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v%FY 1998
HUD INCOME LIMITS
BRIEFING MATERIAL
` ` hh#(U.S. Dept. of HUD
` ` hh#(Office of Policy
` ` hh#( Development & Research
` ` hh#(December 1997
FY 1998 INCOME LIMITS BRIEFING MATERIAL
&
I.Overview of HUD Public Housing/Section 8 Income Limits
II.Attachments:
1.` ` ` U.S. Housing Act of 1937 Provisions Related to Income
Limits
2.` ` ` HUD Methodology for Estimating FY 1998 Median Family
Incomes
3.` ` ` Comparison of FY 1989 HUD and 1990 Census Median Family
Income Estimates
4.` ` ` Metropolitan Areas with Very Low Income Limits Not
Based on 50 Percent of the Area Median Family Income
Level
5.` ` ` Metropolitan Areas with LowIncome Limits Not Based on
80 Percent of the Area Median Family Income Level
6.` ` ` FY 199798 Distribution of Changes in County Median
Incomes
7.` ` ` FY 1998 Median Family Incomes for States and
Metropolitan and Nonmetropolitan Portions of States
(11/97 Area Definitions)
=
88 I. OVERVIEW OF HUD PUBLIC HOUSING/
t
SECTION 8 INCOME LIMITS
Overview
The Department of Housing and Urban Development (HUD) is
required by law to set income limits that determine the
eligibility of applicants for HUD's assisted housing programs.
The major active assisted housing programs are the Public Housing
program, the Section 8 Housing Assistance Payments program, and
Section 202 housing for the elderly and Section 811 housing for
persons with disabilities.
Income limits are calculated for metropolitan areas and
nonmetropolitan counties in the United States and its territories
using the Fair Market Rent (FMR) area definitions used in the
Section 8 program. They are based on HUD estimates of median
family income, with adjustments for family size. Adjustments are
also made for areas that have unusually high or low income to
housing cost relationships.
The statutory basis for HUD's income limit policies is
Section 3 of the U.S. Housing Act of 1937, as amended.
Attachment 1 provides the key excerpts relevant to income limits,
which may be summarized as follows:
©` ` ` Lowincome families are defined as families whose
incomes do not exceed 80 percent of the median family
income for the area.
` ` `
©` ` ` Very lowincome families are defined as families whose
incomes do not exceed 50 percent of the median family
income for the area.
©` ` ` Income limits for nonmetropolitan areas may not be less
than limits based on the State nonmetropolitan median
family income level.
©` ` ` Income limits are adjusted for family size.
©` ` ` Income limits are adjusted for areas with unusually
high or low family income or housingcosttoincome
relationships.
©` ` ` The Secretary of Agriculture is to be consulted prior
to establishing income limits for rural areas, since
these limits also apply to certain Rural Housing and
Community Development Service programs.
Median Income Estimates
Income limits start with the development of estimates of
median family'Ѝ Family refers to the Census definition of a family, which
is a householder with one or more other persons living in the
same household who are related to the householder by birth,
marriage, or adoption. The definition of family excludes oneperson households.' income for the 356 metropolitan and 2,327
nonmetropolitan FMR/income limit areas (including U.S.
territories). Attachment 2 provides a detailed explanation of
how median family income estimates are calculated. The major
steps are as follows:
` ` ` 1990 Census income data are aggregated to the
FMR/income limit area level, and mid1989 estimates of
median family income are derived for those areas. (The
Census asks for total income for the previous year,
which means that the Census data are actually measuring
mid1989 income levels.)
` ` ` Census P60 series data are used to estimate the median
family income levels for the nine Census Divisions for
1989 and the most current survey. Census Divisional
and national estimates of change are then calculated to
estimate the change between 1989 and the current survey
data year. (The P60based income estimates do not
provide precise enough estimates for this purpose below
the Divisional level.)
` ` ` Bureau of Labor Statistics (BLS) series data are used
to calculate average wages for areas, for Census
Divisions, and for the nation as a whole for 1989 and
the most current year for which data are available.
` ` ` The changes in average incomes and average wages
between 1989 and the most recent year for which data
are available are calculated using Census P60 and BLS
data. The ratios of P60 to BLS changes are then
calculated for each Census Division. The change in
local area wages between 1989 and the most current data
year is then multiplied by the P60/BLS Census
Divisional ratio to obtain an estimate of the increase
in local median family incomes since the Census. Use
of this procedure forces the sum of changes in local
median family incomes to equal the P-60 Census
Divisional change.
` ` ` The resulting midcalendaryear income estimates are
then trended forward another year using the preliminary
Census P60 estimate of the most recent year's change
in median family incomes.
` ` ` A trending factor of 4 percent per year is then applied
to update the midcalendar year 1996 estimates twentyone months to produce a midFY1998 estimate.
Accuracy of Median Income Estimates
The reliability of HUD income estimates can be measured by
comparing 1989 HUD estimates with 1990 Census estimatesЍ The 1990 Census provides information on 1989 yearend
income amounts, which should be thought of as approximating midyear point estimates of income, whereas the HUD FY 1989 estimates
are for a three month earlier point estimate of income.. The
1989 HUD estimates were based on 1980 Census data updated with
County Business Patterns (CBP), BLS, and Census Current Population Survey data. During the 1980's, family income increased by
over 75 percent.
