Daniel McCracken writes:
At work, I came across a potentially serious flaw in how HUD uses statistics to determine eligibility for federal housing programs (and the amount of subsidy each household receives). It seemed like something you might be interested in or blog about, so I figured I’d pass it along.
For background, here’s the simplified version of how HUD’s programs work. To qualify for affordable housing, a household’s income is compared to their area’s median family income (AMI). If their income is lower than, say, 50% of the AMI (different programs use different percentages, but 50% is pretty common), they’re eligible for the program.
To account for the higher costs of living for larger families, the income limits are adjusted for household size. So in Boulder County, CO (where I live), families of 4 qualify for the program with income less than $47,400, the limit for 2-person households is $37,950, and the limit for 6-person households is $55,000.
The specifics of the household size adjustment are what have me confused. Here’s how it works (again, I’ll use the 50% AMI eligibility standard): HUD finds each county’s AMI in the American Community Survey (for Boulder in 2016, $94,800). It then uses 50% of this amount ($47,400) as its limit for 4-person households, and this is then used to generate the limits for other household sizes.
That’s the first confusing thing. The average family size for Boulder County in the relevant ACS is ~3.1. If HUD cares about adjusting for household size in determining program eligibility, why isn’t the initial AMI figure of $94,800 also adjusted upwards (by ~$1900, based on the income limit tables) to account for Boulder County’s smaller family size?
The other confusing thing happens after a family qualifies, when rent amounts are calculated. Every program is different, but the general rule is that families pay 30% of their income for rent.
But this part is *not* adjusted for household size. A 1-person household making $30,000 pays the same amount of rent as a 5-person household making $30,000. Shouldn’t HUD be using 30% of a family’s household-size-adjusted income, so that the 1-person household pays more rent (due to lower costs of living)?
Anyways. It seems like HUD is being totally inconsistent in its adjustments for household size, but I wanted to run the idea past someone who knows what they’re talking about. I actually emailed HUD asking them about my first question (re: adjusting for the area’s average household size), and this was their response:
“As for your question about average family sizes, while the current average number of people in a family is [around 3], the fact that people are not divisible means that HUD would never base income limits on a portion of a person. At the time the income limits calculations were being derived, the most common size family was 4 persons nationally, and since Median Family Incomes are irrespective of family size, HUD always equates the very low-income limits to a 4-person family.”
This doesn’t make any sense to me, and they ignored my follow-up email. So maybe you can tell me what I’m missing.
(Here’s the documentation from HUD, in case you’re curious:
There is an implicit adjustment for household size when determining rents, because HUD deducts $480 for each dependent when calculating a household’s annual income.
So in effect they appear to be adjusting for household size *twice* at the eligibility stage, using 2 totally different formulas. But at the rent calculation stage they only use one formula (one that results in a much smaller adjustment than the other one in most cases).
I’ve not had a chance to look into this at all but it seems like the kind of issue we should all be aware of, so I’m sharing. Feel free to contribute in comments.