Security deposits must sit in a segregated interest-bearing account whose balance equals everything collected from tenants in occupancy plus accrued interest

mfh.fees_and_charges.security_deposits_held_in_a_segregated_interest_bearing_account · v1.0.0

The owner must place security deposits into a segregated, interest-bearing account, and the balance of that account must equal the total amount collected from all tenants then in occupancy plus any accrued interest. For Section 202/8, Section 202 PRAC and Section 811 PRAC the balance is that total plus accrued interest less allowable administrative cost adjustments, and for Section 202/8 those administrative costs may not exceed the accrued interest allocated to the family's balance for the year. Section 202 properties with Section 8 or PAC must additionally keep a record of the amount in the account attributable to each tenant and allocate accrued interest to each tenant annually and on move-out. Owners must comply with any state or local law on investment of deposits and distribution of interest; where state law is silent or HUD's rule is more demanding, HUD's rule applies, and where the two conflict the owner follows whichever gives the tenant the greater benefit. Where state or local law is silent on the rate, the actual rate earned must be computed and credited to each tenant's portion.

Confidence

high

Effective from

2013-11-27

Last reviewed

2026-09-01