The Department of Housing and Urban Development (HUD) is required by law to set income limits that determine the eligibility of applicants for HUD's assisted housing programs. The major active assisted housing programs are the Public Housing program, the project-based Section 8 program, the Section 8 Housing Choice and Project-Based Voucher programs, Section 202 housing for the elderly program, and Section 811 housing for persons with disabilities program. There are many other HUD and non-HUD programs that use median incomes and/or income limits to determine eligibility and sometimes funding amounts or rents. There is a listing of Federal programs in Attachment 1.

HUD Section 8 Income Limits begin with the production of median family incomes. HUD uses the Section 8 program's Fair Market Rent (FMR) area definitions in developing median incomes, which means that median incomes are developed for each metropolitan area, parts of some metropolitan areas, and each non-metropolitan county. For fiscal year (FY) 2019, there are two changes to the geographic area definitions used last year. First, the two counties (islands) that comprise the Kahului-Wailuku-Lahaina, HI will no longer have separate income limits; there is one income limit throughout the metropolitan area for FY 2019. Second, Enid, OK is a new metropolitan area, formed out of nonmetropolitan Garfield County. HUD Section 8 Income Limits are calculated for every FMR area with adjustments for family size and for areas with unusually high or low family income or housing-cost-to-income relationships.

The statutory basis for HUD's income limit policies is Section 3 of the U.S. Housing Act of 1937, as amended.² Attachment 2 provides the key excerpts relevant to income limits, which may be summarized as follows:

Low-income families are defined as families whose incomes do not exceed 80 percent of the median family income for the area.

Very low-income families are defined as families whose incomes do not exceed 50 percent of the median family income for the area. The FY 2014 Continuing Appropriations Act defines Extremely Low-Income Families as very lowincome families whose incomes do not exceed the greater of 30 percent of the median family income for the area or the federal poverty guidelines as published by the Department of Health and Human Services.

The Extremely Low-Income Limits based on poverty guidelines are capped by the Very Low-Income Limit.

Income limits for non-metropolitan areas may not be less than limits based on the State nonmetropolitan median family income level.

The Secretary of Agriculture is to be consulted prior to establishing income limits for rural areas, since these limits also apply to certain Rural Housing and Community Development Service programs.

Footnotes:

¹Also known as HUD Public Housing/Section 8 Income Limits

² 42 U.S.C. 1437b

The very low-income limits (usually based on 50 percent of median incomes) are the basis of all other income limits, as they are the best-defined income limits and have been the subject of specific, limited legislative adjustments subsequent to reviews of the HUD calculation methodology. In addition, a number of other income limit calculations are tied by legislation or regulation to their calculation.

There are currently several legislated income limit standards (e.g., 30%, extremely lowincome limits, 50%, 60%, 65%, 80%, 95%, 100%, 115%, 125%) that were intended to have progressive relationships. To ensure that this occurs, the very low-income limits have been used as the basis for deriving other income limits unless that relevant statutory language has no references or relationship to low- and very low-income limits as defined by the U.S. Housing Act of 1937. If this were not done, for instance, HUD low-income limits would be less than very low-income limits in areas where very low-income limits had been adjusted upward by more than 60 percent because of unusually low area median family incomes relative to the Section 8 Fair Market Rents (FMRs).

Very low-income limits are calculated using a set of formulae as follows. The first step is to calculate a four-person income limit equal to 50 percent of the area median family income. Adjustments are then made if this estimate is outside formula constraints. More specifically, the very low-income limit for a four-person family is calculated as follows:

(1) 50 percent of the area median family income is calculated and set as the preliminary four-person family income limit;

(2) the four-person very low-income limit is increased if it would otherwise be less than the amount at which 35 percent of it equals 85 percent of the annualized two-bedroom 40th percentile rent. This adjusts income limits upward for areas where rental housing costs are unusually high in relation to the median income;

(3) the four-person very low-income limit is reduced to the greater of 80 percent of the U.S. median family income level, or the amount at which 30 percent of a four-person family's income equals 100 percent of the two-bedroom 40th percentile rent. This adjusts income limits downward for areas of unusually high median family incomes;

(4) the four-person income limit is increased if it is less than 50 percent of the relevant state non-metropolitan median family income level,³ and;

