The U.S. Department of Housing and Urban Development helps low-income families afford their housing costs under the 1937 U.S. Housing Act. The Housing Choice Vouchers Program, formerly known as Section 8, requires landlords participating in the program to include a utility allowance in its rental charges to low-income tenants.
The purpose of a HUD utility allowance is to help subsidize the utility costs for lower-income families as part of their total housing costs.
HUD Utility Allowance Limitations
HUD limits the amount of rent that participating landlords can charge housing voucher tenants. The HUD program allows low-income HUD participants to locate affordable housing in the private market. Each family has the discretion to find its own suitable housing, but its housing allowance is limited to 30 percent of their monthly income. A family's monthly rent obligations include the monthly rent payment plus reasonable utility costs.
Local public housing agencies help HUD establish monthly rental allowances for eligible recipients in HUD's public housing program. As part of a family's monthly rental allowance, HUD includes a utility allowance.
A family's utility allowance is the amount designated by the public housing agency as a family's reasonable allowance to cover its monthly utility bills. Since HUD limits the amount of rent landlords can charge their low-income HUD tenants, their rental costs must include their estimated utility allowances.
Agencies determine each family's total rental payment or housing voucher by factoring in the costs of shelter and a reasonable allowance for utility costs. Utility allowances help landlords participating in the federal housing program to receive rent payments that adequately cover their tenants' utility costs.
Landlords who pay for their tenants' utility payments receive higher rental payments from the federal government than those who do not provide them. Under the HUD housing program, families who pay for their own utilities benefit from lower rental payments and receive larger housing vouchers.
Calculating Utility Allowances
A HUD utility allowance is based on an average estimated cost for natural gas, oil or propane, electricity, water, sewage and trash collection. HUD does not provide assistance for telephone bills.
Public housing agencies provide each public housing family with a standard utility allowance based on the type of rental unit. A family's utility allowance can be $10 to $200 per month, depending on the number of people in the household, the types of utilities provided within a rental unit and the end use of the utility. The end use depends on the appliances in a family's home.