Affordable housing

A term used to describe dwelling units whose total housing costs are affordable

Meaning deemed "affordable" to those that have a median income. Although the term is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the concept is applicable to both renters and purchasers in all income ranges. This article focuses on the affordability of owner-occupied and private rental housing as social housing is a specialized tenure.

In the United States and Canada, a commonly accepted guideline for housing affordability is a housing cost that does not exceed 30% of a household's gross income. Housing costs considered in this guideline generally include taxes and insurance for owners, and usually include utility costs. When the monthly carrying costs of a home exceed 30–35% of household income, then the housing is considered unaffordable for that household.

Supply and demand

Distribution of U.S. Median Home Values
Because of supply and demand, the most "affordable" places are where there is the least demand relative to supply. Where the supply of available housing is less than the demand, low- and moderate-income households often struggle to obtain housing that is affordable. In these housing markets, rising land values often outpace rising incomes. Such housing markets often have a limited supply of residential land, or a number of regulations that make it difficult or costly to increase housing supply at rents affordable to consumers at income ranges below the local average.

Measuring demand is complicated, and subject to different views. It can be measured in terms of the costs for housing, housing type (such as apartments vs. single-detached homes, or the size and configuration of units, including number of bedrooms) and location for housing (relative to commercial/employment centers, transportation infrastructure, schools and other community resources.) A key element in measuring housing demand is differentiating between the "ability to pay" that some households have, and the "willingness to pay" of households for certain housing types in certain locations. When a place has attributes that trigger high degrees of "willingness to pay", prices often rise due to the finite supply, thereby changing that place's relationship to household "ability to pay". When a place has attributes that make it undesirable, the willingness to pay is reduced and the price falls. This explains why some places within an otherwise unaffordable area (measured in the aggregate) remain very affordable, such as a distressed inner city neighborhood in an otherwise expensive city.

In the United States, a key element in determining affordable housing is acceptable commuting time/distance. In Southern California, for example, a household's inhabitants must decide whether to pay more for housing to keep commuting time and expense low, or to accept a long and/or expensive commute in order to obtain "better" housing.

Household Income

A primary factor in housing affordability is household income. The most common approach is to consider the percentage of income that a household is spending on housing costs.

Another method of studying affordability looks at the regular hourly wage of full-time workers who are paid only the minimum wage (as set by their local, regional, or national government). The hope is that a full-time worker will be able to afford at least a small apartment in the area that he or she works in.

Other countries look at those living in relative poverty, which is usually defined as making less than 60% of the median household income. In their policy reports, they consider the presence or absence of housing for people making 60% of the median income.

Housing Costs

The other major factor is the measurement of housing costs.

Some organization and agencies consider the cost of purchasing a single-family home; others look exclusively at the cost of renting an apartment.

Many U.S. studies, for example, focus primarily on the median cost of renting a two-bedroom apartment in a large apartment complex for a new tenant. These studies often lump together luxury apartments and slums, as well as desirable and undesirable neighborhoods. While this practice is known to distort the true costs, it is difficult to provide accurate information for the wide variety of situations without the report being unwieldy.

Normally, only legal, permitted, separate housing is considered when calculating the cost of housing. The low rent costs for a room in a single family home, or an illegal garage conversion, or a college dormitory are generally excluded from the calculation, no matter how many people in an area live in such situations. Because of this study methodology, median housing costs tend to be slightly inflated.

Costs are generally considered on a cash (not accrual) basis. Thus a person making the last payment on a large home mortgage might live in officially unaffordable housing one month, and very affordable housing the following month, when the mortgage is paid off. This distortion can be significant in areas where real estate costs are high, even if incomes are similarly high, because a high income allows a higher proportion of the income to be dedicated towards buying an expensive home without endangering the household's ability to buy food or other basic necessities.

Furthermore, the absolute availability of housing is not generally considered in the calculation of affordable housing. In a depressed or sparsely settled rural area, for example, the predicted price of the canonical median two-bedroom apartment may be quite easily affordable even to a minimum-wage worker – if only any apartments had ever been built.

Cost of the "right to build"

An article in the November 2007 issue of Atlantic Monthly reported on a study of the cost of obtaining the "right to build" (i.e. a building permit, red tape, bureaucracy, etc.) in different U.S. cities. The "right to build" cost does not include the cost of the land or the cost of constructing the house. The study was conducted by Harvard economists Edward Glaeser and Kristina Tobio. According to the chart accompanying the article, the cost of obtaining the "right to build" adds approximately $600,000 to the cost of each new house that is built in San Francisco. 

