HUD 2016 Income Limits Have Been Published

On March 28, 2016, HUD released the 2016 Income Limits. Owners of properties participating in HUD’s Multifamily Housing Programs must utilize these limits when processing Move-Ins and Initial Certifications effective March 28, 2016 or later.

For those owners participating in the Low Income Housing Tax Credit (LIHTC) Program, a separate table of income limits is utilized for income eligibility determinations on tenant income certifications (TICs). This table, called the Multifamily Tax Subsidy Project Income Limits, is available here. Unlike the immediate implementation deadline for the HUD income limits, LIHTC income limits must be implemented on Initial TICs within 45 days (by May 12, 2016).

Owner/Agents are responsible for verifying that the correct HUD and/or LIHTC income limits are incorporated into their compliance software. Owner/Agents will need to reference their vendor instructions for specific guidance regarding how to make this update in their software. Please note, if PMCS processes your certifications and vouchers, we will update these limits in the software for you.

Below are two questions we have been asked regarding the correct implementation of income limits:

Question:

I know I have to incorporate the new limits on any Move-In or Initial Certification effective March 28, 2016 or later. However, must I re-run any Annual or Interim Recertifications effective after March 28, 2016, but signed by the resident before March 28, 2016?

Answer:  Since in-place households are not subject to income limits during the recertification process, HUD does not require owners to re-process Annual or Interim Recertifications effective after March 28, 2016 and signed before this date.

Question:

In reviewing the Income Limit tables on HUD’s website, I noticed that several of the Extremely Low Income Limits and Very Low Income Limits for a given county are the same. I also noticed that several different counties all have the same Extremely Low Income Limit of $24,300. Why is that?

Answer: The fact that several Extremely Low Income Limits equal the Very Low Income Limits is intentional and correct. In July 2014, HUD redefined the Extremely Low Income Limit as “a low-income family whose income does not exceed the greater of 30 percent of the area median income or the federal poverty guideline for that household size.” Prior to this definition modification, the federal poverty level did not play a role in determining income limits.

For reference, here are the 2016 published Poverty Guidelines:

2016 POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA
Persons in family/household	Poverty Guideline
1	$11,880
2	16,020
3	20,160
4	24,300
5	28,440
6	32,580
7	36,730
8	40,890

 

Note: For families/households with more than 8 persons, add $4,160 for each additional person. There are separate poverty guidelines for Alaska and Hawaii. These figures do not have to be loaded into your compliance software. They are provided for informational purposes only.

When determining the Extremely Low Income Limit for a specified county or Metropolitan Statistical Area (MSA), HUD processes two mathematical comparisons in sequence:

1. First, using a 4-member household, HUD determines the higher of 30% of the area median income and the 2016 poverty guideline for a 4-member household.
2. Next, HUD caps the resulting figure from Step 1 at the Very Low Income amount (if necessary).

Here is an example of how this works:

Cherokee County, North Carolina has a Median Family Income (MFI) of $44,300.

Step # 1: 30% of $44,300 is $13,290. Compare this to the poverty guideline for a 4-member household, which is $24,300. The resulting figure is the higher of the two, $24,300.

Step #2: Cap the resulting figure from Step 1, $24,300, at the Very Low Income Limit for a 4-member household, which is $24,150. The Extremely Low Income Limit for Cherokee County, North Carolina is $24,150.

As an industry, we are accustomed to the simplified definition of Low-Income Limits as 80% of the median income and Very Low-Income as 50% of the median income. However, HUD has made some adjustments to the formulae to eliminate anomalies. For this reason, and to ensure you are using the correct income limits, we strongly recommend you use the HUD’s FY 2016 Income Limits Documentation System to confirm the income limits for your area and not attempt to arrive at the numbers mathematically on your own for the various household sizes.

Note: A detailed explanation and illustration of adjustments made in each income limit area are available on HUD’s FY 2016 Income Limits Documentation System, when you click on the dark-blue “Explanation” tab displayed on the table.