On January 9, HUD posted a pre-publication copy of a notice in the Federal Register titled “Changes to the Methodology Used for Calculating Section 8 Income Limits under the United States Housing Act of 1937.” Since Fiscal Year (FY) 2010, in calculating the thresholds for “low-income families” and “very low-income families,” HUD has limited the increase from one year to the next as the higher of either five percent or twice the percentage change in the national median family income. The Department also does not allow income limits to decrease by more than five percent from the previous year. This notice proposes adding an additional requirement that the annual income limits never increase by more than 10 percent per year and also proposes changes to the definition of national median family income.

The Department has identified two rationales for limiting income limit increases and decreases. The first is that the American Community Survey (ACS)–which is used to calculate area median family income estimates–is subject to error and may fluctuate despite the underlying median income staying the same. The second reason is that certain programs, such as the Low-Income Housing Tax Credit (LIHTC), use the income limits to determine rent for low-income families and by limiting decreases, HUD helps to ensure that certain properties remain financially viable. Similarly, by limiting increases, HUD helps to ensure that low-income families do not face large rent increases very quickly.

The Department would also like to calculate the national median family income by using “the most recent unadjusted estimates of median family income provided by the Census Bureau via the ACS.” The Department states that “[b]y continuing to remove inflation adjustments from its cap calculation, HUD is keeping the calculation in line with its purpose of capturing trends in median family income data addressing survey volatility rather than volatility introduced by accelerating or decelerating inflation.”

Comments on the proposed changes will be due 30 days after the notice is published.

The full pre-publication copy of the notice, including questions to which HUD is looking for responses, can be found here.