Re: Unaffordable Housing: What it costs to rent a 2 Br Apt
From: Dick Margulis (
Date: Thu, 28 Jun 2018 12:52:15 -0700 (PDT)

I am most familiar with the way the program works in Connecticut and can give only broad and vague information about how this works nationally.

To understand the US program, you might want to begin here:

The same page has a section on Canada:

So, specifically in Connecticut, here's the deal:

The state has set a standard saying that local jurisdictions (towns, cities) should have 10% of their housing units designated "deeded affordable units." That means that they are not just homes that happen to be cheap but that even if they are improved and the market conditions change, they cannot be sold for more than a set price (calculated based on some variables that I'll discuss).

For jurisdictions that have not reached the 10% level, a developer can override local zoning restrictions on density (minimum lot size or homes per acre) if they set aside 30% of the units as income-qualified affordable units. The developer can be denied zoning approval only if they do not meet all health and safety regulations. This is the provision we used to get zoning approval for 30 homes clustered in the middle of 33 acres in a zone that is otherwise designated for 3-acre McMansion lots.

Now, what is an "income-qualified affordable unit"?

As the Wikipedia article explains, the federal government determines the "area median income" (AMI) for families of various sizes in standard statistical areas that are used for all sorts of programs and all sorts of metrics. They calculate quintiles of the AMI for households of 1 to 8 people. This is nonlinear. 40% AMI for a family of 3 is not half of 80% AMI. 80% AMI for a family of 3 is not 80% of 100% AMI. Leave it to the federal government to redefine what the word percent means. Anyway, the state receives the federal figures, applies their own algorithm, and publishes a chart every year, and that's the basis for what follows.

In the main Connecticut program for affordable housing, as I said, 30% of the homes have to be affordable. Of these, half (or more but never less) have to be affordable by households earning 60% AMI or less. The other half (or less) have to be affordable by households earning 80% AMI or less. If the rest of the development consists of market rate homes of various sizes, then the affordable homes have to be a similar mix of sizes, thereby accommodating households of various sizes. (They also have to be mixed in; they can't be constrained to an affordable ghetto. And they have to be built over the same period as the market rate homes, not all held to the end.)

In our case, 30% of 30 homes is 9 homes. 5 of them (in various sizes) are at 60% AMI and 4 are at 80% AMI.

However, Connecticut has other programs at 100% AMI and 120% AMI. Not all programs are available all the time everywhere, but we were able to add 4 homes at 100% AMI. These don't count toward the town's 10% affordable goal, but they do help the four buyers who get them. So we have 13 income-qualified affordable homes altogether.

Someone buying an affordable home has to be qualified by a third-party agency to determine their eligibility. For homeownership, what matters is the total household income projected for the year following purchase. If the household income goes up in subsequent years, they still own the house and don't have to give it up. However, anytime in the next 40 years that the house changes hands, the new buyers must meet the same income qualification standards (with the then current AMI figures), and the house has to sell at the affordable price.

Commercial developers are generally expected to fund the subsidies for the affordable homes they include in market-rate developments. But they can apply, as we did, for state funds to cover the gap between what the home has to sell for and what it costs to build. We applied for and got $2.6 million in state funding. This is off-budget money that comes from selling state bonds to investors who take the tax credit. While it's technically a zero-interest loan, we don't have to pay it back if we follow the rules for 40 years.

What makes a home affordable? In theory, a statistical family can devote 30% of their gross income to housing costs (mortgage, condo fees, taxes--I might be forgetting something, but utilities don't figure into this). For purpose of determining the price, the state assumes each bedroom has 1.5 people. So they impute a household size based on the number of bedrooms, run some sort of weird algorithm I don't pretend to understand, and arrive at a selling price that meets all the criteria.

That's probably fifteen times as much detail as you wanted. If you have other questions, let me know.


On 6/28/2018 2:57 PM, Fred H Olson wrote:
Could you be more specific about the housing program that provided
subsidies to your cohousing community?

Thank you for your question, Lynn. I did not know the specifics but
have been meaning to find out more details.  I am not involved
with Rocky Corner Cohousing
that used this program. Dick Margulis <dick [at]>
from there wrote about it in his June 12 Cohousing-L post:
I'm sure he could provide much more detail.

A little search found
"Low-Income Housing Tax Credit"
which I am pretty sure is the program in question.  It starts:

  The Low-Income Housing Tax Credit (LIHTC - often pronounced
  "lie-tech", Housing Credit) is a dollar-for-dollar tax credit in the
  United States for affordable housing investments. It was created under
  the Tax Reform Act of 1986 (TRA86) and gives incentives for the
  utilization of private equity in the development of affordable housing
  aimed at low-income Americans. LIHTC accounts for the majority
  (approximately 90%) of all affordable rental housing created in the
  United States today.


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