Novogradac Revises Down National Median Income Estimate by 2.5 Percent
The national median income for 2021 will be less than originally forecast.
The Congressional Budget Office (CBO) this week released its midyear estimate of consumer price index (CPI). The CBO’s estimate of CPI is one of the components the U.S. Department of Housing and Urban Development (HUD) uses to calculate income limits for the low-income housing tax credit (LIHTC) and HUD programs. The CBO revised its estimate of 2021 CPI to 260.2, which is down from the estimate of 266.8 released in January. If HUD does not change its methodology, the 2021 income limits will use the CBO’s estimate of 2021 CPI that will be released in January 2021.
Based on this new information, Novogradac adjusted its estimate of national median income for 2021 to $79,200 (an 0.89 percent increase over the 2020 national median income). This is 2.5 percent lower than Novogradac’s initial estimate of $81,200, which would have been 3.44 percent higher than the 2020 national median income.
The 2021 Median Income in Context
The U.S. median income increased by just less than 4 percent for 2020, following increases in national median income of 5 percent and 5.75 percent for 2019 and 2018, respectively. In this context, the estimated 0.89 percent increase for 2021 represents a significant slowing. But it’s still worth noting that if the estimate holds, 2021 will be the fifth straight year that national median income has increased (2017-2021), compared to the decreases in national median income that occurred in 2015 and 2016.
As always, there will be some geographic areas that increase by a higher percentage and some areas that will have decreases.
Besides providing a general indication of income limit trends overall, the change in national median income is important for another reason. HUD caps increases in the income limits used for LIHTC properties each year to the greater of 5 percent or two times the change in the national median income. Therefore, if national median income increases by 0.89 percent the cap would be 5 percent for 2021.