Understanding the 2015 HUD Income Limits

Published by Thomas Stagg on Wednesday, April 1, 2015
Journal thumb April 2015

The U.S. Department of Housing and Urban Development (HUD) released income limits for fiscal year (FY) 2015 March 6, continuing its policy of releasing a set of Section 8 income limits and a set of multifamily tax subsidy project (MTSP) income limits, which are used by low-income housing tax credit (LIHTC) properties and tax-exempt bond properties. The income limits were revised on March 10 for San Jose-Sunnyvale-Santa Clara, Calif., HUD metro fair market rents (FMR) area.

About the 2015 Income Limits
FY15 income limits were based on the American Community Survey (ACS) data collected for 2012 where reliable one-year estimates were available. In counties without reliable one-year ACS estimates, the five-year ACS median income estimate for 2008 to 2012 was used. The ACS data was then trended through April 2015, using an inflation factor based on the Congressional Budget Office (CBO) forecast of the national consumer price index (CPI). This is a change from prior years, where the trending factor was made up of the CPI adjustment and the national change in ACS data for the previous five years.

The MTSP income limits increased from FY14 to FY15 in 83 percent of counties, decreased in 16 percent of counties and had no change in 1 percent of counties without taking into account Housing and Economic Recovery Act (HERA) special income limit and hold-harmless provisions. The income limits remained unchanged in 42 percent of counties and increased in 58 percent of counties for MTSPs after taking into account the HERA special income limit and hold-harmless provisions using FY09 as the base year for hold harmless.

HUD continues to apply a floor and ceiling to any increases or decreases to MTSP income limits, but not to HERA special limits. Annual decreases for MTSP income limits are limited to no more than 5 percent and all annual increases are limited to the greater of 5 percent or twice the percentage change in the national median family income. The national median family income for 2014 was $63,900. In FY15, the national median family income is $65,800. The change from FY14 to FY15 is 2.973 percent, therefore increases for 2015 were capped at 5.947 percent.

HUD’s hold-harmless policy was eliminated in FY 2010, so the income limits that it publishes do not take into account any hold-harmless policy. However, the Internal Revenue Service (IRS) has a hold-harmless rule that is now applied on a property-by-property basis. All properties’ rent and income limits are held harmless, but only from the point at which they are placed in service (or for rents, in the year the rent floor election is effective). Although each property’s income and rent limits can never decrease, other properties in the same area can have lower income and rents limits than properties that were placed in service in prior years. Properties must start with the limits in effect the year the property is placed in service and then are held harmless from that point on.

As was the case last year, the MTSP charts list MTSP 50 percent and 60 percent income limits for each county, as well as HERA special 50 percent and 60 percent income limits for each county that has a HERA special income limit:

  • MTSP (50 percent and 60 percent): An income limit based on the Section 8 very low-income (VLI) limit. The HUD-published MTSP 50 percent limit is equal to the Section 8 HUD VLI limit and the HUD-published MTSP is equal to 120 percent of the Section 8 HUD VLI limit.
  • HERA special (50 percent and 60 percent): An income limit for properties that were in service prior to Jan. 1, 2009, and that is based on the calculation found in Internal Revenue Code Section 142(d), which allows the income limit to increase by the percentage increase in the actual area median income, before HUD makes its adjustments.

Novogradac & Company’s analysis of the 2015 income limits shows that for MTSPs without the HERA special income limit and hold-harmless provisions (see map on page 41):

  • The income limits in 792 counties (17 percent) decreased.
  • The income limits in 18 counties (0 percent) did not change.
  • The income limits in 3,955 counties (83 percent) increased.

For MTSPs without the HERA special income limit and hold-harmless provisions, there was an average increase of 2.59 percent.

There are three main reasons MTSP income limits may have increased or decreased by more than the corresponding change in AMI:

  • The county is affected by HUD’s non-metro adjustment.
  • The county is affected by HUD’s 5 percent floor and ceiling on income limit decreases and increases from year to year.
  • The county is a high housing cost area and the FMR for the area increased or decreased.

For MTSPs with the HERA special income limit and hold-harmless provisions for properties in service on or before Jan. 1, 2009 (see map on page 43):

  • The income limits in 0 counties decreased.
  • The income limits in 1,985 counties (42 percent) did not change.
  • The income limits in 2,780 counties 58 percent) increased.

The average increase for this category is 1.71 percent.

There are two main reasons why 1,985 counties had no change in income limit:

  • An unadjusted MTSP had a decrease and the county is being held harmless (see above).
  • The income limit was already being held harmless at an amount higher than the increased MTSP.

The accompanying maps illustrate changes from 2014 to 2015.