FY 2008 Income Limits Documentation System

FY 2008 Low-Income (80%) Income Limits Calculation

In general, most four-person low-income limits are the higher of 80 percent of the area median family income or 80 percent of the State non-metropolitan median family level. Because the very low-income limits are not always based on 50 percentof median, calculating low-income limits as 80 percent of median would produce anomalies inconsistent with statutory intent (e.g., very-low income limits could be higher than low-income limits). The calculation normally used, therefore, is to set the four-person low-income limit at 1.6 (i.e. 80%/50%) times the relevant four-person very low income limit. The only exception is that the resulting income limit may not exceed the U.S. median family income level ($61,500 for FY 2008) except when justified by high housing costs. Use of very low-income limits as a starting point for calculating other income limits tied to Section (3)(b)(2) of the U.S. Housing Act of 1937 has the effect of adjusting low-income limits in areas where the very low-income limits have been adjusted because of unusually high or low housing-cost-to-income relationships.

In accord with the Very Low-Income Limits (based on 50% of MFI), the Low-Income limits are subject to a Hold Harmless policy.

1. The first step in establishing the Low-Income Limit is establishing the preliminary 4-person income limit. This is accomplished by multiplying the 4-Person Very Low-Income limit by 1.6 (80%/50%). The calculations are as follows:

   Area	4-Person Very Low-Income Limit	Preliminary 4-Person Low-Income Limit
   King County, WA	$40,700	$65,100

2. Next, a comparison is made to ensure that the preliminary 4-Person Low-Income limit is not greater than the U.S. median family income level:

   Area	US Median Family Income	Comparison	Result
   King County, WA	$61,500	Is $65,100 > $61,500? Yes	Capped By US Median 4 Person LIL = $61,500

3. Next, a check is made to see if the area qualifies as a High Housing Cost Area. This is similar to the High Housing Cost adjustment made for Very Low-Income limits. An area's income limit is adjusted due to High Housing Costs if 85% of the area's annual 2 bedroom FMR is greater than 35% of the US Median Income. As we are deriving the Low-Income limit, the 85% of the annual 2-BR FMR is augmented by 1.6:

   Area	2BR FMR	Annual 2BR FMR	Annual 2BR FMR* 1.6*85%	35% of US Median Income	Comparison	Result
   King County, WA	$942	$11,304	$15,373	$21,525	Is $15,373 > $21,525? No	No Adjustment 4-Person LIL =

Subsequent to the comparisons above, Low-Income Limits are calculated for each person size family between 1 and 8 persons. As is done with the Very Low-Income Limits, the 1 Person Limit is calculated by multiplying the 4-Person limit by 70%, the 2 person is obtained by multiplying the 4-Person limit by 80%, the 3 person by multiplying the 4-Person by 90%, the 5 Person by multiplying the 4-Person by 108%, the 6 Person by multiplying the 4-Person limit by 116%, the 7 Person by multiplying the 4-Person limit by 124%, and the 8-person by multiplying the 4-Person limit by 132%. Typically, if an area is subject to the Hold Harmless provisions at the Very Low-Income (50%) level, this will carry over to the Low-Income (80%) level. However, to ensure that there are no discrepencies due to rounding, following the calculation of each person sized income limit, a comparison is made to the FY 2007 value to determine if a "hold harmless" policy is to be invoked for Low-Income Limits. The results are as follows:

Problems or questions? Contact Peter.B.Kahn@hud.gov.