Gross Rent

What Is Gross Rent?

Gross rent is what a home actually costs a renter each month once utilities are counted. It equals the rent paid to the landlord, often called contract rent or rent to owner, plus the cost of utilities the renter pays separately.

The point is comparability. One apartment might rent for $1,000 with heat and water included, while another rents for $900 and the tenant pays $150 a month for utilities. The second looks cheaper, but its gross rent is higher.

How Gross Rent Works

Three major systems use the term, and each fills in the utility portion differently:

In the Housing Choice Voucher Program, if a unit’s gross rent is above the agency’s payment standard, the family pays the difference on top of its total tenant payment. When a family first leases such a unit, its share cannot exceed 40% of its adjusted monthly income.

Under the tax credit, a unit counts as rent-restricted only if its gross rent is no more than 30% of the income limit imputed to it. That limit assumes one person in a studio and 1.5 people per bedroom in larger units, so it depends on the unit’s size rather than on the actual tenant’s income. Section 8 or similar rental assistance paid to the owner does not count toward gross rent.

HUD’s fair market rents are also gross figures: by regulation they estimate rent plus the cost of utilities, except telephone.

Example

Suppose a tax credit unit’s rent limit, at 30% of the applicable income limit, works out to $1,250 a month, and the utility allowance for tenant-paid electricity is $125. The owner can charge at most $1,125 in rent, because rent plus the allowance cannot exceed $1,250. If a voucher pays part of that rent, the voucher payment is not counted as gross rent.

Gross Rent vs. Contract Rent

Contract rent is only the amount on the lease. Gross rent adds utilities. Most affordability measures, including cost burden, are based on gross rent, so a household whose contract rent looks affordable can still be cost-burdened once its utility bills are counted.