estate must produce documentation of a market value appraisal and outstanding mortgage debt. The difference shall be treated as the monetary value of the asset and the imputed interest added to income.
4. Applicants who own a primary residence with no mortgage on the property may not be eligible for some programs due to a limit on assets set forth by the New Jersey Council on Affordable Housing. See ,COAH Asset Limits for details.
5. Rent from real estate is considered income, after deduction of any mortgage payments, real estate taxes, property owner’s insurance and reasonable property management expenses as reported to the Internal Revenue Service. Other expenses are not deductible. If actual rent is less than fair market rent, the administrative agent shall impute a fair market rent.
6. Retirement Income: As a general rule, prior to retirement age, we do not count the income from retirement accounts, such as 401K’s and IRA’s, although all retirement accounts must be disclosed as part of the application process. For federal programs, however, we do count income from IRA’s or other forms of retirement accounts in which the funds are accessible to the applicant. Since a 401K program is not accessible to the owner, except in cases of hardship, we do not count the income from them as long as the applicant is not of retirement age. Once retired, we count most forms of distribution of funds that are made to the applicants from their retirement accounts, but, again, there are variations on the precise methodology, depending on the specific program requirements.
7. Income from students who are enrolled full time is counted in certain situations and with certain limitations.
8. Income typically does not include benefit payments, rebates or credits received under any of the following: Federal or State low-income energy assistance programs, food stamps, payments received for foster care, relocation assistance benefits, income of live-in attendants, scholarships, student loans, personal property such as automobiles, lump-sum (one-time) additions to assets such as inheritances, lottery winnings, gifts and insurance settlements. Income, however, does include interest and other earnings from the investment of any of the foregoing benefits, payments, rebates, or credits.
VERIFICATION INCOME: No documentation is required upon the submission of a Preliminary Application. All income and other pertinent information is verified by third-party sources at the time of Final Application. Attached, you will find a checklist that provides the basis of the documentation that is most often required. Please note, however, that additional documentation may be requested, depending on the program and the specific source of income that we are attempting to verify.
RECERTIFICATION: For most programs, once you qualify and are certified for an affordable home that you buy or lease, subsequent changes in your income will have little or no effect on your eligibility. Certain rental properties may require re-certification of household on an annual basis. A few will require you to pay a higher rent if your income increases to a certain level.
Application Update:
Some application forms indicate that, when calculating income from assets, expenses relative to the sale are deducted from the equity prior to imputing .4% interest, which is then added to gross annual income. However, most non-federally funded programs do not make that deduction from equity prior to imputing an income and the current rate has been adjusted so as to comply with the current HUD Passbook Rate, which is subject to change.
Financial Support Clarification
(This does not include Child Support or Alimony)
The definition of income was amended so as to clarify that one-time contributions are not considered income, while regular payments of financial support or gifts are counted as regular income for the purposes of assessing eligibility under UHAC regulations. Pursuant to regulations set forth by the IRS in 2024 any regular support, when annualized, exceeding $18,000 will be counted as income.
Changing Household Composition or Income
PRELIMINARY PHASE:
Our policies allow any applicant to change their household composition or income during the preliminary phase of the application process, as long as we are notified in writing. To process such changes, we will need your name, application number or numbers, the name or names of the properties for which you applied, and the details of the change that you are reporting.
FINAL APPLICATION PHASE:
We have a long-held policy that prevents applicants from changing their household composition and/or their income to meet the requirements of the affordable housing program, once they have submitted their Final Application. The purpose of this policy is to discourage applicants from making temporary or other unverifiable changes in their household composition or income.
The policy states, “Current gross income” and household composition are determined at the time that the Final Application is submitted. Once submitted, whether it be complete or not complete, the household composition and the sources and types of income may NOT be modified. In the event that the applicant changes their household composition and/or their employment or other circumstances after the submission of the final application, the new circumstances would be considered only after a re-submission of a Preliminary Application. The Waiting List policies and procedures would apply upon receipt of the Preliminary Application.
NOTICE:
We do our best to describe the regulations and policies that govern the determination of household membership and income. In the event that we have not set forth a policy or regulation that addresses a particular situation, we reserve the right to use the regulations set forth in the HUD Handbook 4350 to the extent that it is on point and does not conflict with the UHAC Regulations.