2020 Vision–Estimating Median Income for 2019 and 2020
On Sept. 13, the U.S. Census Bureau the released the 2017 American Community Survey (ACS) data. With the release of the 2017 ACS data, Novogradac & Company is able to estimate the national median income, state median incomes as well as low-income housing tax credit (LIHTC) income limits for many areas through 2020.
About the Calculations
The (ACS) is an integral part of HUD’s calculation of area median income. The 2018 ACS data will be used by HUD to calculate the 2020 income limits for LIHTC and Section 8 properties.
HUD takes the ACS data and uses the change in consumer price index (CPI) to adjust the historical ACS data to arrive at the Section 8 and LIHTC income limits. When calculating the change in CPI HUD uses the annual CPI from the year ACS year and a Congressional Budget’s Office estimate of the CPI for the income limits effective year. For example, the calculation for the 2018 income limit was as follows: 2015 ACS*(CBO estimate of the December 2018 CPI/2015 Annual CPI)=2018 income limits.
Projecting 2019 and 2020 Data
Now that the 2016 and 2017 ACS data has been released, Novogradac is able to estimate the income limits for many areas for 2019 and 2020. When estimating the income limits, all information is publically available except for the CBO’s estimate of the CPI that HUD will use in its calculation. The CBO releases its CPI estimate twice a year. Traditionally when making its final determination of income limits, HUD will use the CBO’s estimate released in January of the income limits effective year. For example, the 2017 income limits use the CBO’s estimate of December 2017 CPI released in January of 2017.
Therefore, the exact CBO estimate that HUD will use when determining income limits is not available. However, Novogradac can utilize earlier versions of the CBO’s estimate of the annual CPI when estimating income limits.
U.S. Median Income
Novogradac estimates the U.S. median income will increase by more than 5 percent in 2019 and almost 4.4 percent in 2020. The change in U.S. median income is especially important as increases in LITHC and Section 8 income limits are limited to the greater of 5 percent or two times the change in U.S. median income. Based on this estimate, the cap for 2019 will be more than 10 percent and the cap for 2020 will be just under 8.8 percent
State Median Income
Using the process above Novogradac calculated the change in state median incomes for 2019 and 2020 as well as the change in national median income.
Three states - Wyoming, Louisiana and Vermont - are estimated to have decreases in median income for 2019. The outlook for 2020 is not as rosy. There are four states and one commonwealth that are estimated to have decreases in median income for 2020: Alaska, Connecticut, Vermont, West Virginia and Puerto Rico.
Rhode Island and the District of Columbia are estimated to have the largest increases in 2020 (8.80 and 8.48 percent, respectively).
Available for Purchase: Novogradac Rent and Income Estimates
Understanding LIHTC income and rent limit growth is vital to develop and manage successful affordable rental housing properties. Among other things, better understanding how income limits will change in future years can enable developers, investors and lenders to better underwrite LIHTC properties. With Novogradac Rent & Income Estimator Reports you can understand how income and rent limits will change over the next one to two years. While data isn’t available for every area, Novogradac & Company can provide projections of area median income (AMI) for 2019 and 2020 and very low-income (VLI) for 2019 and 2020 for many areas.