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What is affordable housing?

Affordable housing benefits communities, people, and the local economy, and it is an integral aspect of life. ​​Affordable housing is generally defined as housing on which the occupant or occupants are paying no more than 30 percent of gross income for housing costs, which includes utilities. The term can refer to privately-owned subsidized housing, housing choice vouchers and public housing.

Income limits for affordable housing tenants change according to location. These limits are based on median income estimates and fair market rent area definitions for each metropolitan area, parts of some metropolitan areas, or each non-metropolitan county. Qualifying affordable housing projects can receive government funding.

You can read more about what affordable housing is in our article here.

How does affordable housing get built?

It can be very difficult for affordable housing to be approved, financed and built, and the main reason for this is that lenders loan money for housing developments based on the expected income of the property. When rents are set to affordable levels, this leads to a gap between the money that investors provide, and the money needed to build.

However, affordable housing properties are receiving more support, and therefore being approved and built at increased rates, as people understand the great need for affordable housing, and government entities assist in bringing them to areas where housing is most needed.

A federal tax credit administered by state agencies, the Low-Income Housing Tax Credit (LIHTC), is the primary source of development funding for most affordable housing communities. The LIHTC legislation allows for the allocation of tax credit dollars that can be used to help fund the properties, thus increasing their chances of actually coming to fruition.

In order to receive these tax credits, a proposed development must dedicate at least 20 percent of its units to people who earn less than half of the area median income, or at least 40 percent of its apartments to people who earn less than 60 percent of area median income.

To be deemed affordable, the rent for those apartments must be no more than 30 percent of the target income level.

Yet, even if a new community proposal meets these conditions, tax credits aren’t guaranteed. States allocate tax credits through a competitive process that varies by state. In most states, there are more property proposal applications than available credits.

Complicating affordable housing funding further is the fact that most affordable housing financing deals involve a mortgage, tax credits, and two or three other sources of money. It’s not uncommon for developers to rely on 20+ financing sources as they try to fill the gap between what it costs to build affordable housing and the money they have available.

You can read more about how affordable housing gets built at the Urban Institute.

After tax credits and other financial sources are confirmed, construction on the property can begin. This is a process that can last between 1-2 years. Often properties begin pre-leasing before the property officially opens.

How does the affordable housing application process work for potential residents?

Depending on the housing program that someone is applying to, applications for an open waiting list will be available from a given area’s housing authority, or by an affordable apartment community’s management company or landlord.

Housing authorities manage the Section 8 Housing Choice Voucher and Public Housing programs, but not all offer both programs. The housing authority may also participate in other housing programs, and offer affordable apartment communities as well.

How to get an application varies by each housing office, but more information can be found online, in the relevant office, or by calling to request one via mail.

However, we can answer a few of the most commonly asked questions here:

Do all affordable housing residents have to apply with government agencies or the property?

Prospective residents should apply with the property.

How long is the affordable housing application process?

The application process varies. Depending on availability, applications are usually processed within 30 days.

If someone applies for affordable housing, are they able to select their affordable community, or must they take what is available at the time?

Yes, the applicant can select their unit based on availability and what they qualify for.


Affordable housing processes and definitions can seem confusing, until you dig in and learn more. While these processes may change from year to year in some states as legislation is updated, the end result remains the same: affordable housing gives more people a place to call home without overspending. And at a time when the housing crisis rages on, affordable housing is as vital as ever.

Are you interested in learning more about other aspects of the affordable housing process? You can check out affordable housing developments from The Annex Group here, read about how communities benefit from affordable housing, or learn about affordable housing requirements and guidelines here.

You can also ensure that critical affordable housing investments continue to be made by supporting the Build Back Better Bill here.

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