HUD and PD&R Data Sets

FY 2006 Income Limits

Frequently Asked Questions

1. Why did the area definitions change for the income limits and median family income estimates?
A: In a Federal Register notice published December 16, 2005, HUD proposed changes in the metropolitan area definitions used to calculate HUD median family income estimates and income limits. These new definitions, which match FY2006 FMR areas, were used in the new HUD estimates that became effective March 8, 2006. The new definitions are based on the current Office of Management and Budget (OMB) metropolitan statistical area (MSA) definitions, but divide OMB areas along the old FMR area lines in cases where significant differences in rents or median incomes exist. OMB revises metropolitan area definitions after each Decennial Census. It issued its 2000 Census-based definitions in 2003, which contained substantial changes to several metropolitan area definitions. These changes were made to better reflect metropolitan area commuting and patterns of economic integration. The OMB metropolitan area definitions are used on a widespread basis throughout the federal government for both data collection and program administrative purposes.

For further explanation, please review the December 16, 2005 Federal Register notice in which HUD proposed changes in the metropolitan areas definitions used to calculate HUD median family income estimates and income limits:

2. Why can’t I find the income limits for a particular nonmetropolitan county or a metropolitan area?
A: HUD revised the FMR and income limit area definitions based on guidance from the Office of Management and Budget (OMB) that revised metropolitan areas using 2000 Census data. Some former nonmetropolitan counties are now part of metropolitan areas, and some metropolitan areas have been subsumed within other areas, or their names have been significantly changed. In instances where OMB metropolitan area definitions have changed, HUD’s FMR areas may consist of submarket areas within the new OMB metropolitan area. Submarkets are established only if there are significant differences in rents or median incomes between the different old FMR areas that comprise the new OMB metropolitan area. HUD uses FY2006 FMR areas in calculating FY2006 income limits because FMRs are used in the calculation of certain income limits and the two sets of definitions are linked in statutory history. For a complete description of OMB metropolitan area definitions and HUD FMR area definitions, please review the FY2006 Income Limits Area Definitions report:

3. Why does my very low income limit not equal 50% of my median family income (MFI) (or my low income limit not equal 80% of my MFI)?
A: There are many exceptions to the arithmetic calculation of income limits. These include adjustments for high housing cost relative to income, the application of state nonmetropolitan income limits in low-income areas, and national maximums in high-income areas. These exceptions are detailed in the FY2006 Income Limits Briefing Material report. Please review this report and pay special attention to Attachments 3 and 4 (beginning on page 19), that list the exceptions for metropolitan areas. Please also note that Tables 1 and 2 (beginning on page 7) show that most nonmetropolitan area income limits are based on state nonmetropolitan area medians:

4. Why is my income limit lower or unchanged from last year?
A: Income limits may be unchanged from last year either because area incomes or other factors governing local income limits did not increase or because income limits would normally be lower but have been administratively frozen rather than allowed to decrease. HUD has in the past selectively frozen income limits in instances where a reduction resulted from changes in income estimates, income estimation methodology, or income limit methodology. The widespread scope of the area definitional changes for the FY2006 income limits made the application of a simple hold harmless policy difficult. A primary area hold harmless policy was applied to the FY2006 income limits. Under this policy, if a new metropolitan area included parts of two old FMR/income limit areas, the income limits would not be allowed to fall below the FY2005 income limits of the largest part of the new area in FY2006. The only areas where income limits were decreased in FY2006 were those that were merged into a more populous income limit area and the larger area’s income limits were less than the smaller area’s FY2005 income limits.

5. Why did some area median family income estimates decrease in FY2006 even though the OMB definition of the area did not change?
A: A modest number of areas had decreases in their FY2006 median family income estimates. This sometimes occurred because of changes in OMB metropolitan area definitions that resulted in new estimates that were lower than the FY2005 estimates for parts of the new area. Decreases were more likely to occur, however, in areas where median family income estimates had decreased but the medians had been frozen at previous year’s levels. Given the widespread definitional changes that occurred in FY2006, HUD determined that it was inconsistent to allow some areas to retain higher than calculated median family income estimates while applying decreases to areas that were subject to new OMB definitions. As noted previously, however, most income limits were “held harmless” in areas where median family incomes were reduced.

