The U.S. Department of Housing and Urban Development (HUD) recently released their 2016 Income Limits. According to the release, the estimated Median Family Income (MFI) fell from $70,900 in FY’15 to $70,500 for FY’16. The reduced income estimate will make qualifying as a low income or very low income household increasingly difficult, as the limits for those categories fell by $300 and $200 respectively. The decrease in the income estimate runs counter to the most recent average hourly wage data, which has increased by $1.60 (7.2%) in the region over the past year.

Why did the HUD Estimate Decline?

HUD combines two pieces of data to estimate the MFI for the region. First, it uses the U.S. Census Bureau’s American Community Survey estimate of family income in the region; however this estimate is 2 or 3 years out of date.  HUD then uses an inflation estimate to adjust the MFI to current dollars.

Even though American Community Survey data used by HUD indicated that family incomes had increased regionally by $1,300, they used a lower inflation adjustment factor than they had used in 2015 (they estimated 5.24% inflation between 2012 and 2015, but only estimated 2.637% between 2013 and 2016). Had they used the previous year’s inflation adjustment, MFI in the region would have increased by $1,300 rather than decreasing by $400.

This has impacted numerous regions throughout the country, where 54% of metropolitan areas realized a decrease in their MFI, in spite of a growing economy.

Source: HUD, Bureau of Economic Analysis, HRPDC

A Lack of Consistency

The major issue to highlight with respect to the MFI estimate is the lack of consistency in the estimation process from year to year. For Hampton Roads (and the majority of  metro areas), the methodology employed to calculate HUD median incomes has changed every two to three years, which has significantly impacted qualifying income limits. This makes it very difficult for those in need to assess the assistance that will be available to them, and for policy makers at the local and regional level to plan from year to year.