Novogradac & Company has released its study of expected increases in state median incomes for 2020 and 2021. Novogradac estimates that the U.S. median income will increase by just less than 4 percent in 2020 and 3.4 percent in 2021. This changes are important for affordable housing programs because they affect the income limits for resident eligibility and maximum rents for Low-Income Housing Tax Credit (LIHTC) properties. Increases in LIHTC and Section 8 income limits are limited to the greater of 5 percent or two times the change in the U.S. median income. Based on this, the cap for 2020 will be just under 8 percent and the cap for 2021 will be slightly less than 7 percent.
The Novogradac analysis is based on the U.S. Census Bureau 2018 American Community Survey (ACS) data. This is the same data that HUD will use to determine the 2021 income limits for LIHTC and Section 8 properties, which will be released by HUD in the Spring of 2021.
The Novogradac study also provides estimates of the change in state median incomes. There are five states that are estimated to have decreases in median income for 2020 (Alaska, Connecticut, Oklahoma, Vermont and West Virginia), but the income in each of these states is expected to go up in 2021. Three states are expected to have 2021 decreases in income (Montana, Rhode Island, and South Dakota). All other states are expected to have income increases in both 2020 and 2021.
Since an understanding of potential income growth is important for project budgeting purposes, the Novogradac study may be useful to developers and managers of LIHTC properties. The Novogradac “Rent & Income Limit Estimator” is now available for purchase. Additional information on this tool may be found at the Novogradac website (www.novoco.com).