This story has been updated.
Along with rising prices and property values, the federal metric used by the City of San Antonio to determine housing affordability has increased by almost 13%, more than twice as high as its previous biggest jump in 2019.
The U.S. Department of Housing and Urban Development recently released 2022 income limits that determine whether a household is eligible for housing assistance programs. Those limits form the foundation of the new area median income (AMI) for the San Antonio-New Braunfels area.
On Thursday, June 2, the AMI jumps to $83,500 for a family of four, up from $74,100.
The metric plays an important role in policymaking and development. HUD uses AMI to set rents for those living in federally subsidized housing, while local officials use AMI to direct funding toward specific housing goals. Developers use it to build housing that qualifies for public funding.
For low-income residents who struggle to afford rent, the higher AMI is a double-edged sword. The higher income limit means more people will qualify for housing assistance, but landlords who rent to tenants through most federal housing programs can also legally raise rents.
How HUD determines and uses AMI
HUD determines an area’s AMI using census data, calculating the range of incomes in a region. The midpoint, or median, of those incomes is the AMI.
For the San Antonio-New Braunfels region, HUD groups Bandera, Bexar, Comal, Guadalupe and Wilson counties together. That skews the area’s AMI a bit higher than what it would be within San Antonio, which census data reveals as the most impoverished major city in the country.
The San Antonio-New Braunfels AMI has increased every year since 2016. In 2019, it jumped 6.3%, the biggest jump before this year’s 13% rise.
Once calculated, HUD then uses AMI to set the maximum rent that can be charged to residents who live in federally funded housing, including mixed-income properties developed through housing authorities and housing built using low-income housing tax credits or development grants. HUD sets rental caps at no more than 30% of each AMI income level (for example, 80% of AMI, 60% of AMI, etc).
When HUD increases rent limits because of higher AMI, the agency is essentially saying that because people are making more money, they should be able to afford higher rents. But AMI does not necessarily correlate to a region’s true cost of living or take inflation into account; it is simply the median of the region’s incomes.
So while some residents’ incomes will have increased over the past year, others’ may not have, or their income hasn’t risen enough to be able to afford higher rents. Regardless, higher AMI can mean higher rents.
For example, under the new 2022 rent limits, HUD calculates the maximum rent for a family of four making 60% of AMI, or $50,100, can increase to about $1,250. Under 2021 limits, 60% of AMI was $44,460, and that family would have paid no more than about $1,100.
But AMI-based rent limits are a ceiling, not a floor; HUD does not require property managers to raise or charge rents to the maximum allowed under the calculation.
And while some will take advantage of the higher limits, not all landlords will raise rents just because higher AMI limits have been released, said Veronica Garcia, interim director of the city’s Neighborhood and Housing Services Department.
Some tenants will be protected by existing lease agreements, she said, and in general, landlords “don’t want a bunch of vacancy rates right away.”
But while residents at Prospera Housing Community Services multifamily properties in San Antonio should not expect a sudden increase, said Jacque Woodring, the nonprofit’s executive vice president of growth, its rents will go up based on the higher AMI.
“It’ll be a phased approach,” Woodring said.
Tenants who pay rent using a housing choice (or “Section 8”) voucher will not be impacted, as their rent is restricted to 30% of their income, rather than being pegged to AMI. Nor will tenants of public housing projects, like those built by the San Antonio Housing Authority, as those rents are also restricted to 30% of income. But SAHA’s mixed-income properties, which offer both income-restricted units and market-rate units, could see rent increases, said a spokeswoman with the agency.
How the city uses AMI
While higher AMI will mean higher rents for some, it also means more families, even those who saw their incomes rise over the past year, could qualify for affordable housing and certain home repair programs, Garcia said.
San Antonio uses AMI to determine eligibility for its own housing assistance programs and to set goals for its 10-year affordable housing plan, which aims to preserve and produce more than 28,000 rental units and houses.
As much as $120 million of the recently passed $150 million housing bond is earmarked for housing and rental rehabilitation, acquisition and preservation for those earning 30% to 50% of AMI. The housing plan calls for another $150 million affordable housing bond in five years.
In San Antonio, efforts are underway that aim to attack the housing affordability crisis from both ends. In addition to the housing bond, the goal of the city’s $230 million SA Ready to Work education and job training initiative is to boost residents’ incomes.
How developers and property managers use AMI
The additional families and individuals who will now qualify for housing assistance under the higher AMI will create even greater demand for affordable housing, said Scott Ackerson, Prospera’s executive vice president of strategic relationships.
“This at a time when we already don’t have a sufficient supply of affordable housing,” he pointed out.
Prospera builds and renovates housing for individuals and families earning 50% AMI or less. It operates about 50 multifamily properties in South and Central Texas, including 15 properties in San Antonio.
Developers like Prospera are able to build affordable housing by taking advantage of two federal tax credit programs. The 9% tax credit can cover almost three-quarters of development costs, while the 4% tax credit covers about a third of those costs, according to city estimates.
But there aren’t enough tax credits available to reach the current local demand for housing that serves residents making 60% AMI and below, Ackerson said. “We’re having conversations with managed care organizations [and] other potential stakeholders to see if there are ways that we can get creative.”
Managed care organizations, health care companies that focus on limiting costs, do so by addressing the root causes of poor health outcomes — including lack of housing, access to healthy food or education. Prospera has partnered with Superior HealthPlan to provide on-site medical support services in addition to other resident services.
The city’s recently passed bond is a good start toward adding and diversifying funding sources for affordable housing, Ackerson said, but rising construction costs and inflation mean that “what used to be $150 million, probably today is not $150 million anymore … it’s kind of the perfect storm.”
