HPD Adopts New Household Factor Policy for Studio Units in Affordable Housing Program Workbooks

HPD Changes Studio Household Factor from 0.7 to 0.6

Historically, annual AMI increases generally result in corresponding increases in the maximum affordable rents. However, 2026 marks a significant departure from HPD’s prior policy relating to Household Factor for non-subsidized projects, as HPD simultaneously implemented a policy change affecting the calculation of rents for studio apartments.

When establishing maximum rents for affordable housing units, HPD adjusts HUD income limits (discussed below) based upon an assumed Household Factors. For example, HPD historically assumed that a studio apartment would be occupied by a one-person household and applied a household factor of 0.7. A one-bedroom unit generally utilizes a household factor of 0.75, a two-bedroom unit utilizes 0.90, and larger units utilize progressively larger factors.

In HPD’s initial 2026 Workbooks for 485-x, 467-m and 421-a(16), the agency reduced the studio household factor from 0.7 to 0.6. As a result, despite the increase in HUD income limits, maximum rents for studio affordable units decreased, while rents for one-bedroom and larger units generally increased.

Following inquiries, HPD confirmed that the reduction in Household Factor was intentional and due in part to reduced dwelling unit factor requirements under the City of Yes for Housing Opportunity zoning text amendments. This change also aligns with HPD’s past policy of using a 0.6 Household Factor for City-financed projects.

HPD Provides Temporary Flexibility

Following industry pressure, HPD subsequently announced that applicants participating in the City’s new-construction tax incentive programs may temporarily utilize either:

• the 2025 Workbooks (which utilize the historical 0.7 studio HHF); or
• the 2026 Workbooks (which utilize the new 0.6 studio HHF).

This flexibility currently applies to RPTL § 485-x (Affordable Neighborhoods for New Yorkers or ANNY), RPTL § 467-m (Affordable Housing from Commercial Conversions or AHCC), and 421-a(16) (Affordable New York Housing).  HPD has advised that this dual-workbook approach will remain available until HPD adopts the 2027 AMI, at which time all new-construction tax incentive programs will utilize the 0.6 studio Household Factor.  Importantly, applicants must select a single workbook year and apply it consistently across the project; rents cannot be mixed and matched between the 2025 and 2026 workbooks.

Practical Implications

For projects containing a significant number of studio affordable units, the ability to continue utilizing the 2025 Workbooks may produce materially higher maximum rents and improved project economics. Conversely, projects weighted toward larger unit types may benefit from the higher income limits reflected in the 2026 Workbooks.  The tables below illustrate the impact of the Household Factor policy change at various AMI levels:

AMI Level	2025 Studio Rent (0.7 HHF)	2026 Studio Rent (0.6 HHF)	Change	Annual Change
40%	$1,134	$1,018	($116)	($1,392)
60%	$1,701	$1,527	($174)	($2,088)
70%	$1,984	$1,781	($203)	($2,436)
80%	$2,268	$2,036	($232)	($2,784)
100%	$2,835	$2,545	($290)	($3,480)
130%	$3,685	$3,308	($377)	($4,524)

Owners, developers, lenders, and investors should carefully evaluate which Workbook year produces the most favorable results before making submissions to HPD.

HUD 2026 AMI Increases

The U.S. Department of Housing and Urban Development (“HUD”) released its Fiscal Year 2026 Area Median Income (“AMI”) and Multifamily Tax Subsidy Project (“MTSP”) income limits on May 1, 2026. The release occurred approximately one month later than HUD’s traditional April 1 target date after a delay in the publication of the American Community Survey (“ACS”) five-year data due to the recent federal government shutdown.  HUD uses ACS data, together with other demographic and economic data, to calculate median family incomes and establish income limits used to determine eligibility for numerous federal affordable housing programs, including Section 8, Low-Income Housing Tax Credit projects, and tax-exempt bond-financed developments.  On or about May 17, 2026, HPD incorporated the new HUD limits into its affordable housing materials by updating the applicable 421-a(16), 485-x and 467-m Workbooks and publishing its 2026 Income Limits and Maximum Rents Worksheet.

For the New York City HUD Metro FMR Area, the 100% of AMI for a family of four increased from $162,000 in 2025 to $169,600 in 2026, an increase of approximately 4.7%.  The table below shows the past five years of change:

Year	100% AMI (Family of Four)	Annual Increase
2022	$133,400	11.82%
2023	$141,200	5.85%
2024	$155,300	9.99%
2025	$162,000	4.31%
2026	$169,600	4.69%

HPD generally calculates affordable housing income limits by applying the applicable AMI percentage (e.g., 60%, 80%, or 130%) to HUD’s published AMI for a family of four and then adjusting the resulting figure based on the assumed household size for the applicable unit type (commonly referred to as “Household Factors” or “HHF”).  HPD then determines the maximum annual housing cost based on the assumption that a household should spend no more than 30% of its gross income on housing and divides that amount by twelve to arrive at the maximum monthly gross rent.  Depending on the applicable program, HPD may further adjust the gross rent to account for tenant-paid utilities in order to determine the maximum net rent (i.e., maximum gross rent less applicable Utility Allowances).

Rosenberg & Estis will continue to monitor HPD’s implementation of the 2026 AMI and the studio Household Factor policy. If you would like assistance evaluating the impact of these changes on a particular project, please contact your trusted R&E attorney, Nicholas DiLorenzo, Member or Daniel M. Bernstein, Member and Head of R&E’s Tax Incentives & Affordable Housing Group.