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How Will the COVID-19 Pandemic Affect HUD Income Limits?

Published by Thomas Stagg on Tuesday, March 24, 2020 - 12:00AM

Although it is likely too early to understand the long term effects of the COVID-19 pandemic on the economy, there are a lot of questions about the 2020 income limits that are anticipated to be released in the coming weeks. In short, the 2020 limits will not be impacted by COVID-19, but there likely will be consequences for 2021 and beyond.

Effect on 2020 HUD Limits

COVID-19 likely will have little to no impact on the Department of Housing and Urban Development’s (HUD) 2020 income limits. Novogradac anticipates the information covered in this recent blog post will remain accurate. The income limits will be based on the American Community Survey median family income (ACS) results from 2017, the 2017 CPI and the Congressional Budget Office’s (CBO) estimate of 2020 CPI from January 2020. All of these factors were determined before COVID-19’s impact on the economy.

In the short term, there will likely be a disconnect between income limits and what is happening in the economy. The national median income is anticipated to increase by approximately 4 percent for 2020. While this is good news for prospective tenants with higher incomes (more can qualify), the reality is many millions of Americans will experience severe losses in income.

HUD has not provided any indication that income limits will be delayed beyond its target release date of April 1, 2020.

When Will Income Limits Feel the Effects of COVID-19?

It is a little harder to understand when the impacts of COVID-19 will be felt and for how long. However, due to HUD’s use of CPI forecasts and the trailing nature of the HUD income limit calculation, even if the economic impact does not extend beyond 2020, the impact of unemployment and losses in income happening now will affect income limits in 2021 and may be felt all the way through 2024.

Effect on 2021 Limits

As more fully explained here, the 2021 income limits will be based on 2018 ACS, the 2018 CPI and CBO’s estimate of 2021 CPI. The 2018 ACS and 2018 CPI are historical amounts that will remain unchanged by the current economic changes. However, it is likely COVID-19 will have a large impact on 2021’s CPI, though it is hard to estimate by how much. To understand the potential impacts, we must consider how much the CPI forecast impacts income limits.

First, a reminder of how 2020 will be calculated:

2020 Income Limit Calculation

Based on the most recent CBO CPI estimate (January 2020) Novogradac originally estimated that the CPI factor for 2021 limits would remain almost the same as the 2020 CPI estimate. Therefore, the estimate of 2021, would look something like this:

2021 Estimated Income Limit Calculation

Because the CPI estimate is similar for the two years, the income limits increase is equal to the change in the underlying ACS (note AMI is rounded to the nearest $100, which results in a minor change due to rounding). However, it is very likely that the CBO will change its CPI estimate based on the current economic climate. The size of the change to the forecasted 2021 CPI will affect how much the limits change. Consider the following two examples of revised CPI factors.

2021 Estimated Income Limit Calculation With Revised CPI Factors

The revised estimate 1 above uses a CPI factor that assumes zero growth in CPI between the current estimated 2020 CPI and 2021 CPI. In this example, even though the 2018 ACS estimate increased 4 percent over the 2017 ACS estimate there is only a 1.6 percent increase in income limits due to the stagnation of the CPI factor.

In the revised estimate 2 the CPI factor is the growth (deflation) necessary to keep income limits flat from year to year. What this example is telling us is that from 2018 to 2021 if the CPI grows by less than 2 percent (less than 0.75 percent increase for each year) then this hypothetical area would have flat or declining income limits.

It is important to note that 4 percent is an average national growth rate. Individual areas will be impacted by the median incomes for that specific area. The impact of a stagnant or decreasing CPI would be greater in an area that already had flat or decreasing ACS. The graphic below illustrates how the same CPI scenarios would impact income limits in an area with flat ACS estimates from 2017-2018

CPI's Impact on Income Limits in an Area With Flat ACS Estimates 2017-2018

This example, where ACS did not have an increase from 2017 to 2018, shows that any sort of slowdown in the CPI would result in a decrease in income limits. If, for some reason, CBO’s estimate of 2021 CPI was to be lower than 2018’s CPI then the CPI factor would serve to decrease the ACS Estimate.

2021 Income Limit Calculation if CPI is Lower than 2018's CPI

As a reminder for LIHTC and tax-exempt bond developments, once a property is placed in service, its income limits will not decrease from year to year, but this could result in flat rents for a few years while income limits recover.

Although we do not know what will happen, these examples illustrate the impact that CPI will play on the 2021 estimates. Novogradac will continue to monitor the CBO’s estimate of CPI and update our estimator as needed.

Lasting Impact of COVID-19

It is likely that COVID-19 will have a large impact on 2020 median family incomes. As large sectors of the economy is unable to work due to social distancing, the impact will likely show up in the 2020 ACS. This means the impact of COVID-19 will likely be felt in 2023 when HUD will use the 2020 ACS data to determine income limits. If COVID-19 continues to impact the economy through 2020 and into 2021, the impact may also be felt in the 2021 ACS, which determines the 2024 income limits.


In summary, the HUD income limits for 2020 should be unaffected by COVID-19. However, the impact of COVID-19 will be reflected in the 2021 income limits and likely impact income limits all the way through 2024. Developers, equity providers and allocating agencies should take this likelihood into consideration when underwriting.

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