Estimating Median Income For 2018 and 2019
With the release in September of 2016 American Community Survey (ACS) data, Novogradac & Company was able to estimate the national median income, state median incomes as well as low-income housing tax credit (LIHTC) income limits for many areas for 2018 and 2019.
About the Calculations
The (ACS) is an integral part of HUD’s calculation of area median income. The 2016 ACS data will be used by HUD to calculate the 2019 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 2017 income limit was as follows: 2014 ACS*(CBO estimate of the December 2017 CPI/2014 Annual CPI)=2017 income limits.
Estimating 2018 and 2019 Data
Now that the 2015 and 2016 ACS data has been released, Novogradac is able to estimate the income limits for many areas for 2018 and 2019. 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.
For example, to estimate 2018 income Novogradac performs the following calculation:
2015 ACS Data * (CBO’s most recent estimate of December 2018 CPI/2015 CPI)=2018 income limit
State Median Income
Using the process above Novogradac & Company calculated the change in state median incomes for 2018 and 2019 as well as the change in national median income.
All 50 states plus Puerto Rico and District of Columbia are estimated to have increases in median income for 2018 over 2017. However, there are three states (Wyoming, Louisiana, and Vermont) that are estimated to have decreases in median income for 2019.
Vermont has a very interesting two year trend as it is estimated to have a nearly 15 percent increase in 2018 but then a minor decrease in median income in 2019. The District of Columbia has the largest combined median income increase over the two years: 15 percent in 2018 and almost 5 percent increase in median income in 2019.
Novogradac estimates the U.S. Median Income will increase by over 5.6 percent in 2018 and 5.15 percent in 2019. The change in U.S. Median Income is especially important for as increases in LIHTC 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 2018 and 2019 will be more than 10 percent.
Available for Purchase: Novogradac Rent and Income Estimator
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 and Income Estimator 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 estimates of area median income (AMI) for 2018 and 2019 and very low income (VLI) for 2018 and 2019 for many areas. Learn more about these projections and for which areas they are available.