[Federal Register Volume 89, Number 7 (Wednesday, January 10, 2024)]
[Notices]
[Pages 1583-1586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00279]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-6436-N-01]


Changes to the Methodology Used for Calculating Section 8 Income 
Limits Under the United States Housing Act of 1937

AGENCY: Office of the Assistant Secretary for Policy Development and 
Research, HUD.

ACTION: Notice.

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SUMMARY: The United States Housing Act of 1937 provides for assisted 
housing for ``low-income families'' and ``very low-income families.'' 
These designations are defined as percentages of area median family 
income and are known as income limits. Since FY 2010, HUD has limited 
the increase from year to year in its income limits as the higher of 
five percent or twice the percentage change in national median family 
income. This notice adds an express stipulation that the annual income 
limit increase may never exceed ten percent. HUD further clarifies the 
definition of national median family income for purposes of setting 
income limits.

[[Page 1584]]


DATES: Comment Due Date: February 8, 2024.

ADDRESSES: HUD invites interested persons to submit comments on this 
notice. Communications must refer to the above docket number and title.
    There are two methods for submitting public comments.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW, Room 10276, 
Washington, DC 20410-0500. Due to security measures at all Federal 
agencies, however, submission of comments by mail often results in 
delayed delivery. To ensure timely receipt of comments, HUD recommends 
that comments submitted by mail be submitted at least two weeks in 
advance of the public comment deadline.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
http://www.regulations.gov website can be viewed by other commenters 
and interested members of the public. Commenters should follow 
instructions provided on that site to submit comments electronically.
    Note: To receive consideration as public comments, comments must be 
submitted through one of the two methods specified above. Again, all 
submissions must refer to the docket number and title of the notice.
    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications regarding this notice submitted to HUD will 
be available for public inspection and copying between 8 a.m. and 5 
p.m. weekdays at the above address. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the public 
comments must be scheduled by calling the Regulations Division at (202) 
708-3055 (this is not a toll-free number). HUD welcomes and is prepared 
to receive calls from individuals who are deaf or hard of hearing, as 
well as individuals with speech or communication disabilities. To learn 
more about how to make an accessible telephone call, please visit 
https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. Copies of all comments submitted are available for inspection and 
downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Questions on this notice may be 
addressed to Adam Bibler, Director, Program Parameters and Research 
Division, Office of Economic Affairs, Office of Policy Development and 
Research, HUD Headquarters, 451 7th Street SW, Room 8208, Washington, 
DC 20410, telephone number (202) 402-6057; or via email at 
<a href="/cdn-cgi/l/email-protection#2151515345614954450f464e57"><span class="__cf_email__" data-cfemail="b8c8c8cadcf8d0cddc96dfd7ce">[email protected]</span></a>. HUD welcomes and is prepared to receive calls from 
individuals who are deaf or hard of hearing, as well as individuals 
with speech or communication disabilities. To learn more about how to 
make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.
    This Federal Register notice will be available electronically from 
the HUD User page at https://www.huduser.gov/portal/datasets/fmr.html. 
Federal Register notices also are available electronically from https://www.federalregister.gov.

SUPPLEMENTARY INFORMATION:

