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What is "affordable housing"?

There is no single definition of affordable housing. What is considered "affordable" by a family earning $100,000 a year will likely be out of reach for another family that earns only $25,000 a year. Incomes and housing costs also vary by location. A typical home in one community might cost $300,000, while that same house would cost half as much in another part of the country.

Rules of thumb often are used to determine affordability. For example, the federal government considers housing to be affordable if a family spends no more than 30 percent of its income on its housing costs, including utilities. Using this benchmark, a family earning $30,000 a year could afford to pay up to $9,000 a year (or $750 a month) on housing. In the private sector, lenders underwriting home purchases typically require that families spend no more than some set percentage of income (such as 28 percent) for mortgage payments, taxes and insurance.
Yet, these "rules" don’t tell the whole story. A family making $200,000 per year can afford to spend 30 percent of its income on housing and have enough left over to meet other necessities, but a family making $20,000 might not be able to make ends meet on the income left over after spending 30 percent for housing. A family’s capacity to meet other expenses depends on other factors such as family size and age of children.

To learn more 
about the difficult trade-offs that families face when housing is unaffordable, see the Center for Housing Policy's report, Something's Gotta Give [PDF].
Gates of Ballston
Gates of Ballston, Arlington VA -- photo courtesy of AHC Inc.

Ultimately, families of all incomes need affordable homes – homes that are decent and accessible to jobs, shopping and other services, and available at a cost that allows them to provide for life's other necessities, such as food, clothing or medical care.
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What is "subsidized" housing?

Most housing – affordable or otherwise – is provided by the private market place. That is, developers, homebuilders or landlords compete to sell or rent units to potential home buyers or tenants. Some households, however – particularly lower-income households – are at a great disadvantage when it comes to renting or buying market-rate homes. They may have to pay excessive portions of their income, crowd in with other families to pool resources, or live in substandard conditions. That is why various government programs have been created to help people obtain decent, affordable homes.

Subsidized housing is housing that is made available at below-market rates through the use of government subsidies. Unlike other government support programs, such as food stamps or Medicaid, housing subsidies are not an entitlement and are generally in short supply. Many communities have long waiting lists for housing assistance.

Click here to learn more about housing subsidy programs.
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Who is eligible to live in subsidized housing?

To live in a home funded by a federal housing subsidy, an applicant must qualify by income. The yardstick the government uses to measure income eligibility for housing assistance is the median income for the area, known as the area median income or AMI. For the largest federal rental assistance programs – specifically, Housing Choice Vouchers, public housing, and project-based Section 8 – federal law limits eligibility to households with incomes at or below 80 percent of AMI. Other federal rental assistance programs are limited to families with incomes at or below 60 percent of AMI (Low-Income Housing Tax Credit) or 50 percent of AMI (supportive housing for the elderly and disabled). Direct federal subsidies for homeownership are generally limited to families with incomes at or below 80 percent of the area median income, though reduced-cost mortgage programs reach families with somewhat higher incomes.

6 North
Photo courtesy of McCormack Baron Salazar
Because there are many more eligible families than resources available to serve them, two other factors come into play in selecting families for admission to federally subsidized housing. The first is "income targeting" – a rule that directs a certain percentage of new admissions to families with incomes below 30 percent of the area median income. This rule is intended to ensure that families with the most severe housing needs are prioritized for scarce rental subsidies.

The second factor is local admissions criteria which allows public housing agencies and private owners of assisted housing to admit families based on other criteria (e.g., priority to homeless families, the elderly, or selection by lottery). Click here to leave this site and access a chart providing more detailed
information on income eligibility, income targeting, and rents for federal rental assistance programs.

When state and local housing programs use federal funding, they are subject to federal rules. When using only state or local funds for housing, however, they are not subject to these rules. As housing challenges have grown among moderate-income families, a number of states and localities have decided to use purely state or local funding to meet the needs of these families. States and localities are also using policy tools other than direct subsidies – such as innovative zoning policies, tax abatements, and the use of publicly owned land – to meet the housing needs of these families.
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What is "workforce housing"?

As one observer put it, "housing is where the jobs go home to sleep at night." Workforce housing is housing for the occupations needed in every community, including teachers, nurses, police officers, fire fighters and many other critical workers. In many communities, there is a mismatch between where these jobs are located and where affordable homes are located – a difficult situation for both working households and employers. Many working families must choose between paying exorbitant housing costs to live close to their jobs or enduring lengthy commutes from areas with more affordable housing. In areas with particularly high housing costs, employers may have difficulty retaining employees because the workers do not make enough to afford nearby homes and tire of long commutes.

Workforce housing also is an issue of equity. People who provide the bulk of essential services in their communities – teachers, police officers, fire fighters, hospital workers, laundry and restaurant workers – often cannot afford to live in the communities they serve. The lack of affordable workforce housing is felt beyond working families, however. High housing costs force families to move further and further from their place of work to afford housing. Cities become ever more sprawling, leading to increases in traffic congestion, air pollution, and road maintenance costs that negatively affect the quality of life for all residents in the community.

The families in need of workforce housing don't fall neatly into a single narrow income category. Employees in some industries (e.g. retail sales, food service, tourism) are likely to be in the lower income ranges. Seasoned workforce jobs with education or training requirements, such as teachers, police officers, nurses, etc., may fall into the middle income brackets but still find it difficult to afford homes in the community where they work.

To address these issues, a growing number of employers, states and localities are developing "workforce housing" programs to bring housing within reach of working families. These programs utilize many of the tools described in the Toolbox section of this site.

