Roza, this is a fairly detailed question without a lot of backup.  I have included the two referenced citations for a quick review. Here is what Handbook 4350.3 chapter 5 indicates.

G. Regular Cash Contributions and Gifts

1. Owners must count as income any regular contributions and gifts from persons not living in the unit. These sources may include rent and utility payments paid on behalf of the family, and other cash or noncash contributions provided on a regular basis.

I think we can clearly see that the above situation is a fairly straight-forward issue and is income.  I am not necessarily saying that this is a direct link to your situation.

Here are all the references from Housing Notice 14-04 that mentions the word “Utility/Utilities”.

Page 17

a) Enhanced voucher family right to remain. A family that receives an enhanced voucher has the right to remain in the project as long as the units are used for rental housing and are otherwise eligible for housing choice voucher assistance (e.g., the rent is reasonable, unit meets HQS, etc.). The owner may not terminate the tenancy of a family that exercises its right to remain except for a serious or repeated lease violation or other good cause. If an owner refuses to honor the family’s right to remain, the family may exercise any judicial remedy that is available under State and/or local law.

b) Payment standard where the family chooses to stay in the same project.

(1) Special payment standard. For a family that stays in the project, the payment standard used to calculate the voucher housing assistance payment is the gross rent (rent to owner plus the applicable PHA utility allowance for any tenant-supplied utilities) of the family’s unit (provided the proposed gross rent is reasonable), regardless of whether the gross rent exceeds the normally applicable PHA payment standard.

(2) Rent reasonableness documentation and lease requirements. All regular program requirements concerning the reasonableness of the rent and the provisions of the HUD-prescribed lease addendum apply to enhanced vouchers. The PHA must determine that the proposed rent for the family’s unit is reasonable. The PHA determines whether the proposed new rents for the property are reasonable just as it does for any other potential units under the tenant-based assistance programs.

Page 18

The method for calculating the minimum rent changes if the family’s income subsequently decreases to a significant extent (15 percent or more) from the family’s gross income on the effective date of the expiration of the use agreement that removed the affordability restrictions at the property. Guidance on recalculating the minimum rent in cases when a family’s income significantly decreases is discussed in detail in subsection (1) below.

The enhanced voucher minimum rent only applies if the family remains in the project.

The enhanced voucher minimum rent does not apply if the family moves from the project.

(1) Significant decline in family income – effect on enhanced voucher minimum rent. If an enhanced voucher family suffers a significant decline in family income, the minimum family share required of the family shall be reduced so that the percentage of income for rent does not exceed the greater of 30 percent or the percentage of monthly adjusted income actually paid by the family for rent (the rent to owner plus tenant-paid utilities) on the effective date of the expiration of the use agreement that removed the affordability restrictions at the property. HUD is defining a significant decrease as a decrease in gross family income of at least 15 percent from the gross family income on the date of the expiration of the use agreement that removed the affordability restrictions at the property.

Page 20

If the owner raises the rent for a family assisted with an enhanced voucher in accordance with the lease, State and local law, and voucher program regulations, the PHA will increase the enhanced payment standard to equal the new gross rent (rent to owner and the applicable PHA utility allowance for any tenant-supplied utilities) for the unit provided the PHA determines the rent is reasonable. The additional cost of the subsidy will be covered through the regular renewal process for the PHA’s voucher program.

If a change in the PHA utility allowance (either an increase or decrease) affects the gross rent for a family assisted with an enhanced voucher, the PHA must adjust the enhanced payment standard accordingly. The enhanced payment standard may never exceed the gross rent for the assisted family’s unit.

Okay having said all of that, let me a couple of things.

1. I think it is unusual to point to The Notice when it is applicable to such a narrow definition of tenant protection/enhanced vouchers.  
2. Also, the references here are to “Utility allowances”, not some form if assistance.
3. I get the idea that they are “jumping a gap” in the logic.  If one thing is included, then another is included.  However still a little unsure why they’re stretching so hard.

Now, back to Handbook 4350.3.  The section referenced is focused on the calculation of income. So, the section is more on than the Notice.  However, once again, this is not a very specific reference by comparing it to “gifts.”

I then went to a 4350.3 Q&A document to see if there were any related insights there.  It was much of the same.  

Not being able to find a real specific reference in any of the above documents, I just went back to basics to determine how this may be viewed in the big picture.  I find a general statement that if income is not specifically excluded, it is included.  Once again, I cannot find any particular justification for what the client is doing, however, I cannot find a specific reference that they are doing anything wrong either.  This always leaves me a spot where it doesn’t feel right, but I cannot find any particular rule that prohibits it.  In those cases, I tend to side with the client’s policy until something further is received from an authoritative source. SO, I guess I cannot find anything that stops the client from doing this.

Most of the justification I can find for this is in the attached Exhibit 5-1.

From: AHACPA Support <support@ahacpa.org>
Sent: Monday, February 11, 2019 5:04 PM
To: les@ahacpa.org
Subject: Utility Discount in Tenant Income