Towne Tip: Real Property Determination Under HOTMA’s Asset Limitation
This guidance applies to HUD Multifamily programs subject to HOTMA's asset limitation under Section 104.
Section 8 Project-Based Rental Assistance and Section 202/8 are subject to this provision. LIHTC, HOME, NHTF, Section 202/162 PAC, Section 202/811 PRAC, Section 236 IRP, Section 811 PRA, and SPRAC are not.
For LIHTC, consult your allocating agency, and for HOME, your Participating Jurisdiction, to confirm that the asset limitation does not apply, specifically surrounding denial of housing due to ownership of real property.
Real Property Counts Two Separate Ways
Real property ownership affects the asset limitation through two distinct, independent questions. First, the property's value can push a household's net family assets over the threshold, $109,797 for 2027. Second, separate from value entirely, HUD's four-part test can find a household out of compliance because they own a home they could live in, regardless of that home's dollar value.
An exemption from the four-part test does not exclude the property from the net family assets calculation. A household can clear the real property restriction entirely and still have that same property's value counted toward the $109,797 threshold. These are two separate determinations and must be reviewed independent of each other.
Annual and Interim Certifications Require Its Own Written Policy
At move-in the rule must be followed, exceeding the threshold or owning disqualifying real property means denial. At annual and interim reexamination, MFH Owners can choose a written policy of total non-enforcement, full enforcement, or limited enforcement with a cure period of up to six months, and that policy must be documented in the Tenant Selection Plan.
Total non-enforcement does not remove the obligation to calculate net family assets. A household's real property still must be identified and its value still has to be counted toward the threshold, even under a policy that won't terminate assistance for noncompliance. What non-enforcement removes is the obligation to investigate whether that property qualifies for an exemption or is suitable for occupancy, since the four-part test itself won't be enforced.
A household curing noncompliance tied to real property ownership specifically must either no longer own the property or have it newly qualified for an exemption, and net family assets still cannot exceed the threshold after that cure. Offering the property for sale does not, on its own, exclude its value from net family assets, even once the sale itself resolves the ownership restriction.
When Self-Certification Ends the Question and When It Doesn’t
A property manager may use one combined form asking a household to certify their present ownership interest in real property, their legal right to reside in it, and their legal authority to sell it. At this time HUD does not have a required form, therefore this question can be built into the housing application or questionnaire itself, rather than using a separate standalone form, or owner/agents can create their own required form.
If the household certifies they own no real property at all, that certification is sufficient on its own. No further verification is required.
If the household certifies they do own real property, third-party verification becomes mandatory for three specific questions: the legal right to reside in the property, the legal authority to sell it, and whether it is suitable for occupancy. Self-certification does not resolve these three questions once ownership itself has been admitted.
The Four-Part Test
The determination applies only when the property is enforcing the asset limitation, including limited enforcement, and a household has declared present ownership interest in real property. When both conditions are met, check each of the following four categories. If any applies, the household's ownership does not by itself put them out of compliance with the real property restriction.
1. Exemptions. Four categories exempt a property outright:
A manufactured home or Homeownership Option property already receiving assistance under the property.
Property jointly owned with an individual who does not live with the household but resides at the property.
Property owned by a household that includes a domestic violence, dating violence, sexual assault, or stalking survivor.
Self-certification must be accepted directly for this exemption, with no additional evidence required, tied to confidentiality protections under 24 CFR § 5.2007.
Property which is currently being offered for sale.
HUD names two specific acceptable documents directly: a contract with a real estate agent, or a current real estate listing.
2. Legal right to reside. This applies when a household owns property they cannot legally occupy. HUD's own example is a property zoned as commercial.
Before requesting a paid Zoning Verification Letter from a city or county planning department, check whether that city or county publishes a free public GIS zoning lookup tool, many Minnesota cities and counties do, which returns the same zoning designation at no cost.
3. Legal authority to sell. This applies when contested ownership, active divorce proceedings, or unresolved heirs' property prevents a legal sale.
HUD names a divorce pleading or complaint as a direct example of sufficient documentation for divorce proceedings. For contested ownership in Minnesota specifically, a Notice of Lis Pendens filed with the county recorder under Minnesota Statute § 557.02 documents pending litigation affecting title. For unresolved heirs' property, the county district court's probate case file documents an unsettled estate.
4. Suitability for occupancy. Five conditions apply:
Disability-related needs. HUD does not specify a standard document type. Proceed carefully and confirm the approach against applicable fair housing and civil rights requirements before making a determination.
Family size. Contact the HUD office overseeing the property's specific MFH contract for documentation expectations, rather than relying on an internal standard alone.
Geographic hardship. HUD does not specify a standard document type for this condition either.
Unsafe physical condition. An inspection report or correction notice from the local city building or housing inspection department documents this directly.
Minneapolis's Inspections Services division is one example of a department that issues these.
Legal right to reside, cross-referencing category 2.
Four-Part Test and Net Family Asset Workflow:
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Does the property qualify for one of the four exemptions?
If so, the property is exempt, continue with the Net Family Asset Threshold.
If not, continue to RPR part 2.
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Does the household lack legal right to reside at the property?
If so, the property is exempt, continue with Net Family Asset Threshold.
If not, continue to RPR part 3.
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Does the household member have the legal authority to sell the real property?
If not, the property is exempt, continue with the Net Family Asset Threshold.
If so, continue to RPR part 4.
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Is the real property suitable for occupancy?
If not, the property is exempt, continue with the Net Family Asset Threshold.
If so, you have moved through the Four-Part Test and the household does not qualify to move into the property.
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Does the property’s value, combined with other assets, exceed HUD’s net family asset threshold?
If so, the household is unqualified.
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Review the property Tenant Selection Plan for clarification.
Worked Example
The Torres household applies for a unit at a Section 8 PBRA property. During the application, Mrs. Torres discloses that she owns a two-bedroom house in another city, valued at $95,000, which she inherited from her mother two years ago alongside her brother, who currently lives in the house.
Because Mrs. Torres declared ownership, self-certification alone does not resolve the determination. The property manager checks the four categories. The jointly-owned-with-a-non-household-resident exemption applies. Her brother does not live in Mrs. Torres's household, and does reside at the jointly owned property, matching HUD's language of exemption directly. The property is exempt from the real property restriction.
The property manager's work is not finished. The $95,000 value still counts toward the Torres household's net family assets. This is a move-in application, not a reexamination, so if the household's combined net family assets, including this $95,000, exceed $109,797 (2027), the household does not qualify.
Common Error
Treating the exemption finding as the end of the determination. A property manager who confirms the joint-ownership exemption and stops there, without carrying the property's value into the net family assets calculation, has completed only one of the two questions real property ownership raises.
