What is Affordable Housing?

Nearly half of American households now spend more on housing costs than they are financially comfortable with. For many low-income families, in particular, homeownership is but a distant, far-off dream. The Washington Post reports that a person making minimum wage can no longer afford rent on a 2-bedroom apartment anywhere in the United States.

As real estate and rental housing costs climb across the country, it creates a financial strain on lower-income families and individuals. Federal and local agencies across the country have created a number of affordable housing programs to combat the housing market’s decreasing affordability.

In this guide, we’ll explain how affordability is calculated, identify the two main types of affordable housing, and answer your frequently asked questions about affordable housing.

For the purposes of this article, “affordable housing” refers to rental housing within the private market that designates all or part of their housing units as “affordable.”

How Housing Affordability is Determined

When it comes to defining housing affordability, the U.S. Department of Housing and Urban Development (HUD) goes by the “30-percent” rule when determining how much people can afford to spend on their housing.

By the federal government standard, your housing is “affordable” if it costs no more than 30 percent of your monthly household income to live there. (That includes your rent or mortgage plus all associated costs, like utilities.)

If you’re paying more than 30 percent of your monthly income on your housing, you are “rent-burdened” by government standards.

Types of Affordable Housing

There are two main types of affordable housing — Section 42 and Section 8.

Section 42

Section 42, also known as the Low Income Housing Tax Credit (LIHTC), is an affordable housing program that offers a federal tax credit to developers of affordable rental housing. To qualify for the tax credit, the developer must allocate some or all of their units as “affordable.”

Rent for Section 42 properties is usually based on a percentage of the renter’s income (30 percent or lower), and the government provides tax incentives to these properties to offset the difference compared to the market rate.

By incentivizing developers to create more affordable housing, the government is able to expand the number of quality rental housing for people with lower incomes.

Who is Eligible for Section 42 Housing?

Depending on local rules and the general cost of living where you live, households can qualify for affordable housing if their income is either 50 percent and 80 percent of the AMI, or below.

When looking for Section 42 affordable housing, you’ll usually see three different categories, each of which has slightly different rules and eligibility requirements for renters:

  • Income-based housing refers to privately owned properties that designate at least 20 percent of their units as low-rent or income-based while meeting other HUD criteria. These units usually rent to households at 50 percent or below the AMI.
  • Income-restricted housing refers to planned developments specifically designed for low to middle-income families, generally making 60 percent or less of AMI.
  • Senior housing refers to communities that are specifically designed to accommodate senior citizens. To qualify for senior housing, all occupants must be at least 62 years old, or at least 80 percent of the units must be occupied by at least one person aged 55 years or older.

Learn more about the differences between income-based and income-restricted housing.

Section 8

Section 8 is a rental assistance program that uses government vouchers designed to make up the difference in rent for what the tenant can’t afford to pay based on the Area Median Income.

Also known as the Housing Choice Voucher (HCV) program, Section 8 is reserved for low-income households with income that is at or below 50 percent or 30 percent of the Area Median Income (AMI) for that community.

Section 8 is funded federally but administered locally. Public housing agencies (PHAs) are responsible for receiving the funds from U.S. Department of Housing and Urban Development (HUD) and administering the vouchers locally to participants.

Who is Eligible for Section 8 Housing?

PHAs base qualification for Section 8 vouchers on family size, citizenship status, and total annual gross income. According to HUD, “the family’s income may not exceed 50% of the median income for the county or metropolitan area in which the family chooses to live. By law, a PHA must provide 75 percent of its voucher to applicants whose incomes do not exceed 30 percent of the area median income.”

Affordable Housing in the Southeast U.S.

Olympia Management, Inc. specializes in managing affordable housing developments in multiple states throughout the Southeast U.S. We currently offer income-based, income-restricted, and senior housing options in the following states:

To learn about available rental units in your area and how to qualify for housing assistance, contact us today.

Affordable Housing FAQ

  • Is it easier to get housing through Section 42 or Section 8?
    • It is generally easier to access housing through Section 42 rather than Section 8, which has stricter eligibility requirements and longer waitlists.
  • Can you qualify for affordable housing with bad credit?
    • Your credit rating doesn’t affect your eligibility to receive subsidies, but property owners and management companies are within their rights to pull your credit report to determine if you meet their minimum credit score threshold in order to rent to you. Learn more about credit scores and housing eligibility.
  • Can you qualify for affordable housing with an eviction?
    • Having an eviction on your record can certainly complicate matters, but your eligibility will depend on the reason for eviction as well as how long ago the eviction took place.
  • How is affordable housing funded?
    • The most common ways state and local governments fund affordable housing is through the Low-Income Housing Tax Credit (LIHTC), federal block grant programs, Choice Neighborhood Initiative, the USDA Rural Housing Service, and even privately funded community development financial institutions (CDFIs).
  • What’s the difference between affordable housing and public housing?
    • Public housing refers to rental housing units that are owned and managed by HUD. In contrast, affordable housing involving Section 42 or Section 8 typically involves subsidized rent for privately-owned properties.
  • What is a housing choice voucher?
    • A housing choice voucher is a rent subsidy used by tenants enrolled in the Section 8 housing program. This subsidy gives tenants greater choice over where they live compared to public housing projects.