Finding affordable housing is a major problem in many parts of the United States. As of October 2021, 49% of Americans said that the availability of affordable housing was a major problem in their area. In 2020, 46% of renters spent at least 30% of their income on housing alone. This includes a whopping 23%
The post What is Income-Restricted Housing? appeared first on The Zumper Blog.
Finding affordable housing is a major problem in many parts of the United States. As of October 2021, 49% of Americans said that the availability of affordable housing was a major problem in their area. In 2020, 46% of renters spent at least 30% of their income on housing alone. This includes a whopping 23% who spend at least half of their income on rent. Income-restricted housing offers an affordable option for renters who are struggling to pay for housing.
What is income-restricted housing?
Income-restricted housing is a planned development for low-income renters that’s funded by the government and some nonprofits. The Department of Housing and Urban Development (HUD) established low-income housing funded by federal taxes in the 1960s. Low-income housing offers lower rental rates to individuals with a low income. The government subsidizes the difference between the apartment’s market value and the rent that’s actually charged through this program.
What’s the difference between income-restricted and income-based housing?
Income-restricted housing and income-based housing have similar names, which often leads to confusion. Rent for an income-restricted apartment is capped at a percentage of the area’s median income. The exact percentage varies based on the rental market rates and the size of the apartment.
Rent for an income-based apartment is determined by the renter’s individual income rather than the area’s median income. The apartment’s rent may not exceed 30% of the renter’s adjusted gross income.
Can I use a Section 8 voucher for income-restricted housing?
You cannot use a Section 8 housing choice voucher for income-restricted housing. These housing choice vouchers are only applicable for nonsubsidized rentals. Government subsidies fund both income-restricted and income-based housing.
Section 8 housing choice vouchers are awarded to eligible individuals who are very low income, elderly, or disabled. HUD funds from the government pay the public housing agencies (PHAs) that provide the vouchers. These vouchers make private market housing accessible to individuals who couldn’t otherwise afford these units. Though the property manager must agree to rent their unit under the Section 8 program, renters can apply for any apartment using a Section 8 voucher. This type of assistance is not limited to any particular property.
Who owns income-restricted housing?
Some income-restricted housing is owned by the government. In this case, the government itself acts as the property manager. Private owners may also provide income-restricted housing. In this case, the owner receives a government subsidy for the housing. This private operator then acts as the property manager.
Many income-restricted apartments exist within designated communities that are comprised exclusively of this type of unit. Some apartment properties maintain a blend of income-restricted housing and market-rent units. However, for a property manager to receive the Low-Income Housing Tax Credit (LIHTC), they must rent:
At least 20% of housing to renters making 50% of the area’s median gross income or less.At least 40% of housing to renters making 60% or less of the area’s median gross income.No units to renters making 80% or more of the area’s median gross income.
How much does income-restricted housing cost?
The rent price for income-restricted housing varies by location. The area’s median income plays a major role in the final cost of the unit. For example, the median household income in the San Jose-Sunnyvale-Santa Clara area of California is $110,040 per year. An income-restricted property limiting renters to 60% of the median income would therefore cater to anyone making $66,024 per year or less. Meanwhile, the median income in Detroit, Michigan, is just $27,838 per year. Individuals making 60% of the average in Detroit would be eligible for income-restricted housing making $16,703 per year or less.
Though this may seem unfair, it’s important to note that the cost of living varies by area as well. The overall cost of living in Detroit is 42.8% lower than in Santa Clara. The average rent in Santa Clara is $2,829 per month while the average rent in Detroit is $1,166 per month.
Since income-restricted apartments base their rent on market value, the rate may fluctuate over time. This means that renters could see an increase from year to year if they choose to renew their leases.
Who qualifies for income-restricted housing?
To qualify for income-restricted housing, you must have an annual household income of no more than 60% of the area’s median income. In comparison, the requirements for income-based housing are stricter. To qualify for income-based housing, you cannot make more than 50% of the area’s median income.
Each locale may set its own requirements on top of this, which further limits the income of these renters. You’ll usually find a chart for your locale that defines “Low,” “Very Low,” and “Extremely Low” income limits based on family size. Cities usually give preference to families with lower income levels, but you may still qualify with “Low” income depending on how competitive the rental market is in your area.
How do I find income-restricted housing?
Contact your local public housing authority (PHA) to find income-restricted housing in your area. Your PHA can provide you with a list of rentals in the area that offer income-restricted units. You’ll need to fill out an application with the PHA, pass a background check, and provide proof of identification and proof of income. If you have children living with you, you’ll need to provide birth certificates. There’s often a waitlist for income-restricted housing, so you should begin the application process as early as possible if you’re looking for this type of unit.
Income-restricted housing can provide a useful solution for low-income families who are struggling to afford market rent units. However, you should keep in mind that you’ll have to reevaluate your housing choice annually. If the market rent increases, the price of your unit may go up, too. An increase in your income will also impact your eligibility. Consider your needs carefully each year to determine whether income-restricted housing is the best solution for your needs.