(5) the four-person income limit is increased if it is less than 95 percent of last year's very low-income limit and reduced to the greater of 105 percent of last year’s very low-income limit or twice the change in the national median family income estimate if that amount would be larger than 5 percent. Between FY 2018 and FY 2019, the estimate of national median family income increased and the change in income limits is capped at 110 percent of last year's very lowincome limit. HUD uses 40th percentile rents instead of FMRs that include 50th percentile areas, to calculate high housing cost areas. This is to create a uniform national standard for the relationship between the rent and income distributions in defining the high- and low-housing cost adjustments, and, in the past, to prevent fluctuations in Low-Income Housing Tax Credit Difficult Development Area (DDA) determinations that result solely from high housing cost income limit fluctuations as areas go in and out of the 50th percentile FMR program. Beginning with the FY 2018 FMRs, no additional 50th percentile areas can be designated, so this use of 40th percentile rents only impacts the few remaining areas where the three-year 50th percentile FMR has not expired. For FY 2019, only three areas continue to use 50th percentile FMRs, Bergen-Passaic, NJ HMFA, San DiegoCarlsbad, CA MSA, and Spokane, WA HMFA. FY 2019 is the last year for 50th percentile FMRs.

Table 1 summarizes the rules governing very low-income limit determinations:

Table 1 Summary of Income Limits Determinations for FY 2019 Very Low-income Limits

	Type Income Limit Calculation	Non-metro Counties	Metropolitan Areas
1	Limits based on 50% of local median family income	579	383
2	Limits based on State non-metropolitan median family income level	1292	123
3	Limits increased to the amount at which 35% of 4-person family's income equals 85% of the 2-bedroom 40th percentile rent	15	31
4	Limits decreased to the greater of 80% of the U.S. median family income or the amount at which 30% of a 4-person family's income equals 100% of the 2- bedroom 40th percentile rent	1	0
5	Limits floored if they would be less than 95% of last year's limit	19	11
6	Limits capped if they would otherwise increase by more than twice the increase in the National Median Income (i.e., would be more than 110% of last year's limit)	67	77
7	TOTALS	1973	625

Footnotes:

³ A Housing and Community Development Act of 1987 amendment directed that non-metropolitan area income limits should never be set at less than if they were based on the State non-metropolitan median family income level. In implementing this provision, HUD used its discretion to apply this policy to metropolitan areas to avoid inequities that would otherwise result. Doing so avoids the anomaly of assigning higher income limits to a non-metropolitan county than are assigned to an adjacent metropolitan area where the median family income is less than the State non-metro level but above the level for the non-metro county.

Most four-person low-income limits are the higher of: (a) 80 percent of the area median family income, or (b) 80 percent of the State non-metropolitan median family income level. Because the very low-income limits are not always based on 50 percent of median, strictly calculating low-income limits as 80 percent of median could produce anomalies inconsistent with statutory intent (e.g., very low-income limits could be higher than low-income limits). The calculation normally used, therefore, is to set the four-person low-income limit at 1.6 (i.e., 80%/50%) times the relevant four-person very low-income limit. The only exceptions are that the resulting income limit may not exceed the U.S. median family income level ($75,500 for FY 2019) except when justified by high housing costs; and once adjusted, the fourperson low-income limit decrease is limited to five percent or, if increasing, capped at the greater of five percent or twice the national change in median income (which is 10 percent for FY 2019). Use of very low-income limits as a starting point for calculating other income limits tied to Section (3)(b)(2) of the U.S. Housing Act of 1937 has the effect of adjusting low-income limits in areas where the very low-income limits have been adjusted because of unusually high or low housingcost-to-income relationships.

Table 2 summarizes the rules governing low-income limit determinations and how many areas are affected by each provision:

Table 2 Summary of Income Limits Determinations for FY 2019 Low-income Limits

	Type Income Limit Calculation	Non-metro Counties	Metropolitan Areas
1	Limits based proportional increases from very low-income limits (i.e., set at 80/50ths of the very low-income limits)	568	349
2	Limits based on State nonmetropolitan median family income level	1292	118
3	Four-person base low-income limit capped at the U.S. median of $75,500	16	36
4	Limits increased for high housing costs	19	35
5	Limits floored if they would otherwise be less than 95% of last year's low-income limit	19	12
6	Limits capped if they would otherwise increase by more than twice the increase in the National Median Income (i.e., would be more than 110% of last year's limit)	59	75
	Totals	1973	625

HUD has adjusted low-income limits for areas of unusually high or low income since passage of the 1974 legislation that established the basic income limit system now used. Underlying the decision to set minimum and maximum low-income limits is the assumption that families in unusually poor areas should be defined as low-income if they are unable to afford standard quality housing even if their incomes exceed 80 percent of the local median family income. Similarly, families in unusually affluent areas are not considered low-income even if their income is less than 80 percent of the local median family income level unless justified by area housing costs.

