Last week, HUD finalized its calculations for the upcoming year’s passbook savings rate.
The new rate has been set at 0.45% for 2025.
Affordable housing programs use the passbook savings rate to calculate imputed income from assets. This number essentially represents how much income a household’s assets could potentially generate if they were invested in a typical fashion. For decades, programs would apply this equation whenever the total cash value of a household’s assets exceeded $5,000:
Total Cash Value of Assets x Passbook Savings Rate = Imputed Income from Assets
If the resulting imputed income from assets was greater than the household’s actual income from assets, the asset income reflected on the certification would be the imputed amount calculated.
The passbook savings rate was set at 2% for many years. In 2016, HUD revised the number to 0.06% to better reflect contemporary economic conditions.
Under the Housing Opportunities Through Modernization Act (HOTMA), HUD is now obligated to adjust the passbook savings rate each year using Federal Deposit Insurance Corporation (FDIC) data. HUD analyzes quarterly National Savings Rate data and informs stakeholders of the revised passbook savings rate by no later than September 1.
HOTMA also changed the way we use this number. Going forward, affordable housing programs only impute asset income for individual assets that have undeterminable income. Examples include real property that does not generate rents, collections, and plots of land. Moreover, the equation is only applied when the total cash value of all assets exceeds $50,000.
The rate for 2024 was set at 0.4%, as described in Notice H 2023-10/PIH 2023-27. Many sites continue to experience delays in their software’s ability to reflect this change, even today. HUD reminds stakeholders that if they are unable to produce 2024 certifications that utilize the 0.4% rate, they may continue to use 0.06%.
As we await all the puzzle pieces to come together to allow for full HOTMA compliance, NCHM reminds stakeholders to remain vigilant about what rates to use for each year’s certification.