6. Why were the Bergen-Passaic, Monmouth-Ocean, Fort Lauderdale and West Palm Beach areas treated differently?
A: These areas were singled out for special consideration in the Federal Register notice of December 16, 2005 because of the magnitude of the decreases in income limits, which ranged from 10% in Fort Lauderdale to 18% in Bergen-Passaic and would have otherwise occurred under the primary area hold harmless policy. The manner in which FMR submarkets were permitted in new OMB metropolitan areas eliminated most large changes in metropolitan area income limits. In these four instances, however, previously distinct metropolitan areas were merged into much larger metropolitan areas with similar rents but much lower median family incomes.

7. What does the term “HMFA” mean?
A: HUD Metro FMR Area. This term indicates that only a portion of the OMB-defined core-based statistical area (CBSA) is in the area to which the income limits (or FMRs) apply. HUD is required by OMB to alter the name of metropolitan geographic entities it derives from the CBSAs when the geography is not the same as that established by OMB. See OMB’s bulletin establishing the current CBSA definitions at

8. How can you tell if the entire CBSA or just the subarea (SA) is used to calculate the income limits?
A: The FY2006 Income Limits Area Definitions report places a “CBSA” in front of those areas where all counties in the CBSA are used in the calculation; an “SA” is placed in front of those areas where only the counties or towns of the subarea are used. Note that HUD Metro FMR Areas (HMFAs) are not the same as CBSAs, but that an HMFA’s income limits may be based on CBSA data. Please review the report:

9. How can 60 percent income limits be calculated?
A: HUD recommends you take 120 percent of the Very Low Income Limit. Do not calculate income limit percentages based on a direct arithmetic relationship with the MFI; there are too many exceptions made to the arithmetic rule in computing income limits. For the Low Income Housing Tax Credit program, the Revenue Ruling 89-24 states that “…40 percent of the applicable units must be occupied by individuals or families having incomes equal to 120 percent or less of the income limit for a very low-income family of the same size.”

10. How are Low Income Housing Tax Credit maximum rents computed from the very low income limits?
A: The imputed income limitation (as defined in 26USC Sec. 42(g)(2)) is 60 percent of the MFI. A rent may not exceed 30 percent of this imputed income limitation under 26USC Sec. 42(g)(2). Unit rents by number of bedrooms are derived from Very-Low Income Limits (VLILs) for the different household sizes according to the following table:

LIHTC Maximum Rent Derivation from HUD Very-Low Income Limits (VLILs)

Unit Size
0 Bedroom
1 Bedroom
2 Bedroom
3 Bedroom
4 Bedroom
50% MFI Unit Maximum Monthly Rent is 1/12 of 30% of:
1-Person VLIL
(1-Person VLIL + 2-Person VLIL)/2
3-Person VLIL
(4-Person VLIL + 5-Person VLIL)/2
6-Person VLIL
60% MFI Unit Maximum Monthly Rent is 1/12 of 30% of:
120% of 1-Person VLIL
120 % of [(1-Person VLIL + 2-Person VLIL)/2
120% of 3-Person VLIL
120 % of [(4-Person VLIL + 5-Person VLIL)/2]
120 % of 6-Person VLIL
NOTE: Maximum rents for larger units are set by assuming an additional 1.5 persons per bedroom.

11. Has the rounding policy for medians and income limits changed since last year?
A: Two rounding changes have been made to the calculation of medians and income limits. Median incomes, which historically have been rounded to the nearest 100, were mistakenly rounded to the nearest 50 for FY2005 median income publications. FY2006 medians are rounded to the nearest 100.

Also, the rounded 4-person income limit is now being used to calculate other family size income limits instead of the unrounded 4-person income limit. This will reduce some of the complexity in reproducing HUD calculations and was done in response to requests to simplify the calculations.


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