HUD Releases Income Limits for 2012

On Dec. 1, HUD released income limits for 2012. Under the Housing and Economic Recovery Act of 2008 (HERA), income limits are used to determine qualification levels as well as set maximum rental rates for projects funded with low-income housing tax credits and projects financed with tax-exempt housing bonds. These projects are referred to by HUD as Multifamily Tax Subsidy Projects (MTSPs) and are calculated and presented separately from the Section 8 income limits.

According to Revenue Ruling 94-57, income limits must be implemented on the effective date or 45 days from the published date, whichever is later, which means this year's limits must be implemented no later than Jan. 14, 2012. To access the income limits online, go to www.huduser.org/portal/datasets/mtsp.html.

Area Median Income Growth Rate

According to HUD, the area median income growth rate is equal to the change in the Consumer Price Index from December 2009 to December 2010. That change was 1.4 percent, so the area median income limit will increase 1.4 percent for all counties.

The very-low income limit will also experience a 1.4 percent increase, except in counties affected by high or low housing costs. Since MTSPs follow the very low-income limits, they will generally have a 1.4 percent increase. And HERA Special Income Limits will also have a 1.4 percent increase because they are indexed to the 1.4 percent change in area median income.

A Closer Look at the Limits

MTSPs, unlike Section 8 properties, are still subject to “hold harmless” provisions. Beginning with the fiscal year (FY) 2010 income limits, HUD eliminated its longstanding “hold harmless” policy, which maintained Section 8 income limits for certain areas at previously published levels when reductions would otherwise have resulted from changes in median family income estimates, housing cost adjustment data, or metropolitan area definitions.

However, hold harmless provisions for some MTSPs still apply. Hold harmless counties may have an increase in income limits if the amount the county was held harmless at is less than 1.4 percent and it is not a high housing cost county.

Here are a few items to note from the new data:

• For MTSPs outside a HUD Hold Harmless Impacted Area and without the HERA Special Income Limit:

  • The income limits in 125 counties decreased.

  • Two counties' income limits did not change.

  • And income limits increased for 4,637 counties.

• The average increase for this category was 1.73 percent.

• For MTSPs with the HERA Special Income Limit and located in a HUD Hold Harmless Impacted Area:

  • No counties had a decrease in income limit.

  • 537 counties' income limits were unchanged.

  • 4,227 counties' income limits increased.

  • The average increase here is 1.39 percent.

Calculating Your Site-Specific Income Limits

The income limits you will use to certify households are set at a percentage of area median gross income (AMGI), adjusted for household size. The percentage of AMGI your site must use depends on the site owner's agreement with your state tax credit agency. It's usually 40 percent, 50 percent, or 60 percent of AMGI.

The “very low-income” figures in the HUD release reflect 50 percent of AMGI, adjusted for various household sizes. Then you determine from the owner's agreement what percentage of AMGI applies. For example, if your low-income households are supposed to be at or below 50 percent of AMGI, you can just use the very low-income row. Move along the row until you reach the figure below the appropriate household size (for example, three-person). That number is your income limit for households of that size earning no more than 50 percent of AMGI.

If your low-income households are supposed to be at 60 percent of AMGI, multiply the very low-income number for each household size by 1.2 (50% x 1.2 = 60%). If your households are supposed to be at 40 percent of AMGI, multiply the very low-income number by 0.8 (50% x 0.8 = 40%).