Annually, HUD publishes annual income limits, which are used to determine the income eligibility of applicants for HUD housing assistance programs and are based on data from the American Community Survey and other sources. The income limit for federal affordable housing programs is the maximum income a household can earn to qualify or be targeted for assistance.
These new income limits are in effect as of April 1, 2024.
These limits determine eligibility for assisted housing programs including the Public Housing, Section 8 project-based, Section 8 Housing Choice Voucher, Section 202 PRAC housing for the elderly, and Section 811 PRAC housing for persons with disabilities programs.
Income limits are based on a percent of median family income for an area and are adjusted based on how many people live in the household (including children). In addition to being used to determine eligibility for federal rental housing programs, income limits are also used to determine the maximum rents allowed for the HOME and Low-Income Housing Tax Credit (LIHTC) incentive.
What is new about the income limit methodology in 2024?
HUD made a modification to the methodology for determining the cap on how much income limits can go up in a single year in any individual Fair Market Rent (FMR) area.
Since 2009, HUD has limited the year-to-year increase in income limits as the higher of five percent or twice the percentage change in national median family income.
Year, Cap
FY 2010, 5.00%
FY 2011, 5.00%
FY 2012, 5.00%
FY 2013, 5.00%
FY 2014, 5.00%
FY 2015, 5.95%
FY 2016, 5.00%
FY 2017, 7.00%
FY 2018, 11.47%
FY 2019, 10.01%
FY 2020, 7.95%
FY 2021, 5.00%
FY 2022, 11.89%
FY 2023, 5.92%
This year, HUD is putting an additional parameter such that if twice the change in national median income is over 10%, the cap in that year can’t be greater than 10%. HUD is calling this the “cap-on-cap.”
HUD says it is making this change for three reasons:
- Tenant protection. By limiting increases in income limits, HUD decreases the burden on low-income households who otherwise would face a large single-year rent increase resulting from higher income limits.
- Statistical error. The data used to determine income limits in some FMR areas may not have a large sample size, and thus statistical error could lead to a change in the estimated local median income that is greater than actual change.
- Stability and certainty. With the adoption of this methodological change, HUD also hopes to assist affordable housing development by providing additional certainty on future maximum income limit increases and the data used to determine that limit.
HUD says it believes cap-on-cap is a very reasonable limitation. It says that a cap has been in place for 15 years, usually capping at significantly less than 10 percent, and interest in credits has still exceeded demand for credits nationally. This policy change has no impact on developers who wish to build market rate housing without the LIHTC subsidy, HUD says.