HUD uses 40th percentile rents instead of FMRs that include 50th percentile rents in some areas, to calculate high housing cost areas. This is to create a uniform national standard for the relationship between the rent and income distributions in defining the high- and low-housing cost adjustments, and, in the past, to prevent fluctuations in Low-Income Housing Tax Credit Difficult Development Area (DDA) determinations that result solely from high housing cost income limit fluctuations as areas go in and out of the 50th percentile FMR program. Beginning with the FY 2018 FMRs, no additional 50th percentile areas can be designated, so this use of 40th percentile rents only impacts the few remaining areas where the three-year 50th percentile FMR has not expired. All three of these areas will expire at the end of FY 2019.

The Quality Housing and Work Responsibility Act of 1998 established a new income limit standard based on 30 percent of median family income (the extremely low-income limits), which was to be adjusted for family size and for areas of unusually high or low family income. A statutory change was made in 1999 to clarify that these income limits should be tied to the Section 8 very low-income limits. The Consolidated Appropriations Act, 2014 further modified and redefined these limits as Extremely Low Family income limits to ensure that these income limits would not fall below the poverty guidelines determined for each family size. Specifically, extremely lowincome families are defined to be very low-income families whose incomes are the greater of the Poverty Guidelines as published and periodically updated by the Department of Health and Human Services or the 30 percent income limits calculated by HUD. Puerto Rico and other territories are specifically excluded from this adjustment. There are separate poverty guidelines for Alaska and Hawaii. The remaining 48 states and the District of Columbia use the same poverty guidelines. The extremely low-income limits therefore are first calculated as 30/50ths (60 percent) of the Section 8 very low-income limits. They are then compared to the appropriate poverty guideline and if the poverty guideline is higher, that value is chosen. If the poverty guideline is above the very lowincome limit at that family size, the extremely low-income limit is set at the very low-income limit because the definition of extremely low-income limits caps them at the very low-income levels.

The income limit statute requires adjustments for family size. The legislative history and conference committee report indicates that the Congress intended that income limits should be higher for larger families and lower for smaller families. The same family size adjustments are used for all income limits, except extremely low-income limits set at the poverty income threshold. They are as follows:

Number of Persons in Family and Percentage Adjustments
1	2	3	4	5	6	7	8
70%	80%	90%	Base	108%	116%	124%	132%

Income limits for families with more than eight persons are not included in the printed lists because of space limitations. For each person over eight-persons, the four-person income limit should be multiplied by an additional 8 percent. (For example, the nine-person limit equals 140 percent [132 + 8] of the relevant four-person income limit.) Income limits are rounded up to the nearest $50. Local agencies may round income limits for nine or more persons to the nearest $50, or they may use the un-rounded numbers. Family size-adjusted income limits are not re-tested for compliance with the cap and floor rules, as discussed below. Rounding anomalies produce some family size-adjusted income limits whose annual change may lead to a decrease of more than five percent or an increase of more than the 11.5 percent allowed for FY 2018 income limits.

Due to the extremely low-income definition changes, these family size adjustments are no longer sufficient to determine the level of extremely low-income limits. The poverty guidelines have fixed dollar amount adjustments between household sizes (different for Alaska and Hawaii than the rest of the U.S.). Therefore, the actual amounts shown for 1- to 8-person families will not necessarily follow the percentages shown above. For families with more than 8 persons, HUD has developed a tool that should be used to calculate the extremely low-income limit for that area at http://www.huduser.gov/portal/datasets/il/il19/index.html. Please use the FY 2019 Income Limits Documentation system, pick the area in question, and select "Click Here" under the label "Extremely Low-Income Limits." Near the bottom of the explanations, there is a drop-down box to select the number of household members needed (from 9 to 20).