I. Background

    The United States Housing Act of 1937 (the 1937 Act) provides for 
assisted housing for ``low-income families'' and ``very low-income 
families.'' Section 3(b)(2) of the 1937 Act defines ``low-income 
families'' and ``very low-income families'' as families whose incomes 
are below 80 percent and 50 percent, respectively, of the area median 
family income, with adjustments for family size. These income limits 
are referred to as ``Section 8 income limits'' because of the 
historical and statutory links with that program, although the same 
income limits are also used as eligibility criteria for several other 
federal programs. The 1937 Act specifies conditions under which Section 
8 income limits are to be adjusted either on a designated area basis or 
because of family incomes or housing-cost-to-income relationships that 
are unusually high or low.\1\ Section 8 income limits use the same area 
definitions as Section 8 Fair Market Rent (FMR) area definitions, which 
in turn are based on Office of Management and Budget (OMB) metropolitan 
statistical area definitions.
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    \1\ The 1937 Act is codified at 42 U.S.C. 1437a.
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    HUD issues updated area median family income estimates and Section 
8 income limits annually. Since Fiscal Year (FY) 2010, HUD has limited 
the amount that the income limit for an area could increase or 
decrease.\2\ Prior to FY 2010, income limits could not decrease at all 
and there was no limitation on annual increases. Under the current 
methodology, HUD does not allow income limits to decrease by more than 
5 percent from the prior year's level and does not allow income limits 
to increase by more than the higher of 5 percent or twice the change in 
the national median family income.
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    \2\ Final Notice on Ending the ``Hold Harmless'' Policy in 
Calculating Section 8 Income Limits Under the United States Housing 
Act of 1937, 75 FR 27564 (May 17, 2010).
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    There are several reasons for these limits on increases and 
decreases. First, HUD's calculation of area median family income 
estimates is based on survey data from the Census Bureau's American 
Community Survey (ACS). Survey estimates of income are subject to 
measurement error and may fluctuate from year to year even when the 
true median income for a given area is unchanged. The limits on 
increases and decreases ensure that outlier estimates of area median 
family income changes do not cause undue administrative burden or 
negatively impact program participants through wildly fluctuating 
income limit levels.
    Second, several programs, most notably the Low-Income Housing Tax 
Credit (LIHTC), use Section 8 income limits to determine eligibility 
and rent levels for low-income households. By limiting decreases in 
income limits to no more than 5 percent, HUD helps ensure the financial 
viability of affordable housing properties.\3\ By limiting increases in 
income limits, HUD decreases the burden on low-income households who 
may face large rent increases resulting from higher income limits.
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    \3\ Effective income limits for properties financed with Low 
Income Housing Tax Credits may not decrease once the properties are 
placed in service. However, the viability of future properties and 
properties under development may suffer if the income limit 
decreases before the property is placed in service.
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II. Determination of the Limit (Cap) on Annual Income Limit Increases

    This notice announces a change to the FY 2010 criteria for 
determining the maximum possible increase in income limits. For FY 2024 
income limits and thereafter, HUD intends to set the maximum possible 
increase in income limits at the higher of five percent or

[[Page 1585]]

twice the change in national median family income, with an absolute cap 
of ten percent. HUD believes that this adjustment to the current 
methodology will align the cap rule with its intended purpose in high 
income-growth periods. In such periods, doubling the year-to-year 
change in national median family income produces a cap that is 
significantly higher than the upper range of income growth experienced 
by areas while limiting the possibility of overly burdensome rent 
increases for LIHTC tenants.
    Additionally, HUD is formally establishing the definition of 
``national median family income'' used in the calculation of the cap in 
income limit increases. From FY 2010 to FY 2014 HUD used an estimate of 
national median family income based on the ACS estimate of national 
family income adjusted in part with an inflation adjustment and in part 
on historical trends in national median family income. From FY 2015 to 
FY 2021 HUD used estimates of ACS national median income adjusted with 
actual and forecast inflation alone. For FY 2022 and FY 2023, HUD used 
unadjusted estimates of national median family income from the ACS.
    For FY 2024 and thereafter, HUD intends to continue calculating the 
cap on income limit increases using the most recent unadjusted 
estimates of median family income provided by the Census Bureau via the 
ACS. Therefore, for FY 2024 income limits, the cap would be based on 
the change in national median family income from ACS 2021 to ACS 2022 
(see the discussion below regarding HUD's income limit release 
schedule). By 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.

III. ACS Basis for Median Family Incomes and Income Limits Release 
Schedule

    HUD released FY 2023 income limits on May 15, 2023. HUD would 
ordinarily have based the 2023 income limits on ACS 2020 data. However, 
the Census Bureau did not release normal ACS 2020 one-year data as a 
result of difficulties with the ACS data collection during the COVID-19 
pandemic. Therefore, HUD elected to ``skip'' 2020 and instead base the 
FY 2023 income limits on ACS 2021 data. HUD intends to preserve this 
two-year gap between the vintage of the ACS data and the fiscal year 
for which the income limits are published. FY 2024 income limits will 
therefore be based on ACS 2022 data. An exception to this practice may 
occur in years in which the ACS implements new metropolitan statistical 
area definitions that HUD has not yet captured in its Fair Market Rent 
calculations. HUD believes it can implement this two-year gap and still 
release income limits on or around April 1 of each year.

