What is ami for my area?
One metric that can be confusing to many and important to humanize is Area Median Income (AMI) and the associated AMI levels determined by the US Department of Housing and Urban Development (HUD) every year. Since AMI is used in determining eligibility for affordable housing programs at the federal and sometimes local levels, it’s particularly important that decision-makers and community members understand this metric and who, exactly, may be helped by those programs.
Each year, HUD calculates the area median income (AMI) for every geographic region in the country using data from the US Census-based American Community Survey. The area median income is the midpoint of a region’s income distribution, meaning that half of the households in a region earn more than the median and half earn less than the median. A household’s income is calculated by its gross income, which is the total income received before taxes and other payroll deductions.
In addition to calculating AMI, HUD defines and calculates different levels of AMI for geographic areas across the country by household size.
These parameters help HUD identify households that are eligible for certain housing assistance programs administered (However, the number of tiers used, and the percentage of AMI required for eligibility varies by each housing program).
A good example of how these thresholds are used at the federal level is HUD’s Housing Choice Voucher Program. The Housing Choice Voucher Program is the federal government’s primary program for helping very low-income families, the elderly, and the disabled afford decent, safe, and sanitary housing in the private market. To be eligible for a Housing Choice Voucher, household income must be at or below 50% of the AMI.
The chart below displays the three AMI levels for households of one to six people in Broome County, NY. In this example, a one-person household in Broome County would need to have a household income at or below $26,850/year to be eligible for a Housing Choice Voucher, a two-person household (which may include a child) would need annual household income at or below $30,700 to be eligible, and so on.
In addition to HUD, many local housing programs use AMI levels to govern eligibility for affordable housing programs. However, when initial housing policies are being contemplated, community leaders, decision makers, and other stakeholders can be left confused and wondering who, exactly, they may be helping through their housing policies. To overcome this, it can be helpful to add context and create graphics that humanize AMI metrics so that decision-makers know who they may be assisting and/or targeting through their affordable housing programs.
Below is an example of how this can be done using the data from the table above. In this figure, we overlay the median income of various occupations in the area with its AMI data. By doing this and aligning it with the individual household income level figures along the axis, it is easier to tell who fits into these AMI levels and would be eligible for local affordable housing assistance programs.
For example, if you were considering establishing a local affordable housing voucher program targeting households that earn at or below 50% of the AMI, you can now see that a family of four (two adults and two children) where one parent is a truck driver and the other takes care of the children during the day would not qualify because the household income ($46,000/year) is above the 50% AMI threshold for a family of four ($38,350).
Looking at the data and metrics in this light provides more human context to the reader or decision maker by informing them about who the local program can assist based on the eligibility requirements being contemplated. They can then adjust the eligibility requirements if desired before implementing new programs.
With more and more aspects of our lives and local policies focusing on data and metrics, it is important to continue to use the human context to make the data more impactful and meaningful and help stakeholders better understand who benefits from local or regional affordable housing assistance programs.
Camoin Associates’ Real Estate Development Team offers a wide variety of housing-related services to local, state, and regional governments, non-profit organizations, and private developers. Learn more.
This article was originally published in Camoin Associates’ Economic Development Navigator blog in January 2020 and was updated in March 2023.
Income Limits
Q1. Is HUD raising rents on low-income tenants?
The potential impact of changing income limits varies based on the program. Many tenants in Federally-supported housing will see no impact because rents are directly tied to tenant incomes. For other programs, such as Low Income Housing Tax Credits, properties have their maximum allowed rents based on the income limits that HUD is mandated to publish. The Federal government has no control over how individual LIHTC landlords set rents within the prescribed range. HUD has not required or suggested rent increases. To the extent that owners increase rents, they should be minimal increases, phased in over time, and only to an extent consistent with maintaining financial feasibility of the property.
Q2. Income limits have fallen in my area but haven’t done so in the past, why did this happen?
Beginning with FY 2010 Income Limits, HUD eliminated its long standing “hold harmless” policy. HUD’s “hold harmless” policy sustained Section 8 income limits for certain areas at previously published levels when reductions would otherwise have resulted from changes in median family incomes, housing cost adjustment data, median income update methodology, income limit methodology, or metropolitan area definitions. HUD eliminated the “hold harmless” policy to ensure better alignment between an area’s most recent income experience and the income thresholds for housing assistance.
