Friday, March 17, 2023

Oregon Mortgage Interest Deduction Reform Bill Would Still Provide $270 In Monthly STATE Subsidy for Home with $900K Sales Price.

A recent Fortune story HERE focused on the income necessary to afford a $1 Million home and concluded that income range of $195K to $210K to qualify.

I thought it would be useful see how HB 3010 , that would phase out OREGON mortgage interest deductions for homeowners with incomes above $200K, would play out for the purchaser of a $900K home. ($900K brings a 20% down mortgage within the Fannie/Freddie current conforming limit of $762,200).

(There is a work session scheduled for this bill on Tuesday March 21st).

I constructed an example that shows a buyer with $225,000 income purchasing a $900K home with 20% down and a $720K mortgage at a 6% interest rate. The subsidy value was calculated using a 9.9% marginal state income tax rate. 

For Oregon tax purposes that $225K buyer would 

  • Lose 50% of the mortgage interest deduction
  • Retain 50% of the mortgage interest deduction
  • Retain 100% of their property tax deduction 

The NET impact would be 

  1. The buyer would pay $2,126 more in state taxes, .9% of their annual income
  2. The buyer would CONTINUE to receive $3,240 in annual state subsidy for their home, $270 a month. 
  3. The buyer would continue to receive 100% of their FEDERAL deductions for mortgage interest and property tax. (Federal mortgage interest deductions do not phase out until mortgages exceed $750K).
  4. IF the homebuyer of that $900K home had an income BELOW $200K, there would be NO STATE OR FEDERAL REDUCTION in mortgage interest and property tax deductions. (The "front ratio" [housing expense/income] for a $200K buyer using the same assumed inputs is still a feasible 32% vs 29% for the $225K buyer).

Courtesy, Oregon Housing Blog

Tuesday, February 28, 2023

Updated Oregon FHA Loan Estimator Includes Monthly Premium Reduction, FY 2023 Mortgage Limits, and FY 2022 Income Standards.

In 2022 I posted an Oregon specific FHA loan calculator that showed an estimated monthly payment and qualifying income, including income required IF the household had "compensating factors".

I have updated that with a NEW FHA Feb 2023 Oregon Loan Estimator HERE

The first worksheet has a total of  7 required variable inputs and it returns more than 20 values for each of the four loan scenarios. (Because each loan scenario has differing allowable loan ratios for housing expense and total reoccurring expenses, the qualifying income for each scenario differs).  

The worksheet incorporates the just announced reduction in monthly MIP rate, FY 2023 FHA mortgage limits, and the FY 2022 income limits (due for updating in May). User selection of their county results in the automatic calculation of the proper limits for that county. 

A second worksheet includes a link to the HUD compensating factors portion of the FHA Single Family Policy Guide and a one page summary extracted from the Guide. Note that the guidance applies to manual underwriting; automated underwriting systems may (or may not) incorporate some or all of this guidance. 

Some observations for a Portland metro $400,000 sales price at 6% interest, 3.5% down, and $300 monthly other debt payments. 

  • With NO compensating factors an income of $117,400 would be required. That's 122% of the current HUD Portland MFI of $106,500. 
  • With 1 or more compensating factors the income required could drop to as low as $91,000, 22% BELOW the income required if the borrower has no compensating factors. $91,000 is 95% of the current MFI of $106,500. (Note that credit scores of 580+ are required for the three compensating factor scenarios). 

NOTE that per an earlier post I projected that Portland metro MFI will soon increase to $114,400--if accurate, come May this would REDUCE the share of MFI required to qualify from the current 122% and 95%. 

Originally created and posted on the Oregon Housing Blog. 

Monday, February 27, 2023

Select Metro FY 2023 HUD Median Family Income Projections: Both Corvallis and San Francisco Have Projected DECREASES.

Last week I posted my projections for Portland Metro HUD MFI increases for FY 2023, including project LIHTC rent increases by bedroom size.

In my post I noted that not ALL areas would have projected MFI increases. Over the weekend I did projections for Oregon metro areas and for a few metro areas outside of Oregon. The table I created is pasted below.


TWO Oregon metro areas are projected for DECREASES. Salem has a minor decrease of .1%  while Corvallis has a major decrease of 11.7%.  In FY 2022 the Corvallis metro MFI was about $5,000 HIGHER than the Portland metro HUD MFI, but for 2023 the projections show (without any adjustments or caps) that their HUD MFI would be $16,000 BELOW the Portland metro HUD MFI. 

Outside of Oregon our sister Portland on the East coast has a projected decrease of 3.8% but San Francisco has an even higher projected decrease of  4.7%. 

As noted before these are NOT official HUD Median Family Incomes for FY 2023; always act only on official OHCS and HUD income and rent publications. 

Also, HUD or state or local government agencies may limit or cap annual decreases or increases in income limits and affordable rents. Individual projects may also have elected income limit floors that could limit the rate of decrease. 

 Originally created and posted on the Oregon Housing Blog. 

Friday, February 24, 2023

NEW: I Project that Portland Metro HUD FY 2023 Median Family Income Limits Will Go Up by $7,900 to $114,400 and LIHTC 2BR Max Rents Will Go Up $90-$108 Per Month.

