Affordable housing is defined by the U.S. Department of Housing and Urban Development (HUD) as housing that is affordable to low-income households.
Housing is considered affordable if it does not cost more than 30% of gross income. For example, an individual making $15,000 per year should pay no more than $450 per month in rent or home payments.
The market determines the price of a home. Affordable housing is government-subsidized and built with a specific group of people in mind: families, seniors, people with disabilities, veterans, and low-income individuals.
HUD issues a set of guidelines for affordable apartments for rent. Rental units must be affordable to those earning no more than 50% of the area’s median income. At the same time, owner-occupied units must be affordable to those earning no more than 80% of the area’s median income. HUD does not provide direct funding for affordable housing units; instead, it provides tax credits to developers who incorporate affordable units into their projects and then sell these tax credits to investors.
Affordable homes options include:
- Low-income housing
This type of housing is intended for people earning up to 60 percent of the area median income, or about $38,000 per year for a family of four. The Department of Housing and Urban Development (HUD) sets income limits by geographic area based on HUD’s estimate of the local median income.
- Residential housing for the elderly
Also called “senior citizen” or “retirement” housing, this option is intended for people 55 and older who earn up to 80 percent of the Area Median Income (AMI).
- Public housing
This is government-owned and subsidized rental property. Because public housing comes from government sources, there are eligibility guidelines that families must meet to live there. To qualify for most forms of public housing, you must:
- Be a citizen or legal resident who has lived in the U.S. for a minimum amount of time.
- Be low-income.
- Meet specific criteria regarding any previous evictions or criminal history.
Affordable housing vs Social housing
Social housing is a general term used to refer to all types of accommodation that the government subsidizes. Social housing is not for sale; it is rented at below-market rates.
Social housing can be provided by local governments, non-profit groups, or companies. It is generally available only to people who meet certain income levels and family status requirements.
Affordable housing and social housing are often used interchangeably, and they both mean low-cost housing. However, the two terms refer to different types of buildings. Affordable housing is a general term for homes that sell or rent for less than the market price. Social housing usually refers to government-subsidized housing rented out to lower-income people at affordable levels.
Affordable housing can also mean homes that people buy with government-subsidized mortgages, such as Veterans Affairs (VA) loans, Federal Housing Administration (FHA) loans, and Rural Housing Service (RHS) loans.
Affordable living is a critical need in the United States, and for a variety of reasons. It helps maintain the middle class, improves the overall economy, reduces poverty rates, and helps cities have stronger property values. The aim of affordable housing is to give people who earn below-median income an opportunity to live in suburban communities.