So July 1st just rolled around, and the new HOTMA changes are going into effect. But what does it all mean? And how can you best prepare for any new compliance requirements.

Any Public Housing Authority that administers Housing Choice Vouchers and Public Housing must now comply with certain provisions of the Housing Opportunity Through Modernization Act of 2016 (HOTMA). Many of these provisions have already been in effect, but subjected to a grace period.

In a June 16 letter, Todd Thomas, Acting Deputy Assistant Secretary for HUD’s Office of Public Housing and Voucher Programs, reminded all Executive Directors that by July 1 PHAs must: (1) apply the new income exclusions in 24 CFR 5.609(b); (2) use the updated definitions in 24 CFR 5.100, 5.403, and 5.603; and (3) adopt policies addressing de minimis errors.

These changes are also reflected in Notice PIH 2024-38 by HUD, Housing Opportunity Through Modernization Act (HOTMA) Sections 102 and 104: Updated Guidance to Public Housing Agencies (PHAs) on Compliance.

What are the HOTMA changes that went into effect July 1st, 2025?

HOTMA Income Definition Updates

• “Earned income” & “unearned income” (24 CFR 5.100): Used to apply exclusions like 5.609(b)(3) (earned income of children <18) and 5.609(b)(14) (portion of dependent students’ earnings over the deduction).

• “Family” (5.403): Determines basic eligibility for PIH programs; HOTMA expanded which single persons qualify as a “family” to align with the 2021 Consolidated Appropriations Act.

• “Day laborer,” “independent contractor,” “seasonal worker” (5.603): These terms support the nonrecurring income exclusion at 5.609(b)(24).

• “Dependent” (5.603): Clarifies (explicitly) that foster children and foster adults are not part of the assisted family and aren’t counted as dependents—this wasn’t a policy change, just codified. Applies to exclusions at 5.609(b)(14) & (15).

• “Foster child” & “foster adult” (5.603): New definitions; used in exclusions at 5.609(b)(4) & (8) (payments for their care; income of live‑in aides, foster children/adults).

• “Health and medical care expenses” (5.603): Replaces “medical expenses” in exclusions at 5.609(b)(2)(i)(B) and 5.609(b)(6).

• “Minor” (5.603): Tied to the trust distribution exclusion at 5.609(b)(2)(i)(B).

Updated Income Exclusions PHAs must use (24 CFR 5.609(b))

• Imputed return on assets ≤ $50,000 is not counted when no actual asset income can be determined (5.609(b)(1).

• Certain trust distributions from irrevocable/revocable trusts outside the family’s control are excluded (5.609(b)(2)).

• Earned income of dependents under 18 is excluded; only their unearned income counts (5.609(b)(3)).

• Payments for foster children/foster adults (incl. state or Tribal kinship/guardianship payments like Kin-GAP) are excluded (5.609(b)(4) & (8)).

• Insurance payments/settlements for personal or property losses are excluded (5.609(b)(5)).

• Health & medical care reimbursements that offset documented expenses are excluded (5.609(b)(2)(i)(B)).

• Non‑recurring income that will not repeat in the coming year is excluded (5.609(b)(24)).

• Civil rights settlements or judgments are excluded (5.609(b)(25)).

• Gross self‑employment/business receipts are excluded to the extent only net income is counted (clarified at 5.609(b)(24) & (28)).

• Amounts excluded by other federal statutes stay excluded; HUD will maintain the qualifying list (5.609(b)(22)).

De minimis error policy (24 CFR 5.609(c)(4))

• Definition & threshold: A de minimis error is when your income calculation is off by no more than $30 per month in adjusted income (=$360 per year) for a family. You are not considered out of compliance solely because of such an error.

• Who it applies to & where it’s codified: The rule covers PHAs and owners across PH/program regs (24 CFR 5.609(c)(4); 882.515(f); 882.808(i)(5); 960.257(f); 982.516(f)).

• Corrective action requirements:

  • If the family overpaid rent because of the error, you must credit or repay them, retroactive to the effective date of the action.

  • If the family underpaid, HUD says they may not be required to repay the difference.

What This All Means in Simple English

In plain terms, July 1 means PHAs now have to use HUD’s refreshed rulebook for what “counts” as income, what doesn’t, and how to treat small math mistakes. You’ll follow new definitions (so everyone is talking about the same things like “earned income,” “foster child,” or “seasonal worker”), you’ll ignore a longer list of income types that Congress/HUD say shouldn’t raise a family’s rent (like small trust payouts, foster care payments, one‑time windfalls), and you’ll formalize a “de minimis” policy so a $30/month error doesn’t trigger findings or chase-backs from tenants. Practically, this means updating your policies, software, and staff scripts so every recert effective after July 1 applies the new definitions/exclusions automatically—and documenting how you’ll fix tiny errors if they pop up. It’s all about getting to the right rent with less paperwork anxiety: clearer rules, fewer gotchas, and a little grace for honest, minor miscalculations.

How Verify4 is setup to help MHAs

Verify4’s income and employment verification solution is a game change for housing authorities. We help them comply with income calculations faster, with greater accuracy. Best of all, we do it for a fraction of the price compared to other solutions MHAs are used to.

• Level-5 “Up-Front Income Verification” out of the box. Verify4 is the most reliable third-party data match but HUD’s hierarchy definition. Verify4 delivers employer‑reported quarterly wage records straight from state databases—authoritative, FCRA-compliant, and timestamped—so staff aren’t chasing paystubs or employer letters.

• Faster, cleaner annuals and interims. HOTMA wants past-12‑month actual income. With an instant wage history and current quarter data, you can calculate past income, spot 10% shifts for interims, and document everything in seconds.

• Built-in error prevention for the de minimis era. Automated pulls reduce fat-finger math and missing-job errors—the top causes of those <$30 discrepancies. If you do miss something, your audit trail shows good-faith reliance on primary-source data.

Verify4 is the only firm offering real-time, high-coverage income and employment verifications—covering over 93% of employees and 99% of wage data, with up to 25 years of history. It's fast, affordable, and integrates easily into existing systems.

To learn more about how Verify4 can help your organization make smarter, fairer decisions, reach out at [email protected] or visit www.Verify4.com