Affordable Housing Explained, Part 2

Last week we took a look at Mayor de Blasio’s primary strategy for creating the 80,000 affordable rental units cited in his ten-year plan: providing benefits to private real estate developers in exchange for making a percentage of their rental units affordable. Let’s look at what “affordable” really means in these programs as we continue to explore the implications of this model in NYC. 

What is Affordable Housing and Who Does it Serve?  

Like all cities, NYC’s definition of affordable is based on federal standards, established by the Department of Housing and Urban Development (HUD). A cabinet level department, HUD is the successor to a number of federal housing agencies originally created to stimulate housing development during the Great Depression. Throughout history, HUD conceived its major programs—mortgage insurance, public housing, Housing Choice Vouchers, and flexible grants to local governments—as timely solutions to major imbalances in the national housing market. Today, HUD’s mission is vast: to create strong, sustainable, inclusive communities and quality, affordable homes for all.

The Civil Rights Movement’s landmark passage of the Fair Housing Act required HUD to begin monitoring local governments’ use of federal programs for discriminatory practices and impact. To receive routine funding, local governments and housing authorities must present HUD with plans outlining how federal housing and community development funds will be used and administered locally. Local governments define affordable housing based on federal standards and often model local policy after best practices demonstrated by HUD.

Signing of bill establishing the Department of Housing and Urban Development (HUD), 1965. [LBJ Library, photo by Donald Stoderl]

Signing of bill establishing the Department of Housing and Urban Development (HUD), 1965. [LBJ Library, photo by Donald Stoderl]

According to the federal government, if a household spends up to 30% of its gross monthly income on rent, its rent is considered affordable. Households spending more than 30% on rent (about 56% of NYC residents) are considered rent burdened, while those spending more than 50% are considered severely rent burdened (about 30% of NYC residents). In the policy world, rent burden represents a lack of affordability and choice in the marketplace.

HUD determines a household’s degree of financial hardship in relation to the Area Median Income (AMI). Each affordable housing program provides affordable units to different income groups or mixes of income groups.

In the kind of private market incentive programs we discussed earlier, owners are required to set the rents of their affordable units at prices deemed manageable to the income groups targeted by the respective program. A breakdown of New York City’s income groups and affordable rent estimates for each is provided below, based on a family of four. Single individuals making less than $47,000 a year qualify as low income, less than $29,400 as very low income, and less than $17,650 as extremely low income.

Income Bracket % of Area Median Income Rent Required to Prevent Rent Burden Annual Income (4 person household)
Extremely Low Income 0-30% Up to $629 < $25,150
Very Low Income 31-50% $630-$1,049 $25,151 – $41,950
Low Income 51-80% $1,050-$1,678 $41,951 – $67,120
Moderate Income 81-120% $1679-$2,517 $67,121 – $100,680
Middle Income 121-165% $2,518-$3,461 $100,681 – $138,435

Building owners are required to advertise their new affordable units on the City’s affordable housing lottery website, NY Housing Connect, where anyone can enter a lottery for a chance to apply for an apartment in new housing developments of their choice. Even without major publicity, housing lotteries have drummed up as many as 560 applicants per available affordable apartment. If selected, residents are contacted by owners to apply and provide verification of their household income.

Many incentive programs target affordable units to low income households while others, like NYC’s 421-a, the New Housing Opportunities, and 50/30/20 programs, target middle and moderate income households earning up to 175% of the AMI.

NYC also incentivizes private owners to preserve affordable housing. Owners can apply for financing through programs like J-51, the Participating Loan Program (PLP), or the Article 8A Loan Program to rehab their buildings in exchange for placing their units under rent stabilization for the duration of the benefit period.

An owner is obligated to keep their units affordable for a period established by the program, usually between 14 and 30 years. When these contracts expire, the owner may convert their affordable units to market rate. According to the Furman Center, in the next decade 58,288 units of affordable housing will be eligible to opt-out of affordability restrictions as their contracts expire. To counter the opt-out trend, the City’s preservation programs are designed to entice developers into new agreements to keep units affordable.

Federal Policies Lost In Translation

If NYC’s AMI seems high, that is because HUD’s definition of “area” is metropolitan in scope. In addition to the five boroughs, NYC’s metropolitan statistical area includes Putnam, Rockland and Westchester Counties. Rockland County’s median income is about 50 percent higher and Westchester County’s median income is about 65 percent higher than that of New York City. As a result, NYC’s AMI is $62,511; over $10,000 higher than if it were defined using NYC data alone, a somewhat baffling technicality that has concrete implications in underdeveloped neighborhoods.

As a result, the income groups targeted by affordable programs are often higher than those in neighborhoods like the Cromwell-Jerome Avenue area in the Bronx. As part of his ten-year plan, de Blasio has targeted the community for rezoning (along with East Harlem, East New York, and others) to make way for affordable rentals and new businesses. According to a recent Crain’s article, the Cromwell-Jerome area’s median income is $26,934, roughly half of the citywide median income. The community is already wondering who will the affordable housing be for?

