Housing is determined by HUD to be “affordable” when its cost represents no more than 30% of a household’s actual income. However, HUD determines annually the Area’s Median Income (AMI) levels for various size households determines an “affordable rent” by a bit of reverse logic, several algorithms and census statistics.

To make housing affordable for the low/moderate income person/family, a developer or owner (which might be a non-profit organization), must financially package the property so that the end cost is low enough to be “affordable” for at least a portion of the unit owners/renters. This is usually accomplished by using several pots of money which are available for this purpose. Primary sources of funding are federal HOME dollars, CDBG grants administered through the local municipality, state dollars… other public sources available through the local community. In addition, developers can use low-income housing tax credits, municipal zoning incentives, privately donated monies or reduced interest loans from financial institutions. If a developer uses a piece of property within an existing Community Land Trust, that further reduces the cost and assures perpetual affordability. At every level, funds are limited and it requires dedication, patience and creativity to produce a final affordable project.

The above subsidizes the unit cost; Section 8 certificates, formally called Housing Choice vouchers (which generally apply only to rental situations) subsidize the person/family. If an owner agrees to accept a Section 8 family, the family pays no more than 30% of its income for rent and the federal government pays the difference between that amount and the lesser of the contract rent or the FMR. Units must not have higher market rents than the “Fair Market Price” established for the area.

Reprinted from the City of Evanston [Illinois] Housing Commission’s Affordable Housing Future website at http://www.evanstonhousing.com/index.htm