Utility Allowances

Background

Under the provisions of the U.S. Housing Act of 1937, as amended, HUD provides housing assistance to approximately 1.3 million households living in public housing across the country. This assistance is provided through approximately 3,100 Public Housing Agencies. HUD has responsibility for the oversight of federally assisted public housing and establishes regulations to guide these PHAs in how they implement the federal housing assistance.

To keep assisted housing affordable for lower-income households, federal housing law directs that the resident's share of rent in federally assisted public housing should equal 30 percent of the household's adjusted monthly income. In interpreting the federal housing law, HUD has defined the Total Resident Payment for "rent" to include both shelter and the costs for reasonable amounts of utilities. The amount that a PHA determines is necessary to cover the resident's reasonable utility costs is the utility allowance.

Such allowances are estimates of the expenses associated with different types of utilities and their uses. The utilities for which allowances may be provided include electricity, natural gas, propane, fuel oil, wood or coal, and water and sewage service, as well as garbage collection. The functions, or end-uses, covered by an allowance may include space heating, water heating, cooling, refrigeration, lighting, or appliances. Allowances are not provided for telephone service.

Utility allowances can be small or large, ranging from less than $10 to over $200 for a resident household per month, depending on the PHA, the number of utilities and uses covered, and the dwelling unit and/or household size.

Whether a household receives an allowance for a given utility service generally depends on the way the utilities are metered. Utilities can be metered in one of three ways: master-metered, checkmetered, and individually metered. Allowances are provided for checkmetered or individually metered utilities, but not for master-metered utilities.

Master-Metered Utilities. A master meter measures consumption for the building as a whole, rather than for individual dwelling units or households. Master meters are owned by the local utility company. Where utilities are master-metered, the PHA pays the local utility company for utilities used. In such instances, the utility costs are included in the basic rent levels established by the PHA, and no separate allowance is provided. However, the PHA may establish a "surcharge," an extra fee paid by residents for utility consumption for major appliances not seen as essential, such as a food freezer.

Checkmetered Utilities. Some PHAs install separate sub-meters (called "checkmeters"), in addition to the utility-owned master meter, to measure consumption by individual dwelling units. These checkmeters are owned by the PHA. As with master-metered utilities, the PHA pays utility company for utilities used. With checkmetered utilities, however, the PHA provides each household a utility allowance in the form of a maximum level of consumption that it may consume without a surcharge. A surcharge is applied when a household exceeds this level.

Individually Metered Utilities. Where utilities are individually metered, each household has a separate account with the utility company and pays the bill directly to that company. For this reason, individually metered utilities also are called "resident-paid" or "resident-purchased" utilities. The PHA provides a utility allowance to the household through a reduction in the household’s monthly rent. Many buildings have different metering systems for different utilities (sometimes referred to as “mixed metering”). For example, electricity might be individually metered, gas master-metered, and water checkmetered. An allowance also could be provided to residents for some non-metered utilities, such as trash pickup and sewer services, because the residents pay for these services directly.

Individual meters generally are more common than checkmeters in public housing. However, metering configurations vary widely by region. For example, individual metering is more prevalent in the Northwest, whereas checkmetering is very common in the South.

Allowances Are Calculated for Categories of Units

Utility consumption tends to vary according to certain characteristics of units, such as building construction type and size. To account for such factors, PHAs group dwelling units with similar characteristics into categories and calculate distinct allowances for each category. Each category (group) of dwelling units is called an allowance category.

Next section: Methodologies to Establish Utility Allowances