U.S. Department of Housing and Urban Development
Special Attention of:
Secretarial Representatives, State/Area Coordinators, Economists
Issued: December 14, 1995
Expires: Effective until superseded
Subject: Estimated Family Incomes for Fiscal Year 1996
This memorandum transmits median family income (MFI) and income distribution estimates for Fiscal Year 1996 (FY 1996). They are calculated for each metropolitan and nonmetropolitan area using the Fair Market Rent (FMR) area definitions applied in the Section 8 Housing Assistance Payments program. The estimated median family income for the United States for FY1996 is $41,600.
The FY 1996 MFI estimates are based on 1990 Census median family income estimates updated to 1996 with a combination of Bureau of Labor Statistics earnings and employment data and Census Divisional P-60 median family income data. Attachment 1 provides an explanation of the methodology used to develop these estimates. Attachment 2 provides median income estimates for States, and Attachment 3 provides local estimates of median family incomes. Attachment 4 provides the area definitions used for income limits, which are the same as the Fair Market Rent area definitions.
All estimates are based on the area definitions used to develop HUD's Section 8 program Fair Market Rents. These area definitions are generally the same as those currently used by the Office of Management and Budget.
Please note that the use of the HUD median family income estimates and income limits is subject to individual program guidelines covering definitions of income and family, family size, effective dates, and other factors. If your have any questions concerning these income estimates, please refer them to your Office's economist. Public inquiries may be referred to HUD USER, whose toll-free number is 1-800-245-2691 (use 202-708-3178 in the Washington metropolitan area).
Michael A. Stegman
Assistant Secretary for Policy Development and Research
Previous Editions are Obsolete
HUD 21B (3-80)
GPO 871 902
FY 1996 HUD estimates of median family income are based on 1990 Census data estimates updated with a combination of local Bureau of Labor Statistics data and Census Divisional data. Separate median family income estimates (MFIs) are calculated for all Metropolitan Statistical Areas (MSAs), Primary Metropolitan Statistical Areas (PMSAs), and nonmetropolitan counties.
The income adjustment factors used to update the 1990 Census-based estimates of MFIs are developed in several steps. Average wage data from the Bureau of Labor Statistics (BLS) were available for 1989 through the end of 1993 at a county level, and were aggregated to the metropolitan area level for multi-county metropolitan areas. Census Divisional level median family and household income estimates were available from the Current Population Report (CPS) March 1989-94 surveys. These data were then used to update mid-1989 income estimates from the 1990 Census to the middle of 1993. The mid-1993 estimates were then trended forward to mid-1994 using the national-level change from the preliminary March 1995 CPS results. The mid-1994 estimates were then trended forward to mid-FY 1996 using factors based on past P-60 Series trends. The step-by-step normal procedures as well as the exception procedures used are as follows:
- (1) Estimate mid-1989 local median family incomes using 1990 Census data. (Current HUD Section 8 Fair Market Rent (FMR) program definitions are used to define metropolitan areas, which are normally the same as Office of Management and Budget metropolitan area definitions.)
- (2) Calculate the BLS wage change factors for each Census Division for the 1989-93 period as follows:
Census Division BLS Wages (1993) ____________________________________ Census Division BLS Employees (1993) _______________________________________ = 4-year BLS wage increase factor for Census Division Census Division BLS Wages (1989) ____________________________________ Census Division BLS Employees (1989)
- (3) Calculate the change in median family and household incomes for the nine Census Divisions for the 1989-1993 period using Census P-60 series data, as follows:
Census Division P-60 MFI (1993) _______________________________ = 4-year increase factor for Census Census Division P-60 MFI (1989) Division P-60 Median Family Income
- (4) Compare the BLS and P-60 series Census Divisional factors calculated in steps 2 and 3 to provide a means of adjusting local BLS wage factor changes so that they aggregate to the same change factor as P-60 changes in family incomes.
4-year increase factor for Census Division P-60 MFI _________________________ = 4-year ratio of Census Division P-60 MFI 4-year increase factor for to 4-year ratio of Census Division BLS Census Division BLS Wages wage changes
- (5) Calculate the 1989-93 increase factors for the individual metropolitan areas and nonmetropolitan counties by applying the Census Divisional index factors from step 4 to local BLS data.
Local BLS Wages (1993) __________________________ Local BLS Employees (1993) Ratio of Census 4-year income _________________________ * Division P-60 = adjustment = 1989 to mid-1993 MFI to Census factor for MFI adj. factor Local BLS Wages (1989) Division BLS wages MSA or County __________________________ Local BLS Employees (1989)
- (6) Convert 1989-93 step 5 change factor to a 1989-1996 change factor by using an annual trending figure of 4.9 percent for the mid-1993 to mid-1994 period based on the results of the March 1995 CPS survey. A 4.0 percent factor is then applied to the update the mid-1994 estimate to mid-1995, and a 3.0 percent factor (3/4ths of 4.0 percent) is applied to the mid-1995 to April 1, 1996 period. (Use of a trending factor is necessary because of lags in Bureau of Labor Statistics and P-60 Series data availability; the 4.0 percent factor is based on national income change patterns in recent years.)
(Step 5 adj. factor) * 1.049 * 1.04 * 1.03 = 1989 to mid-FY 96 adjustment factor
- (7) Calculate median family incomes for FY 1996 by multiplying the step 1 Census estimate of median family income by the income adjustment factor derived in Step 6.
1990 Census Median Family Income * Step 6 factor = FY 1996 MFI estimate
- (8) Compare the MFI estimates from step 7 with median family income estimates based on post-1989 American Housing Survey (AHS) estimates of median family income updated to 1996. Past analysis shows that there is 95 percent likelihood that the true local median family income is within 6 percent of the AHS-based estimate. For areas where an AHS-based estimate differs by more than 6 percent from the Census-based estimate, local MFI estimates are increased or decreased so that they are within 6 percent of the AHS-based estimate.
- (9) Compare the 1996 MFI estimate with the 1995 MFI estimate. If the 1995 estimate is higher, set the 1996 estimate at the 1995 level. (This policy is applied except when estimates are revised with decennial Census data. It is intended to minimize disruption in program activities due to temporary decreases in income estimates.)
In addition to the above procedures, constraints are placed on annual changes in the Census Divisional and BLS change factors based on past experience. These guidelines constrain increases for a small number of areas with unusually high increases.
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