Furthermore, in an effort to minimize disruptions in the operation of the Section 8 Housing Choice Voucher (HCV) program, HUD instituted maximum thresholds for the amount income limits can change from year to year. The new policy limits annual increases in income limits to 5 percent or twice the change in the national median family income as measured by the American Community Survey, whichever is greater. For the FY 2022 income limits, the cap is approximately 11.89 percent. For areas where income limits are decreasing, HUD limits the decrease to no more than 5 percent per year.
Income Limits for rural housing programs will continue their current hold-harmless policy at the request of the Rural Housing Service, because these limits are based on area definitions and program rules specified by the Rural Housing Service of the Department of Agriculture. Income-based rents used in the HOME Investment Partnerships program (HOME) will also be held harmless.
Q3. Why don’t the income limits for my area reflect recent gains (or losses)?
Although HUD uses the most recent data available concerning local area incomes, there is still a lag between when the data are collected and when the data are available for use. For example, FY 2022 Income Limits are calculated using 2015-2019 5-year American Community Survey (ACS) data, and one-year 2019 data where possible. This is a three-year lag, so more current trends in median family income levels are not available.
Q4. What is the difference between HUD’s Median Family Income (MFI) and Area Median Income (AMI)?
HUD estimates Median Family Income (MFI) annually for each metropolitan area and non-metropolitan county. The metropolitan area definitions are the same ones HUD uses for Fair Market Rents (except where statute requires a different configuration). HUD calculates Income Limits as a function of the area's Median Family Income (MFI). The basis for HUD’s median family incomes is data from the American Community Survey, table B19113 - MEDIAN FAMILY INCOME IN THE PAST 12 MONTHS.
The term Area Median Income is the term used more generally in the affordable housing industry. If the term Area Median Income (AMI) is used in an unqualified manner, this reference is synonymous with HUD's MFI. However, if the term AMI is qualified in some way - generally percentages of AMI, or AMI adjusted for family size, then this is a reference to HUD's income limits, which are calculated as percentages of median incomes and include adjustments for families of different sizes.
Q5. Why does my very low-income limit not equal 50% of my median family income (or my low-income limit not equal 80% of my median income)?
There are many exceptions to the arithmetic calculation of income limits. These include adjustments for high housing cost relative to income, the application of state nonmetropolitan income limits in low-income areas, and national maximums in high-income areas. These exceptions are detailed in the FY 2022 Income Limits Methodology Document, https://www.huduser.gov/portal/datasets/il.html#2022_data. Please also note that Tables 1 and 2 (beginning on page 5) show that most nonmetropolitan area income limits are based on state nonmetropolitan area medians.
For further information on the exact adjustments made to an individual area of the country, please see our FY 2022 Income Limits Documentation System. The documentation system is available at https://www.huduser.gov/portal/datasets/il.html#2022_query. Once the area in question is selected, a summary of the area’s median income, Very Low-Income, Extremely Low-Income, and Low-Income Limits are displayed. Detailed calculations are obtained by selecting the relevant links.
Q6. Why is the Extremely Low-Income Limit much higher than in the past and sometimes no different than the Very Low-Income Limit?
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 low-income 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 low-income 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.
Q7. Why am I unable to access the FY 2022 Income Limits Documentation System using a prior year bookmark, or using the results of web search? Using links from these methods generally result in broken webpages.
The income limits documentation calculates median family incomes and income limits for each area of the country; therefore, certain parameters must be set for these calculations to be performed correctly. Please access the FY 2022 Income Limits Documentation System using this link: https://www.huduser.gov/portal/datasets/il.html#2022_query
Median Family Incomes
Q8. How does HUD calculate median family incomes?
To calculate the FY 2022 median incomes, HUD uses 2019 ACS or PRCS median family incomes as the basis for FY 2022 medians for all areas designated as Fair Market Rent areas in the US and Puerto Rico. For an ACS estimate to be considered statistically valid, the estimate must have a margin of error less than half the size of the estimate and the estimate must be based on at least 100 observations. In areas where there is a statistically valid survey estimate using 2019 one-year ACS or PRCS data, that is used. If not, statistically valid 2019 five-year data is used. Where statistically valid five-year data is not available, HUD will average the minimally statistically valid income estimates from the previous three years of ACS or PRCS data. Minimal statistical validity is defined as those ACS estimates where the margin of error of the estimate is less than half the size of the estimate. ACS data from 2019, 2018, and 2017 will be evaluated to determine if it is minimally statistically valid. HUD averages the minimally statistically valid 5-year data which is adjusted to 2019 dollars using the national change in CPI between the ACS year of the data and 2019. For all places in the US and Puerto Rico: All estimates (using either one-year data or five-year data) are then inflated from 2019 to February 2022 using the Consumer Price Index (CPI).