IV. Request for Comments

    While HUD invites comments on any aspect of this notice, HUD is 
particularly interested in receiving comments in response to the 
following specific questions:
    Question for comment #1: Is a cap of ten percent appropriate for 
HUD's income limit calculation methodology? If not, is there an 
alternative cap that would be more appropriate? Would such a cap harm 
planned or in development LIHTC-financed properties (i.e., do such 
properties assume rent growth in excess of 10 percent)?
    Question for comment #2: In updating its income limits each year, 
HUD's goal is to allow income limits to rise with prevailing income 
growth, thus allowing similar numbers of households to be eligible for 
assistance each year. Many HUD eligible households receive fixed 
incomes. A number of fixed income programs, such as social security and 
veteran disability benefits, are adjusted for inflation in a different 
way than HUD income limits. Have income limits kept pace in your 
community with other social programs that provide basic income for 
individuals and households who would also need housing assistance such 
as elderly, disabled, and homeless veterans? That is, are individuals 
or families that would have been eligible in previous years now no 
longer eligible because income limits have not kept pace in your area? 
Or are more eligible than had been the case previously?
    Question for comment #3: In its calculation of income limits, HUD 
may adjust income limits away from the legislatively defined 
percentages of Area Median Family Income for places with high and low 
housing costs relative to Area Median Family Income, or where incomes 
are otherwise unusually high or low. Currently, beyond the limit on 
increases and decreases discussed in this notice, HUD also implements 
high- and low-housing cost adjustments and sets a floor for each State 
based on the State non-metropolitan median family income (for more 
information on the current methodology, see https://www.huduser.gov/portal/datasets/il//il23/IncomeLimitsMethodology-FY23.pdf as well as 
HUD's online individual area income limit documentation tool available 
at https://www.huduser.gov/portal/datasets/il.html#query_2023). What 
other criteria, if any, should HUD use when considering whether to make 
such adjustments in addition to those in existing policy? For example, 
should there be a national minimum income limit to reflect a minimum 
rent needed to operate and maintain rental housing in the lowest cost 
housing markets? Should the same criteria be used in United States 
territories?
    Question for comment #4: HUD recognizes the tension inherent in the 
use of an income-based measurement for setting rents, where the costs 
of operating affordable housing rental properties may grow faster or 
slower than prevailing incomes, due to a number of factors including, 
for example, recent rises in insurance costs. For LIHTC property 
owners, in the past have you raised your rents in LIHTC units to the 
maximum allowable year-over-year increases? For purposes of HUD better 
understanding the context of your answers, please indicate the location 
of the property (e.g., ZIP code, city, or county) to which the answer 
applies.
    [cir] If yes, why have you done so, and have the increases been 
adequate to operate and maintain your property?
    [cir] In the years where you raised rents to the maximum allowable 
amount, did you see any changes in the turnover of your units as 
compared with turnover in years when you did not raise rents to the 
maximum allowable amount?
    [cir] If no, what factors do you use in determining how much you 
raise your rents? In what years have HUD income limit changes been 
adequate for a LIHTC property to keep up with operating and maintenance 
costs, and in what years has it not been adequate?
    Question for comment #5: Should income limits consider direct 
measures of costs, such as wages or insurance, instead of, or in 
addition to, its high housing cost adjustment, recognizing that HUD may 
currently lack the statutory authority to do so? If so, which specific 
costs should HUD consider, and which measurements or data would you 
recommend as a reference?
    Question for comment #6: Does HUD's income limits methodology help 
or hinder the use of Housing Choice Vouchers in LIHTC-financed 
properties?

[[Page 1586]]

To what extent does this impact vary for places with high and low 
housing costs?

Solomon Greene,
Principal Deputy Assistant Secretary for Policy Development and 
Research.
[FR Doc. 2024-00279 Filed 1-9-24; 8:45 am]
BILLING CODE 4210-67-P


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