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Understanding the 2016 HUD Income Limits

Published by Melissa Ly and Thomas Stagg on Thursday, May 5, 2016

Journal cover May 2016   Download PDF

The U.S. Department of Housing and Urban Development (HUD) released income limits March 28 for fiscal year (FY) 2016, continuing its policy of releasing a set of Section 8 income limits at the same time as a set of multifamily tax subsidy project (MTSP) income limits. MTSP income limits are used by low-income housing tax credit (LIHTC) properties and tax-exempt bond properties.

About the 2016 Income Limits

FY 2016 income limits were based on the American Community Survey (ACS) data collected for 2013 where reliable one-year estimates were available. In counties without reliable one-year ACS estimates, the five-year average ACS median income estimate for 2009 to 2013 was used. The ACS data was then trended through April 2016, using an inflation factor based on the Congressional Budget Office (CBO) forecast of the national consumer price index (CPI). 

The MTSP income limits increased from FY 2015 to FY 2016 in 36 percent of counties, decreased in 58 percent of counties and had no change in 6 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 74 percent of counties and increased in 26 percent of counties for MTSPs after taking into account the HERA Special income limit and hold-harmless provisions using FY 2009 as the base year for hold harmless. Please see for a sortable chart of the income limit changes.

Type Income Limit CalculationNon-Metro CountiesMetropolitan Areas
Limits floored if they were less than 95 percent of last year’s limit21987
Limits capped at 105 percent (or double the increase in the national median, if greater) oF last year’s limit9480

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 2015 was $65,800. In FY 2016, the national median family income is $65,700. The change from FY 2015 to FY 2016 is negative 0.152 percent; therefore MTSP increases for 2015 were capped at 5 percent. The following is a table listing the number of counties and metropolitan areas with limits floored and limits capped: The areas subject to the ceiling and floor are shown on the map on page 4.

National Non-Metro Median Income

LIHTC properties subject to volume cap (i.e., 9 percent properties) in rural areas as defined by the U.S. Department of Agriculture are allowed to use the greater of the national non-metro median income (NNMI) or the income limit otherwise applicable to their development. The NNMI decreased from 2015 to 2016 for the first time since HERA implemented the national non-metro adjustment. 

In addition, an area may lose its rural status (see December 2012 Novogradac Journal of Tax Credits for more information about the change in USDA’s rural definition). There is no clear guidance from the Internal Revenue Service (IRS) that a property is held harmless at the NNMI when the NNMI decreases from one year to the next or an area loses its rural status. Those relying on the national non metro median income to determine the income limit for your development should check with their state agency for their interpretation of how the hold harmless policy applies to rural developments.

Inflation Adjustment

Beginning with the FY 2015 income limit calculations, HUD incorporated a CPI forecast from the CBO to adjust the trailing ACS data to the midpoint of the fiscal year. The CPI forecast replaced the old trend factor, which was based on the annualized change in national median family income over the past five years. HUD indicated that this change was due to the fact that previous income growth was not a reasonable indicator of upcoming income growth. For FY 2016, HUD continues to use the CPI forecast from CBO in the FY 2016 income limits, which will inflate the 2013 ACS data to the midpoint of FY 2016. The CBO projection of CPI, published in January 2016 is used to adjust the 2013 data.

For the FY 2015 income limits, the HUD CPI trending factor was 1.05244. However, the HUD CPI trending factor for 2016 is only 1.02637. Due to the large decrease in the trending factor, areas that were relatively flat in their ACS growth will have a decrease in income limits and areas that had a modest increase in the ACS data will likely show a decrease in AMI from 2015 to 2016. 

Assume a county had the exact same ACS data for 2012 and 2013. The 2015 and 2016 income limits would be as follows:

ACSTrend FactorAMI
50,000 1.0524452,622
50,000 1.0263751,318

This results in a 2.48 percent decrease in a county that had no change in its ACS data. 

Area Definitions

The areas used by HUD in determining income limits for FY 2015 and for the previous years were based on OMB metropolitan area definitions as updated through Dec. 1, 2009, and included HUD modifications that were first used in the determination of FY 2006 fair market rent (FMR) areas. On Feb. 28, 2013, OMB released area definition updates that were not incorporated in the income limit and fair market rent process, due to the timing of the release and the availability of ACS data. 

In FY 2016 income limits, HUD incorporated the Feb. 28, 2013, OMB metropolitan area definitions. In addition to incorporating the new metropolitan area definitions released by OMB in 2013, the FY 2016 income limits update incomes for the Pacific Islands, with separate data for American Samoa, the Northern Mariana Islands and the Virgin Islands, with separate data for St. Johns, VI.

The majority of the changes were name changes only and most of the name changes resulted from areas moving from a non-metro county to a HUD Metropolitan FMR Area. For example, Peach County, Ga., became a metropolitan area called Peach County, Ga. HMFA–comprised entirely of Peach County. 

In 2015, there were 2,037 non-metro areas and 535 metro areas for a total of 2,572 areas. In 2016 there are 1,974 non-metro areas and 625 metro areas for a total of 2,599 areas. Properties located in areas that had a change in their area definition will want to pay close attention to how this affects their income limits. One example of this change is Greene County, Ala. During 2015, Greene County was part of the Tuscaloosa, Ala. MSA; however, in 2016 it was broken off into its own non-metro county. This change resulted in area median income (AMI) in Greene County decreasing by 38 percent. The very low income (VLI) decrease was capped at 5 percent, but this means that Greene County, Ala., will likely see decreases in income for the foreseeable future as the VLI decreases to be in line with the now lower AMI for the county.


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 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 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 before 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 2016 income limits shows that for MTSPs without HERA Special income limit and hold-harmless provisions (see map Change in HUD Published MTSP from 2015 to 2016):

  • The income limits in 1,495 counties (58 percent) decreased.
  • The income limits in 176 counties (6 percent) did not change.
  • The income limits in 928 counties (36 percent) increased.

For MTSPs without HERA Special income limit and hold-harmless provisions, there was an average decrease of 0.54 percent (not taking into account any weighting for the population of each county).

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 state median income floor.
  • 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 zero counties decreased.
  • The income limits in 1,922 counties (74 percent) did not change.
  • The income limits in 677 counties (26 percent) increased. 
  • The average increase for this category is 0.74 percent (not taking into account any weighting for the population of each county).

There are two main reasons why 1,922 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 in a prior year at an amount higher than the increased MTSP.
  • The following maps illustrate changes from 2015 to 2016.



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