National Median Income Expected to increase by 4 Percent in 2020, 3.4 Percent in 2021
Novogradac estimates the U.S. median income will increase by just under 4 percent in 2020 and 3.4 percent in 2021. The change in U.S. median income is especially important as increases in low-income housing tax credit (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 formula, the cap for 2020 will be just under 8 percent and the cap for 2021 will be just under 7 percent. This is a slowdown in median income growth from the last couple of years, however, it is still very robust growth in median income.
Estimating 2020 and 2021 Data
On Sept. 26, 2019 the U.S. Census Bureau released the 2018 American Community Survey (ACS) data. With the release of the 2018 ACS data, Novogradac is able to predict the national median income, state median incomes as well as LIHTC income limits for many areas through 2021.
The (ACS) is an integral part of HUD’s calculation of area median income. The 2018 ACS data will be used by HUD to calculate the 2021 income limits for LIHTC and Section 8 properties, which will be released by HUD around April 2021.
Using the 2017 and 2018 ACS data as well as estimates of CPI growth from the Congressional Budget Office (CBO), Novogradac is able to estimate the income limits for many areas for 2020 and 2021. Some areas that rely on the 5-year ACS data will not be available until December.
State Median Incomes
Using the same process as for the U.S. median income, Novogradac also calculated the change in state median incomes for 2020 and 2021.
There are five states that are estimated to have decreases in median income for 2020 (Alaska, Connecticut, Oklahoma, Vermont and West Virginia) however, each of these states are estimated to rebound with positive growth in 2021. Three states are estimated to have decrease in median income in 2021: Montana, Rhode Island and South Dakota. All other areas are estimated to have increases in median income in 2020 and 2021.
Rhode Island is estimated to have the largest increases in 2020 (8.45), however, Rhode Island is estimated to cool in 2021 and have a very small decrease in state median income. Fresh off winning the World Series, the District of Columbia is estimated to lead the way in income limit growth; it is estimated to have the second highest growth rate of all states in 2020 and the highest in 2021 (8 percent for 2020 and 10.5 percent for 2021).
Available for Purchase: Novogradac Rent and Income Limit 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 the Novogradac Rent and Income Limit 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 can provide projections of area median income (AMI) for 2020 and 2021 and very low income (VLI) for 2020 and 2021 for many areas. Visit the estimator page to learn more about these projections and for which areas they are available or contact Thomas Stagg for bulk ordering or to buy the entire dataset.