What is Affordable Housing?

There are 2 housing-related terms that are commonly misunderstood: luxury housing and affordable housing. For this post, we will talk just about affordable housing.

Last year, the Chinatown Blogger conducted 10 focus groups in Chinatown with 93 participants. (And what!? You thought the Chinatown Blogger was some ET dropped from space to blog about Chinatown?) To gather diverse opinions and views, focus groups included a broad segment of the community organized by age groups, different occupations, and Chinatown residents/non-residents. There was one common mis-interpretation when participants in the focus groups were asked about what they thought was affordable housing? The most common (and incorrect) answer was: Whatever that I can pay!

The problem with understanding what affordable housing is due to the complicated formulas drawn up by the Department of Housing and Urban Development (HUD). When a developer says: “We are building 15% affordable on-site with an income of 80%-120%…” most people would scratch their head at that statement. To understand these terms, let’s look at the Boston Redevelopment Authority’s figures on affordability. The table can be accessed from the City of Boston’s website.

By using the 100% as the barometer in the 1st table, a single person making up to $60,050/yr is eligible for an affordable unit. In the 2nd table, a maximum set price is given for a home purchase based on the number of bedrooms. The 3rd table is maximum rent the developer is allowed to charge for a rental unit. Again, using the 100% as the barometer for a rental unit, a developer can charge $1,501/month for an affordable studio apartment. Developers have the option to increase the income guidelines from 100% up to 120% of the income limits for an affordable unit (vice versa they can decrease to 30% of income if they wish).

Based on the 120% income guidelines, a single person can make up to $72,050/yr and be charged a maximum of $1,801 for a studio apartment. To summarize, if at 100% income limit the maximum rent for a studio is $1,501 or if at 120% of income limit, the maximum rent is $1,801… that doesn’t sound too affordable considering that the average median household income for Boston residents is ~$40,000/yr.

The problem with some of the affordability data is because Greater metropolitan Boston communities with higher incomes are included to compute the guidelines.While we have highlighted just a single person, how would these affordability guidelines affect, say, a young couple/family of 2 working adults. The 100% income is $68,650/yr, which is plausible if each adult worked full-time and made $34,325/yr ($82,350/yr combined if at 120%). A 1 bedroom at 100% eligibility would equate to $1,716/mo. Can this young couple afford the rent? Yes, because $1,716 x 12 and then divided by $68,650 equals to 30% of their income. But can a 1-bedroom asking $1,716 still be considered affordable? That is a decision this hypothetical young couple would have to decide.

This entry was posted on June 25, 2008 at 2:55 pm and is filed under WORD ON THE STREET. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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