To generate buy-in from local communities slated for new development projects, NYC routinely sets aside 50% of affordable units for applicants from the local community. While some were debating the fairness of reserving affordable units for artists, HUD recently flagged this practice of setting aside units for locals as a potential violation of the Fair Housing Act. HUD is currently investigating whether NYC’s community preference practice will disproportionately favor some racial or ethnic groups over others.

NYC’s Mega Market Requires Special Attention from Fed and State Lawmakers

Less than a year ago, former HUD Secretary Sean Donovan declared that the country is in the “worst rental affordability crisis ever.” Homeownership rates have fallen to a 19-year low, placing citizens at the mercy of the country’s increasingly oppressive rental market. With funds for HUD programs like public housing, Housing Choice Vouchers, CDBG and HOME flat lining or diminishing amidst rising needs, Treasury Department-run tax incentive programs are providing the bulk of new affordable units.

Council member Jumaane D. Williams chairs the oversight hearing on 421-a tax exemptions. [Image credit: William Alatriste/New York City Council]

Council member Jumaane D. Williams chairs the oversight hearing on 421-a tax exemptions. [Image credit: William Alatriste/New York City Council]

Now more than ever before, the success of affordable housing policy relies on private interest groups. The role of the government is shifting from housing provider to choreographer— incentivizing private developers to correct imbalances in the housing market by creating affordable units for people at all income levels.

The theory that increasing the supply of housing will decrease demand and lower overall rental prices remains inconclusive in NYC, where the demand is relentless and the cost of land is extremely high. While we continue to observe the nuances of this theory, HUD’s age-old role as the guardian of fair housing law and the monitor of local governments’ use of HUD funded programs must now expand in scope. From its high and powerful perch, HUD must monitor how private market programs are impacting the country’s most vulnerable citizens. NYC is the foremost testing ground.

Last week, the New York City Council established a task force to study our tax incentive programs, presumably in a last-minute effort to provide Mayor de Blasio with recommendations for the state legislature, scheduled to review 421-a, J-51 and rent regulations, all up for renewal this spring.

If de Blasio had his way, he would most likely call upon the State to convert 421-a into a more robust affordable program in addition to passing reforms cited in his ten-year plan: overturn vacancy decontrol as a method for deregulating rent stabilized units; repeal the 1971 Urstadt Law that prohibits NYC from having stronger rent regulations than elsewhere in the state; and identify additional resources for affordable housing. These changes all require legislative action in Albany.

As HUD’s fair housing enforcers and Albany lawmakers consider NYC’s policies, they should offer de Blasio the strategic flexibility needed to test and tweak federal models and status-quo programs to yield greater balance in NYC’s market.


Below, our experts provided some answers. In summary, local and state tax incentive programs are outcomes of state and local legislative processes. They are managed by state Housing Finance Agencies. HUD currently has no authority in monitoring the aggregate effects of these policies to determine their overall impact on minorities and/or low-income residents at the local level. This is the job of NY City and State politicians. The AMI, although set by the feds, should not be restrictive because local governments have the freedom to target populations at lower income levels within their programs.

In the absence of collective political will, the fair housing advocacy community has held local and state governments accountable to the goals set forth in the Fair Housing Act. Next time we will look at how the country’s housing policies have been shaped by fair housing goals. We will also look at how a prominent legal tool for enforcing fair housing goals is now jeopardized by a forthcoming supreme court case.


The following comment is from the Brooklyn Brewer, an expert on New York City housing programs.

It is a mixed blessing that the term “subsidized” housing became “affordable housing.” It’s good because it’s on the political radar, but on the other hand we cannot have a conversation about housing that is affordable for regular people without bringing in the government alphabet soup jargon of subsidy programs. Call it “attainable” and you’re put in the weirdo-advocate box.

It’s important to stress the dynamics that exist between city policymakers, who are most familiar with the city’s neighborhoods, and those in Albany and Washington. It is correct to point out that with federal funds declining, the onus is on other arms of government to take up the slack. At the federal level, this is the Treasury. In truth, no affordable housing would be built in New York City without the Low Income Housing Tax Credit, which is commonly the most important component in subsidizing both new construction and refinancing (aka “preservation”).

Yet HUD is standing in the way. As you mention, the HUD-defined AMI is not appropriate for building affordable housing in this city. The combination of a misunderstanding federal government, expiring and outdated subsidy programs, and local NIMBYism makes the jobs of the mayor and housing commissioner–especially over the next six months–unenviable in the least.

The following is comment is from Scoot, an expert on federal housing programs.