For additional details concerning the use of the ACS in HUD’s calculations of MFI, please see our FY 2022 Median Family Income methodology document, at https://www.huduser.gov/portal/datasets/il.html#2021_data.
Additionally, full documentation of all calculations for Median Family Incomes are available in the FY 2022 Median Family Income and the FY 2022 Income Limits Documentation System. These systems are available at https://www.huduser.gov/portal/datasets/il.html#2022_query.
Area Definitions:
Q9. Why do area definitions change for median incomes and income limits?
HUD follows Office of Management and Budget (OMB) definitions of metropolitan areas with some exceptions. In 2006, when HUD implemented the widespread area definition changes OMB made based on the 2000 Decennial Census, exceptions were made to the new OMB area definitions when FMR or MFI changes for new areas were greater than five percent. HUD created exception subareas, called HUD Metro FMR Areas (HMFA), which continue to exist today.
The FY 2022 MFIs and income limits are based on new metropolitan area definitions, defined by OMB using commuting relationships from the 2010 Decennial Census, as updated through 2018. While HUD has maintained its HMFA subareas, there is no longer the five percent FMR or median income test; all counties added to metropolitan areas will be an HMFA with rents and incomes based on their own county data, where available. The disposition of all counties is shown in the Area Definitions report https://www.huduser.gov/portal/datasets/il.html#2022_data.
Q10. What is the relationship between Fair Market Rent areas and Income Limit areas?
With minor exceptions, FMR areas and Income Limit areas are identical. HUD uses FMR areas in calculating income limits because FMRs are needed for the calculation of some income limits; specifically, to determine high and low housing cost adjustments. Also, the two sets of area definitions are linked in statutory history. The exception to the similarity between Fair Market Rent areas and Income Limit areas is Rockland County, NY. By statute, income limits are calculated for Rockland County, NY while separate FMRs are not.
Q11. What does the term “HMFA” mean?
HUD Metro FMR Area. This term indicates that only a portion of the OMB-defined metropolitan statistical area (MSA) is in the area to which the income limits (or FMRs) apply. HUD is required by OMB to alter the name of metropolitan geographic entities it derives from the MSAs when the geography is not the same as that established by OMB.
Multifamily Tax Subsidy Projects (MTSPs) (otherwise known as Low-Income Tax Credit projects (LIHTC) or tax-exempt bond-financed projects)
Q12. What is the national non-metro median to be used to calculate the floor on rural LIHTC rents?
Section 3004 of the Housing and Economic Recovery Act (HERA) specifies that any project for residential rental property located in a rural area (as defined in section 520 of the Housing Act of 1949) use the maximum of the area median gross income or the national non-metropolitan median income. The FY 2022 non-metropolitan median income is: $71,300 and the 1-8 person 50-percent income limits based on the non-metropolitan median income are listed below:
Statewide Income Limits For U.S. Non-Metropolitan Total
FY 2022 Very Low-Income (50%) Limit (VLIL)
Q13. What are Multifamily Tax Subsidy Projects?
Multifamily Tax Subsidy Projects (MTSPs), a term coined by HUD, are all Low-Income Housing Tax Credit projects under Section 42 of the Internal Revenue Code and multifamily projects funded by tax-exempt bonds under Section 142 (which generally also benefit from LIHTC). These projects may have special income limits established by statute so HUD publishes them on a separate webpage. If you are a tax credit developer or resident in an MTSP, please go to the following site to determine what the appropriate income limits are, https://www.huduser.gov/portal/datasets/mtsp.html.
Q14. How can 60 percent income limits be calculated?
For the Low-Income Housing Tax Credit program, users should refer to the FY 2022 Multifamily Tax Subsidy Project income limits available at https://www.huduser.gov/portal/datasets/mtsp.html. The formula used to compute these income limits is as follows: take 120 percent of the Very Low-Income Limit. Do not calculate income limit percentages based on a direct arithmetic relationship with the median family income; there are too many exceptions made to the arithmetic rule in computing income limits.
