Exhibit 2: Income Categories Used in Housing Programs
For many HUD programs and housing programs administered by other Federal agencies, eligibility is restricted to households whose incomes do not exceed a specific percentage of the median family income for the area in which the household lives. HUD estimates median family income for each metropolitan area and nonmetropolitan county each year, and the official income limits based on HUD-adjusted area median family income (HAMFI) vary by location and household size.
In contrast, poverty status is determined by comparing income with national poverty thresholds that vary by household size but not location. Because HUD's income limits vary with location and use smaller adjustments per person for household size, they are not directly comparable to Federal poverty lines. Averaged across the United States, however, 30 percent of area median income approximates poverty thresholds.
The number of households below a specified percentage of HUD's area median income is not related to any specific break on the total income distribution, such as quintiles. For example, almost one-half (43 percent) of all U.S. households and 62 percent of all renters have incomes below 80 percent of their area median income. More than 27 percent of all U.S. households have incomes below 50 percent of area median income.
The upper limits of income categories used in housing programs and in this report are as follows:
80 percent of area median income. Defined as lower income by the U.S. Housing Act and used for many rental and homeownership programs.
60 percent of area median income. Used as low income for the low-income housing tax credit and HOME programs.
50 percent of area median income. Defined as very low income by the U.S. Housing Act and used for many rental programs.
30 percent of area median income. Defined as extremely low income in the Quality Housing and Work Responsibility Act of 1998 (QHWRA), which for each rental housing assistance program requires that at least a minimum share of entrants have extremely low incomes.
The table below shows how many U.S. renter households fell into the different income groups relevant for housing programs in 1997. To suggest the overlap between the HUD income groups and poverty, it also shows the share of each income group whose cash income
fell below the poverty line or below 150 percent of the poverty line, the approximate eligibility cutoff for the U.S. Department of Agriculture Food Stamp program. As in this exhibit, this report frequently refers to specific income groups as ranges of percentages of area median income because official terms are so complex. For example, incomes 51-80 percent of area median are officially "low but not very low" incomes. Exhibit 3 gives examples of HUD income cutoffs for nine large metropolitan areas, and Exhibit 4 describes HUD's rental assistance and affordable housing programs.
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