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Why is decent, affordable housing important?

Decent, affordable housing is important to families. Certainly, it fulfills a basic human need for shelter, but it also contributes to the well-being of both parents and children. Studies show that children in stable housing do better in school and are less likely to experience disruption in their education due to unwanted moves. By alleviating crowding and improving housing quality, decent, affordable housing reduces exposure to stress, toxins and infectious disease which leads to improvements in both physical and mental health. Affordable housing also frees up funds within families' tight budgets to spend on health care and food. Studies have found that children whose parents receive housing assistance benefit from better nutrition. For parents, living in decent, affordable housing also means reduced stress due to a lessening of concerns that high housing costs will lead to foreclosure and eviction; this in turn leads to fewer physical and mental health problems and reduced absenteeism on the job.

To learn more about how housing helps kids do better in school and improve child and family health, click here to leave this site to access literature reviews on "how housing matters" prepared by the Center for Housing Policy and Enterprise Community Partners.  Click here to read a research brief produced by the Center for Housing Policy for the John D. and Catherine T. MacArthur Foundation that profiles the research efforts of Sandra J. Newman, director of the John Hopkins Institute for Policy Studies, to understand how affordable housing affects the lives of its occupants [PDF].

Affordable housing also is important to the economic vitality of communities. Affordable homes can attract and retain employees to your community – a selling point and a competitive advantage for area employers. Affordable homes also support the local workforce so they can live close to their jobs. Shorter commutes allow workers to spend more time with their families while the community benefits from reductions in traffic congestion, air pollution and expenditures on roads. In revitalizing communities, the construction of affordable homes can also help to stimulate economic growth. A healthy mix of housing options, from market-rate and affordable rental housing, single-family homes, duplexes, as well as developments for seniors ensures opportunities for all individuals to improve their economic situation and contribute to their communities.
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Why is there still an affordability problem?

According to 2011 data from Harvard's Joint Center for Housing Studies, between 2001 and 2007 the number of households paying more than half of their income for housing, considered a severe housing burden, increased by 30 percent to 17.9 million households. Importantly, both the absolute number of severely-burdened households and the percentage of the market they represent increased every year during this period.

While some assume that recent home price deflation means that we no longer have a housing affordability problem, the data does not support this assumption. In the unlikely event that home prices should continue to decline until 2015 and eventually reach 2000 levels, projections from the Joint Center indicate that there would still be 16.2 million households severely burdened by housing costs. And these statistics do not even capture the fact that many working families can only afford to live far from their places of work, forcing them to endure long commutes and spend much of their housing cost savings on transportation.

So why do housing affordability problems persist in many communities? There are a variety of reasons, including that housing affordability is determined by the relationship between a variety of factors including income, rent or mortgage payments, and energy costs. 

Working families have seen only modest wage increases in recent years.  In fact, after accounting for inflation, many families' incomes either remained flat or dropped while home values in many cities increased to unprecedented levels, even doubling in some metropolitan areas. Although prices have recently begun to decline, they haven't declined enough to be affordable to many working families.

With stagnant wages, the only housing option for many working families has been rental housing. And the Center for Housing Policy has demonstrated through their Paycheck to Paycheck research that in most markets, even rental housing is out of reach for families that depend upon workers in low-paying jobs. These families require ongoing subsidies such as those provided by the federal government through its various rental assistance programs. Unfortunately, available subsidies serve only about one-quarter of those in need -- a strong argument for continued and expanded federal funding for these programs.

Photo courtesy of Potterhill Homes

While home prices have declined in many markets, rents have not seen comparable declines. One reason for this is the limited production of rental housing. In the first five years of this decade, barely 200,000 units of rental housing were produced -- not enough to replace units lost to conversion or demolition much less meet rising demand, especially in some of the country's strongest markets.  And the economic downturn has worsened the outlook for rental housing production as sources of capital have become more difficult to secure, which is especially true for funding from Low Income Housing Tax Credits, one of the most important funding sources for developers of affordable rental properties.  At the same time, in many communities families affected by the foreclosure crisis may be seeking out rental housing, placing additional pressure on this segment of the market and causing rent levels to increase.

For working families who own a home, dropping home values have meant that many now owe more than their homes are worth, making it difficult to refinance their mortgages to lower their monthly housing expenses. Although some government efforts are attempting to address this problem, for existing homeowners the loss in home value can mean lost wealth and an increased risk of foreclosure, rather than any increased affordability. Some of these homeowners will lose their homes; in fact, initial findings are showing that even those who refinance may eventually lose their homes.

Energy costs, including utility payments and transportation costs, represent the final component of housing affordability. These costs have become increasingly volatile with the growing instability of our energy supplies and will likely remain unpredictable for the foreseeable future.  Transportation costs have also increased with gas price volatility, a fact that is too often overlooked when determining housing affordability. The combined cost burden of housing, utility and transportation costs has only recently been documented through research conducted by the Center.

The new realities of our housing market will require new and creative policy solutions at the federal, state and local levels. State and local policies that make it difficult or expensive to build new affordable homes and apartments or rehabilitate existing units often serve to exacerbate affordability by preventing the market from supplying enough high-quality housing to meet the demand and pushing development further from job centers. Low-density zoning, excessive and duplicative permitting procedures, and policies that limit the availability of multifamily rental homes are examples of policies that may drive up the price of housing by restricting the supply of affordable homes.

What can be done? provides the tools to help you tackle the problem in your community. Start with the Building a Strategy section to see where your community stands. Then, explore the many proven solutions to creating more affordable housing in the Toolbox section.

