Affordable housing is housing that a household can pay for without being financially stretched. The most common benchmark in the United States is that rent plus basic utilities (or a mortgage plus housing costs) should take no more than about 30% of a household’s gross income. Households that spend more than that are often described as cost burdened.
In everyday use, the term also refers to specific rental properties whose rents are restricted for lower-income households through a government program.
How it works
Most affordable housing programs tie eligibility to area median income (AMI), the midpoint income for a region adjusted for household size. HUD publishes income limits each year, and programs set their thresholds as a percentage of AMI. Common tiers include:
- Extremely low income: generally 30% of AMI or less
- Very low income: generally 50% of AMI or less
- Low income: generally 80% of AMI or less
The main ways affordable rentals are created and funded include:
- Low-Income Housing Tax Credit (LIHTC). Developers receive federal tax credits in exchange for keeping a share of units rent restricted for qualifying households, typically at 50% or 60% of AMI, for a long compliance period.
- Housing Choice Vouchers. Often called Section 8, vouchers let eligible tenants rent private units, with the local housing authority paying part of the rent directly to the landlord. Payment levels are based on fair market rent.
- Public housing. Units owned and run by local public housing agencies.
- Inclusionary zoning. Local rules that require or encourage new developments to set aside some units at below-market rents.
Example
Picture a hypothetical household of three earning $54,000 a year in an area where that income equals 60% of AMI. Using the 30% guideline, an affordable monthly housing cost is $54,000 times 0.30 divided by 12, or $1,350, including a utility allowance. A LIHTC unit restricted at 60% of AMI would be priced at or below that level.
Why it matters for landlords
Affordable housing can offer steady demand and, in some programs, reliable subsidy payments. It also brings extra work: annual income recertifications, rent limits, utility allowances, unit inspections and detailed records that agencies may audit. Missing a step can put tax credits or subsidy contracts at risk.
Software built for this work helps. TenantLoop for affordable housing keeps resident files, documents and rent records organized in one place, and our affordable housing compliance guide walks through the basics. Program rules are detailed and change, so confirm requirements with your housing agency or an attorney.
Related terms
Related questions.
What does AMI mean in affordable housing?
AMI stands for area median income, the midpoint household income for a metro area or county, adjusted for household size. Programs set eligibility as a percentage of AMI, such as 50% or 60%.
Is affordable housing the same as Section 8?
Not exactly. Section 8 usually refers to the Housing Choice Voucher program, which helps tenants pay rent in privately owned units. Affordable housing is a broader term that also covers tax credit properties, public housing and other income-restricted rentals.
Can a private landlord offer affordable housing?
Yes. Private owners take part through programs like LIHTC, by accepting housing vouchers, or through local inclusionary zoning rules. Each program comes with its own rent limits, income checks and reporting.