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HUD Publishes FY 2022 Income Limits; 99% of Counties Will See Increase

Published by Thomas Stagg on Tuesday, April 19, 2022 - 12:00AM

The U.S. Department of Housing and Urban Development (HUD) posted fiscal year (FY) 2022 income limits April 18 to determine eligibility for HUD-assisted programs, such as for public housing, Section 8, Section 221(d)(3) and Section 236 properties. HUD also published Multifamily Tax Subsidy Projects (MTSP) income limits to determine eligibility for the low-income housing tax credit (LIHTC) and tax-exempt bond properties. As a reminder, other programs such as HOME and Housing Trust Fund-assisted apartments, may have limits that are released at a different time with a different effective date.

Income limits are effective immediately and must be used within 45 days of release, which is June 2.

Fiscal Year 2022 Data and Changes

The FY 2022 data revealed several interesting changes outlined below:

  • The FY 2022 national median income is $90,000, a 12.5% increase over 2021.
  • Among the 2,602 areas for which HUD publishes limits, less than 1% (24 areas) will have a decrease and only one area has no change.  The remaining areas will see increases.
  • The average change nationally is a 10.5% increase, which is heavily impacted by the cap methodology, which will be discussed later.
  • In a change from recent trends there was no significant difference in the average increase in metro and non-metro areas. Both increased by 10.5%.

Cap on Increases

In determining very low-income limits (VLI), which are used by LIHTC, tax-exempt bond developments and many HUD programs, HUD has certain adjustments that impact income limits. One of the adjustments is the cap on year over year changes. The is capped at the greater of 5% or two times the change in national median income. This cap on increases has been in place since HUD FY 2010 and HUD has always used two times the change in year over year national median income. Below is an illustrative calculation of the cap. Note the actual HUD cap may have varied slightly due to rounding.


Click to Enlarge


For 2022, HUD has changed the way they are calculating the cap. Instead of using the change in national median income, it is using the change in national median income from the 2018 American Community Survey (ACS) to the 2019 ACS.

2019 ACS Median Income $80,944

2018 ACS Median Income $76,401

% Change in Median Income 5.946%

Two times the change 11.89%

The cap calculation ends up being less than the change in national median income from 2021 to 2022.  In addition, the new calculation that is based on ACS data that is three-to-four years old ignores the current impact of inflation.

Because the cap HUD is using is less than 50% of what it would be if HUD continued to use its past methodology, 1,465 areas out of 2,602 areas are capped (56%). About half of the areas are capped. In 2021, about 14% of the areas were capped.

As discussed in the Income Limits Working Group’s letter to HUD about the data issue related to the 2023 income limits, decreasing the cap may make it harder for residents trying to qualify for affordable housing.

See below for one example area to illustrate the impact:

Santa Cruz-Watson, California, MSA

4 Person 50% limits with old cap methodology = $87,050

4 Person 50% limits with new cap methodology = $77,750

$9,300 decrease in 50% income limit

A prospective tenant making $80,000 who would have qualified for a LIHTC apartment under the previous HUD methodology will not qualify using the new calculation.

Of significant concern is the impact of this new cap on rent level on the critical affordable homes currently in the development process. Properties placed in service after the release of the FY 2022 limits will be most impacted. These developments that have not leased to tenants yet could charge the max LIHTC rent.  Using a cap that does not take into account current inflation will impact a property’s ability to underwrite debt permanently over the course of the financing. The lower rents will impact a development’s ability to increase debt to respond to the higher construction. In addition, the amount of supportable debt was already being squeezed due to rapidly increasing operating costs.

Again using Santa Cruz-Watson, California MSA as the example:

2 bedroom 50% with old cap methodology = $1,958

2 bedroom 50% with new cap methodology = $1,750

A $208 decrease in max rent would result in an almost $250,000 decrease in net operating income for a 100-apartment development comprised of two-bedroom units with all apartments restricted at 50% and an almost $300,000 decrease in operating income for a 100-apartment (all two-bedrooms) development with all apartments restricted at 60%.

One final note on the cap: The cap does not apply to HERA Special areas limits. Therefore, HERA Special limits may increase by more than the cap. For example, the HERA Special limit for Sebring, Florida, MSA is increasing by 24%. As a reminder, HERA Special is only available for developments that were placed in service prior to Jan. 1, 2009.

What to do if Income Limits in Your Area Increased

If income limits increased in your area, it’s important to implement the higher income limits immediately to help tenants qualify for housing. More caution is advised when deciding whether to increase the rents being charged to tenants. Remember that rent limits are a ceiling and not a floor.

While raising rents can help properties cover operating expenses and maintenance cost, each property owner should contact an experienced consultant to discuss options if and when to increase rents. In fact, HUD updated its FY 2022 income limits frequently asked questions page to comment on the subject on rent increases: “However, HUD has no control over how LIHTC rents are set and has not required or suggested rent increases. HUD continues to encourage property owners to exercise compassion with respect to tenants affected by the COVID-19 pandemic and would be surprised that an owner would be so out of step with the moment in which we are living to raise rents at this time.”

What to do if Income Limits in Your Area Decreased

If income limits decreased in your area, remember that once a development is placed in service, it is held harmless against any future decreases. Due to the gross rent floor, even if income limits decrease between allocation and being placed in service, a development can continue to use rents in effect as of the allocation date. Although rents will not decrease, flat rents still put pressure on a development–it will be important to understand the “hold harmless gap,” which is the gap between your hold harmless income/rent and what the limit would be without the hold harmless provision.


Find HUD income limits data on the Income Limits page. For questions about specific area income limits, please contact a Novogradac professional near you.



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