Under FAR 107, the 400' AGL altitude has been well established. As a hobbyist, the FAA "recommends" you stay under 400' but legally you just have to stay out of controlled airspace. In most parts of the country, Class E airspace begins as 1200' AGL, but it can go down to 700' AGL close to large airports and even at the surface if the class E is supporting an instrument support procedure.
With that said, Under FAR 101.41(b) you have to operate your hobby drone IAW "community-based set of safety guidelines and within the programming of a nationwide community-based organization." As far as I know the only recognized "nationwide community-based organization" is the AMA. You don't have to be an AMA member to fly as a hobbyists by their guidelines. Under their guidelines they say stay below 400' when you're within 3 miles of an airport (makes sense).
14 CFR 101.41 - Applicability.
14 CFR 101.43 - Endangering the safety of the National Airspace System.
http://www.modelaircraft.org/files/100.pdf
So Between FARs 101.41 and 101.43, you have section 336 of 2012 HR 658
SEC. 336. SPECIAL RULE FOR MODEL AIRCRAFT. (a) IN GENERAL.—Notwithstanding any other provision of law relating to the incorporation of unmanned aircraft systems into Federal Aviation Administration plans and policies, including this subtitle, the Administrator of the Federal Aviation Administration may not promulgate any rule or regulation regarding a model aircraft, or an aircraft being developed as a model aircraft, if—
(1) the aircraft is flown strictly for hobby or recreational use;
(2) the aircraft is operated in accordance with a community-based set of safety guidelines and within the programming of a nationwide community-based organization;
(3) the aircraft is limited to not more than 55 pounds unless otherwise certified through a design, construction, inspection, flight test, and operational safety program administered by a community-based organization;
(4) the aircraft is operated in a manner that does not interfere with and gives way to any manned aircraft; and
(5) when flown within 5 miles of an airport, the operator of the aircraft provides the airport operator and the airport air traffic control tower (when an air traffic facility is located at the airport) with prior notice of the operation (model aircraft operators flying from a permanent location within 5 miles of an airport should establish a mutually-agreed upon operating procedure with the airport operator and the airport air traffic control tower (when an air traffic facility is located at the airport)).
(b) STATUTORY CONSTRUCTION.—Nothing in this section shall be construed to limit the authority of the Administrator to pursue enforcement action against persons operating model aircraft who endanger the safety of the national airspace system.
(c) MODEL AIRCRAFT DEFINED.—In this section, the term ‘‘model aircraft’’ means an unmanned aircraft that is—
(1) capable of sustained flight in the atmosphere;
(2) flown within visual line of sight of the person operating the aircraft; and
(3) flown for hobby or recreational purposes.
(Note the bold text - (b) STATUTORY CONSTRUCTION is a catch all. (2) hobbyists continually ignore this and even put videos on YouTube basically incriminating themselves)
Between FARS 101.41 and 101.43 NOTHING mentions hobbyist altitude restrictions - BUT...
the 2014 policy letter by Huerta, the former FAA Administrator. Pages 16 and 17 mentions sUAV compliance with FAR 91.126 through FAR 91.135 with speaks to operating in controlled airspace.
"Accordingly, as part of the requirements for model aircraft operations within 5 miles of an airport set forth in section 336(a)(4) of P.L. 112-95, the FAA would expect modelers operating model aircraft in airspace covered by §§ 91.126 through 91.135 and part 73 to obtain authorization from air traffic control prior to operating."
https://www.faa.gov/uas/media/model_aircraft_spec_rule.pdf
So putting it all together...
Part 107 - 400' AGL
Part 101.41 - no restriction but
Part 101.43 - don't endanger the NAS
FAA Recommendation - stay below 400' AGL, and finally,
2014 - Huerta Policy Memo - Hobbyists, stay out of controlled airspace.
Yes, this is confusing and convoluted but it's the current law. I work as a volunteer safety counselor with the FAA and in my part of the country this is the way my local FSDO is viewing this. Review for your self, comments welcomed!