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Which is more important -- rental homes or homeownership?

To meet the diverse needs of your community, both rental housing and homeownership are important. The recent housing crisis demonstrated the risks involved with an overemphasis on one type over the other and the importance of having a balance of housing options. Rental homes fulfill the needs of many families. For some, especially low- and moderate-income families in high-cost markets or families who have recently lost a home to foreclosure, rental homes are the most financially realistic option. Other people rent because they prefer the lifestyle of renting and may be as socially invested in their community as homeowners typically are. Among their ranks are both former homeowners who are empty-nesters and lifelong renters who don’t want to worry about lawns, gutters and home repairs. Rental housing also provides a perfect housing option for people in all stages of the life cycle, including singles, the recently divorced, and the widowed. Still others rent because they expect to move frequently -- with some studies showing that increased housing mobility allows renters to take advantage of career advancement opportunities not available to less mobile homeowners. Finally, for some families, affordable rental housing is an important steppingstone that allows them to accumulate savings and become prepared for homeownership.

Homeownership is also a critical part of the housing stock and can be a stable and affordable option when the mortgage terms and home price are within reach of a family's budget. For many working families, homeownership represents the American Dream. Aside from comprising their largest financial asset, homeownership provides security from unwanted moves, control over features of their home, and tax benefits. Some studies have shown that homeownership is beneficial for children – they are more likely to do well in school, less likely to have behavior problems and less likely to become pregnant as teenagers. From a community’s perspective, homeowners may provide stability to their neighborhoods in which they are invested.

For these reasons, communities should work to ensure there is sufficient rental and homeowner housing stock to meet the diverse needs of all families in the community.

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How can we increase housing options for working families?

There are many innovative housing policies that will help bring rental and for-sale homes within reach of working families. But no one policy by itself will solve the problem; a comprehensive housing strategy is needed. An effective housing strategy enables housing officials to coordinate limited resources so they are used efficiently and in a way that is responsive to local circumstances. Some communities may have a need for foreclosure prevention and neighborhood stabilization that is not being adequately addressed through existing efforts.

Others may have an ample supply of affordable homes but need to revitalize them to stimulate economic opportunity in some neighborhoods or preserve their endangered stock of affordable rental apartments. Whatever the circumstances, preparation of a comprehensive housing strategy helps avoid a haphazard approach to implementation of solutions and enables communities to address the housing needs of residents and members of the local workforce in an effective and coordinated fashion.

Elements of an effective housing strategy include: (1) a needs assessment highlighting deficits in the local housing supply and resources available to address

Carlton Court
Photo courtesy of McCormack Baron Salazar
those shortfalls; (2) overarching goals ("Increase the supply of affordable rental units") and specific objectives related to those goals ("Build 10,000 new rental units in the next 10 years"); (3) a series of well-designed and coordinated policies that address all the different aspects of the problem; and (4) a realistic timeline for implementation with benchmarks to track progress and responsible parties designated for each step. This last piece can help officials make sure development stays on track and community goals continue to be met.

Finally, as the housing crisis and economic downturn have shown, as the realities of housing markets change, policies and programs should be reassessed to assure they are appropriate for the new realities.

Click here to learn more about how to develop an effective housing strategy.

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What can state and local governments do?

Through the efforts of innovative states and localities, we've learned quite a lot about what can be done and what works when it comes to increasing the supply of affordable homes for working families. The options are many, and the goal of is to help you sort through and identify those that are best for your community.

After a detailed review of state and local housing policies, we've identified six broad roles that state and local governments can play to make housing more affordable. Because housing problems are complex, most communities with housing challenges will want to consider a comprehensive approach that includes policies within all or nearly all of these categories. Click on each category to go to the corresponding section of the policy Toolbox:

  • Expand Development Opportunities -- This includes making publicly-owned land and tax-delinquent properties available for development of affordable homes and changing the zoning rules to allow more affordable homes to be built. Communities facing disinvestment due to a rise in mortgage foreclosures can benefit from these policies to ensure that foreclosed homes are reestablished as affordable, productive properties to help stabilize neighborhoods.
  • Reduce Red Tape -- Expediting the approval process and re-thinking overly restrictive fees and regulations can create more affordable homes by reducing the time, risk, and cost of new development. These techniques can also be employed to encourage the rehabilitation and redevelopment of foreclosed homes and properties. Vacant homes have a destabilizing effect on established neighborhoods and anything that speeds the return of occupants to the homes helps stabilize the neighborhood.
  • Capitalize on Market Activity -- During times of strong housing markets, communities can tap the increased tax revenue associated with rising property values or provide incentives or requirements to include a modest number of affordable homes within new developments. Communities can ride the tide of a strong market to expand the supply of affordable homes. During times of weaker housing markets, communities can capitalize on market activity they generate through tax incentives. During these times, communities can use the policies in this section to ensure that affordable homes will continue to be a part of the local housing landscape when market-rate development resumes.
  • Generate Capital -- Promising approaches include leveraging federal funds through the Low-Income Housing Tax Credit program, which is administered by state housing finance agencies. Tax credits include a noncompetitive 4 percent credit and a competitive 9 percent credit. Other tools include issuing general obligation bonds for housing, and leveraging the support of area employers. The tools to generate capital may be impacted by an economic downturn. Programs like the LIHTC have been adjusted to account for the limited market for tax credits by allowing state agencies to convert some credits to cash. Other programs have seen funding decline because their funding is often tied to real estate activity, but these programs will likely remain valuable to incentivize or provide financing to help spur affordable housing production when the economy improves.
  • Preserve and Recycle Resources -- By recycling downpayment assistance (rather than providing grants), and using shared equity homeownership strategies, communities can help preserve the buying power of government subsidies and maintain long-term affordability. This category also includes efforts to preserve affordable rental housing -- a key policy that helps ensure housing remains affordable to working families.
  • Help Residents Succeed -- Investing in homeowner education and counseling and help families manage their credit, navigate the private mortgage market, and hold on to their homes when economic circumstances change. Tenant protection laws can be established to protect renters in the case of foreclosure and help them stay in their homes. An expanding set of tax incentives and building standards are being adopted at the state and local level to promote energy savings at home through building techniques and land-use changes that encourage energy and locational efficiency, thus reducing household utility and energy costs.
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Where do I find housing data for my community?

