Income Limits 101
Why can’t HUD simply publish them in February?
Most of us in the affordable housing business were a bit taken aback last spring when HUD income limits were not published until mid-May. Although those well-seasoned in housing management know not to expect a consistent publication date, it was still surprising to see the latest income limits publication yet by our venerable partners at HUD. Fortunately, I had the recent opportunity to gain better insight into the complexities of the income limit processes and can, in a nutshell, tell you that it all comes down to the data collection. Now that may seem overly simplistic and obvious, so I will attempt to provide further details here that can be easily understood. To be perfectly honest, most high-level discussions of data sampling and statistical analysis go right over my head (and I’m sure I have plenty of company in that respect) but please bear with me as I give it my best shot.
For a little background information, we can go back to 2007 when HUD made a major change in their methodology for calculating income limits. The crux of this alteration was switching data sets to using the American Communities Survey data. As a result, some turbulence was created in the system causing HUD to deem certain properties as “held harmless” from decreases in their Area Median Gross Income (AMGI) from 2006 to 2007. This was augmented in 2008 by the Housing and Economic Recovery Act (HERA) provision that then allowed those with Hold Harmless status to increase their income limits from the “frozen” 2006 levels by the same percentage increase that the actual AMGI levels had experienced in the meantime. Fortunately, HUD recognized that this would be quite a challenge for the average industry layman to determine, so they began publishing their Multi-Tax Subsidy Projects (MTSP) income limits in 2009, which include the HERA Special limits, to address this issue. In addition, they removed the Hold Harmless status from HUD properties in 2010 but Low-Income Housing Tax Credit (LIHTC) properties were statutorily protected from this revision via the HERA provision from 2008. All of this is to say that along with all of the other volatility that we’ve experienced in the industry over the past few years, there has also been a lot going on with our income limits.
As far as this year goes, however, we’re fortunate in that there have been no new statutory requirements for HUD to implement in calculating the income limits but they will be using five years of data, representing years 2005 through 2009, which will should give us the most accurate AMGI at the lowest geographic level than in many years. This, of course, will be a more current reflection of income than in recent publications and will result in capturing the effects of the recession that we’. Predictions are that income levels will be going down in many places, but again we should keep in mind that this potential downward trend will not affect our tax credit properties who are allowed to maintain their previously higher income limits. Another effect of having five years of data from which to work is that HUD expects to retain this methodology going forward which should provide for more stable estimates over time.
Did you begin reading this article with the expectation that I would tell you when the 2011 income limits would be published? As I often tell my children, my magic wand is on the fritz and my crystal ball has been in the shop for quite a while. So, my friends, your guess is as good as mine! I can tell you, however, that HUD didn’t expect to receive all of the necessary data until February and then estimated that their turnaround time in producing the income limits would be at least six to eight weeks after that. Maybe that means mid-April or maybe we won’t see them again until mid-May. Either way, I hope that I’ve provided you with a little further insight into the behind the scenes intricacies of the process.