Ask Member Support: Verifying Net Income under the New Rent-Geared-to-Income Rules
My team is undergoing Annual Reviews and a question has come up around reported income.
My understanding is that under Ontario’s new, simplified rent-geared-to-income rules, we should use the Notice of Assessment (NOA) from the Canada Revenue Agency (CRA) to verify the tenant’s income, except when projected income has decreased by a minimum of 20 percent.
We have an uncommon case with a tenant where their income has actually increased to market, and the tenant has provided paystubs. What should we do?
In a case like this, where the tax-based income in the Notice of Assessment (NOA) or Proof of Income (POI) Statement does not accurately reflect a tenant’s current income, as a housing provider you can ask for more information to use an alternate method to approximate net income. Service managers should have rules on the use of approximated net income (ANI) and what documents they will accept for verification.
Depending on the direction provided by your service manager, approximated net income may be used instead of the tax-based net income in these cases:
- Initial review at move-in (at the discretion of the service manager)
- Annual rent-geared-to-income (RGI) review – if the tax-based net income amount does not accurately reflect the current average income
- In-year reviews – approximated net income is used for all in-year reviews, but unchanged income may continue to be tax-based
Verifying approximated net income
The alternate documentation you request should come from the employer or organization that issues the income. Usually, you only need one piece of alternate documentation to verify the approximated net income.
This could be a regular statement of income (for example, a pay stub or a monthly financial statement) or a letter requested from the employer to verify gross income, payment frequency, and employment start date.
The documentation must provide enough information to allow you to estimate the approximate net income that you expect the tenant to receive over the 12-month period following the RGI review.
Remember that consent for disclosure of information must be signed by members of the household, as required by the service manager.
Once the income is verified and the rent calculated, compare the amount to the maximum RGI (equivalent to market rent) for the unit. Notify the household that the rent will increase to market rent (normally the first day of the month after the review is completed) including a right to a review of your decision. Even though they will be paying market rent, they remain eligible for RGI over the next 24 months and will continue to report changes. After paying market rent for 24 consecutive months, they will no longer be eligible for RGI and will become a market rent household.
Note: Due to the rent freeze for 2021, the effective date of the increase in the notice cannot be earlier than January 1, 2022.
Have more questions around the new rent-geared-to-income rules?
ONPHA members can receive personalized support from our team of experts. Contact firstname.lastname@example.org with your questions.
Learn more about the new RGI rules
ONPHA’s online course The New, Simplified World of Rent-Geared-to-Income, is a great resource to help housing providers better understand the Province’s new RGI rules. The course includes supporting materials that make calculations a breeze, including a sample Notice of rent change – RGI to market, as well as examples of alternate documentation that can be used for a variety of income types (from self-employment, to invest income, and more).
The next course offering starts in January 2022. Stay tuned to ONPHA’s website and e-Alert newsletters for registration details.