Chances are a great deal of data already are available on housing conditions in your community, but the information needs to be pulled together to paint a comprehensive picture. The place to start is with your local housing and community development agency. Communities that receive federal dollars (often passed through the states) through the HOME or Community Development Block Grant programs (CDBG) have to submit Comprehensive Housing Affordability Strategies as part of their Consolidated Plan that include extensive data on area demographics, housing needs and the local housing supply. Other government agencies, such as the local tax assessor's office, can be a source of useful data on areas where home values are growing or declining or where clusters of
vacant properties are emerging. Local Realtors and area lenders can share data on recent home purchases for neighborhoods in your community.

Another great resource to tap is your local community college and university. In addition to faculty members who may be available to do custom analyses of census or other data; you may be able to engage the services of students in the planning, architecture or economics department to conduct on-foot surveys of neighborhood housing and building conditions.

With some official sources of data, there may be a considerable time lag between data collection and release, and you may find that some of the data are a few years out of date. That’s why it is important to go beyond official data sources to talk to those in the know – Realtors, local lenders, residents active in community groups and others. Their insights can be invaluable and they often can pinpoint problems long before they show up in the official data.

Click here for a list of housing data resources on the Internet.

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How can my community fund its affordable housing efforts?

With limited federal dollars available for housing and growing shortfalls in state and municipal budgets, most communities have to get creative. Many communities pull funding together from a variety of sources, finding private and non-profit partners to leverage their resources and make them go further.  Listed below are several ways your community can fund affordable housing:

Tap into federal funding. New federal funding through the Neighborhood Stabilization Program (NSP) is available for states and localities that have been affected by widespread foreclosures. The initial round of NSP funding, known as NSP1, was authorized by the Housing and Economic Recovery Act (HERA) of 2008. NSP1 provided $3.92 billion in grants to states and selected localities based on a formula that allocated more funding to communities that had been greatly impacted by foreclosures. In 2009, the American Recovery and Reinvestment Act (ARRA), established two additional rounds of NSP funding, known as NSP2 and NSP-TA. NSP2 will provide $1.93 billion in competitive grants to states, localities, and non-profit organizations, and NSP-TA will provide $50 million on a competitive basis to organizations that provide technical assistance to NSP grantees.

ARRA also included $5 billion in weatherization assistance for states and U.S. territories to support the installation of energy conservation materials on low-income homes.

The Consolidated Plan merges into one process and one document all the planning and application requirements of four HUD block grants that can be used for affordable housing: HOME, Community Development Block Grants (CDBG), Emergency Shelter Grants (ESG), and Housing Opportunities for People with AIDS (HOPWA) grants. These funds are provided directly by HUD to large cities and urban counties, as well as to states, who allocate these federal grant funds to jurisdictions that do not receive money directly. Communities must submit a Consolidated Plan to receive these funds. Other direct HUD funding for new affordable housing development is provided through the Section 202 Supportive Housing for the Elderly and Section 811 Supportive Housing for Persons with Disabilities programs.

Click here to view a list of resources providing more information on the Consolidated Plan.

The largest source of federal funding for new development of affordable homes is actually provided not by HUD but through the Low-Income Housing Tax Credit administered by the Internal Revenue Service as part of the tax code. There are two types of Low-Income Housing Tax Credits: 9 percent and 4 percent credits. In most states, competition for 9 percent credits has traditionally been very heavy, however the economic downturn has limited the market for tax credits and has hurt developers' existing and proposed projects. The 4 percent credit is noncompetitive, and more could be done to draw down these credits. Click here to leave this section and learn more about expanding usage of 4 percent Low-Income Housing Tax Credits.

Crawford Square
Crawford Square, Pittsburgh PA -- photo courtesy of McCormack Baron Salazar
The Rural Housing Service (RHS), an agency in the U.S. Department of Agriculture, operates a broad range of programs to support affordable housing and community development in rural areas. RHS offers both direct loans and guarantees for mortgages extended by others. Under the Section 502 program, loans help low-income families purchase or rehab homes. The agency also operates the Section 515 program which provides low-cost mortgages for property owners to develop rental housing that is affordable to the lowest income rural residents.

Generate state or local funds. In addition to federal funds, many states and localities fund housing and community development from local revenue sources such as property taxes or general city or state tax revenue -- all of which have been affected by the economic downturn. Some communities earmark money from real estate transfer taxes to finance housing trust funds that, in turn, finance the construction or rehabilitation of homes. Some float general obligation bonds or use future tax revenues (tax-increment financing) to fund new housing efforts. Others levy impact fees
on new developments as a way of funding some of the required infrastructure for new developments, including linkage fees on new commercial development.  Click here to leave this section and learn more about generating additional capital for affordable homes.