Attachment 3 provides information on the results of these
comparisons. To summarize, it shows the following patterns for
HUD income estimates:
` ` ` The FY 1989 HUD estimate for the nation as a whole was
within 3.5 percent of the 1990 Census national median
family income.
` ` ` HUD State nonmetropolitan median income estimates were
within 10 percent of the 1990 Censusbased estimate for
every State except West Virginia. The State estimates
are of special interest because they are used to
establish minimum income limits for about 60 percent of
all nonmetropolitan counties whose income limits would
otherwise be lower.
` ` ` Standard errors were calculated by comparing HUD
estimates with Census estimates. The standard errors
were:
` ` $1,441 for State nonmetropolitan median
family income estimates;
` ` $2,509 for metropolitan areas; and,
` ` $2,672 for nonmetropolitan counties.
` ` ` Fortysix percent of the metropolitan areas had
estimates within 5 percent of the Census estimate, and
80 percent had estimates within 10 percent. Eightyeight percent of the State nonmetropolitan areas had
estimates within 5 percent of the Census estimates and
all were within 10 percent.
Since 1993, HUD has used BLS wage data in place of County
Business Patterns (CBP) data in the median family income
estimation process. BLS data have broader and more current
coverage, including Federal, local, and State government
employment not covered by CBP data. Use of BLS rather than CBP
data was tested for the 1980 to 1990 period, and it was
determined that use of BLS data would have improved the
reliability of the HUD median family income estimates.
Income Limit Calculations
HUD's Public Housing/Section 8 very lowincome and lowincome limits are calculated in accordance with Section 3(b)(2)
of the U.S. Housing Act of 1937, as amended.
Very LowIncome Limits: Very lowincome limits are calculated
using a set of formula relationships. The first step is to
calculate a fourperson income limit equal to 50 percent of the
estimated area median family income. Adjustments are then made
if this estimate is outside formula constraints.
More specifically, the very lowincome limit for a fourperson family is calculated as follows:
(1)` ` ` 50 percent of the area median family income is
calculated and set as the preliminary fourperson
family income limit;
(2)` ` ` if it is lower, the fourperson income limit is
increased to the amount at which 35 percent of it
equals 85 percent of the annualized twobedroom Section
8 FMR (this adjusts income limits upward for areas
where rental housing costs are unusually high in
relation to the median income);
(3)` ` ` if it is higher, the fourperson income limit is
reduced to the amount at which 30 percent of it equals
120 percent of the twobedroom FMR (this adjusts income
limits downward for areas where rental housing costs
are unusually low in relation to the median income);
(4)` ` ` to minimize program management problems, income limits
are held at FY 1997 levels for areas where lower income
limits would result because of FMR reductions; and,
(5)` ` ` in no instance are income limits less than if based on
the State nonmetropolitan median family income level.
In implementing the 1987 HCD Act amendment that established
minimum income limits for nonmetropolitan areas based on the
State nonmetropolitan median family income level, HUD used its
discretion to apply this standard to metropolitan areas. This
avoids the inequitable anomaly of assigning higher income limits
to a nonmetropolitan county than are assigned to an adjacent
metropolitan area whose median family income is less than the
State nonmetro level but above the nonmetro county's level.
LowIncome Limits: Most fourperson lowincome limits are the
higher of 80 percent of the area median family income or 80
percent of the State nonmetropolitan median family income level.
Because the very low income limits are not always based on 50
percent of median, calculating low income limits as 80 percent of
median would produce anomalies inconsistent with statutory intent
(e.g., very low income limits could be higher than low income
limits). The calculation normally used, therefore, is to set the
fourperson lowincome limit at 1.6 (i.e., 80%/50%) times the
relevant fourperson very lowincome limit. The only exception
is that the resulting income limit may not exceed the U.S. median
family income level ($45,300 for FY 1998) except when justified
by high housing costs. Use of very lowincome limits as a
starting point for calculating other income limits tied to
Section (3)(b)(2) of the U.S. Housing Act of 1937 has the effect
of adjusting income limits in areas where the very low income
limits have been adjusted because of unusually high or low
housingcosttoincome relationships.
HUD has adjusted lowincome limits for areas of unusually
high or low income since passage of the 1974 legislation that
established the basic income limit system now used. Underlying
the decision to set minimum and maximum lowincome limits is the
assumption that families in unusually poor areas should be
defined as lowincome if they are unable to afford standard
quality housing even if their incomes exceed 80 percent of the
local median family income. Similarly, families in unusually
affluent areas are not considered lowincome even if their income
is less than 80 percent of the local median family income level
unless justified by area housing costs.
Family Size Adjustments
The statutory guidance governing income limits requires that
income limits are to be higher for larger families and lower for
smaller families. The same family size adjustments are used for
all income limits. They are as follows:
Number of Persons in Family and Percentage Adjustments
1 2 3 4 5 6 7 8
70% 80% 90% Base 108% 116% 124% 132%
Income limits for families with more than eight persons are
not included in the printed lists because of space limitations.
For each person in excess of eight, 8 percent of the fourperson
base should be added to the eightperson income limit. (For
example, the nineperson limit equals 140 percent [132 + 8] of
the relevant fourperson income limit.) Income limits are
rounded to the nearest $50.
Summary of Local Income Limit
Determinations for FY 1998
# Metro # NonMetro Areas Counties
For Very Low Income Limits:
` `
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