Income Limit Estimates for 2021 and 2022

Published by Thomas Stagg on Wednesday, December 2, 2020 - 12:00am

(This is part three of a three-part series that looks at estimated income limits on a national, state and local level. This post covers local median income.)

The release of the 2019 American Community Survey (ACS) data provides an initial sneak peek at income limits for 2022. Using the ACS and the Congressional Budget Office’s (CBO’s) consumer price index (CPI) estimate, Novogradac can provide initial estimate area median income (AMI) and very-low income for 2021 and 2022. While we still need to wait for final CPI figures, these initial estimates provide insight into overall income limit trends.

Initial Analysis–Local Estimates

The income limit used for LIHTCs and Section 8 is referred to as very-low income (VLI). When calculating VLI, HUD starts with the calculation of AMI for the county or area and then applies adjustments to arrive at VLI. As anticipated, the estimates of AMI and VLI for 2021 are heavily affected by the slowdown in the U.S. economy.

Based on the areas for which we are able to generate a reliable estimate, the average increase in VLI for 2021 and 2022 is 0.95% and 5.39%, respectively. The cap on increases for 2021 will be 5% and the cap for 2021 is estimated to be 11.6%. This means that for 2021, no area will have an increase of greater than 5%, even if the increase would otherwise be greater. In addition, no area will be allowed to decrease by greater than 5% in either year.

The chart below shows distribution of the change in VLI for each year. As mentioned above, no area in 2021 will be allowed to increase by greater than 5%. In 2021, more than 35% of all areas will be flat or have decreasing income limits from the prior year, due to due to the impact of the lower CBO estimate of CPI for 2021. (See Part 1 for more information about the CPI impact). Novogradac expects 2022 will see much larger growth in income limits compared to 2021 with more than 50% of the areas having an increase of more than 5%.

Blog Graph: Distribution of Estimated Change in VLI
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VLI Estimates

VLI is much more complicated to estimate compared to AMI. Historically, only around 50% of the areas actually have a VLI that is equal to 50% of AMI–the rest of the areas have an adjustment that make their VLI not equal 50% of AMI.

The largest adjustment is called the non-metro adjustment. Historically, this adjustment affects about 40% of all areas. However, population-wise, it affects less than 20% of the U.S. population. In this adjustment HUD does not allow the VLI for any area to be less than the non-metro median income for the state in which the area is located. Since the non-metro median income is calculated similar to AMI – this adjustment will be affected by the lower CBO CPI estimate. Unfortunately, Novogradac has not yet cracked the code on how HUD calculates the non-metro median income for each state, so we do not have an estimate of the state-by-state affect. However, please see Part 2 in this series for a look at how the statewide median income is impacted for each state.

The next two biggest adjustments in terms of number of areas adjusted is the floor and cap adjustment. The cap puts a limit on year-to-year increases in VLI equal to the greater of 5% or two times the change in national median income. National median income is estimated to increase by less than 1% in 2021 and roughly 5.8% in 2022. This means the caps for 2021 and 2022 are estimated to be 5% and 11.6%, respectively. The table below shows the percentage of areas that will be capped and floored based on the areas that Novogradac is able to estimate:

Blog Chart: Estimated Area Floor and Cap Adjustment 2021-2022
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The final adjustment to consider is the high housing cost adjustment. This is applied to areas where rent is a disproportionately high percentage of the income for that area and therefore more people need assistance to be able to afford the rent. In these areas, HUD will adjust the income limit up so that more people can qualify for assistance. This adjustment is based on the HUD-published fair market rents (FMR). Due to data limitations, Novogradac is only able to the 2021 estimates for high housing cost areas, therefore, these areas have been excluded from the 2022 estimates unless the estimate without the high-housing-cost adjustment is greater than the 2021 high housing cost amount.


The next two years will see a lot of volatility in income limits. It is important to understand how income will change for your specific area. Estimates for individual areas can be ordered here.