Mobilize non-traditional partners. Faced with shrinking budgets, some communities are leveraging support for affordable homes in other ways. For
example, when employment markets are strong and affordable housing is lacking, employers face the problem of attracting and retaining workers. During these times, communities can engage employers by helping them implement employee benefit programs that provide homeownership counseling and financial assistance for downpayments or rent. Many communities work with foundations or other nonprofits able to commit resources for specific housing projects and programs in the community.

Click here to leave this section and learn more about leveraging employer commitment to affordable homes for their workers.

Use existing resources creatively. Communities can figure out ways to stretch their resources to go further. One strategy, implemented with great success in some jurisdictions, is recycling downpayment assistance. Instead of cash grants to families, downpayment assistance is structured as forgivable loans or as silent second mortgages that are repaid when the home is sold or refinanced and the money goes back into a pool to assist other homebuyers. To further extend and enlarge the buying power of public subsidies, in some places, communities receive a share of the price appreciation upon the sale of a home, in addition to their initial investment. All are ways to ensure limited money can reach more families. Click on one of these links to leave this section and learn more about recycling downpayment assistance and shared equity homeownership.

Recognize it's not all about money. Not all housing initiatives require money. Communities can enact policies that provide incentives to the private market to create more housing. Donating public land or facilities for conversion to homes by private or nonprofit developers is one option. When land costs are taken out of the development financial equation, affordable housing can often become feasible. Making the permitting and approval process less time consuming can help builders and owners move forward with plans to build or rehabilitate homes. Rezoning parts of the jurisdiction for housing, increasing allowable densities, or implementing inclusionary zoning policies are other possibilities that do not require dollars per se. Click on one of these links to leave this section and learn more about strategies for reducing red tape, expanding development opportunities or inclusionary zoning.
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How do we ensure that "affordable housing" stays affordable?

The public invests considerable resources creating affordable rental and for-sale homes for working families. Because public resources are limited, communities have a vested interest in ensuring that these homes stay affordable over time. For rental developments, policies to maintain long-term affordability include covenants requiring that new affordable developments remain affordable in perpetuity (or for as long as possible), together with realistic funding structures that make it possible for owners to make good on this promise. It is also important to put policies in place to preserve the affordability of existing affordable rental developments in danger of leaving the affordable inventory. To leave this section and learn more about the preservation of existing affordable rental homes, click here.

For for-sale homes, communities can adopt shared equity homeownership policies, such as community land trusts or shared appreciation mortgages. Shared equity homeownership represents a unique approach to affordable homeownership. Under this approach, a state or local government provides funding to help a family purchase a home. In return for this investment, the government entity shares in the price appreciation of that home. The public's share of the home's appreciation may be used in two ways; it can either be returned to the government in the form of a cash payment that can be used to help another family, or it can stay with the home, reducing the cost of that home for the next family.

By sharing the gains in home price appreciation with the public investor, shared equity homeownership results in substantial benefits now and for years to come. Homebuyers benefit from a substantially lower home price and the opportunity for significant home equity gains. Local communities benefit by retaining vital workers who otherwise couldn't afford to live in the communities they serve. And, by ensuring that the public's investment keeps pace with the housing market, shared equity strategies allow governments to help generations of families achieve homeownership with a single initial investment. Click here to leave this site and view Shared Equity, Powerful Results: Helping One Generation of Homeowners After Another, the Center for Housing Policy’s suite of materials on shared equity.

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How do we provide housing for those with special needs?

Some members of your community have needs that go beyond just shelter. Community members with such special needs may include people who are homeless or are at risk of homelessness, as well as those who have left other systems of care without a place to live, such as young people aging out of foster care or people leaving jail or prison. Others, such as the elderly, may have chronic, disabling health conditions. Still others may suffer from mental illness, HIV/AIDS, and/or substance use issues. In addition, some people face substantial barriers to housing stability because of domestic violence or other trauma.

Different approaches have been used to meet the special needs of individuals and families. One option is to provide counseling and other services to families who live on their own. Another option is to bring individuals together to an affordable development that offers specialized services. Many communities have had success building and funding supportive housing – the combination of permanent, affordable housing with services such as education, job training, medical and psychiatric assistance – that help people with special needs live more stable, productive lives. Proponents of supportive housing point out that, despite higher up-front costs to provide supportive housing, it may be cost-effective for a society as a whole. A study of more than 4,000 people with severe mental illness in New York City found that considerable cost savings result when these individuals are provided with stable, supportive housing as compared to leaving them stuck in the revolving door of high-cost crisis care, prisons, and emergency housing. Investing in a long-term solution can produce positive results for people with special needs and their communities. Click here to leave this site and learn about supportive housing.

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What strategies work best in rural areas and weak markets?

Housing needs are not confined to "hot" markets, coastal areas or urban landscapes. Housing needs are more pervasive, affecting families in all types of markets and in many regions throughout the country. In weak markets or in rural areas, home prices and rents are lower, but affordability still is an issue when low wages and salaries are insufficient for families to live in their homes without spending an excessive portion of their income. Some housing may be dilapidated because weak market conditions discourage their owners from investing in upkeep and maintenance. And, today, some communities have been particularly hard hit by foreclosures among homeowners.

Strategies to deal with these problems will differ from place to place, but much can be done to address these problems. Resources available nationwide, such as Low Income Housing Tax Credits and financing programs of the Federal Home Bank system, as well as state allocations of funding through the Community Development Block Grant and HOME programs, can be used to create more affordable homes in rural areas. The Rural Housing Service (RHS), an agency in the U.S. Department of Agriculture, operates the Section 515 program which provides low-cost mortgages for property owners to develop rental housing for the lowest income rural Americans. The agency also administers the Section 502 loan program to help low-income families purchase, build, repair, or renovate homes. Funds also may be used to refinance debts when necessary to help families avoid losing a home. Country Lane
Country Lane, Lakeville MN -- photo courtesy of LHB Inc.

