HUD Releases 2013 Income Limits
On Dec. 4, HUD released income limits for 2013, but revised the limits after discovering a calculation error. The revised numbers were issued Dec. 11. Under the Housing and Economic Recovery Act of 2008 (HERA), income limits are used to determine qualification levels as well as set maximum rental rates for projects funded with low-income housing tax credits and projects financed with tax-exempt housing bonds. These projects are referred to by HUD as Multifamily Tax Subsidy Projects (MTSPs) and are calculated and presented separately from the Section 8 income limits.
According to Revenue Ruling 94-57, income limits must be implemented on the effective date or 45 days from the published date, whichever is later. According to the IRS-issued LIHC newsletter, since the Dec. 11 income limits supersede the income limits released on Dec. 4, the IRS will treat the income limits released Dec. 11 as if they were released on Dec. 4 for all IRC Section 42 purposes. Therefore, based on the Dec. 4 release date, owners must start using the revised 2013 income limits for all purposes no later than 45 days after Dec. 4, or Jan. 18, 2013. To access the income limits online, go to www.huduser.org/portal/datasets/mtsp.html.
A Closer Look at the Limits
MTSPs, unlike Section 8 properties, are still subject to “hold harmless” provisions. Beginning with the fiscal year (FY) 2010 income limits, HUD eliminated its long-standing “hold harmless” policy, which maintained Section 8 income limits for certain areas at previously published levels when reductions would otherwise have resulted from changes in median family income estimates, housing cost adjustment data, or metropolitan area definitions.
However, hold harmless provisions for some MTSPs still apply. Hold harmless counties may have an increase in income limits if the amount the county was held harmless at is less than 1.4 percent and it isn’t a high housing cost county.
For MTSPs outside a HUD Hold Harmless Impacted Area and without the HERA Special Income Limit, at the county level, the average change was a 0.52 percent decrease. For MTSPs placed in service before Jan. 1, 2009, which does include the HERA Special and Hold Harmless provisions, the average change was a 1.41 percent increase.
Overall, state and national area median incomes (AMI) declined. Nationally, AMI decreased from $65,000 for FY2012 to $64,400 for FY2013. That’s a 0.9 percent drop. In metro areas, the AMI fell by 1.9 percent, going from $67,600 for FY2012 to $66,300 in FY2013. In non-metro areas, the AMI remained steady at $52,400.
At the state level, 74 percent of states’ AMIs decreased and 26 percent increased. And 76 percent of metro areas and 50 percent of non-metro areas had an AMI decrease. Twenty-four percent of metro areas and 44 percent of non-metro areas had an AMI increase. No metro areas remained the same, and only 6 percent of non-metro areas maintained the same AMI from last year.
Calculating Your Site-Specific Income Limits
The income limits you’ll use to certify households are set at a percentage of area median gross income (AMGI), adjusted for household size. The percentage of AMGI your site must use depends on the site owner’s agreement with your state tax credit agency. It’s usually 40 percent, 50 percent, or 60 percent of AMGI.
The “very low-income” figures in the HUD release reflect 50 percent of AMGI, adjusted for various household sizes. Then you determine from the owner’s agreement what percentage of AMGI applies. For example, if your low-income households are supposed to be at or below 50 percent of AMGI, you can just use the very low-income row. Move along the row until you reach the figure below the appropriate household size (for example, three-person). That number is your income limit for households of that size earning no more than 50 percent of AMGI.
If your low-income households are supposed to be at 60 percent of AMGI, multiply the very low-income number for each household size by 1.2 (50% x 1.2 = 60%). If your households are supposed to be at 40 percent of AMGI, multiply the very low-income number by 0.8 (50% x 0.8 = 40%).