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Affordable Housing – Low Income Housing

Affordable housing/Low income housing is housing deemed affordable to those with a median household income as rated by country, province (state), region or municipality by a recognized Housing Affordability Index. In the United States, a commonly accepted guideline for housing affordability is a housing cost that does not exceed 30% of a household’s gross income. When the monthly carrying costs of a home exceed 30-35% of household income, then the housing in considered unaffordable for that household. Determining housing affordability is extremely complex.

The federal government in the U.S. provides subsidies to make housing more affordable. Housing assistance from the federal government for lower income households can be divided into three parts:

1.) “Tenant based” subsidies given to an individual household, known as the Section 8 program

2.) “Project based” subsidies given to the owner of housing units that must be rented to lower income households at affordable rates, and

3.) Public Housing, which is usually owned and operated by the government. (Some public housing projects are managed by subcontracted private agencies)

“Project based” subsidies are also known be their section of the U.S. Housing Act or the Housing Act of 1949, and include Section 8, Section 236, Section 221 (d)(3), Section 202 for elderly households, Section 515 for rural renters, Section 514/516 for farm workers and Section 811 for people with disabilities. There are also housing subsidies through the Section 8 program that are project based. The United States Department of Housing and Urban Development (HUD) and USDA Rural Development administer these programs. HUD and USDA Rural Development programs have ceased to produce large numbers of units since the 1980s. Since 1986, The Low-Income Housing Tax Credit (LIHTC) program has been the primary federal program to produce affordable units; however, the housing produced in this program is less affordable than the former HUD programs.

In the U.S., households are commonly defined in terms of the amount of realized income they earn relative to the Area Median Income or AMI. Localized AMI figures are calculated annually based on a survey of comparably sized households with geographic ranges known as metropolitan statistical areas, as defined by the US Office of Management and Budget. For U.S. housing subsidies, households are categorized by federal law as follows.

Moderate income households earn between 80% and 120% of AMI

Low income households earn between 50% and 80% of AMI

Very low income households earn no more than 50% of AMI

Some states and cities in the United States operate a variety of affordable housing programs, including supportive housing programs, transitional housing programs and rent subsidies as part of public assistance programs. Local and state governments can adapt these income limits when administering local affordable housing programs; however, U.S. federal programs must adhere to the definitions above. For the Section 8 voucher program, the maximum household contribution to rent can be as high as 40% gross income.

Comprehensive data for the most affordable and least affordable places in the U.S. is published each year by an affordable housing non-profit organization, the National Low Income Housing Coalition, The NLIHC promotes a guideline of 30% of household income as the upper limit of affordability. According to a 2012 National Low Income Housing Coalition report, in every community across the United States “rents are unaffordable to full-time working people.”

Governmental and quasi-governmental agencies that contribute to the work of ensuring the existence of a steady supply of affordable housing in the United States are the U.S. Department of Housing and Urban Development (HUD), USDA Rural Development, the Federal Home Loan Bank, Fannie Mae, and Freddie Mac. Important private sector institutions worth consulting are the National Association of Home Builders, the National Affordable Housing Management Association (NAHMA), the Council for Affordable and Rural Housing (CARH) and the National Association of Realtors.

As you can see affordable housing/low income housing is a complicated property type. We have a team of dedicated commercial real estate appraisers focused on this property type. Please contact us for any affordable housing/low income housing appraisal services.