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What IS affordable housing?
February 18, 2016

By Kris Berggren | What is affordable housing, anyway? 

The answer seems so obvious – housing that one can afford within one’s means, right?

Well, yes...but. It’s complicated.

The United States Department of Housing and Urban Development (HUD) considers housing affordable “if it costs the occupant no more than 30 percent of their income for gross housing costs, including utilities.”

This definition of affordability indicates a standard by which a household can afford housing at fair-market rent without being cost-burdened. (We’ll explain all terms in bold in a future post.)

So why is this a big deal and why do we and other housing advocates focus on this so much?

For one thing, it’s the standard by which federal housing subsidies known as Section 8 vouchers are determined.

Adopted in 1981, that standard remains the benchmark for affordability and is especially meaningful for people at lower income levels. At higher income levels, some homeowners or renters choose to spend more for their housing costs but they’re also more likely to have enough disposable income to cover other basics such as food, education, clothing, child care and transportation.

Beacon primarily serves people who are extremely low-income – those who would typically qualify for a Section 8 voucher, were any available. (There are long wait lists.) This chart outlines qualifying incomes in the Twin Cities metro area. The numbers vary in different areas of the country, and even different parts of the state based on average median income (AMI) and average fair-market rent.

(Oh, and by the way, the HUD figure is also the standard that many mortgage lenders used for years to determine if an applicant’s income was sufficient for them to repay their loans in a timely manner. At least this was true before the subprime loan/foreclosure crisis – consider this my public service announcement to go see the movie The Big Short. )

Finally, there are different types of affordable housing. The financing packages Beacon assembles to create or preserve affordable housing have grown and shifted over the years as policy makers create programs and appropriate (or unfortunately, sometimes eliminate) funding sources. The financing usually resembles a huge puzzle – make that a 3-D puzzle.

Affordable housing is often subsidized for capital and operating costs through public sources including Section 8 and state or local sources (Affordable Housing Trust Fund, or the state’s Group Residential Housing pool, for example.) At Beacon, private contributions are always part of the mix, as well.

It can also be supportive housing (housing that has services targeted to the particular needs of its tenants – i.e. youth, seniors, people with disabilities). It can be newly developed, such as Prior CrossingNicollet SquareRiverview Apartments and other recent Beacon developments.

There is also “naturally occurring affordable housing” (or NOAH – you knew there would be another acronym, right?). That would be housing already on the market whose rents fall within the boundaries of affordability,  for example houses or apartment units in modest or transitional neighborhoods that haven’t been “gentrified” (where more affluent residents purchase and renovate homes in older, grittier neighborhood, usually driving up market-rate rents and consequently driving out lower-income folks who can’t pay those rents.)

And then there is workforce housing. At Beacon that includes Creekside Commons, family sized apartments affordable to workers with modest earned incomes.

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Housing Deconstructed: The first of an occasional series on housing terms and concepts by members of the Beacon staff. Was this useful? Interesting? Sleep inducing? Share your thoughts.