Consequences of affordable housing shortages

A common measure of community-wide affordability is the number of homes that a household with a certain percentage of median income can afford. For example, in a perfectly balanced housing market, the median household (and the half of the households which are wealthier) could officially afford the median housing option, while those poorer than the median home could not afford the median home. 50% affordability for the median home indicates a balanced market.

A community might track the percentage of its housing that is affordable to households earning 60% of median income. In addition to the distress it causes families who cannot easily find a place to live, lack of affordable housing is considered by many urban planners to have negative effects on a community's overall health. For example, lack of affordable housing can make low-cost labor more scarce, and increase demands on transportation systems (as workers travel longer distances between jobs and affordable housing). A number of studies and articles focused on U.S. cities (Los Angeles, CA, Sarasota, FL) seek to link housing cost increases and declines in enrollment at local schools.

Policy tools to address affordable housing

Numerous policies in the U.S. and abroad have been designed to address the problem of inadequate supplies of affordable housing. Sophisticated secondary market mechanisms, inclusionary zoning, and land banking are three prominent tools, as well as tax and fiscal policies that result in reducing the cost of mortgages and the cost of borrowing. Other more recently promoted policy tools include relaxation of prohibitions against accessory dwelling units, and reduction of the amount of parking that must be built for a new structure.

Affordable housing is a controversial reality of contemporary life, for gains in affordability often result from expanding land available for housing or increasing the density of housing units in a given area. Ensuring a steady supply of affordable housing means ensuring that communities weigh real and perceived livability impacts against the sheer necessity of affordability. The process of weighing the impacts of locating affordable housing is quite contentious, and is laden with race and class implications.

Affordability by country

United States

Comprehensive data for the most affordable and least affordable places in the U.S. is published each year by an affordable housing non-profit organization, the National Low Income Housing Coalition. The NLIHC promotes a guideline of 30% of household income as the upper limit of affordability.

Under this definition, most people in the United States have secured affordable housing arrangements. In 2001, the median household paid $658 per month in total housing costs. A total of 20% of households are deemed to be living in unaffordable housing: Nine percent of all households are renters in unaffordable housing, and eleven percent of all households are homeowners with high housing costs.

In the 2000 U.S. Census, the median homeowner with a mortgage (70% of homeowners and 48% of census respondents) spent $1,088 each month, or 21.7% of household income, on housing costs. The median homeowner without a mortgage (30% of all homeowners (80% of elderly homeowners) and 20% of respondents) spent $295 per month, or 10.5% of household income, on housing costs. Renters in 2001 (32% of respondents) spent $633 each month, or 29% of household income, on housing costs.

Housing subsidies by country


Australians in receipt of many social security benefits from Centrelink who rent housing from a private landlord are eligible for rent assistance. Rent assistance is a subsidy paid directly to the tenant in addition to the basic Centrelink benefit such as the Age Pension or the Disability Pension. The amount of rent assistance paid depends on the amount of rent payable, whether the tenant has dependents and how many dependents there are. Tenants who live in public housing in Australia are not eligible for rent assistance.

Australians buying a home for the first time are eligible for a first home owner grant. These grants were introduced on 1 July, 2000 and are jointly funded by the Commonwealth government and the state and territory governments. First home buyers are currently eligible for grants of $14,000 (for established dwellings) or $21,000 (for newly constructed dwellings) to alleviate the costs of entering the housing market.

The Commonwealth government in 2008 introduced first home saver accounts, whereby those saving for a new home are eligible for government contributions to their savings account, subject to conditions.

United Kingdom

The United Kingdom has a long tradition of promoting affordable social rented housing. This may be owned by local councils or housing associations. There are also a range of affordable home ownership options, including shared ownership (where a tenant rents part share in the property from a social landlord, and owns the remainder). The government has also attempted to promote the supply of owner occupied affordable stock for purchase, principally by using the land-use planning system to require that housing developers provide a proportion of lower cost housing within new developments. This approach is commonly known as inclusionary zoning and the current mechanism for securing the provision of affordable housing as part of a planning application for new housing development is through the use of a S.106 Agreement.

