Basics of Affordable Housing

Affordable Housing typically refers to homes with reduced or subsidized rents made possible through government funding and incentives for housing providers.

Affordable housing is defined as housing where the cost to the tenant is less than 30% of their household’s income.

The most well known affordable housing programs, such as the Section 8 and Low Income Housing Tax Credit programs, use the Area Median Income (AMI) as a metric to determine income eligibility and rent restrictions. Rents and eligibility requirements are set relative to the Area Median Income so that a household earning a lower percentage of the AMI would be eligible for homes with cheaper rents.

HUD and affordable housing providers will often refer to AMI Bands, or ranges of income, when communicating income eligibility and rents. HUD defines these bands as:

Income Classification Area Median Income (AMI) Band
Extremely Low Income Income at or below 30% of AMI
Very Low Income Income between 31 and 50% of AMI
Low Income Income between between 51 and 80% of AMI
Moderate Income Income between 81 and 120% of AMI

Housing providers may use terminology like "affordable at 50% of AMI" which means that the home is affordable to Very Low Income households who earn between 31 and 50% of area the median income.

Low Income Housing Tax Credit (LIHTC) Apartments

Colonial Park is a 160 unit apartment complex built using the LIHTC program. The apartments have lower than market rents and amenities similar to what you find in a market rate apartment community.

Low Income Housing Tax Credit apartments have cheaper than market rents and amenities similar to what you find in a market rate apartment community.

Housing providers participating in the LIHTC program are required to charge reduced rents for low- and moderate income tenants. Low income housing created through the LIHTC program are required to remain affordable for 15 years, though in practice many agreements extend for 30 or more years.

By law, a Federally funded low income housing project (including LIHTC) may not refuse to rent to a Section 8 voucher holder. To learn more, read the Low Income Housing Tax Credit section of the Low Income Housing Guide.

Project Based Section 8 Apartment

Stearns Apartments is a 140 unit apartment community that offers rental assistance for its residents through the Section 8 Project Based subsidy program. Any resident in a low income housing apartment assisted with the program will pay rent based on their income and is why this housing is often referred to as income based housing.

The Project-based Section 8 Program creates or rehabilitates income based rental housing for Low-, Very Low-, and Extremely Low income households. Unlike the tenant-based Section 8 Housing Choice Voucher program, the rental assistance is tied to the individual apartment or home.

For most Project-based Section 8 tenants, rent is set at 30% of their household’s income. In some cases, minimum rents of up to $50 may be set.

To learn more, read the Project Based Section 8 section of the Low Income Housing Guide.

Section 202 Senior and Section 811 Disabled Apartment

Adamsville Green is a 90 unit apartment project set aside for seniors. The Section 811 program sets aside units for persons with disabilities. Each of these programs provide income based housing much like Section 8.

The Section 811 program sets aside units for persons with disabilities, their families, and in some cases live-in caretakers. Like the project based Section 8 program, Section 811 sets rents at 30% of their household’s income.

To learn more, read the Section 811 section of the Low Income Housing Guide.

USDA, Rural Development Section 515 Apartments

Seaford Apartments is a 37 unit apartment property that provides low income housing in a rural area. Usually much smaller than urban and suburban apartment projects, these apartment complexes usually provide around 30 low income apartments and sometimes have rental assistance with income based apartments.

The USDA Rural Rental Housing Program makes loans available to non- or limited-profit organizations for the creation of affordable rental housing in rural communities. The program aims to serve populations facing critical housing issues in rural communities such as overcrowding, maintenance deficiencies, and a growing disparity between housing costs and earned income.

Rents for Section 515 units are set by the size and operating costs of the unit. Typically, tenants will pay between a basic minimum rent and a higher - but below market rate - ceiling rent based on their income.

An additional USDA rental program, Section 521, may be used to provide rental assistance to some units for very low income tenants. Rents for units with Section 521 Rental Assistance will be no higher than 30% of an eligible households monthly adjusted income.

Public Housing Apartment Communities

HUD's Public Housing program is used to provide federally funded and locally managed affordable housing to low income households, seniors, and persons with disabilities.

Similar to Section 8 housing, Rents for public housing units are determined by the tenants adjusted income so that most qualified tenants will pay no more than 30% of their adjusted monthly income. Public Housing Authorities may establish a minimum rent of $25 to $50.

To learn more, read the Public Housing section of the Low Income Housing Guide.