FY 2007 Median Family Income Documentation System

Median Family Income Calculation Methodology

This year's estimates are the first to be able to take advantage of the first full Census American Community Survey (ACS) sample sizes collected in 2005. While HUD's FY2007 median family income (MFI) estimates are still updates of 2000 Census data, the 2007 HUD update factors differ from FY2006 update factors in two very important ways:

• FY2007 estimates are based on local area ACS 2005 surveys for places of 65,000 or more, where such surveys have been published.

• Estimates for all other areas now reflect the state-level change between the 2000 Census state and 2005 ACS state estimates, rather than being based on applying ACS changes (e.g., 2000-2004 for FY2006 estimates) to 2000 Census estimates.

Because of the new reliance on the ACS in the estimation process, comparisons between FY2006 HUD median family incomes and FY2007 median family incomes are not entirely valid as indicators of local median family income changes. Although the ACS will detect real changes in local median family incomes since the 2000 Census, the ACS also is known to provide generally lower estimates of incomes than the 2000 Census, and HUD's FY2007 median family income estimates reflect that difference. HUD's FY2007 estimates make more extensive use of ACS data than previously, although local Bureau of Labor Statistics wage data continue to be used to influence estimates for areas of less than 65,000. All estimates are projected forward from 2005 to April 1, 2007, using an annual trend factor of 3.5 percent. Except for minor modifications, HUD continues to use the same area definitions used in FY2006.

Due to it's size, the Atlanta-Sandy Springs-Marietta, GA HUD Metro FMR Area has published local area 2005 ACS Survey results.

The step-by-step normal procedures used to develop FY 2007 estimates for Atlanta-Sandy Springs-Marietta, GA HUD Metro FMR Area are as follows:

1. The 2000 Census was used to estimate what are treated as mid-1999 local median family income estimates.

2. The 2000 Census estimates are updates from mid-1999 to end-2005 using the following formula:

   (1 - 5*MoER)* ACS Local Median 2005 Census Local Median 2000

   +

   (5*MoER)* ACS State Median 2005 Census State Median2000

   Where MoER is the "margin of error ratio." The MoER is defined as the margin of error of the 2005 ACS local MFI estimate divided by the 2005 ACS estimate of local MFI. The weight assigned to the change in local median family income from the ACS is the larger of 1 minus 5 times the MoER or zero and the weight assigned to the change in state MFI is five times the local MoER, or one, whichever is smaller.
   NOTE:ACS estimates are based on samples drawn throughout the survey year that ask about income for the previous 12 months, thereby reflecting income over a 24 month period. All responses are then adjusted by the Bureau of the Census to "annual" 2005 values using the average of the sum of the CPI indexes for the 12 months before the survey date over the annual CPI index for the year. See "Income, Earnings, and Poverty from the 2005 American Community Survey", August 2005 page 2 for a discussion of inflation adjustments made by Census for the ACS. HUD makes a further adjustment to these values by moving the "as of" date to December of the survey year, again using CPI indexes. Specifically, HUD adjusts the annual 2005 estimate to December using the seasonally adjusted December 2005 CPI (197.7) over the 2005 annual CPI (195.3). All 2005 ACS and BLS data are adjusted to December of 2005 in this way.

3. Median family income estimates for April 1, 2007, are then estimated as follows:

   Step 1 median family income
   * Step 2 adjusted local update factor
   * 1.035 (3.5% annual trending) ^{1.25 years}
   = FY 2007 Median Family Income estimate

Although HUD is revising its median family income estimates to use the new ACS data, it is continuing its hold-harmless policy with respect to income limits. That is, HUD will continue to set income limits at the higher of normal income limit calculations or at the previous year's income limits.

The results of the Median Family Income Step by Step Process

Atlanta-Sandy Springs-Marietta, GA HUD Metro FMR Area Results

1. The following are the 2000 Census Median Incomes (as of 1999) for:

   Area	2000 Census Median Family Income
   Atlanta-Sandy Springs-Marietta, GA HUD Metro FMR Area	$58,520

   NOTE: Since HUD uses area definitions based on the calculation of Fair Market Rents, the 2000 Census Median shown above will not match Census publications as HUD uses special tabulations of Census data specific to HUD's area definitions.

2. The mid-1999 to end-2005 update factor is calculated as follows:

   Area	ACS Local Median2005	Confidence Interval	MoER	Year End 2005 Update Factor	Census Local Median2000	Local Factor Calculation	Weight (1-5*MoER)	ACS State Median2005	Census State Median2000	State Factor Calculation	Weight (5*MoER)	Result
   Atlanta-Sandy Springs-Marietta, GA HUD Metro FMR Area	63,484*	1,064	1,064 / 63,484 = 0.0168	(197.7 / 195.3) = 1.0123	58,520	(63,484 * 1.0123) / 58,520 = 64,264 / 58,520 = 1.0982	0.916	53,744	49,280	(53,744 * 1.0123) / 49,280 = 54,404 / 49,280 = 1.104	0.084	(0.916 * 1.0982) + (0.084 * 1.104) = 1.006 + 0.0927 = 1.0987

   ^*The 2005 ACS Local Median shown here was derived from a special tabulation generated for HUD specific to HUD's area definitions.

3. The FY 2007 median family income is estimated as follows:

   Area	Step 1 2000 Census Area Median Family Income	Step 2 Adjusted Local Update Factor	Trending 3.5% for 1.25 years	FY2007 Area MFI Estimate
   Atlanta-Sandy Springs-Marietta, GA HUD Metro FMR Area	58,520	1.0987	1.0351.25 = 1.043940	(58,520 * 1.0987 * 1.043940) = 67,121.09

4. In keeping with HUD policy, the MFI Estimate is rounded to the nearest $100:

   Area	Unrounded FY 2007 MFI Estimate	Rounded FY 2007 MFI Estimate
   Atlanta-Sandy Springs-Marietta, GA HUD Metro FMR Area	$67,121.09	$67,100

Problems or questions? Contact Peter_B._Kahn@hud.gov.