Payment Standard

What Is a Payment Standard?

A payment standard is the most a public housing agency will use to calculate a family’s subsidy in the Housing Choice Voucher program. HUD regulations describe it as the maximum monthly subsidy payment. It works as a ceiling: a family can rent a unit that costs more, but the extra comes out of the family’s pocket.

Each agency adopts a payment standard schedule with an amount for every unit size, from efficiencies up. The amounts are tied to HUD’s fair market rent for the area, or to the Small Area FMR by ZIP Code where those apply.

How Payment Standards Work

Setting the amount. An agency may set any payment standard from 90% to 110% of the published FMR, called the basic range, without HUD approval. It can use one percentage for all unit sizes or vary them. Anything above 110% is an exception payment standard. An agency can adopt some of these on its own, such as up to 110% of a ZIP Code’s Small Area FMR, or up to 120% of the FMR after notifying HUD that it meets certain criteria. Other exception amounts need HUD approval. Agencies may also set different payment standards for different parts of their jurisdiction.

Calculating the subsidy. The agency’s monthly housing assistance payment is the lower of:

1. the payment standard minus the family’s total tenant payment (TTP), or
2. the unit’s gross rent minus the TTP.

TTP is generally 30% of the family’s adjusted monthly income.

The 40% cap. When a family first leases a unit whose gross rent is above the payment standard, its share cannot exceed 40% of its adjusted monthly income.

Example

Suppose the two-bedroom payment standard is $1,600 and a family’s TTP is $500, meaning its adjusted income is about $1,667 a month.

• Unit renting for $1,500 (gross): the subsidy is $1,000 ($1,500 − $500), and the family pays $500.
• Unit renting for $1,800 (gross): the subsidy is capped at $1,100 ($1,600 − $500), and the family pays $700. That is 42% of adjusted income, over the 40% cap, so the agency could not approve this lease.

Why It Matters

Payment standards strongly affect where voucher holders can live. If they are set too low compared with local rents, families may be unable to find a unit before their voucher expires, or may be limited to lower-cost, higher-poverty neighborhoods. If they are set higher, each voucher costs more, and agencies with fixed budgets may be able to assist fewer households.