Since FY 2010⁴ HUD has limited all annual income limit decreases to five percent and all annual increases to the greater of five percent or twice the change in the national median income.

Specifically, the low-income and very low-income four-person limits will not be allowed to decrease more than five percent or increase more than five percent or twice the national increase in median family income, whichever of those is larger The national median income for the United States for FY 2019 is $75,500, an increase of five percent over the national median income in FY 2018. Twice this change is 10 percent which is greater than five percent, so this higher value is used as the cap on increases. The cap and floor rules do not apply to the extremely low-income limits where these are set according to the poverty threshold.

This policy was implemented in the following way:

• The four-person very-low income limit is computed as half of the local median family income. Median family incomes are rounded to 100 so, by definition, the raw four-person income limit is rounded to 50.
• The cap for the four-person very low-income limit is last year's four-person very lowincome limit multiplied by the greater of 1.05 or twice the change in the national median family income (which is higher at 1.10%) and rounded down to the nearest $50. The cap is rounded down to ensure that it is less than or equal to last year's four-person very low income limit times this cap.
• The floor for the four-person very low-income limit is last year’s four-person very lowincome limit multiplied by 0.95 and rounded up to the nearest $50. The floor is rounded up to ensure that it is greater than or equal to 95 percent of last year's four-person very lowincome limit.
• If the otherwise adjusted four-person very low-income limit is above the cap, then it is set at the cap. If it is below the floor, then it is set at the floor.
• Family size adjustments are made to the floored/capped four-person very low-income limit.
• No additional adjustments are made to families of more than or less than four persons for the very low-income limit, except that it is then rounded up to the nearest $50.
• The cap and floor are applied in an analogous way to the four-person low-income limit.
• No additional capping or flooring is done to any income limit based on either the very lowincome limit or the low-income limit.
• Family size adjusted limits may be slightly larger or smaller than the cap or floor imposed on the four-person low- and very low-income limits due to rounding.

Footnotes:

⁴Prior to FY 2010, HUD maintained a "hold harmless" policy, whereby Section 8 income limits for certain areas were held at previously published levels when reductions would otherwise have resulted from changes in housing cost, median income, or income limit methodologies, or changes in metropolitan area definitions.

HUD income limits apply to the following programs:

Program	Income Limits Standard
Department of Housing and Urban Development
Public Housing	Very low -income, low-income standards, or extremely low-income limits
All Section 8 Programs	Very low-income, low-income standards, or extremely low-income limits
Indian Housing (1996 Act)	"Low-Income" is defined as the greater of 80 percent of the median family income for the Indian area or of the U.S. national median family income
Section 202 Elderly and Section 811 Handicapped programs	Very low-income or low-income standards
Section 235 (Homeownership program)	"95 percent" of area median income, or higher costbased income limits
Section 236 (Rental program)	Low-income standard
Section 221(d)(3) (BMIR)(Below Market Interest Rate) rental program	"95 percent" of area median income, defined as 95/80ths of low-income definition
Community Planning and Development programs	Very low-income or low-income standards for current programs under management
HOME Investment Partnerships Act of 1990	"60 percent of median" and "65 percent of median" are used as income targeting and qualification requirements; both limits are tied to Section 8 income limit determinations
National Homeownership Trust Act of 1990	"95 percent" of median is referenced as the eligibility standard, with a "115 percent" of median standard for high cost areas
Low-Income Housing Preservation and Resident Homeownership Act of 1990	Affordability of units for current occupant of "moderate income" affects terms under which mortgage may be prepaid; "moderate income" is defined as 80-95 percent of median, with "80 percent" defined as the Section 8 low-income standard
Rural Housing and Community Development Service
Rental and ownership assistance programs	Assistance based on HUD Section 8 very low-income or low-income standards, or income limits tied to these standards
Treasury Programs
Multifamily Tax Subsidy Projects	Current standard is Section 8 very low-income standard or 120 percent of that definition (i.e., the "60 percent" of median standard) for projects determining income eligibility and rents who haven't used income limits prior to FY 2012. Income Limits for projects using income limits in FY 2010 or earlier will no longer use Section 8 Income Limits. A separate income limits publication is produced for this program.
Tax-exempt Mortgage Revenue Bonds for homeownership financing	115 percent of area median income, with "115 percent" defined as 230 percent of the Section 8 very low-income standard
"Difficult Development Area" Designation (Low-Income Housing Tax Credit)	Areas with the worst housing cost problems as measured by the FMR to 60 percent of median family income ratio; this designation is awarded to the population-weighted 20 percent of the metro and non-metro areas (using HUD area definitions) with the most severe problems and is recalculated annually; such areas receive special additional tax benefits under this program
"Qualified Census Tract" (Low-Income Housing Tax Credit Program Definition)	Areas, as defined by the Census and designated by HUD, where 50% of all households have incomes less than 60 percent of the area median family income, adjusted for household size, or the poverty rate is 25 percent or higher; such areas receive special additional tax benefits under this program; this calculation is based on 2010 Census data and income limit policies and area definitions in effect as of the date estimates are prepared
"Qualified Census Tract" (Mortgage Revenue Bond Program)	Areas, as defined by the Census, where 70 percent of all families have incomes less that 80 percent of the state median family income, based on 2010 Census data
Federal Deposit Insurance Corporation
Disposition of Multifamily Housing to Non-profit and Public Agencies	Not less than 35 percent of all dwelling units must be made available for occupancy and be affordable for lowincome families, and at least 20 percent must be made available for occupancy and be affordable for very lowincome families. An "affordable rent" is defined as the rent that would be paid by a family paying 30 percent of income for rent whose income is "65 percent of median". This 65 percent figure is defined in relation to the very low-income standard (i.e., normally as 65/50ths of the standard)
Disposition of Single Family Housing	For rentals, priority is given to non-profits and public agencies that make the dwellings affordable to lowincome households. Households who intend to occupy a dwelling as their primary residence whose adjusted income does not exceed 115 percent of area median income, as determined by the Secretary of HUD, are given a purchase priority for the first 3 months a property is for sale.
Federal Home Loan Banks
Rental program funding Priorities	Very low-income, "60 percent of median" (defined as 120 percent of very low-income), and low-income standards used
Homeownership funding priorities	115 percent and 140 percent of median family income limits are used
Federal Housing Finance Agency
Income-based Housing Goals of Freddie Mac and Fannie Mae	Goals for percentages of loans are established for households with incomes at or below specified percentages of the HUD-published median family income for metropolitan and nonmetropolitan areas, as detailed in 12 CFR, Part 1282. The area definitions used relate to OMB metropolitan area definitions and the median family income estimates for the nonmetropolitan portions of each state.
Other Federal Banking Regulatory Provisions
Targeting of loan funds to low-income households and areas	Varies by agency
Uniform Relocation Act
Reimbursement to households forced to relocate from their residence by Federal agency	Extent of replacement housing assistance dependent on qualifying as low-income, as defined by HUD; Act applies to all Federal agencies that initiate action that forces households to relocate from their residence
Department of Veterans Affairs
Eligibility for disability income support payments to veterans	Eligibility for non-service related income support payments is restricted to families with incomes below the HUD low-income standard

HUD calculates median incomes as the basis of its income limits that are used to determine eligibility for various HUD programs. Medians are not directly used in HUD programs and are calculated at the family level only, not the per person level as is done for income limits. The average family size is over 3, so, by convention, HUD equates the median family income for an area with a four-person family for the purposes of calculating income limits.

HUD uses the Section 8 program's Fair Market Rent (FMR) area definitions for its median incomes, which means that medians are developed for each metropolitan area, parts of some metropolitan areas, and each non-metropolitan county. For FY 2019, there are two changes to the geographic area definitions used last year. First, the two counties (islands) that comprise the Kahului-Wailuku-Lahaina, HI will no longer have medians calculated separately by county; the names of these areas will change from the island names (Kalawao and Maui County) to the metropolitan in FY 2019. Second, Enid, OK is a new metropolitan area, formed out of nonmetropolitan Garfield County.