To promote homeownership, many rural communities have had great success with the Self Help Opportunity Program. This program enables low-income participants to build their own homes, usually working together in groups on their neighbors' houses at the same time. Homebuyers use their own "sweat equity" to reduce the cost of their homes. Habitat for Humanity has successfully applied the self-help housing model throughout the country, and in the process become one of the nation's largest home builders. Many communities work closely with Habitat and other self-help housing developers to provide free or low-cost land and other support. Click on one of these links to leave this site and learn more about affordable housing in rural communities or to learn about Habitat for Humanity.

Early intervention, including financial counseling and emergency loans and refinancing can help families forestall foreclosures on their homes. Click here to leave this section and learn more about ways to help residents avoid foreclosure and equity loss. Other topics addressed by that are of particular interest in weak-markets include: strategies for dealing with vacant and abandoned properties and strategies for incentivizing market activity through tax abatements and tax increment financing.

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Where can I learn more about affordable housing solutions?

You've come to the right place! is a guide for policymakers and practitioners who want to create more affordable housing opportunities in their communities. We present solutions -- do-able, proven solutions -- that are working in states and localities around the country. We lay out more than 20 specific programs and policies organized into six overall strategies -- and explain the details in plain English so that you can adapt these ideas for your community. Furthermore, we've culled through and summarized dozens of print and online resources so that you won't have to. Where to start? We suggest beginning with building a comprehensive housing strategy for your community and then moving on to policy Toolbox.

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How does the government support homeownership?

A number of different government subsidies are designed to reduce the costs of owning a home. The largest is the federal income tax deduction for mortgage interest. To obtain the benefits of the mortgage interest deduction, families have to make enough money to justify itemizing their deductions on their tax returns (as opposed to taking the standard deduction). For this reason, many working homeowners do not receive the benefit of the deduction.

However, these families may be eligible for other forms of government support for homeownership. State or local policies to reduce the cost of homeownership include: below-market interest rates on mortgages from a state or local housing finance agency; downpayment assistance to help families afford the costs of private-market homes or programs to fund the construction of homes that sell for a reduced cost. Working families also benefit from homeownership education and counseling, which can be helpful in navigating the homebuying process. By using shared equity strategies, communities can ensure that a single investment in affordable homeownership can help one generation of homeowners after another.

The government also began providing additional support to first-time homebuyers in the form of a tax credit beginning in late 2008. The Housing and Economic Recovery Act of 2008 included a $7,500 tax credit for first-time homebuyers. This tax credit was increased to $8,000 as part of the American Recovery and Reinvestment Act of 2009, and HUD subsequently announced that qualified borrowers could immediately apply the $8,000 towards their downpayment and closing costs. In addition, several states and localities have also established comparable first-time homebuyer tax credit or bridge loan programs.

The federal government also provides support for homeownership through foreclosure prevention and housing market stabilization programs. In early 2009, the Obama Administration initiated the Making Home Affordable (MHA) Program. MHA is a comprehensive plan to stabilize the U.S. housing market by assisting 7 to 9 million homeowners by reducing mortgage payments to affordable levels and preventing avoidable foreclosures. The program provides detailed guidelines for loan modifications and refinancing by authorized servicers and covers loans issued by five of the largest servicers, as well as those owned or securitized by Fannie Mae or Freddie Mac. All in all this program covers over 75 percent of all home mortgage loans in the U.S., although the actual number of loans being modified is much more limited.

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What can government agencies do? provides a menu of opportunities for state and local governments to become involved – along with their private and non-profit partners – in creating more decent, affordable homes. The "government" role in housing refers to the variety of activities – taxation, zoning, subsidizing, regulating, lending and others – that take place at several levels of governance – federal, state and local.

At the federal level, the government serves primarily as a funder, providing financial resources through federal tax policy such as the home mortgage interest deduction, direct subsidies such as assistance to low-income renters and indirect subsidies such as tax credits to builders of affordable homes. Through its other funding mainstays – the Community Development Block Grant Program (CDBG) and HOME – the federal government provides funds to states and localities as well as the flexibility to address their area housing needs.

In early 2009, the federal government provided substantial additional funding for affordable housing through the American Recovery and Reinvestment Act (ARRA) of 2009. ARRA provides support for affordable housing in several areas, including preservation of affordable housing units and rental assistance to low-income residents. In addition, ARRA expands funding for neighborhood stabilization and community development efforts that create and/or preserve affordable housing, and revitalize neighborhoods hit hard by the foreclosure and economic crisis.

CityHomes on Park, Minneapolis MN --photo courtesy of LHB Inc.
State governments play an important role in housing, too. They help lower the cost of homeownership through mortgage revenue bond programs and also can allocate their portions of CDBG and HOME funding, along with state matching funds, to areas throughout the state. Low Income Housing Tax Credits (LIHTCs), a major source of funding for new and rehabbed rental homes, also are allocated at the state level. Some states promote housing and community development through state-run housing trust funds or other funding mechanisms. In addition, states are responsible for allocating a large portion of Neighborhood Stabilization Program funds to their localities and guiding these localities in developing plans for using these funds to create and preserve affordable housing and stabilize communities wracked by foreclosures.

