HUD's Area Median Income Standards Work Against Affordable Housing Goals
Housing affordability remains in a desperate situation in most major metropolitan areas, and one of the key tools in formulating affordable housing could be exacerbating the issue.
Area median income is a figure determined by the U.S. Department of Housing and Urban Development to set maximum rents in multifamily developments that use some form of public financing, most notably in the form of Low Income Housing Tax Credits. But AMI is determined at a county level, often pushing the median above what low-income families can reasonably afford.
In Los Angeles County, which contains Santa Monica and Malibu in addition to its eponymous city, the AMI is $77,600, according to HUD. That allows landlords to qualify for inclusionary zoning bonuses tied to providing units set aside for those making 80% AMI or less to rent to individuals making as much as $63,100, The New Republic reports.
In the U.S., the median tenant made just over $40K per year in 2018, while 11 million residents make 30% of their local AMI or less, which qualifies them as extremely low income, per HUD guidelines. Less than 4% of affordable units built with inclusionary zoning carve-outs are set aside for 30% AMI or less, TNR reports.
For buildings to qualify for LIHTC, at least 20% of units must be occupied by tenants making 50% AMI or less, or 40% must be occupied by tenants making 60% AMI or less. In L.A. County, 50% AMI is $38,800. The median income in poorer parts of L.A.'s Chinatown neighborhood is $27K, TNR reports. Disparities like that have contributed to the current national situation, wherein 40% of all residents in buildings that have been awarded LIHTC also receive Section 8 vouchers to make up the difference between their income and their rent, according to HUD data reported by TNR.
Privately owned, publicly subsidized affordable housing has been virtually the only way to build new units that rent for anything below market rate since Richard Nixon implemented a moratorium on the construction of new public housing in the early 1970s, TNR reports. Since then, HUD and state and local governments have dealt with dwindling funding that has left them more dependent than ever on the commercial real estate industry.
One solution proposed by tenant advocates in L.A.'s Chinatown is the use of eminent domain to force land sales. By taking ownership of affordable housing units, governments can stem the tide that has seen two units disappear from affordability for every new unit that gets built as zoning and LIHTC covenants expire, advocates told TNR. About 500,000 units in the U.S. are set to have affordable covenants expire in the next eight years, the National Low Income Housing Coalition found in a 2018 study reported by TNR.