Affordable housing 101
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In everyday conversations about the housing crisis, the term “affordability” or “affordable housing” is often thrown around without clear definitions or standards. And without clear information available to the general public, it can be difficult to understand on a personal and political level.. However, understanding this topic is incredibly important for beginning to solve the housing crisis. At Common, we care deeply about educating the general public on what affordability truly means in the United States, so that people can have a better understanding of a topic that affects almost everyone living in major cities.
Lucky for you, we’ve done a lot of research on affordable housing as we begin partnering with local governments to create it. ! Now you won’t have to sift through 100 different government websites trying to decipher a long list of industry terms. Keep reading for an introduction to what affordable housing really is and its role in solving the housing crisis.
What is the difference between “affordable” housing and affordable with a capital A housing?
At Common, when we talk about affordable housing we usually make a distinction between “affordable” housing and affordable with a capital A housing.
“Affordable” housing is a general term used by people to describe housing that they find priced reasonably in the context of their own lifestyle, income, and market options.
Affordable with a capital A housing is housing created in partnership with local and national government agencies such as: U.S. Department of Housing and Urban Development (HUD) or The New York City Department of Housing Preservation and Development (HPD).
Types of capital A housing
Within capital A affordable category there are two types of housing. See how this is getting complicated? Stay with us!
Section 8 is a housing voucher that you can qualify for if you make 50% of the area median income (AMI) and can be used to pay rent for any apartment within reason. Depending on how much income and rent are for an individual, the government will cover a portion of or ALL of your rent.
The state and city often provide tax incentives and tax exemptions for developers and owners who dedicate a certain portion (usually 20%) of their units to affordable housing. The rents and the income levels of people living in these units are dictated by local AMI. These are typically more high-profile developments that wouldn’t get built without the credit, frontend financial support and backend of tax credits.
How can a renter qualify for capital A affordable housing? We’re glad you asked.
AMI: Area Median Income
Having an income at a certain percentage lower than the median income for a given region is the main factor for qualifying for this type of housing. For example, the AMI of NYC for a single person is $74,700. To apply for affordable housing for renters making between 30% and 40% AMI, your income level should be between about 22,000 to 24,000 a year. If you meet these income requirements, you then have to apply or enter a lottery. In New York City this is done through a portal called Housing Connect.
These are the basics. And from a high-level glance, it doesn’t seem all that complicated — in fact, there are many routes for the government and real estate developers to create affordable housing. So why don’t they?
If we’re in a housing crisis, why don’t cities just build more Affordable housing?
We consulted Chris O’Bannon, Common’s Compliance Manager to best answer this question. Chris makes sure that all of Common’s buildings that offer capital A affordable housing are compliant with local and national laws, which makes him an expert on this topic. He broke it down into three key issues:
Buildings are getting increasingly more expensive to build, and the existing housing supply is often decades old with finite affordability programs. Once those programs end, so does the affordability of the building.
The last few decades have seen a major shift in how people are approaching housing. Millennials are renting much longer than in the past, and the older generations are living longer. Both are bidding up the rent on a limited housing stock not suited for the increase in renter demand.
The main issue is that wages have remained stagnant for about 50 years, while rent has skyrocketed. Years of different policy decisions have led to a major gap between wage and rent increase.
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Affordability is a complex topic, but we hope we were able to help you understand the basics of it today! Housing companies, such as Common, are pioneering the way is attempting to solve this issue through coliving models and partnering with cities on affordable housing.
Here are a few examples of upcoming Common homes that will offer affordable with a capital A options:
If you want to catch up on anything we’ve shared on Common Knowledge over the past few weeks, head to our “Learn” highlight on our Instagram profile!
*Disclaimer: Eligibility for affordable housing is based on your individual circumstances and program rules. This post is for informational purposes only and should not be used to determine whether you are qualified for any particular affordable housing program.