Q15. How are maximum rents for Low-Income Housing Tax Credit projects computed from the very low-income limits?
Please consult with the state housing financing agency that governs the tax credit project in question for a determination of official maximum rental rates. A list of state housing finance agencies can be found at https://lihtc.huduser.gov/agency_list.htm. The Low-Income Housing Tax Credit program is a U.S. Treasury Department program; therefore, HUD has no official authority over setting maximum rental rates. The following table is included for informational purposes only.
The imputed income limitation (as defined in 26 U.S.C. Sec. 42(g)(2)) is 60 percent of the median income. A rent may not exceed 30 percent of this imputed income limitation under 26 U.S.C. Sec. 42(g)(2). Unit rents by number of bedrooms are derived from Very Low-Income Limits (VLILs) for the different household sizes according to the following table:
LIHTC Maximum Rent Derivation from HUD Very Low-Income Limits (VLILs)
Photo via Flickr cc
If you’ve ever applied for affordable housing in New York City, you’ll know that it is all about the area median income, or the AMI. If you make too little or too much, you won’t qualify at all for affordable housing. Even if you do qualify, however, your AMI will impact your likelihood of actually acquiring a unit since most buildings have more units available in some AMI bands than others. For most New Yorkers, this is one of the most confusing aspects of affordable housing, so we’ve broken it down, from how AMI is calculated and what the current NYC parameters are to the many controversies surrounding the guidelines.
How the AMI is calculated
The AMI is an income figure used to help determine eligibility for affordable housing programs in New York City and is calculated on an annual basis by the U.S. Department of Housing and Urban Development (HUD). HUD calculates a median family income for each metropolitan area and each nonmetropolitan county in the United States using data from the American Community Survey. If no data is available for a specific year, HUD uses the most recent data but accounts for inflation by taking the actual and forecasted Consumer Price Index into account.
The current AMI in New York City
The AMI is first and foremost used as a guide to determine who is and is not eligible for different types of housing programs. Below are New York City’s 2018 levels; the 2019 AMI will be released later this year.
Chart created by 6sqft
What the AMI effects
The AMI primarily impacts who is eligible for affordable housing. While many people assume that affordable housing only impacts people living on low incomes, in fact, it affects people living on both low and middle incomes. Sometimes another term—the area’s median family income (MFI)—is used interchangeably with AMI. MFI, not AMI, is generally the term used in relation to housing programs targeting very low-income families, including the Section 8 voucher program.
Controversy over the AMI in New York City
One of the most controversial aspects of the AMI is that it is calculated by HUD and not the City of New York. As a result, New York City’s AMI actually includes several affluent suburbs, including Westchester, Rockland, and Putnam counties. Given that all three suburbs are generally assumed to have higher area median incomes than New York’s five boroughs, many people also assume their inclusion artificially inflates the AMI in New York City. In August 2018, for example, City & State ran an article on this issue observing, “New York City’s AMI is inflated by the inclusion of income data from affluent suburbs, meaning what the city may designate as affordable housing may not be affordable for many city residents – and especially not for the residents of the neighborhood itself.”
While many New Yorkers argue that local AMI is being artificially inflated by HUD due to the inclusion of several nearby suburbs, an article published by the NYU Furman Center in late 2018 suggests that this is a misconception: “Because HUD uses Westchester, Rockland, and Putnam counties in its calculation of NYC’s AMI, many assume that these counties’ more affluent areas are pulling affordable housing beyond the reach of the neediest households in the five boroughs. But removing Westchester, Putnam, and Rockland Counties from HUD’s AMI calculation would not significantly change the metro-wide result.”
Still, many people continue to question the wisdom of basing affordable housing eligible on the AMI. After all, should a family earning more than $100,000 per year be eligible for affordable housing when the city is currently struggling to house families with no stable housing at all, including an estimated 15,485 homeless families with 22,899 homeless children? Again, while it is easy to blame the AMI alone, researchers at the Furman Center note that the AMI is not really to blame. After all, local policymakers can lower the income levels subsidized housing will serve—for example, they can choose to target households at 30 or 50 percent of the AMI as opposed to 60 percent. The real problem, then, may not be the AMI but rather how local authorities choose to use it to set guidelines for affordable housing.
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