It is important to recognize that the state role goes beyond providing funding. Among other key roles, states can provide incentives or requirements to encourage localities to adopt policies that will help expand the supply of affordable homes. States also can serve as conveners and educators, as well as facilitators, through strengthened enabling legislation. To leave this section and learn more about the state role, click here.

Local governments are often where the rubber meets the road as far as housing is concerned. From implementing zoning regulations and processing requests for waivers to issuing building permits, and conducting housing code inspections, localities play a direct role in shaping the housing that gets built in their communities. Some localities also donate publicly-owned land or property that has gone into tax foreclosure and contribute local funds to build or rehabilitate homes.

Many larger local governments are also responsible for creating and implementing plans to use funds provided through the Neighborhood Stabilization Program. These local governments allocate these funds to eligible organizations that develop and/or preserve affordable housing. Local governments may also administer foreclosure prevention programs that aid homeowners in danger of losing their homes.

When considering what local governments can do to expand their impact, it's worth noting that not all government initiatives require spending money. By reducing barriers to development, expanding allowable densities, and creating incentives or requirements for the inclusion of affordable homes within new development, local governments can expand the supply of affordable homes with minimal public expense. Visit the Toolbox section of this site to learn more.
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What are the roles & responsibilities of the private sector?

When the lack of affordable homes – both rental and homeownership – threatens the vitality of the community, homebuilders, bankers and realtors certainly are affected, but so too is the local business community at-large. Individual employers as well as Chambers of Commerce, economic development groups and other industry associations can work alongside Mayors, local officials and affordable housing developers to help expand housing opportunities for low- and moderate-income working families and to ensure they are able to stay in their homes.

What can they do? The private sector can participate in and underwrite media campaigns to raise awareness of the need for workforce housing. As the drivers of jobs, tax, revenue and economic development, area employers and business associations hold considerable sway with city council members and legislators when it comes to reforming zoning regulations or other practices that limit the supply of affordable homes. By advocating for more effective local housing policies and actively supporting efforts to expand the supply of housing, private employers can help both themselves and their communities. They also can advocate for state grants for communities that meet their fair share of the need for affordable homes and tax credits for employers that help employees obtain housing. Finally, they can participate directly in employer-assisted housing programs that help employees find affordable housing and, in turn, attract and retain a stable workforce. Click here to go to the section on employer-assisted housing.

It is also important to recognize the critical role that private-sector developers play in expanding the overall supply of housing.  The public sector has been out of the business of constructing housing for decades, instead focusing on creating funding and incentives for nonprofit and for-profit developers to add to the stock. With the right set of market incentives in place, private-sector developers will respond by increasing the supply where needed, leading to more balanced communities that provide housing for people of all income groups.  And with creative policies to keep that housing affordable over time, communities can go a long way towards meeting both their economic development and affordable housing goals.

Private financial institutions -- namely lenders and servicers -- are critical partners who can help to ensure long-term affordability for homeowners and can also help families stay in their homes. With the dramatic shifts in the housing market currently taking place, many lenders and servicers hold mortgages worth more than the value of the underlying asset, the home.  There are creative options for refinancing that would allow the homeowners to stay in their homes and the lenders to limit their losses. Lenders can explore the different refinancing products here.  Some options include low-interest loans or shared appreciation second mortgages, which split one mortgage into two - a fixed-rate mortgage and a silent second mortgage in which no payments are due until the home is resold.

Lenders and services can work with housing counselors on behalf of the borrower or through voluntary agreements with the federal government to assist households that qualify for the federal program, Making Homes Affordable. Through the Making Homes Affordable program, lenders and servicers receive a financial incentive for helping eligible troubled borrowers to modify their loans or refinance to more affordable monthly payments over the long term. Click here to learn more about how the private sector can help families stay in their homes.
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What are the roles & responsibilities of the nonprofit sector?

Nonprofit organizations have been the sponsors, developers and operators of housing – particularly for low- and moderate-income people – for many years. Some nonprofit community development groups focus on the overall improvement of targeted neighborhoods. Others have as their mission serving vulnerable populations such as the homeless or physically and mentally disabled. Still others are sophisticated housing developers who specialize in putting together multiple funding sources to expand the supply of affordable homes. Housing often is utilized by nonprofits as a platform to provide supportive services such as job training, health care, child care, or transportation. Generally, most nonprofits are committed to making the housing they provide permanently affordable. This means they will be unlikely to opt out of affordable housing programs when market prices rise.

Nonprofits also have the flexibility to participate in unique partnerships. For example, some nonprofits provide housing counseling to the employees of private sector firms that offer employer-assisted housing benefits to their workers. Other nonprofits build close connections with residents of particular neighborhoods, gaining the trust of local residents that may be essential for the success of revitalization efforts. Nonprofits also can work with state and local governments to pool financing for specific housing developments. Or, they can advocate for broader policy changes, such as zoning changes that create more affordable housing opportunities in the communities they serve.

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Why Not
Will affordable housing decrease nearby property values?

Affordable housing, particularly high density, multifamily housing, will lower property values in the surrounding neighborhood – right? Not necessarily! This belief has been refuted by numerous studies conducted over a period of many years and in various locations. For example, a study, commissioned by the Family Housing Fund in Minnesota, studied affordable apartments in 12 Twin Cities neighborhoods and found "little or no evidence to support the claim that tax-credit family rental developments in the study eroded surrounding home values." [1]

Likewise, a study of six metropolitan areas – Atlanta, Boston, Chicago, Cleveland, Sacramento and Austin – by Harvard University's Joint Center for Housing Studies confirms that apartments pose no threat to nearby single-family house values. [2] A study of Low-Income Housing Tax Credit properties in Milwaukee and Madison, Wisconsin found that these developments did not reduce nearby property values. And, more recent work in New York City also found no adverse effects from these types of properties. [3] These studies and others show that property values are primarily determined by the condition of the particular property for sale and other broader, more complex factors such as overall area development and prosperity. [4] Nearby units of affordable housing have no significant impact on these other factors, which are the real drivers of property values.