In prior years, I have tried to estimate, in advance of HUD's official publication, the Portland metro HUD median family income and related affordable rent limits.

It’s a complicated multi stage process and HUD occasionally changes the inputs into that process.

This year HUD has said that the FY 2023 publication will not occur until mid May and that the 2021 ACS one year median family income [Table B19113] will be used because the 2020 ACS one year median income is not available from Census.

Last week CBO published economic assumptions, including CPI projections, that have been previously used in the HUD formula. 

Using CPI data from the CBO publication I just completed MY projection for Portland metro FY 2023 income limits and max rents at 50% MFI and 60% MFI.

The first table shows the method i used to do the MFI calculation and the Portland metro difference in income limits and affordable rent limits at the 4 person 100% MFI level. 

Note that the CPI ratio I calculate is 1.1217 (last FY HUD used 1.1116)--this factor should remain consistent for ALL areas and is multiplied by the 1 year 2021 ACS median family income for the HUD defined area to arrive at the unrounded FY 2023 median family income.  (NOT all areas have a 1 year 2021 ACS median family income and this makes calculations for those areas more complex).

The second table shows the  FY 2023 Portland metro rents I calculated at 50% and 60% MFI for multiple bedroom sizes and and their differences from the current FY 2022 rents. 

FY 2023 Portland Metro Median Family Income and LIHTC Max Rent Observations

  • The HUD median income for a family of 4 is projected to increase 7.4%/$7,900 to $114,400. 
  • The maximum rent for a 2 BR LIHTC unit at 50% MFI increases by $90/7.5%  to $1,288. (Not shown, I project the FY 2023 3 person income limit will be $51,550; the 3 person income limit is used to set maximum  2 BR rents).
  • The maximum rent for a 2 BR LIHTC unit at 60% MFI increases by $108/7.5% to $1,546. (Not shown, I project the FY 2023 3 person income limit will be $61,860; the 3 person income limit is used to set maximum  2 BR rents).
  • The 2BR LIHTC maximum rents at 50% and 60% of MFI are still below the HUD Fy 2023 2 Bedroom FMR of $1,839.  (Housing authority payment standards may be higher or lower than the FMR). 
  • Higher max rents could improve the feasibility of some projects in development by increasing potential project income IF the maximum rents are achievable in the marketplace when compared to street rents.


  • The rent differences in the second table are between the MAX FY 2022 and the MAX FY 2023 rents. LIHTC project rents vary so the rent increase permissible for any one project is likely different than the MAX comparisons show.
  • Pre 2008 LIHTC projects may use different income and rent limits. 
  • These are my projections and are not official. ALWAYS rely on the official HUD and OHCS publication. 
  • HUD could change its methodology, geographic definitions, or adopt caps to limit increases.
  • OHCS or local government policies could restrict rent increases or maximum rents.
  • Minor rounding and calculation differences could mean the rents I calculated are  different from the official publication in May by minor amounts--I anticipate this will be less than $5. 
  • Feel free to bookmark this and come back in May to see how accurate my projections are. 
  • JUST because the Portland metro HUD MFI is projected to increase does NOT mean that ALL HUD areas in Oregon will see increases. While the national inflation factor  is constant at 1.1217, a low 2021 1 year ACS B 19113 MFI value compared to the HUD published FY 2022 MFI could mean that the FY 2023 HUD MFI is the same or LOWER than the HUD FY 2022 MFI. If that happens HUD may (or may not) allow decreases in MFI, or capped decreases, both which could translate into lower maximum affordable rents. 

Originally created and posted on the Oregon Housing Blog

Tuesday, February 21, 2023

Metro SHS 2nd Qtr County Financial Data Analysis: $60 Million Spent in 1st Half of FY 2023 But $243 Million Remained.

I have reviewed the 2nd QTR SHS reports from all three counties and added them to the previously posted 1st QTR reports in the PDF file HERE

The table pasted below has my analysis. 

Some observations

  1. FY 2023 Metro resources allocated YTD though December totaled $76 million.
  2. I anticipated another $105 million in resources for the remained of the FY (through June)
  3. There was a carryover balance of $122 million from last fiscal year. 
  4. So, total resources for FY 2023, including the carryover, total $303 million.
  5. Reported spending in the first half totaled $60 million. 
  6. This left a balance of $243 million not spent. 
  7. To exhaust that $243 million balance would require increasing the second half of the FY spending rate by 308% compared to the rate of spending in the first half of the year ($243M/$60M-1=308%). 
  8. While the average increase required across 3 counties is 308%, the required increase in Clackamas (887%) and Washington counties (552%) is MUCH higher than Multnomah (117%). 
  9. Note: The spend down plans included in the quarterly reports indicate that both Washington county (75%) and Clackamas county (78%) do NOT plan on spending all of their FY 2023 allocations. It is not clear how much of their outstanding balance from FY 2022 is planned to be spent. 
  10. $243M is sufficient to fund 2,643 vouchers for $1,000 a month for the next 7 years, with annual voucher costs inflated 3% a year. If monthly voucher cost is higher, at $1,500 a month , the number of vouchers drops to 1,762.

Originally created and posted on the Oregon Housing Blog.