A high proportion of homes in the UK were previously council-owned, but the numbers have been reduced since the early 1980s due to initiatives of the Thatcher government that restricted council housing construction and provided financial and policy support to other forms social housing. In 1980, the Conservative government of Margaret Thatcher introduced the Right to Buy scheme, offering council tenants the opportunity to purchase their housing at a discount of up to 60% (70% on leasehold homes such as flats). Alongside Right to Buy, council-owned stock was further diminished as properties were transferred to housing associations. Council Tenants in some instances have chosen to transfer management of the properties to arms-length non-profit organizations. The tenants still remained Council tenants, and the housing stock still remained the property of the Council. This change in management was encouraged by extra funding from central government to invest in the housing stock under the Decent Homes Program. The program required council housing to be brought up to a set standard was combined with restrictions on the amounts that councils could borrow and led to an increase in such arms length management organizations being set up. In some areas, significant numbers of council houses were demolished as part of urban regeneration programs, due to the poor quality of stock, low levels of demand and social problems.

In rural areas where local wages are low and house prices are higher (especially in regions with holiday homes) there are especial problems. Planning restrictions severely limit rural development. but if there is evidence of need then Exception sites can be used for people with a local connection. This evidence is normally provided by a housing Needs survey carried out by a Rural Housing Enabler working for the local Rural Community Council.

Housing associations are not-for-profit organizations with a history that goes back before the start of the 20th century. The number of homes under their ownership grew significantly from the 1980s as successive governments sought to make them the principal form of social housing, in preference to local authorities. Many of the homes previously under the ownership of local authorities have been transferred newly established housing associations, including some of the largest in the country. Despite being not-for-profit organizations, housing association rents are typically higher than for council housing. Renting a home through a housing association can in some circumstances prove costlier than purchasing a similar property through a mortgage.

United States

U.S. Federal Housing Budget 1976-2007The federal government in the U.S. provides subsidies to make housing more affordable. Financial assistance is provided for homeowners through the mortgage interest tax deduction and for lower income households through housing subsidy programs. In the 1970s the federal government spent similar amounts on tax reductions for homeowners as it did on subsidies for low-income housing. However, by 2005, tax reductions had risen to $120 billion per year, representing nearly 80 percent of all federal housing assistance. The Advisory Panel on Federal Tax Reform for President Bush proposed reducing the home mortgage interest deduction in a 2005 report.

Housing assistance from the federal government for lower income households can be divided into three parts:

  • “Tenant based” subsidies given to an individual household, known as the Section 8 program
  • “Project based” subsidies given to the owner of housing units that must be rented to lower income households at affordable rates, and
  • Public Housing, which is usually owned and operated by the government. (Some public housing projects are managed by subcontracted private agencies.)
“Project based” subsidies are also known by their section of the U.S. Housing Act or the Housing Act of 1949, and include Section 8, Section 236, Section 221(d)(3), Section 202 for elderly households, Section 515 for rural renters, Section 514/516 for farm workers and Section 811 for people with disabilities. There are also housing subsidies through the Section 8 program that are project based. The United States Department of Housing and Urban Development (HUD) and USDA Rural Development administer these programs, and have further information on the particular programs on the agencies' respective web sites: HUD and USDA, Rural Development. HUD and USDA Rural Development programs have ceased to produce large numbers of units since the 1980s. Since 1986, the Low-Income Housing Tax Credit program has been the primary federal program to produce affordable units; however, the housing produced in this program is less affordable than the former HUD programs.

One of the most unique US public housing initiatives was the development of subsidized middle-class housing during the late New Deal (1940-42) under the auspices of the Mutual Ownership Defense Housing Division of the Federal Works Agency under the direction of Colonel Lawrence Westbrook. These eight projects were purchased by the residents after the Second World War and as of 2009 seven of the projects continue to operate as mutual housing corporations owned by their residents. These projects are among the very few definitive success stories in the history of the US public housing effort.

In the U.S., households are commonly defined in terms of the amount of realized income they earn relative to the Area Median Income or AMI. Localized AMI figures are calculated annually based on a survey of comparably-sized households within geographic ranges known as metropolitan statistical areas, as defined by the US Office of Management and Budget. For U.S. housing subsidies, households are categorized by federal law as follows:

  • Moderate income households earn between 80% and 120% of AMI.
  • Low income households earn between 50% and 80% of AMI.
  • Very low income households earn no more than 50% of AMI.
Some states and cities in the United States operate a variety of affordable housing programs, including supportive housing programs, transitional housing programs and rent subsidies as part of public assistance programs. Local and state governments can adapt these income limits when administering local affordable housing programs; however, U.S. federal programs must adhere to the definitions above. For the Section 8 voucher program, the maximum household contribution to rent can be as high as 40% gross income.