HUD uses median family income data (as opposed to median household income data) from the American Community Survey (ACS) for all areas in the United States. For Puerto Rico an annual survey is also conducted and is called the Puerto Rico Community Survey (PRCS). The FY2019 median incomes use survey data from the 2016 ACS and PRCS. The 2016 data are inflated using a Consumer Price Index (CPI) forecast from the Congressional Budget Office (CBO) through the midpoint of FY 2019. Island areas (Guam, American Samoa, Northern Marianna Islands, and the Virgin Islands) use income data from a census conducted in 2010 of the previous year's (2009) income data, augmented by the change in the national income between 2009 and 2016 (from the ACS). The same CBO forecast is then applied from mid-2016 to the mid-point of the fiscal year, April 2019.

As mentioned above, the FY 2019 median incomes incorporate the 2016 ACS data into the calculation process. Specifically, for each metropolitan area, subarea of a metropolitan area, and nonmetropolitan county, HUD determines if a statistically valid one-year ACS income estimate is available. If one-year data is not available, then statistically valid five-year ACS data (data collected from 2012 through 2016) is used. There are cases where statistically valid five-year ACS data is not available. In those cases, an average of at least two of the past three years of income estimates is used. If at least two years of statistically valid income data are not available, the one-year state nonmetro median is used¹.

Footnotes:

¹For metropolitan subareas without statistically significant five-year ACS data there is no averaging with past years; the larger metropolitan area is used, which is one-year ACS data.

For the FY 2019 median incomes, HUD requires that the margin of error be less than half of the estimate and that the survey median is based on at least 100 responses (as identified by a count indicator value of 4 or more in HUD's special tabulations of ACS data). If the current year estimate does not meet both conditions, the previous years' estimates must meet the margin of error condition to be used in averaging.

HUD uses a CPI forecast from CBO to inflate the 2016 ACS data to the mid-point of FY 2019. The CBO projection of fiscal year CPI, published in January 2019, is used to inflate the 2016 data.

Median family incomes start with the development of median incomes for the nation (with national metropolitan and nonmetropolitan median incomes), for each state and territory (again including national metropolitan and nonmetropolitan median incomes), and for each metropolitan area and nonmetropolitan area using the FMR area definitions for the United State and its territories.

The major steps for calculating medians² are detailed below:

HUD uses 2016 ACS or PRCS median family incomes as the basis for FY 2019 medians for all areas designated as Fair Market Rent areas in the US and Puerto Rico. In areas where there is a statistically valid survey estimate using 2016 one-year ACS or PRCS data, that is used. If not, statistically valid 2016 five-year data is used. Where statistically valid five-year data is not available, HUD will average the valid income estimates from the previous three years of ACS or PRCS data or for two of these three years. This data from the current 2016 five-year data will be considered valid if the margin of error of the estimate is less than one-half of the estimate.

This same test will be applied to the 2015 five-year data and the 2014 five-year data, which will be inflated to 2016 using the change in national CPI calculated between 2014 or 2015 and 2016.

Metropolitan subareas, HUD Metro FMR Areas (HMFAs), do not use averaged data from the current and two previous years (adjusted to the current year) if the five-year data is not statistically valid. These subareas use the 2016 ACS data for the larger metropolitan area.

For all places in the US and Puerto Rico:

All estimates (using either one-year data or five-year data) are then trended from 2016 to April 2016, the midpoint of FY 2019.

For the non-Puerto Rico Insular Areas of the United States,³ which currently lack the annual survey of ACS or PRCS, 2010 Decennial Census data were used for the first time in the FY 2016 medians and income limits. This continues to be the basis of the FY 2019 medians and income limits. National ACS income changes are used to update 2010 Decennial Census data to 2016 and then the same CPI forecast trend factor is applied to bring the data forward to the midpoint of FY 2019.

Attachment 1 shows the distribution of changes in median incomes between FY 2018 and FY 2019 for each state and the United States, overall. The distribution of changes is also shown separately for metropolitan and nonmetropolitan portions of each state and the United States.

Attachment 2 shows the median incomes by state and for the United States and the State Metropolitan median incomes and the State Nonmetropolitan medians.

Footnotes:

²Family refers to the Census definition of a family, which is a householder with one or more other persons living in the same household who are related to the householder by birth, marriage, or adoption. The definition of family excludes one-person households and multi-person households of unrelated individuals. ³The areas without ACS coverage are the U.S. Virgin Islands, Guam, American Samoa, and the Northern Marianas Islands. Puerto Rico is covered by the ACS-equivalent Puerto Rico Community Survey.