Counting Rent Paid by Guarantors as Income
Q My management company will let a qualified applicant with no credit history sign a lease if she can find a guarantor. One applicant told us that if we rent a low-income unit to him, his guarantor will pay the rent for two months. If we accept the applicant, should we count these rent payments as part of his household’s income?
A Yes. The HUD Handbook says that you must include “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” as part of household income [HUD Handbook 4350.3, par. 5-6(G)(1)]. So if you anticipate that a guarantor will pay the household’s rent for two or more months, you must count these anticipated payments when certifying the household.
But if you anticipate that a guarantor will assist a household with only one month’s rent, or if you don’t anticipate the guarantor’s assistance at all (for example, the applicant tells you he expects to be able to make the payments on his own), you needn’t include anything in your income calculations, even if the guarantor ends up paying more than you anticipated. According to HUD, “Temporary, nonrecurring, or sporadic income (including gifts) is not counted” [HUD Handbook 4350.3, par 5-6(G)(3)].