How does HUD determine rent limits for "middle income" tenants (80-120% AMI)?

Date Published: October 2012

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Since neither the HOME Program nor CDBG has policies developed for this middle income group, grantees should develop appropriate policies for their own circumstances. HUD finds the following two options acceptable: 

  • Grantees may set flat rents at 30% of 120% AMI. This method is easier to administer but less flexible in volatile markets and less tied to the individual tenant’s ability to afford the rent. However, the grantee should ensure that this rent does not exceed the market rents for similar units in the community, or this may have a detrimental impact on vacancy rates.
  • Grantees may set rents based on individual tenant household income, but with a condition that rents do not exceed comparable unassisted rents in the neighborhood. This would allow variation among households, submarkets and updating to meet changing market conditions.

Other methodologies could also meet the NSP requirements, provided that they also ensure reasonable costs and comply with all other standards in the Notice.

Grantees must also ensure that generous NSP project subsidies, which may have the effect of reducing borrowing and/or the need for other sources of financing, do not result in undue enrichment of a developer through excessively high rental income.

Tags: NSP Program Requirements - Affordability Period