What is Affordable Housing? Affordable housing (“AH”) refers to housing units that are reasonably priced so that low to moderate income individuals or families can live there without spending more than 30% of their income on housing costs, including rent or mortgage and utilities.
Why is AH important?
- AH allows families to have more money for essentials such as food, healthcare, education and savings.
- AH supports essential workers such as teachers, nurses and service workers who may be priced out of the communities they serve.
- AH prevents vulnerable populations from becoming homeless and ensures they have access to clean, safe and affordable housing.
- AH ensures that communities have a mix of incomes, backgrounds and jobs.
Who qualifies for AH?
Eligibility often depends on Area Median Income (“AMI”) which is the midpoint of the income distribution within a specific geographic location i.e., metropolitan area or county. AMI is calculated annually by Department of Housing and Urban Development (“HUD”), the agency of the U.S. government. Click here to check your county/metropolitan AMI.
- Very low-income: below 50% of AMI
- Low-income: 50-80% of AMI
- Moderate-income: 80-120% of AMI
Example: If the AMI is $70,000
- Very low-income family that earns $35,000 or less should not be paying more than $10,500 per year on rent or mortgage payments.
- Low-income family that earns between $35,000-$56,000 should not be paying more than $10,500 to $16,800 per year on rent or mortgage payments.
- Moderate-income family that earns between $56,000-$84,000 should be paying more than $16,800 to $36,000 per year on rent or mortgage payments.
What types of AH are there?
- Public Housing. This is housing owned and operated by government agencies. In Miami, public housing is managed by government agencies such as Miami-Dade Public Housing and Community Development (“PHCD”)and the City of Miami’s Department of Housing & Community Development. Both agencies administer various programs to provide affordable housing for low-income residents, including public housing units and assistance through programs like the Housing Choice Voucher Program (Section 8). For example, PHCD is responsible for more than 9,000 units of public housing. For the most current list of public housing developments, click here.
- Subsidized Housing e.g., Section 8. Section 8 housing also known as the Housing Choice Voucher Program, is a federal rental assistance program which provides tenants with vouchers to cover a portion of the rent allowing participants to choose their own housing in the private market. The tenant pays for a portion of the rental payment and the government pays the rest.
- Nonprofit/Cooperative Housing. There are non-profit and equity co-ops . These are independent organizations, not owned by the government. Usually, co-ops are built or owned/managed by nonprofits to keep rents affordable, whereby residents become partial owners or “shareholders/members” of the non-profit. Members own the co-op which controls the housing. Members pay housing charges and follow Rules and Occupancy Agreement. The building contains privately owned units with common areas shared by all residents. Co-ops help make urban housing more affordable including restrictions on profit from resale, self-management, nonprofit status, shared facilities and subsidies.
- Inclusionary Zoning Units. Inclusionary zoning is a policy tool used by cities and municipalities that either requires or incentivizes developers to include a certain percentage of affordable housing units within new residential developments. Developers include affordable units in new buildings as a condition of development. If mandated, developers are required to provide affordable units as a condition of getting project approval or permits. If voluntary, in exchange for including affordable units, developers are offered incentives such as density bonuses, reduced parking requirements, faster permitting or approvals, fee reduction or waivers and or tax abatement. Real world examples include (a) San Francisco which requires up to 25% of new rental units to be affordable; (b) New York City which uses mandatory inclusionary housing in rezoned areas; or (c) Boston which requires 13% affordability in projects over 10 units, or developers can build off-site of pay into a fund.
- Low Income Housing Tax Credit (“LIHTC”) Properties. LIHTC properties are funded by the Low-Income Housing Tax Credit program aimed to incentivize private developers to build affordable units. This federal program does not directly build housing. Instead, it provides tax credits to private developers to build, rehabilitate or preserve affordable rental housing. In brief, IRS allocates tax credits to each state based on population. State housing agencies like Florida Housing Finance Corporation run a competitive application process to award credits to developers. Developers awarded with tax credits, sell those credits to investors (banks, corporations) to raise equity for their project. In return, investors get a 10-year stream of tax credits they can use to offset federal taxes. The developer uses this equity to built or renovate affordable housing, reducing the need for debt. This in turn allows the developer to charge lower rents.
What are some challenges?
- Not enough supply. We have a shortage of 7+ million affordable homes.
- Lack of funding from local governments.
- High competition in high cost markets rewarding some developers over others.
- Bureaucracy and red tape relating to slow government response.
- Zoning and land use restrictions.
- Community resistance by NIMBYs i.e., not in my back yard opposition.
- High cost of construction.
- High land costs.
- Lack of long-term investment.