How Much Might the National Median Income Level Grow in 2017?

Published by Thomas Stagg on Wednesday, March 8, 2017 - 12:00am

In January, the Congressional Budget Office (CBO) updated its 10-year economic projections. The update includes the 2017 consumer price index (CPI) estimate that the U.S. Department of Housing and Urban Development (HUD) will use for calculating the 2017 income limits for affordable rental housing properties that involve HUD and low-income housing tax credit financing. 

The CPI inflation factor HUD will use in calculating the 2017 income limits will be 1.0317. HUD multiplies the 2014 American Community Survey data by the CPI inflation factor to determine area median income.

Using this factor, Novogradac & Company LLP has calculated the 2017 national median income to be $68,000. This is a 3.5 percent increase over the 2016 national median income of $65,700.

Changes in national median income are important because HUD caps the increase for the 50 percent very-low income (VLI) amount used for HUD programs and LIHTC properties at the greater of 5 percent or two times the change in national median income. Therefore, if national median income increased by 3.5 percent in 2017, the 50 percent VLI cap would be 7 percent. This means that income limits increases will be capped at 7 percent instead of 5 percent in areas that are seeing rapid increases in their limits.

Example: Oakland, Calif.

Oakland is a high housing cost area, which means it VLI is based on the fair market rent (FMR). The FMR for Oakland increased by almost 30 percent from 2016 to 2017.  If the national median income increased by 2.5 percent or less, the increase in VLI for Oakland would have been limited to 5 percent. However, because the national median income is expected to increase by 3.5 percent the VLI for Oakland would be able to increase by 7 percent.  

Blog graph Oakland-Fremont HMFA 2016-2017
Click to enlarge