Affordable Housing 101

What is affordable housing v. subsidized housing v. workforce housing?

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 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 are often used to determine affordability. For example, the federal government considers housing to be affordable if a family spends no more than 30% 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%) 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 more than 30% 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% for housing. A family’s capacity to meet other expenses depends on other factors such as family size and age of children.

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, and medical care.


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 homebuyers or tenants to buy or rent. Some households, 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 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.


What is workforce housing?

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 is also 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 do not 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.