What is it?

People mean many things when they say "affordable housing." Affordable to whom? Affordable for how long? Affordable for rental or ownership?  There are many different answers to those questions, but there are also some ways to define the term and compare the different projects that fall under it.

Affordable For Whom?

A commonly accepted standard for affordability is that a household's monthly housing costs should not exceed 30 percent of its monthly net household income. Housing is usually considered "affordable" if it would meet this 30 percent standard for families considered "low-income," meaning they earn below 80 percent of the area median income (AMI).

To see what this definition of affordability means in a specific community, check out HUD's income limits. For example, in Oakland, California a household of four is considered low-income if its income is below $35,800. For housing to be affordable to that family, it would need to cost no more than $895 per month.

Because AMI is defined across a large area, the metropolitan definition of low-income is higher in many communities than what residents would consider "low-income" in their specific community. It is important to adjust the official definitions of "low-income," and therefore of "affordable," to fit the local situation.

Affordable for How Long?

How long housing will be affordable is also a major consideration for neighborhood stability. For the purposes of this tool, we will distinguish between housing with affordability restrictions (which we will call affordable housing) and private, market-rate housing that happens to be priced low at the moment due to economic conditions. Market-rate housing is sometimes available at a low cost, but as the demand for housing rises, owners can raise the price as they choose. Since a basic effect of gentrification is that market-rate housing rapidly increases in price, only housing with affordability restrictions of some sort will guarantee a lasting supply of affordable housing.

Effective affordability restrictions legally insure that the housing will be rented or sold at a specified price affordable to households within a specific income range, and they are in effect on a permanent or long-term basis . In many cases, the issue of ownership -who controls the housing-is also important in assuring long-term affordability.

In subsidized housing models, affordability is created by using public and/or private funds to lower the housing costs for residents.  Subsidies generally fall into two categories: 1) development subsidies to help construct or acquire housing; and 2) operating subsidies to supplement the amount that the residents can pay. Operating subsidies are especially needed when housing extremely low-income people and people with special needs, such as seniors, homeless people, and people with disabilities. Ideally, subsidies of either kind come with restrictions on the ownership of either the land or buildings, to ensure long-term or permanent affordability.

Different ways to use both kinds of subsidies are described further in the 'From Goals to Tools ' section.

Resources:

Department of Housing and Urban Development

National Housing Institute, publisher of Shelterforce magazine

Knowledgeplex A comprehensive searchable library sponsored by the Fannie Mae Foundation

LISCnet Online Resource Library from the Local Initiatives Support Corporation

To see what this definition of affordability means in a specific community, check out HUD's income limits. For example, in Oakland, California a household of four is considered low-income if its income is below $35,800. For housing to be affordable to that family, it would need to cost no more than $895 per month.

Because AMI is defined across a large area, the metropolitan definition of low-income is higher in many communities than what residents would consider "low-income" in their specific community. It is important to adjust the official definitions of "low-income," and therefore of "affordable," to fit the local situation.