The Area Median Income (AMI), explained
Photo by Images Money on Flickr.
There are a number of programs used to create affordable housing in the region, including housing vouchers, inclusionary zoning, low-income housing tax credits and public housing.
Each of these programs use a central statistic — the area median income, or AMI — to determine whether families are eligible for the program.
In this explainer, I focus on how the AMI is calculated and what it means for affordable housing in the region.
The area median income (AMI) is the household income for the median — or middle — household in a region.
As a quick refresher, if you were to line up each household in the area from the poorest to the wealthiest, the household in the middle would be the median household.
Each year, the Department of Housing and Urban Development (HUD) calculates the median income for every metropolitan region in the country. HUD focuses on the region — rather than just the city — because families searching for housing are likely to look beyond the city itself to find a place to live.
A rendering of the Channing E. Phillips Homes, which will go up next to the Shaw Metro and will be affordable to families making 60% of the area median income. Image from AHC Inc.
In DC, the region includes more than twenty nearby cities and counties, including Prince George’s County, the city of Alexandria, and Fairfax County. Families in these suburbs tend to be wealthier than those in the District, so the AMI is higher than it would be if HUD calculated the AMI for the city alone.
HUD uses the five-year estimates of the American Community Survey — a national survey similar to the Census — to measure household income. They begin with the median income for a family of four.
In the Washington region, the AMI is $109,200 for a family of four.
Because the metropolitan region includes some of the country’s wealthiest suburbs, this is among the highest AMIs in the country.
The table below reports the median income for families of various sizes in our metropolitan region. Because family incomes differ by the number of people in the household, HUD uses a formula to adjust the AMI for families of different sizes.
These adjusted AMIs are used to calculate affordability throughout the region, including Prince George’s County, Alexandria and the District itself.
Table 1: The AMI in the DC Metropolitan Region, by Household Size:
| Household Size | Median Household Income |
|---|---|
| 1 | $76,020 |
| 2 | $86,880 |
| 3 | $97,740 |
| 4 | $108,600 |
| 5 | $117,290 |
| 6 | $125,980 |
To determine whether a family is eligible for various housing programs we compare a family’s income to a percentage of the AMI.
We typically distinguish between three types of households. Households earning less than 80 percent of the AMI are considered low-income households by HUD. Very low-income households earn less than 50 percent of the AMI and extremely low-income households earn less than 30 percent of the AMI.
Other eligibility standards, including 60 percent AMI or 110 percent AMI, are occasionally used to determine affordability.
In Table 2, I report the income associated with each affordability threshold. In our region, a four-person households earning 80 percent of the AMI earns about $87,360 each year. A four-person household earning 30 percent of the AMI earns about $32,760 each year.
Table 2: Affordable Housing Standards in the Region:
| Percent AMI | Household Income |
|---|---|
| 30% | $32,600 |
| 50% | $54,300 |
| 60% | $65,160 |
| 80% | $70,150 |
| 100% | $108,600 |
| 110% | $130,320 |
Every affordable housing program in the region uses these AMI calculations to determine eligibility
Housing vouchers are generally available for families earning 30 percent AMI. This means that families earning $32,760 or less are eligible for vouchers.
The mandatory inclusionary zoning program in the District requires builders include units available at mostly 80 percent AMI, but also some at 50 percent. Families of four earning up to $70,150 would be eligible for these units.
And affordable housing developments cap rents below market rate to ensure that families can live in these units without spending more than 30 percent of their income on rent. In the Channing Phillips Homes, a new affordable housing development in Shaw, apartments will be targeted at households earning up to 60 percent AMI. This means that a four-person household earning $65,520 or less would be eligible to live in the development. Rents would be capped to ensure that households can afford the rent without paying more than 30 percent of their income.
Critics of these affordability standards argue that poor families in the city are disadvantaged by the AMI calculation
By including the entire region in the AMI calculation, HUD includes many wealthy suburbs of the District. Since these suburbs have a higher median income than the city, the AMI for the region is higher than it would be for the city alone.
As a result, the poorest families in a region, who typically live in the city, earn substantially below 30% of the AMI in the region. There is virtually no housing assistance designed specifically for those families.
Correction: The original version of this post reported median income and housing income requirements that were different from the 2016 rules. The post has been updated to with accurate numbers.