“Affordable housing” seems like it should be easy to define: Does your monthly payment of rent / mortgage still you leave you with enough money to cover all your other basic necessities? What is affordable depends on your monthly income as well as if a number of houses and/or apartments are available in your community in that price range.
For a household, the federal government defines affordable housing (including utilities) as costing no more than 30% of your income.
Of course, this definition isn’t perfect:
- Some people make so little money that no housing is available for even half of what they make.
- Or, even if low income households could find housing at 30% of their income — or half — they still may not be able to afford other basic necessities.
- On the other hand, higher income households may have more disposable (extra) income; they may be comfortable with paying more than 30% for their housing.
Things get more complex, when trying to figure out what is affordable for a community or our nation. Policy-makers ask questions like:
- What quality of a home should most people be able to afford? How much should that cost?
- If your home costs more than you can afford, is there some place else in your community that is more in your price range?
- Is it okay for nearly all the housing in a community to be beyond the price-range of low-income households?
- How can a home be deemed affordable in one part of the country or state, when it is unaffordable someplace else?
Taking all this into account local, state, and federal governments often set up programs to assist households and / or housing developers at a variety of low- to mid-income and cost levels. As a starting point, a community asks what its Area Median Income (AMI) is; that is, at what income level do half the community’s households have more than that and half have less.
Governments then, usually, design programs for a variety of percentages of the Area Median Income:
- 80% of AMI is considered low income
- 50% of AMI is considered very low income
- 30% of AMI is considered extremely low income
