Clear, accessible definitions for common urban planning terms.

What is Affordable Housing?

5 minute read

The term affordable housing refers to housing units that cost less than a predetermined percentage of household incomes. Planners use affordable housing as a general term to describe housing that doesn't put an excessive financial burden on its occupants.

Bronx Apartments

Gregory James Van Raalte / Shutterstock

Affordable housing is a relative term that defines affordability based on a household's income. Thus, the threshold for what counts as "affordable" varies widely by city and state. As defined at the federal level by the Department of Housing and Urban Development (HUD), affordable housing is any dwelling that the occupying household can obtain for less than 30% of its gross income, including utilities. This definition uses Area Median Income (AMI) to determine eligibility for assistance programs, a practice that is criticized by some for distorting the true affordability of housing in an area. Market rate housing, on the other hand, is housing that doesn't fall under any rent restrictions and which landlords can rent at any rate.

Housing affordability is an important measure of a community's economic well-being, calculating how much income households have left to spend on other necessities after paying rent. But since housing tends to cost more near job centers and more "desirable" neighborhoods, the housing-to-income ratio doesn't account for transportation expenses, neighborhood amenities, quality of education, and other factors that families must balance when making housing decisions. In some places, even higher-income families struggle to find adequate housing at their budget. In the United States, one in seven households spend more than half of their income on housing. Critics of the housing cost-to-income measure argue that not taking into account preferences and other factors can make housing costs appear more affordable for low-income households (who might feel forced to seek out cheap housing farther from job centers or near worse schools) and less affordable for high-income households (who may choose more expensive housing for the neighborhood or amenities).

Access to stable, affordable housing can have powerful impacts on a household's health, job opportunities, and educational achievement. Advocates maintain that improving housing affordability brings about important benefits to individuals and families by helping to create stable communities and stimulating economic development. To increase affordable housing, governments can take a range of actions, the most popular of which include public housing, rent control, housing vouchers, and inclusionary zoning. A supply-side approach to affordable housing development—reducing regulations to allow more market-rate housing developments filter more affordable housing options into the market—has also gained popularity in recent years and decades.

For decades, the idea of affordable housing was practically synonymous with public housing, government-funded apartment buildings or complexes(often known as "projects") reserved entirely for qualifying low-income renters. Today, most affordable housing policies seek to promote mixed-income buildings and neighborhoods by requiring affordable units in new buildings (i.e., inclusionary zoning) or subsidizing households with vouchers that can be used for a variety of rental units.

Inclusionary zoning refers to ordinances that require new construction to include a set percentage of affordable units, forcing the inclusion of affordable housing in each new development. This strategy creates affordable housing at no cost to the city, shifts the burden to developers, and integrates different income levels in the same buildings, providing increased access to economic opportunities for a wider range of income levels.

Rent control, or rent stabilization, refers to measures, usually enacted at the city level, that limit the amount a landlord can raise rent on their tenants annually. Many rent control ordinances limit annual increases to 5% or less, plus inflation. In 2019, California passed statewide tenant protections that amount to rent control for areas not yet covered by local ordinances. These rules often don't apply to newer buildings to encourage new construction. The California regulations, for example, exclude buildings built in the last 15 years from the present date, meaning new buildings become eligible for rent control every year.

Each approach to affordable housing has a complicated history, with the lofty goal of "a decent home and a suitable living environment for every American family" consistently undermined by discriminatory policies, underfunded programs, and obstructionist interest groups. Public housing, which concentrates poor households together, perpetuates poor living conditions due to inadequate funding, neglect, and lack of incentives for management companies to perform upkeep. The stigma associated with public housing, combined with other exclusionary policies like red-lining, also exacerbated housing segregation, cementing inequality between neighborhoods and leaving a legacy of disinvestment and systemic poverty. Housing vouchers such as those created by the 1974 "Section 8" Housing Choice Voucher Program aim to increase mobility for low-income families by providing vouchers that subsidize rental housing in any qualifying building. The right of landlords to refuse to rent to voucher recipients and price limits, which are set at Fair Market Rent (a measure set by HUD at the 40th percentile of rent for units in an entire metropolitan area), often trap voucher recipients in the lowest-priced neighborhoods and deny them the mobility that housing vouchers are designed to provide.

While rent stabilization policies are meant to protect renters from excessive rent hikes and maintain the number of affordable housing units, economists criticize them as stopgap measures that only redistribute an existing supply rather than address the root causes of rising housing costs and that disincentivize landowners from providing rental units, reducing the overall number of units available. Inclusionary housing policies face their own detractors, as they challenge long-standing beliefs about the rights of private property developers and prompt questions of whether the burden of economic integration should be placed on developers. Opponents of rent control and inclusionary housing argue that supply-side solutions can be more productive in creating more housing units and bringing supply and demand in closer alignment.

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