Frequently Asked Questions
- Why is my income limit unchanged from last year?
- Why did some area median family income (MFI) estimates decrease in FY2007 even though the OMB definition of the area did not change?
- Why did the area definitions change for the income limits and median family income estimates?
- Why can’t I find the income limits for a particular nonmetropolitan county or a metropolitan area?
- Why does my very low-income limit not equal 50% of my median family income (MFI) (or my low income limit not equal 80% of my MFI)?
- What does the term “HMFA” mean?
- How can you tell if the entire CBSA or just the subarea (SA) is used to calculate the income limits?
- How can 60 percent income limits be calculated?
- How are Low Income Housing Tax Credit maximum rents computed from the very low-income limits?
- What is the FY2007 State Non-Metro Median Family Income and what are the associated income limits used for certain provisions of the Gulf Opportunity Zone (GO Zone) Act of 2005?
1. Why is my income limit unchanged from last year?
A: Income limits may be unchanged from last year either because area incomes or other factors governing local income limits did not increase or because income limits would otherwise be lower but have been administratively frozen rather than allowed to decrease. HUD has in the past selectively frozen income limits in instances where a reduction resulted from changes in income estimates, income estimation methodology, or income limit methodology.
2. Why did some area median family income (MFI) estimates decrease in FY2007 even though the OMB definition of the area did not change?
A: Some area median family incomes changed because incomes are falling in the area. Others declined because FY2007 HUD MFI estimates reflect, for the first time, results from the fully implemented ACS, which was conducted in 2005. The manner in which the ACS data are used depends on the type of data available, which differs by place size. Local ACS MFI estimates are available for areas with populations of 65,000 or more, but the statistical reliability of these estimates differs. When local MFI estimates are available, HUD MFI estimates are based partly on local ACS estimates and partly on state-level ACS estimates. The higher the statistical reliability of local estimates, the more heavily they are used. Local ACS MFI estimates are used in inverse proportion to the size of their margins of error (the numbers computed by adding and subtracting the published margins of error, or MoEs, from the median family income estimates form the “90 percent confidence intervals” for the estimates. There is a 90 percent probability that any random sample of the same size from the population will yield an estimate of the median family income in this range).
In practice, estimates for areas with small MoEs are almost entirely based on local ACS estimates but, where MoEs are large, state-level estimates more heavily influence results. For areas without local ACS estimates, update factors are generated using a combination of state-level 2000 Census to 2005 ACS MFI change and local area BLS wage change data. All estimates are then updated from December 2005 to April 2007 using a trend factor of 3.5 percent, which reflects the average annual change in median income from 1990 to 2000.
Due to several factors, ACS income estimates are known to be lower than those generated from the 2000 decennial Census when both are inflated to the same point in time. For additional details concerning the use of the ACS in HUD’s calculations of Median Family Income, please see our FY2007 Income Limits Briefing Materials, Attachment 2 (pages 15 – 19) which can be found at the following web address: https://www.huduser.gov/datasets/il/il07/IncomeLimitsBriefingMaterial.pdf. Additionally, full documentation of all calculations for Median Family Income and Income Limits is available in our FY2007 Income Limits Documentation System. This system is available at this web address: https://www.huduser.gov/datasets/il.html#2007_query
3. Why did the area definitions change for the income limits and median family income estimates?
A: The area definitions used for income limits and median family income estimates follow the areas determined for the Fair Market Rents (FMRs) for that fiscal year. The definition of only a few areas changed in FY2007 compared with FY2006. These changes were due to a change in the methodology for determining FMR area definitions. The actual calculation and comparison for an individual area can be seen in the FY2007 FMR Documentation System: https://www.huduser.gov/portal/datasets/fmr.html#2007_query.
Most of the changes in area definition occurred in FY2006 and are discussed in detail by individual area in the FY2006 FMR Documentation system: https://www.huduser.gov/portal/datasets/fmr.html#2006_query
In FY2006, HUD revised the area definitions for income estimates based on guidance from the Office of Management and Budget (OMB) that revised metropolitan areas using 2000 Census data. Under the new OMB area definitions, some former nonmetropolitan counties became part of metropolitan areas, and some metropolitan areas were subsumed within other areas, or their names have been significantly changed. In instances where OMB metropolitan area definitions changed, HUD’s areas may consist of subareas within the new OMB metropolitan area. In FY2007, subareas are established only if there are significant differences (5 percent or more) in rents or median incomes between the different old FMR area parts that comprise the new OMB metropolitan area.
HUD uses FMR areas in calculating income limits because FMRs are used in the calculation of certain income limits and the two sets of definitions are linked in statutory history. For a complete description of the area definitions a used in the FY2007 Income Limits, please review the FY2007 Income Limits Area Definitions report: https://www.huduser.gov/datasets/il/il07/Area_Definitions_Report.pdf
4. Why can’t I find the income limits for a particular nonmetropolitan county or a metropolitan area?
A: There were few changes in the area definitions between FY2006 and FY2007 income limits. Some additional subareas were created, but most changes were made in FY2006. The FY2006 area definition changes are discussed in detail for individual areas in the documentation system for Fair Market Rents (FMRs) https://www.huduser.gov/portal/datasets/fmr.html#2006. HUD uses FMR areas in calculating income limits because FMRs are used in the calculation of certain income limits and the two sets of definitions are linked in statutory history.
