What Does "Affordable Housing" Actually Mean?

According to the Office on Housing and Urban Development (HUD), housing is considered affordable if it costs 30% or less of what the renter/homeowner earns, utilities included. Many people pay 50% or more of their income to housing costs, which makes them fall into the "housing burdened" category, and means they have little discretionary income to use on savings, retirement, or entertainment, which helps support the economy.Affordable housing may bring up images of public housing "projects", but more often "affordable housing" refers to rental units that are part of a privately-owned apartment building or multi-family. There are also some homeownership models that have deed restrictions to preserve permanent affordability. In this model, the income restriction applies at time of purchase, but the owner may later exceed the income limits with no penalty.Because the most common model of affordable housing is one or more rental units restricted to affordable levels, that is what we’ll look at here.There are tax credits and lower interest loans available to developers who create affordable units within a housing development and some towns may require that some percentage of units (often 10% - 20%) be made "affordable." The rules and regulations about zoning and tax credits are extremely complex and not what we are covering here, but anyone interested in Massachusetts' rules can find information about the Low Income Tax Credit (for developers creating units reserved for those earning up to 40% of the AMI) here and about affordable housing development here. So nestled into a large apartment building may be several apartments that go for a far lower rent than the others.The rent considered affordable is based on the Area Median Income (AMI), which is defined annually by HUD (in mid-April). Generally, “affordable housing” is available to people/households that earn up to 80% of the AMI. Some affordable housing is restricted to those earning up to 60% of the AMI. The median income varies a lot by region in Massachusetts. Some cities have their own AMI and others are regional (by county or by Census area)For example, the FY22 Boston/Cambridge/Quincy area was $140,200 per household.

So for the many, many towns in the greater Boston area, a family of four earning $111,850 is eligible for affordable housing. And the “affordable” rent for that family of four earning 80% of the AMI would be $2,908 per month for a fully privately owned/developed unit. Development that used 40B funding is slightly different and the cap on the rent for a 40B-funded three bedroom unit would be $2,552 per month.

Wellesley, one of the towns in the Boston/Cambridge/Quincy market has a median rental cost of $4,500 for a three-bedroom, so the $2,908 “affordable” rent is certainly less than market rate, but still not what many would think of as “affordable”. For Boston itself, the median rent for a 3 bedroom is $3,222, and in Quincy, it is $2,600 – less than the rent set for those earning 80% of the AMI.So "affordable housing" really means housing costs that are 30% or less of a household's income. Many in Massachusetts wish that there was more of it, so that MA residents could spend their income in other areas besides just shelter.Several current projects include a percentage of affordable units (due to either a shortage of such units in a municipality or the advantageous financing of projects that contain affordable units, even if the municipality has "enough" affordable units). One such project is the new mixed-use development underway at the former Court Square Hotel in Springfield. The once grand hotel and opera house has been vacant for decades. It is being redeveloped to contain 59 market-rate apartments and 12 "workforce apartments" that will be restricted to those earning up to 80% of the AMI, or $73,300 for a family of four, as of the FY22 HUD AMI limits: The favorable financing that comes with the affordable units helps the developers' bottom line. The full cost of the project is budgeted at $49 million and includes financing from the city and state.The architectural rendering shows what the completed facade with apartments on upper levels and storefront retail, including a restaurant that will be run by the prominent Lee family of restauranteurs.