Additional resources


In Canada, the Social Housing Services Corporation (SHSC) is a leader in providing group services for social housing providers. SHSC was created in the Province of Ontario in 2002 to provide group services for social housing providers (public, non-profit and co-op housing) following the downloading of responsibility for over 270,000 social housing units to local municipalities. It is a non-profit corporation governed by a board of municipal, non-profit and co-op housing representatives. Its mandate is to provide Ontario housing providers and service managers with bulk purchasing, insurance, investment and information services that add significant value to their operations.

With an annual budget of $4.5 million, SHSC and its two subsidiaries, SOHO and SHSC Financial Inc. offers a dedicated insurance program for social housing providers, bulk gas purchasing and an innovative energy efficiency retrofit program which coordinates energy audits, expertise, funding, bulk purchasing of energy-efficient goods, training and education, and data evaluation. SHSC manages and provides investment advice to housing providers on capital reserves valued at more than $390 million. Working closely with other housing sector organizations and non-governmental organizations, SHSC also supports and develops independent housing-related research, including a new Housing Internship program for graduate-level researchers.

Recently there has been a move toward the integration of affordable social housing with market housing and other uses. In the notorious Downtown Eastside of Vancouver, currently under constrution, is the Woodwards Building Redevelopment which is the most inclusive project in the history of Canada. After a two stage competition between three developers, in September 2004 the City of Vancouver Council selected Westbank Projects/Peterson Investment Group to develop and Gregory Henriquez of Henriquez Partners Architects to lead the design of the new buildings at the Woodward's building site. The 330 million dollar project, includes 536 market housing units,200 units of social housing of which 125 are singles non-market housing units to be operated by PHS Community Services,75 are family non-market housing units to be operated by Affordable Housing Society, a Food Store and drugstore, a Bank, shops, community and public space, federal and civic offices, a daycare, and a new addition to the SFU downtown campus: the 130,000 sf School for Contemporary Arts. The oldest part of the complex (built 1903–1908) will be restored, and will serve as non-profit community space( 31,500 sf) which will include space for Aids Vancouver among many others. The project is slated to finished construction near the end of 2009.

United States

Governmental and quasi-governmental agencies that contribute to the work of ensuring the existence of a steady supply of affordable housing in the United States are the U.S. Department of Housing and Urban Development (HUD), USDA Rural Development, the Federal Home Loan Bank, Fannie Mae, and Freddie Mac. Important private sector institutions worth consulting are the National Association of Home Builders and the National Association of Realtors. Valuable research institutions with staff dedicated to the analysis of "affordable housing" includes: The Center for Housing Policy, Brookings Institution, the Urban Institute and the Joint Center for Housing Studies at Harvard University and the Furman Center for Real Estate and Urban Policy at New York University, and the Center on Budget and Policy Priorities. Several of these institutions (the Fannie Mae Foundation, Urban Institute, Brookings Institution Metropolitan Policy Program, Enterprise Community Partners, LISC, the Harvard Joint Center for Housing Studies, and others) partnered to create KnowledgePlex, an online information resource devoted to affordable housing and community development issues. Additional alignments have been established with Starta Development Starta Development to ease the process of funding application with the use of technology.

United Kingdom

All major housing associations are registered with the Housing Corporation, which regulates them and provides grants for development. Housing associations that are registered with the Corporation are also known as Registered Social Landlords.

The Department for Communities and Local Government has responsibility for housing in England. In January 2007 it announced a planned merger between the Housing Corporation and regeneration body English Partnerships to create the Homes and Communities Agency (initially announced as "Communities England"). This new body is likely to have access to more than £4 billion in resources.

In contrast to the rest of the United Kingdom, social housing in Northern Ireland is regulated by the Northern Ireland Housing Executive, which was established to take on ownership of former council stock and prevent sectarian allocation of housing to people from one religion.

See also

  • Community land trust, a way of preserving land for reduced cost housing
  • Housing association, UK charities that rent low-cost housing
  • Exclusionary zoning, zoning practices that raise the cost of housing above an affordable level
  • Inclusionary zoning, zoning that requires the inclusion of affordable housing
  • Housing cooperative, a housing organization that is owned jointly by its resident-members
  • Inclusionary zoning, the practice of designating some high-value land for low-cost housing
  • Migration of the disadvantaged, in which disadvantaged people are priced out of desirable areas
  • Public housing, or social housing, is housing owned directly by a government agency
  • Gregory Henriquez, architect who specializes in affordable housing
  • Woodward's building, a project in Vancouver, Canada, which integrates affordable housing with market housing
  • Subsidized housing, in which part of the cost of housing is paid by a third party, such as a government
  • Sweat equity, a recent term for a landowner's choice to reduce his cash costs by providing his own labor

External links

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