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Statement of Need: This rule is needed to meet HUD’s goal of reducing errors, including overpayment of subsidy, caused by incorrect income determinations and rent calculations in HUD’s public and assisted housing programs. To do this, this rule would implement the upfront income verification (UIP) process and require the use of HUD’s Enterprise Income Verification (EIV) systems. The use of UIV will allow entities to validate the accuracy of a family’s self-reported household income and reduce the incidence of fraud, waste, and abuse in public and assisted housing programs. HUD also believes that the use of UIV is less time-consuming and more accurate than third-party verification.

Summary of the Legal Basis: Sections 6 and 8 of the United States Housing Act of 1937 (42 U.S.C. 1437d and 1437f), section 202 of the Housing Act of 1959 (12 U.S.C. 1701q), sections 221(d)(3), 221(d)(5), and 236 of the National Housing Act (12 U.S.C. 1715l(d) and 1715z-1), section 811 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013), and section 101 of the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s) authorize HUD to provide financial assistance in the form of rent subsidies for participants in HUD’s public and assisted housing programs. These statutory provisions and HUD’s general rulemaking authority under section 7(d) the Department of Housing and Urban Development Act (42 U.S.C. 3535(d)) authorize HUD to establish regulatory policies and procedures governing such rental subsidies, including the verification of employment and income necessary to determine the subsidy amounts.

Alternatives: The policies and procedures governing employment and income verification are codified in regulation. Accordingly, any revisions to the regulatory requirements must also be implemented through notice and comment rulemaking. Implementation of the changes necessary changes described above through other means, such as a handbook, would not be binding or enforceable.

Anticipated Costs and Benefits: Under the Improper Payments Information Act (IPIA) of 2002 and Office of Management and Budget (OMB) implementing guidance Circular No. A-123, agencies are to assess all programs and activities they administer and identify those that may be susceptible to significant improper payments. Consistent with these directives, HUD initiated the Rental Housing Integrity Program (RHIP) in the spring of 2001with the goal of reducing improper payments in HUD’s rental housing assistance programs. The recurring study cost is about $4.3 million annually. The findings of the latest Quality Control Study, implies that the gross transfer resulting from eliminating all the under- and over-payments of rents is approximately $783 million ($523.7 million in rent subsidy overpayment and $258.7 million in rent subsidy underpayment). The single major benefit of the initiative is an improvement on the integrity of HUD programs.

Risks: This rule poses no risk to public health, safety or the environment.