Area Median Income is a measurement of the typical income in an area and it’s a metric that many low income programs use to determine whether or not you are eligible for assistance. You have have seen programs that reference this measurement as Area Median Income (AMI) or Median Family Income (MFI).
Since more and more programs are starting to rely on the Area Median Income (or AMI), I wanted to take a moment to explain what the AMI is, what it means, how it affects you, and how you can find out what the AMI amount is for your area.
What does Area Median Income mean?
Area Median Income (AMI) is the typical income for people in a small geographic area, such as a city or a county. It is exactly what it sounds like! “Area” refers to a specific geographical area, such as city. “Median” refers to the method of calculation. “Income” is the focus of the measurement.
Low income programs typically rely on the AMI because it represents the actual cost of living of the area more accurately than other popular poverty measures.
AMI vs. FPL
Although Area Median Income (AMI) was first introduced in the Housing Act of 1937, relatively few people have heard of it because most popular social support programs use the Federal Poverty Level (FPL) instead.
There are pros and cons to both of these measurements.
The FPL is easier to calculate because there is only one number for the contiguous 48 states and Washington DC. There are separate numbers for Alaska and Hawaii, due to their higher cost of living. In Poverty by America, author Matthew Demond revealed that this official poverty measure was essentially based on the cost of food.
The Area Median Income is much harder to calculate. There isn’t a single simplified chart for the entire country because it is calculated based on local data. However, this also means that it more accurately reflects the cost of living in your area.
After all, the cost of living is much higher in San Francisco, California, than in Springfield, Missouri. That’s why the AMI for San Francisco is $138,550 for a family of four but the AMI for Springfield is only $71,000.
To calculate the a median number, you have to line up all the relevant data from smallest to largest. Once it’s all lined up, you just select the middle number to identify the median. This means that the number is not as affected by extreme highs or extreme lows like an average would be.
How does it affect you?
When programs use the Area Median Income instead of the federal poverty guidelines, more people are usually eligible for that program. This means that you are more likely to be able to get the help that you need.
For example, the Federal Poverty Level in 2023 is $30,000 for a family of four. Even though Springfield, Missouri, is widely regarded as one of the most affordable areas in America, the AMI for that area is still $71,000 for a family of four. A program that required you to earn 60% of the AMI or less would have an income limit of $42,600 – which is $12,600 more than 100% of the Federal Poverty Level.
A lot of our readers have been discouraged when they see that the income limits are based on Area Median Income because that can be confusing. However, this is usually good news because it means that more people will be eligible to receive that assistance.
How do you find the AMI for your area?
The median is the midpoint, which is different than an average. To calculate an average, you take add up all the numbers and divide the total by the amount of numbers you added. To calculate a median, you line up all the numbers in order from smallest to largest and choose the middle number.
Let’s consider the following made-up example of Sally, who lives in Cityopolis. Citypolis has nine residents. Their annual household incomes are as follows: $8,000, $25,000, $50,000, $50,000, $75,000, $80,000, $150,000, $150,000 and $250,000. To average those numbers, you would add them all together ($838,000) and divide them by the total amount of numbers you added together (9), for an average of $93,111. The median simply looks at the middle number, which means it is less affected by extremes. The median for this list is $75,000.
Of course, it would be impossible for you to calculate the Area Median Income for your area because you don’t have access to the income and household data necessary to do all the math.
Thankfully, Fannie Mae publishes a map with the AMI for every area in the United States. All you need to do is visit the Fannie Mae AMI Lookup Tool, enter your address, and click the magnifying glass search icon. A handy little box will pop up showing you what 100%, 80% and 50% of your Area Median Income is.
Some programs use other percentages, like 60%, to calculate eligibility. To find that number, you would simply multiple the 100% figure by the decimal of the percentage. For example, 100% of the AMI for the area around Fisherman’s Wharf in San Francisco is $151,100. To calculate 60% of that, I would multiple $151,100 by 0.6, which equals $90,660.
The Area Median Income is one way to measure the typical income and cost of living in a given geographical area. It is different than the Federal Poverty Level but it also tends to be more accurate. Many programs use a percentage of AMI to calculate the income limits for their low income assistance programs. In this article, we show you how to find the AMI for your area and how this measurement affects you.
FAQs about Area Median Income
We’ve received a lot of questions about Area Median Income as it has become more popular. Here are the most common questions and answers!
What is Area Median Income?
Area Median Income is a measurement of the typical income in a small geographic area, like a city or a zip code. It is used to calculate your eligibility for certain low income programs, like HomeReady and others.
What is the Area Median Income for Chicago?
In 2023, the typical AMI for Chicago is around $105,700. To find the most up-to-date AMI for this area, you will need to use the Fannie Mae AMI Lookup Tool.
What is the Bay Area Median Income?
In 2023, the typical AMI for the San Francisco Bay area is around $166,600. This is a very high cost-of-living area. To find the most up-to-date AMI for this area, you will need to use the Fannie Mae AMI Lookup Tool.