In FY2007, median family incomes and income limits area definitions were changed only in cases where there were significant differences (greater than 5%) in median incomes between the subarea and the Core Based Statistical area, even though the Fair Market Rents show no significant difference. The area definitions report for income limits designates the basis of each submarket’s income limits. Please review at https://www.huduser.gov/datasets/il/il07/Area_Definitions_Report.pdf
To understand the more significant area definition changes in FY2006, please review the FY2006 Income Limits Area Definitions report: https://www.huduser.gov/datasets/il/il06/Definitions06.doc
5. Why does my very low-income limit not equal 50% of my median family income (MFI) (or my low income limit not equal 80% of my MFI)?
A: There are many exceptions to the arithmetic calculation of income limits. These include adjustments for high housing cost relative to income, the application of state nonmetropolitan income limits in low-income areas, and national maximums in high-income areas. These exceptions are detailed in the FY2007 Income Limits Briefing Material report. Please review this report and pay special attention to Attachments 3 and 4 (beginning on page) that list the exceptions for metropolitan areas. Please also note that Tables 1 and 2 (beginning on page 7) show that most nonmetropolitan area income limits are based on state nonmetropolitan area medians.
For further information on the exact adjustments made to any area of the country, please see our FY2007 Income Limits Documentation System. The documentation system is available at: https://www.huduser.gov/datasets/il.html#2007. Once the area in question is selected, a summary of the area’s median family income estimate, Very Low-Income, Extremely Low-Income, and Low-Income Limits are displayed. Detailed calculations are obtained by selecting the relevant links.
6. What does the term "HMFA" mean?
A: HUD Metro FMR Area. This term indicates that only a portion of the OMB-defined core-based statistical area (CBSA) is in the area to which the income limits (or FMRs) apply. HUD is required by OMB to alter the name of metropolitan geographic entities it derives from the CBSAs when the geography is not the same as that established by OMB. See OMB’s bulletin establishing the current CBSA definitions at http://www.whitehouse.gov/omb/bulletins/fy2006/b06-01.pdf.
7. How can you tell if the entire CBSA or just the subarea (SA) is used to calculate the income limits?
A: The FY2007 Income Limits Area Definitions report places a “CBSA” in front of those areas where all counties in the CBSA are used in the calculation; an “SA” is placed in front of those areas where only the counties or towns of the subarea are used. Note that HUD Metro FMR Areas (HMFAs) are not the same as CBSAs, but that an HMFA’s income limits may be based on CBSA data. To determine if income estimates are based on the subarea or CBSA income, please review the FY2007 Income Limits Area Definitions report at: https://www.huduser.gov/datasets/il/il07/Area_Definitions_Report.pdf
8. How can 60 percent income limits be calculated?
A: HUD recommends you take 120 percent of the Very Low Income Limit. Do not calculate income limit percentages based on a direct arithmetic relationship with the MFI; there are too many exceptions made to the arithmetic rule in computing income limits. For the Low Income Housing Tax Credit program, the Revenue Ruling 89-24 states that “…40 percent of the applicable units must be occupied by individuals or families having incomes equal to 120 percent or less of the income limit for a very low-income family of the same size.”
9. How are Low Income Housing Tax Credit maximum rents computed from the very low-income limits?
A: The imputed income limitation (as defined in 26USC Sec. 42(g)(2)) is 60 percent of the MFI. A rent may not exceed 30 percent of this imputed income limitation under 26USC Sec. 42(g)(2). Unit rents by number of bedrooms are derived from Very-Low Income Limits (VLILs) for the different household sizes according to the following table:
LIHTC Maximum Rent Derivation from HUD Very-Low Income Limits (VLILs) | |||||
Unit Size | 0 Bedroom | 1 Bedroom | 2 Bedroom | 3 Bedroom | 4 Bedroom |
50% MFI Unit Maximum Monthly Rent is 1/12 of 30% of: | 1-Person VLIL | (1-Person VLIL + 2-Person VLIL)/2 | 3-Person VLIL | (4-Person VLIL + 5-Person VLIL)/2 | 6-Person VLIL |
60% MFI Unit Maximum Monthly Rent is 1/12 of 30% of: | 120% of 1-Person VLIL | 120 % of [(1-Person VLIL + 2-Person VLIL)/2] | 120% of 3-Person VLIL | 120 % of [(4-Person VLIL + 5-Person VLIL)/2] | 120 % of 6-Person VLIL |
NOTE: Maximum rents for larger units are set by assuming an additional 1.5 persons per bedroom. |
10. 10. What is the FY2007 State Non-Metro Median Family Income and what are the associated income limits used for certain provisions of the Gulf Opportunity Zone (GO Zone) Act of 2005?
A: A. The FY2007 State Non-Metro Median Family Income is estimated to be $47,300. Since this is less than the FY2006 estimate of $47,700, the associated income limits will be held harmless and maintained at the FY2006 level. The 1-8 Person 50% Income Limits are as follows:
1 Person | 2 Person | 3 Person | 4 Person | 5 Person | 6 Person | 7 Person | 8 Person |
$16,700 | $19,100 | $21,450 | $23,850 | $25,750 | $27,650 | $29,550 | $31,500 |