What Are Income-Restricted Apartments? Here’s Everything You Need to Know

published Mar 28, 2020
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Affordable housing can be hard to come by, especially in large urban markets where sky-high rent is the norm. Beyond rent control, are there any options for those on the hunt for rentals that aren’t prohibitively expensive? Two solutions are income-restricted and income-based housing.

You may have heard of income-restricted apartments, which are planned developments for low-income tenants. These buildings are part of the U.S. Department of Housing and Urban Development’s (HUD) initiatives, and are funded by governments and nonprofit organizations. 

In 1965, the Department of Housing and Urban Development Act established HUD as a Cabinet-level agency. The agency was created to provide affordable housing for low-income families as well as the elderly and people with disabilities.

Today, there are about 1.2 million households that classify as income-restricted public housing units across the country. The units are managed by local housing agencies and consist of everything from single-family homes to high-rise apartment buildings.

What is the difference between income-restricted and income-based housing?

In addition to public housing, there is also income-based housing, which refers to privately-owned subsidized housing. Owners receive tax credits in exchange for renting to low-income tenants.

The Low Income Housing Tax Credit (LIHTC) program was created in 1986, and since then, has created some 2 million affordable units. Tax credits are provided based on a state’s population. LIHTC properties account for 90 percent of affordable housing in the United States today.

Who is eligible for income-restricted and income-based housing?

In order to qualify for public housing, tenants’ eligibility is determined based on their annual gross income, their status as elderly or an individual with a disability, as well as their U.S. citizenship or eligible immigration status. 

Income limits are determined based on the median income in a certain county or metropolitan area. Low income is set at 80 percent of an area’s median income, while very low income is set at 50 percent of an area’s median income.

People can apply for these types of housing via their local Housing Authority. Documentation, such as birth certificates and tax returns, is required to prove the information presented in the application.

There are often long waiting lists for public housing, as the current availability exceeds the need. Individual housing authorities have the ability to determine how they will prioritize factors that influence their selection criteria. 

To qualify to live in LIHTC properties, applicants must also fall within a unit’s income limits, which is usually 50 to 60 percent of the area’s median income.

LIHTC owners are also required to accept Section 8 vouchers. Section 8, otherwise known as the housing choice voucher program, allows tenants to choose their own housing where the owner agrees to rent through the program. The landlord receives a direct subsidy on behalf of the participating tenant, and the tenant is responsible for the difference between the total rent and the amount of the subsidy. 

There are no immigration restrictions for LIHTC tenants, and LIHTC properties must comply with the Fair Housing Act, meaning tenants cannot be discriminated against based on race, color, national origin, religion, sex, familial status, or disability.  

How much is rent in income-restricted and income-based housing?

To obtain public housing, you must sign a lease, and you may also need to pay a security deposit. 

The price you will pay in rent for public housing, which is referred to as TTP (total tenant payment,) is based on your household’s predicted gross annual income, minus some deductions. Typical deductions can include $480 for each dependent, $400 for any elderly family members or members with a disability, as well as some deductions for medical expenses for those families headed by an elderly person or a person with a disability.

From there, a household’s TTP is calculated as the highest of the following numbers, according to HUD: (1) 30 percent of the monthly adjusted income; (2) 10 percent of monthly income; (3) welfare rent, if applicable; or (4) a $25 minimum rent or higher amount (up to $50) set by a housing agency. Tenants can stay in public housing as long as they are in compliance with their lease.

The price you will pay in rent for a LIHTC property is set at 30 percent of the area median income tied to the unit, which is calculated with an assumed family size of 1.5 persons per bedroom. The rent charged is not based on the tenant’s income, and a family may remain in a unit even if their income increases after they move in. Rent prices in these units vary by state.