About Low Income Apartment Rentals

A disparity exists between the supply of and demand for low-income housing. The National Low Income Housing Coalition estimates that, for the neediest renters--those with incomes at or below 30 percent of their area's median--there is a shortage of more than 3 million affordable units. Various types of apartment rentals aim to close this gap.

Function

Low-income apartment rentals aim to help poor families meet the nation's generally accepted standard of housing affordability. As the National Low Income Housing Coalition states, housing--the combined cost of rent and utilities--is affordable as long as a family does not spend more than 30 percent of its income on it. The inadequate supply of affordable rentals, the Coalition claims, leads to overcrowding, with the poor opting for low-quality housing and many families committing more than half of their income towards housing.

Methods

Low-income rentals almost always arise from some type of subsidy, either direct or indirect. HUD, which provides or facilitates a significant segment of the nation's low-income housing stock, generally uses direct subsidies. HUD estimates that the public housing program provides housing authority-operated, affordable rentals to 1.2 million U.S. households. The Section 8 program supplies eligible renter households with a subsidy they can use in the private market to make up the portion of their rent that is greater than 30 percent of their income, according to HUD's Housing Choice Voucher fact sheet.

Some cities, namely places with relatively expensive rents, such as New York and San Francisco, use indirect subsidies. In effect, private developers subsidize the construction of low-income rentals. San Francisco's Below Market Rate program requires developers to make 15 percent of the units in new construction of five or more units affordable. That number jumps to 20 percent if the builder elects to erect the affordable units off-site, according to the San Francisco Mayor's Office of Housing. New York uses a relatively complicated scheme. As the New York City Department of City Planning explains, for-profit developers can receive more space than typically allowed by the city's zoning code to develop market rate units in exchange for developing more square feet of affordable rentals.

Income Limits

Every year HUD uses data from the American Community Survey to set income limits for low-income housing programs. These limits are based on an area's median income and household size. HUD tends to consider families for its programs at three different income levels. "Extremely low-income" encompasses families with annual earnings at or below 30 percent of their area's median. The "very low-income" category includes households at or below 50 percent of the median, while HUD classifies "low-income" households as those at or below 80 percent of the median.

Eligibility

Most agencies, particularly HUD, use income as the main qualifier for low-income rental assistance. HUD allows families with incomes at or below 50 percent of their area's median to apply for a housing choice voucher under Section 8, notes the program's website. The cap rises to 80 percent for public housing. San Francisco's Below Market Rate program uses HUD-derived income limits, however, most of the units in its program are available to families at or below 55 percent of San Francisco's median income.

Considerations

When a family enters into an agreement to rent a public housing unit, it does so with their local housing authority. By contrast, a Section 8 tenant signs a pact with his local housing authority regarding the terms of assistance payment as well as a lease with a private market landlord. As HUD's Housing Choice Voucher fact sheet indicates, Section 8 renters must abide by the terms of the lease they sign with their landlord or face sanctions, including eviction, as permitted by applicable law.

References

• HUD: Housing Choice Vouchers Fact Sheet
• HUD: HUD's Public Housing Program
• HUD: HUD 2010 Income Limits
• National Low Income Housing Coalition: 2010 Advocates' Guide
• New York City Department of City Planning: Residential Districts: Inclusionary Housing
• San Francisco Mayor's Office of Housing: Below Market Rate Program