Hunter's Park, Arlington VA -- photo courtesy of AHC Inc.
That said, some research suggests the effects on surrounding property values may depend on the context, concentration and scale of the affordable homes. One review of the research literature found that affordable housing has no adverse effects and may even have positive impacts on property values when well-dispersed. When highly concentrated, however, there may in some cases be more negative impacts on property values, especially in neighborhoods that already are facing other challenges. [5] This suggests the importance of carefully developed affordable housing strategies that ensure that concentrations of poverty are avoided and that affordable homes are well-designed and constructed to ensure they are strong community assets.

One of the major lessons from this body of research is that higher-density affordable housing that is well designed not only does not adversely affect property values, but may even enhance the value of existing homes in the neighborhood. Researchers at Virginia Tech University have concluded that attractively designed and landscaped higher density units actually increase the overall value of area single-family housing. [6] How? New apartments often signal that the local economy is healthy and growing. They also create the density needed to create more retail and other services, thereby increasing the attractiveness of the surrounding area. Finally, the residents of the new multifamily housing can bolster property values by a larger pool of potential buyers for existing owners when they decide to sell their houses.


[1] A Study of the Relationship between Affordable Family Rental Housing and Home Values in the Twin Cities. [PDF] 2000. By Maxfield Research. Minneapolis, MN: Family Housing Fund.
[2] America's Working Communities and the Impact of Multifamily Housing. [PDF] 2004. By Alexander von Hoffman, Eric Belsky, James DeNormandie, and Rachel Bratt. Joint Center for Housing Studies of Harvard University and the Neighborhood Reinvestment Corporation.
[3] Low-Income Housing Tax Credit Housing Developments and Property Values. [PDF] 2002. By Richard K. Green, Stephen Malpezzi and Kiat-Ying Seah. Madison, WI: University of Wisconsin Center for Urban Land Economics Research.
[4] Higher-Density Development: Myth and Fact. [PDF] 2005. By Richard M. Haughey. Washington, DC: Urban Land Institute.
[5] A Review of Existing Research on the Effects of Federally Assisted Housing Programs on Neighboring Residential Property Values. [PDF] 2002. By George Galster. Washington, DC: National Association of Realtors.
[6] Price Effects of Apartments on Nearby Single-Family Detached Residential Homes (Working draft). 2003. by Arthur C. Nelson and Mitch Moody. Blacksburg, VA: Virginia Tech University.

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Won't more housing just overburden our public facilities?

We need more housing to provide homes for an ever-growing population. The issue is how to build and locate those homes in ways that make better use of public facilities. The perception is that new, particularly higher-density, housing will overburden our existing infrastructure. In fact, the opposite can be argued. A recent Brookings Institute study analyzing the costs of sprawl estimated that more than $100 billion in infrastructure costs could be saved over 25 years by pursuing better planned and more compact forms of development. [1] Locating new housing in existing communities can result in efficient use of existing police and fire protection, schools, libraries, trash removal, and other services, and requires fewer resources than establishing new services in more remote locations.

Schools often are a particular point of contention when it comes to higher density housing, such as multifamily homes. Data from the U.S. government’s American Housing Survey show that families with school-age children are more likely to live in low-density, single-family suburban and exurban housing. Single-family developments average 64 children for every 100 units, compared with only 21 children for every 100 units of low-rise or garden apartments and 19 children for every 100 units of mid- to high-rise apartments. The reason is that multifamily housing attracts predominantly childless couples, singles, and empty nesters. A study by the National Multi-family Council makes the point that, although apartment renters do not pay property tax directly, apartment owners do and pay at what usually are higher commercial real estate tax rates. A typical mixed-use development with retail, office, and apartments may be subsidizing the schools and other public services required by residents of low-density housing in the same community. [2]

Finally, higher-density housing can create economies of scale for shops, services, stores, and public transit. The result, proponents of infill and higher-density housing say, will likely be an increase in that community's revenue without significantly increasing the infrastructure and public service burdens.


[1] Investing in a Better Future: A Review of the Fiscal and Competitive Advantages of Smarter Growth Development Patterns. 2004. By Mark Muro and Robert Puentes. Washington, DC: Brookings Institution Center on Urban and Metropolitan Development.
[2] Creating Successful Communities: A New Housing Paradigm. [PDF] 2002. Washington, DC: National Multi Housing Council.
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Isn't attracting jobs more important than providing housing?

A balanced economic development plan should cover both of these areas. Where decent, affordable housing is lacking, firms often encounter difficulty hiring and retaining workers. Some high-profile corporate moves have been prompted by the high cost of housing and excessive burden of commuting faced by employees. Boeing, for example, cited the rising costs of housing and commuting as one of the main reasons for the relocation of its corporate headquarters from Seattle to Chicago. Small businesses are affected as much or more. "It's hard enough for small employers to find good people," a small business owner in Suffolk County, Long Island was quoted as saying. "If there were more affordable housing … I would definitely have a broader range of potential employees to choose from." A balanced economic development strategy should provide for commercial growth as well as the workforce housing needed to fuel that expansion.

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