Affordable housing
Affordable housing is a dwelling where the total housing costs are affordable to those living in that housing unit. In the United States and Canada, a commonly accepted guideline for housing affordability is a housing cost that does not exceed 30% of a household's gross income. Housing costs considered in this guideline generally include taxes and insurance for owners, and sometimes include utility costs. When the monthly carrying costs of a home exceed 30-35% of household income, then the housing is considered unaffordable for that household. (Note that for some US programs, maximum housing cost limits are set as high as 40% gross income.)
Where the demand for available housing significantly exceeds its supply, many low and moderate income households find it difficult to secure housing that is affordable. In these housing markets, land values are increasing faster than incomes. These housing markets may also have a limited supply of residential land, or a number of regulations that make it difficult or costly to increase housing supply at rents affordable to consumers at income ranges below the local average.
Households are commonly defined in terms of the the amount of income they earn relative to 100% of the Area Median Income or AMI. Localized AMI figures are calculated annually based on a survey of comparably-sized households within geographic ranges known as Metropolitan Statistical Areas, as defined by the US Office of Management and Budget. For housing policy purposes, households are categorized as follows: Moderate income households earn between 80-120% of AMI. Low income households earn between 50-80% AMI. Very low income households earn no more than 50% AMI. Note that localities can adapt these income limits when administering local affordable housing programs; however, federal programs must adhere to the definitions above. Data including 2006 AMI levels for all Metropolitan Statistical Areas may be found here.
Demand can be measured in terms of the costs for housing, housing type (such as apartments vs. single-detached homes, or the size and configuration of units, including number of bedrooms) and location for housing (relative to commercial/employment centers, transportation infrastructure, schools and other community resources.)
The most "affordable" places in the U.S. are where there is the least demand and an adequate supply. 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.
Consequences of affordable housing shortages
A common measure of community-wide affordability is the number of homes that a household with a certain percentage of median income can afford. For example, a community might track the percentage of its housing that is affordable to households earning 60% of median income. In addition to the distress it causes families who cannot easily find a place to live, lack of affordable housing is considered by many urban planners to have negative effects on a community's overall health. For example, lack of affordable housing can make low-cost labor more scarce, and increase demands on transportation systems (as workers travel longer distances between jobs and affordable housing). An increasing number of studies and articles focused on US cities (Los Angeles, CA, Sarasota, FL) link the parallel trends of housing cost increases and declines in enrollment at local schools.
Policy tools to address affordable housing
Numerous policies in the U.S. and abroad have been designed to address the problem of inadequate supplies of affordable housing. Sophisticated secondary market mechanisms, inclusionary zoning, and land banking are three prominent tools, as well as tax and fiscal policies that result in reducing the cost of mortgages and the cost of borrowing. Other more recently promoted policy tools include relaxation of prohibitions against accessory dwelling units, and reduction of the amount of parking that must be built for a new structure.
Affordable housing is a controversial reality of contemporary life, for gains in affordability often result from expanding land available for housing or increasing the density of housing units in a given area. Ensuring a steady supply of affordable housing means ensuring that communities weigh real and perceived livability impacts against the sheer necessity of affordability. The process of weighing the impacts of locating affordable housing is quite contentious, and is laden with race and class implications.
Housing subsidies
The federal government in the U.S. provides subsidies to make housing more affordable. Financial assistance is provided for homeowners through the mortgage interest tax deduction and for lower income households through housing subsidy programs. In the 1970s the federal government spent somewhat equal amounts on tax expenditures for homeowners and low income housing subsidies, however by 2005 tax expenditures had risen to $120 billion per year, representing nearly 80 percent of all federal housing assistance. (See Chart.) [1] The Advisory Panel on Federal Tax Reform for President Bush proposed reducing the mortgage interest tax deduction in a final report issued on November 1, 2005.
Housing assistance from the federal government for lower income households can be divided into three parts:
- “Tenant based” subsidies given to an individual household, known as the Section 8 program
- “Project based” subsidies given to the owner of housing units that must be rented to lower income households at affordable rates, and
- 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 by their section of the U.S. Housing Act, and include Section 8, Section 236, Section 221(d)(3), Section 202 for elderly households 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) administers these programs, and has further information on the particular programs on agency web site. HUD programs have ceased producing large numbers of units since the 1980s. Since 1986, the Low-Income Housing Tax Credit program has produced a large share of the affordable units, however the affordability level in these units is less than the former HUD programs.
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.
An overview of the housing challenges facing America was conducted by the Millennial Housing Commission in 2000, under the leadership of Conrad Egan.
Additional resources
Public 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), the Federal Home Loan Bank, Fannie Mae, an Freddie Mac. Important private sector institutions worth consulting are the National Association of Home Builders and the National Association of Realtors. Valuable research institutions with staff dedicated to the analysis of "affordable housing" includes: the Brookings Institution and the Urban Institute and the Joint Center for Housing Studies at Harvard University, and the Center on Budget and Policy Priorities.