First, having AMI determined by MSA rather than political jurisdiction is done in part to prevent forum shopping by services recipients. It makes no sense for the definition of low-income to change just because you cross a random street that takes you from the Bronx or Queens into Westchester or Nassau (anyone who’s been to Mt Vernon, New Hyde Park or Hempstead knows that poverty doesn’t respect borders). Also, there’s nothing to keep jurisdictions from using different local eligibility standards for their own programs. All of the programs in New York described in this piece could be designed to benefit those with extremely low incomes, and they would be if they were intended solely to supplement the city’s existing public housing and voucher stock. However, the purpose of inclusionary programs is not just to serve the poor. They’re intended to make sure that the city is able to maintain economic diversity, which requires a range of options for a variety of residents. I don’t think anyone wants to see New York or any of its neighborhoods become bastions of the super rich with a few token extremely low-income residents thrown in here and there.

Lastly, I’ll say that this piece overstates HUD’s ability to influence local policies like 421-a. Beyond fair housing enforcement, which is limited to ensuring that those in protected classes (race, disability status, sexual orientation, etc) are not the victims of discrimination, HUD does not have the authority to influence local development decisions, particularly those originating in the tax code. The “high perch” that HUD sits on is not a place from which it can tell New York City or New York State how to incentivize affordable housing development with local tax abatement. It’s important not to overstate the federal government’s role given its limited authority.

The following is from Amy, in response to the above.

1) Can you say what HUD’s role is? The mission is very broad and its programs account for a smaller portion of the solutions on the ground these days.

2)  HUD has set a precedent in its model of making affordable housing policy accessible to citizens through the public comment process for local annual PHA plans, five-year Consolidated Plans, etc. Now that tax policy accounts for a good portion of affordable strategy, is there a similar process in place to review local tax programs creating affordable housing?

3) HUD approves the Qualified Allocation Plan (a city’s policy for how Low Income Housing Tax Credits will be allocated), does it not?  If fair housing is only being monitored from the federal level, how can state and local programs be routinely reviewed through this lens?

A response from Scoot, our expert on federal housing programs.

 To answer the question about what HUD’s role is, that’s a very broad question, but essentially HUD provides funding to localities for a number of purposes, which include public housing (both section 8 and capital funds for maintenance), Indian housing (most housing on reservations is funded by HUD), affordable housing construction (HOME program), economic development (through CDBG), mortgage insurance (FHA), fair housing enforcement, homeless prevention, housing for people with AIDS, and smaller programs like lead paint hazard prevention, Choice Neighborhoods (described above), Promise Zones (holistic services, similar to the Harlem Children’s Zone) and a number of other legacy programs (I’m sure I’m missing many).

HUD essentially delivers money to states, entitlement communities, and non-profits with strings attached. It’s probably more helpful though to understand what HUD does not do. HUD can’t dictate local zoning, tell localities what to build or who to build it for (except where fair housing is concerned and even that’s tough, as the ongoing Westchester case has shown), or get involved in local tax programs. That said, I think it’s incorrect to say that HUD accounts for a smaller portion of the solutions on the ground these days. Just because there’s less money going around overall doesn’t mean HUD money isn’t seeding the vast majority of programs related to housing. Yes, New York is a special case because of its ability to run its own programs thanks to its unique capacity and resources, but NYC’s Department of Housing Preservation & Development still gets much of its funding from HUD.

The public comment process you mention isn’t unique to HUD- most federal government programs require localities to provide comment opportunities for residents. But as far as tax incentive programs instituted at the local level, HUD would not have the authority to require that they be wound into the federal comment process unless projects are using federal dollars. Most projects contain a mix of subsidies, but that doesn’t mean that a city’s [five-year] Consolidated Plan can anticipate how developers are going to take advantage of tax breaks. And as I’ve stated before, HUD doesn’t have the statutory authority to monitor or enforce local tax programs. HUD works within a federalist system and respect for local authority, especially in the context of land use, which is sacrosanct.

[Regarding the approval of QAPs, the discretion falls to the state Housing Finance Agencies.] As for fair housing on the state and local level, HUD has a grant program (FHAP) that provides money for state and local governments to do fair housing enforcement. I’m not sure if there are other local programs that operate without support from HUD.

One thought on “Affordable Housing Explained, Part 2

  1. As far as I can tell, no typos. But it was so long, that I may have missed any. Good work, Amy.

    (Then I’m thinking about my CAC Brooklyn Heights Project Meeting tomorrow night, and the off-site affordable housing written into the RFP…)

    From: To: Sent: Sunday, March 8, 2015 12:13 PM Subject: [New post] Affordable Housing Explained, Part 2 #yiv8259872443 a:hover {color:red;}#yiv8259872443 a {text-decoration:none;color:#0088cc;}#yiv8259872443 a.yiv8259872443primaryactionlink:link, #yiv8259872443 a.yiv8259872443primaryactionlink:visited {background-color:#2585B2;color:#fff;}#yiv8259872443 a.yiv8259872443primaryactionlink:hover, #yiv8259872443 a.yiv8259872443primaryactionlink:active {background-color:#11729E;color:#fff;}#yiv8259872443 | amydehuff posted: “Last week we took a look at Mayor de Blasio’s primary strategy for creating the 80,000 affordable rental units cited in his ten-year plan: providing benefits to private real estate developers in exchange for making a percentage of their rental units affor” | |


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