Calculating Net Family Assets Under HOTMA

The Housing Opportunity Through Modernization Act (HOTMA) of 2016 became effective January 1, 2024,* and has changed the way assets are calculated for compliance with the low-income housing tax credit program. It is important to understand these new rules to accurately calculate the total value of assets, as well as the income being earned from the assets.

The first thing to understand is the definition of “Net Family Assets”. Net Family Assets includes both the combined value of assets for both Non-Necessary Personal Property (NNPP) and Real Property.

NNPP refers to items of value that can be converted to cash, such as bank accounts, stocks, or other investment items (with certain exclusions).

Real Property is defined by state law, and typically this includes homes and land. The cash value of Real Property must always be included in Net Family Assets.

HUD Notice H 2023-10, Section F.4.b explains the new asset exclusions, including one essential exclusion: “The value of all non-necessary items of personal property with a total combined value of $50,000 or less, annually adjusted for inflation.” To clarify, this means that if the total value of a family’s NNPP is below the imputed income threshold ($51,600 effective January 1, 2025), we disregard it when calculating total net family assets.

Upon implementation of HOTMA, to accurately understand when to impute asset income, you will need to first calculate the net family assets by combining the value of NNPP and Real Property. Remember, if net family assets are below $51,600 (the income limitation threshold effective January 1, 2025), do NOT impute asset income. If the net family assets exceed $51,600, impute asset income ONLY for assets with undeterminable income.  Examples of both situations follow:

Example #1:  A family has NNPP which includes a savings account of $10,000 with an interest rate of 0.05%; and a non-interest-bearing checking account of $8,000. In addition, they own real estate with a cash value of $27,000, this is considered Real Property. The breakdown would be as follows:

Type of Asset (NNPP)	Cash Value of Asset	Actual Income Earned
Savings	$10,000	$5
Checking	$8,000	$0
Total NNPP	$18,000	$5
Real Property Total	$27,000	Undeterminable
Total Net Family Assets	$27,000
Total Asset Income		$5

 

In this case, since the NNPP is below the income limitation threshold of $51,600, this will be excluded from the net family assets. However, the Real Property would count in the net family assets. Based on this information, the household’s net family assets are $27,000.  Since this is below the income limitation threshold, we would not impute income on the net family assets; however, the actual earned income of $5 does count as income.

Example #2:  A family has NNPP which includes a non-interest-bearing checking account of $42,000; stocks with a cash value of $23,500 earning dividends of $850/year; and life insurance with a cash value of $5,500 and the policy earns no dividends or interest. In addition, they own real estate with a cash value of $32,000. The breakdown would be as follows:

Type of Asset (NNPP)	Cash Value of Asset	Actual Income Earned
Checking	$42,000	$0
Stocks	$23,500	$850
Life Insurance	$5,500	$0
Total NNPP	$71,000	$850
Real Property Total	$32,000	Undeterminable (impute – $144)
Total Net Family Assets	$103,000
Total Asset Income		$994

 

In this case, since the NNPP is above the income limitation threshold of $51,600, it will be included in the net family assets. The Real Property total will be added together with the NNPP for Total Net Family Assets of $103,000. Based on this information, you will need to calculate the current Passbook Rate (0.45%) on the Real Property since it has undeterminable income (32,000 X 0.45% = $144). This imputed income will be added to the actual asset income ($850) for total asset income of $994.

*Please note, HUD Section 8 MFH and RD have delayed implementation for HOTMA until July 1, 2025. In addition, the Pennsylvania Finance Housing Agency has delayed implementation until July 1, 2025. Please be sure to check with your state Housing Finance Agency for HOTMA implementation dates, some states have implemented HOTMA.

 

Owners and Management Agents should be well trained in understanding the HOTMA requirements as they relate to maintaining compliance in affordable housing. MLCM offers consulting services and training regarding the various affordable housing programs impacted by the implementation of HOTMA. For more information on these services don’t hesitate to contact us. The information presented in this post is intended solely for informational purposes and should not be construed as consulting advice from M&L Compliance Management LLC.

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