Common Questions About Affordable Housing

The multifamily commercial real estate market in the Northeast is huge, and we received an overwhelming amount of questions from prospects who are looking for multifamily affordable lending options and low-income housing development programs. Here we address some of the most common questions we receive about affordable multifamily housing.

Q1: What is meant by affordable housing?

The term “Affordable Housing” is widely used in the United States. Used for the affordable housing and rental, or owner-occupied buildings. The affordability is irrespective of one’s income. As regarded by the U.S. Government, housing costs that are either below or 30% of one’s income, is termed as affordable.

Q2: What is Subsidized Housing?

This term is often inappropriately used for housing assisted by the U.S. Government. It’s better used for housing with rental assistance. Hence, subsidized housing is where the government pays directly for all or a percentage of the occupants monthly housing cost. For instance, according to Section 8 housing vouchers, a renter just needs to pay a percentage of the rent that is declared as affordable to them, on the basis of their income.

Q3: Many properties have been built with LIHTC? What’s that?

LIHTC stand for Low Income Housing Tax Credits, which is a Federally owned housing assistance plan, providing tax incentives to affordable housing owners. Instead of direct assistance to renters, the program solely finances the construction, excluding the operation, of rental housing. These properties are rented to families having either 60% or less of the Area Median Income (AMI). These properties are of high quality, often taken as equivalent to luxury housing. LIHTC is considered as the most popular, affordable and successful housing plan, with millions of affordable rental units on board since its inception in the 1980s.

Q4: How can I know if my income qualifies for an affordable apartment?

The U.S. real estate market, and especially in the Northeast, is filled with dozens of housing programs. As a general rule, if your income is less than 60% of the median income of your residing area, you may qualify for LIHTC housing, which is the biggest chunk of rental housing available. To avail rental subsidies, where you pay just 30% of your income as rent, you must be earning less than 50% of the government’s determination of median income. There are special programs that cater to even lower income groups, sometimes as low as 30% of median income. Property managers will know what is available for the properties they manage.

Q5: I am not familiar with Area Median Income (AMI)? Can you explain what is that?

The qualifying criterion for the recipients of government housing plans is based on income. Because every market area is characterized by different income levels and living costs, Area Median Income (AMI) of each market area is taken by the government as a determining factor for qualifying recipients. For instance, in San Francisco, the area median income in 2014 was found to be $88,500, while it was $67,900 in Dallas.

Q6: Can you explain Section 8?

Section 8, unfortunately, is no longer encouraged, yet it was a good plan for helping good people. It’s the HUD plan that helps renters by paying their rent for any rent cost that is more than 30% of their income. For example, if your monthly earning is $2,000 in San Francisco, and your rent is $1,150 a month, this plan will pay $550 of that rent because 30% of your income is $600. However, this subsidy is very limited in number, so you must be willing to wait, as per your number on the long waiting lists of the program across the U.S.

Q7: What is meant by Housing Authority?

It was the U.S.’s first program to get lower income citizens affordable housing. A housing authority is locally based and caters a city or entire county. Some of these are statewide and help housing all over the country. Their funding comes from HUD, the Department of Housing and Urban Development, which is used to execute Section 8 voucher plans and public housing (low rent housing).

Leave a Reply