The total tenant payment is the MINIMUM family contribution towards total housing cost, not just the rent, so necessary utility costs are taken into consideration as well.
A mathematical formula is used to arrive at this number. It includes calculating the tenant’s annual income, applying HUD regulated deductions, and the agencies designated minimum rent. See the formula breakdown below:
Formula 1: 30% of the tenant’s monthly annual income anticipated for the upcoming 12 months minus HUD mandatory income exemptions. There are a lot of income exemptions that are designed to promote self-sufficiency.
Formula 2: 10% of the tenant’s monthly adjusted income which is annual income minus the consideration of HUD’s five Deductions.
Formula 3: Minimum Rent is a minimum threshold amount established by the agency and regulated by HUD for families with minimal income as a minimal contribution towards total housing costs. HUD Regulations require families to continuously become self-sufficient. Therefore, families on the program who have minimal income, the mathematical formula would require the possible use of minimum rent to determine subsidy levels.
Once these three items are calculated, the highest number amongst them is what is used to determine the total tenant payment (TTP).
Total Annual Income – $10,000
Total Eligible Deductions – $3,000
Adjusted Annual Income – $7,000
Formula 1: $10,000 ÷ 12 Months = $833 x 30% = $250
Formula 2: $7,000 ÷ 12 Months = $583 x 10% = $58
Formula 3: $50
In this example, the total tenant payment would be $250, as it is the highest calculated amount between the three formulas.