As "affordable" rents rise with 2024 Area Median Income, a "low-income" 1-BR could cost $2,330! Now HPD warns that maximum rents may not be realistic.

Last month, I wrote (link) about how the updated 2024 New York City Area Median Income (AMI) figures, surfacing on the website of the city Department of Housing Preservation and Development (HPD), showed an astounding rise of nearly 10% over 2023.

That meant 100% of AMI for a four-person household is now $155,300, up from $141,200 in 2023. At the time, HPD had not yet updated the website with the commensurate rents for various income "bands," from low-income to middle-income.

Now it has, as ever-rising AMI generates ever-rising rents. A one-bedroom apartment at 80% of AMI, technically "low-income," could rent for up to $2,330, while a moderate-income one at 100% of AMI could cost up to $2,912. (That's up from $2,119 and $2,648 under the 2023 guidelines.)

At 130% of AMI, allowable for buildings that gain the 421-a tax break, a one-bedroom could rent for $3,786. Better to call these apartment "income-targeted" or "income restricted," rather than "affordable," which merely means rents set at about 30% of household income.

HPD chart, with annotation added

An HPD caveat

Apparently reflecting the mismatch between AMI-derived rents and realistic ones, HPD, for the first time, has appended an addendum, partly in boldface:

Note: The above rents represent the maximum rent that can be charged by AMI; specific rent amounts may vary by program. Refer to 421-a, HOME/LIHTC, program term sheets, or unit advertisements for more specific information.

The AMI calculation is out of whack with local incomes, because it's distorted by both suburban counties and a High Housing Cost Adjustment. Since income-targeted units sometimes compete with free-market ones, developers lower the rent well below the allowable maximum.

For example, at 662 Pacific (B15, aka Plank Road), rents for studios were set at $1,547/month, well below the potential $2,263, with one-bedrooms at $2,273, also well below the allowable $2,838. Rents for two-bedrooms had a smaller discount: $3,219, not the allowable $3,397.

Three later buildings at Atlantic Yards/Pacific Park (B4 and B12/13) also had units at 130% of AMI, but with less of a discount, perhaps because of the distance from the pandemic.

2024 limits

Under the new guidelines, a two-bedroom apartment at 80% of AMI, technically "low-income," could rent for $2,796, while a moderate-income one at 100% of AMI could rent for $3,495.

That's up from $2,542 and $3,117 under the 2023 guidelines. As noted, it's unclear if developers would actually seek such maximums, given competition from both units in the open market and other "affordable" units under construction.

From moderate- to middle-income: 2024

2024 income limits

The differences are even more dramatic as incomes, and rents, continue to rise.

For example, buildings under construction that gain the benefit of the extended 421-a tax break would set rents based on 130% of AMI.

Under 2024 guidelines, that means studios at $3,532, one-bedrooms at $3,786, two-bedrooms at $4,543, and three-bedrooms at $5,248.

In most (but not all) neighborhoods, those rent levels are at or above market rates.

For units at 165% of AMI--the upper limit for past Atlantic Yards/Pacific Park buildings--the limits are even more stratospheric: studios at $4,483, one-bedrooms at $4,805, two-bedrooms at $5,766, and three-bedrooms at $6,661.

Keep in mind that AMI, and commensurate rent ceilings, likely will rise.

From moderate- to middle-income: 2023

2023 income limits

Under 2023 guidelines, 130% of AMI meant studios at $2,756, one-bedrooms at $3,443, two-bedrooms at $4,130, and three-bedrooms at $4,772.

For units at 165% of AMI, the limits were higher: studios at $3,498, one-bedrooms at $4,370, two-bedrooms at $5,242, and three-bedrooms at $6,057.

Studio confusion

Note that, for units other than studios, the rent increase between 2023 and 2024 seems about 10%, commensurate with the income increase.

However, the increase in the rent levels for studios is far more dramatic.

I wrote in June 2023 that the city apparently adjusted rents that were distorted--erroneously?--in the previous year's calculations.

From 2021 to 2022, the guideline rent for a studio at 130% of AMI went from $2,263 to $3,035, an astounding 34.1% increase, well beyond the 11.8% increase in AMI. 

For 2023, the rent for a studio at 130% of AMI was cut to $2,756, despite a rise in AMI, apparently to account for the previous calculation. Now the rent has risen to $3,532. So that $776 increase represents a 28% bump.

Sure, those numbers may not be realistic, but HPD should explain its math, since those in the affordable housing field, and potential tenants, surely have noticed.