What does it mean to be “rent-burdened”? What do Low Income Housing Tax Credits really do? Take our crash course in housing terminology to find out. “Strong Towns”
Housing is one of the most multi-faceted and challenging topics to tackle. Even in the smallest communities, the interplay between public policy, money, development, geography and a myriad of other factors combine to obscure any hope of simple housing problems or solutions.
Whether you’re concerned with affordability, gentrification or just finding a decent place for your family to live, you’ve probably encountered a few housing terms that get tossed around a lot but aren’t very clearly defined. How does rent control function? What is this “missing middle” housing that developers keep talking about? Heck, what does “affordable housing” even really mean?
To help get some clarity on these terms, I’m sharing some simple and clear definitions of them below, along with a Strong Towns take on many of them. I’ve broken these definitions down into 4 categories: The Basics (mixed use, market rate, etc.), Unique Types of Housing (accessory dwelling units, tiny homes, etc.), Affordable Housing Terminology (housing vouchers, public housing, etc.), and the Tricky Subjects (gentrification, NIMBY, etc.).
Let’s start with some really simple words that seem basic but aren’t always clearly defined, especially for those who don’t work in the field of housing and development.
Affordable housing – When the term “affordable housing” comes up, it can refer to one of two things:
- Subsidized affordable housing (sometimes called “capital A Affordable Housing”) is housing that is made to be affordable, not through the private market, but by nonprofit or government subsidies. It can take the form of anything from Housing Choice Vouchers to units created through Low Income Housing Tax Credits (see below for definitions of both of these terms) to apartments managed and sponsored by nonprofit organizations.
- Naturally occurring affordable housing (sometimes called NOAH by those who work in the field) is housing that is available on the regular market, open to anyone and not subsidized by a government or nonprofit, but which happens to be within the budget of many families. Most affordable housing in America falls into this category. In many cities the naturally occurring affordable housing tends to be older, less well cared for and/or not in the most desirable neighborhoods compared with the housing that is only accessible to higher income families.
At Strong Towns, we believe that naturally occurring affordable housing offers the greatest possibility for increasing options and making homes accessible to more people, and we encourage towns to focus on improving the quality of this housing and lifting restrictions that prevent more of it from being built.
Market rate housing – Market rate housing is housing that is available on the private market, not subsidized or limited to any specific income level.
Mixed-use – A mixed-use building is any building that contains at least two different types of uses in it. The most common mixed-use buildings have commercial spaces for stores, restaurants, etc. on the bottom floor and apartments on the upper floor(s). Other common mixed-use building types include: commercial on the bottom floor and offices on the upper floor(s) or residence in one area of the building and studio/workspace in another area of the building (sometimes called a live/work space).
Working with our friends at the data analytics firm, Urban3, we’ve consistently observed that mixed-use developments outperform single-use developments on the tax rolls and we find them to be a much more financially productive form of development that single-use buildings. It’s fairly intuitive when you think about it: Of course two businesses stacked on top of each other make better use of space and pay more in taxes than a single business standing on its own. Mixed-use structures are some of the most basic forms of development, taking us all the way back to ancient civilizations where residents lived in one part of their homes and sold items, offered services or created products in another part of their homes.
At Strong Towns, we’re thoroughly in favor of creating more mixed-used developments because they offer a better return on investment and greater financial productivity for our communities.
Single family vs. multi-family housing — Single-family housing or SFH is any unit meant for only one family to reside in, like a standalone house or a townhouse. Multi-family housing or MFH is any building meant for more than one family such as a duplex, apartment or condo building.
UNIQUE TYPES OF HOUSING
Here are four less-than-common types of housing we hope to see more of in the coming years that deserve sufficient definition.
Accessory Dwelling Units — Also known as ADUs or granny flats, accessory dwelling units are any unit added onto a single family home where an additional person or family could live. These can take the form of a basement, attic or garage that is converted into its own small unit; or a separate cottage built in the yard of a homeowner.
Accessory dwelling units are functionally illegal in many American cities due to restrictions around parking, setbacks, plumbing and a whole host of other regulations that make it impossible to construct a second unit on a single family property. Nonetheless, a growing number of towns are adjusting their laws to allow ADUs — and plenty already exist and operate outside of the law. The advantages of ADUs include: additional income for the homeowner; an expansion of affordable housing options, especially for single people and childless couples who do not require a lot of space; and an opportunity to house aging relatives close to home (hence the term “granny flat”).
One of the questions on our Strong Towns Strength Test is: Is an owner of a single family home able to get permission to add a small rental unit onto their property without any real hassle? We believe that strong towns should allow this sort of simple, affordable housing option and make it easy for property owners to construct ADUs if they choose to.
Missing middle housing – Missing middle refers to housing that accommodates more people than a single family home but does not come in the form of a large apartment building. Typically it means anything from a duplex to a small apartment building but, significantly, it is housing that would blend in in a residential neighborhood dominated by single-family homes. It’s called “missing” middle because many communities do not have very much of this sort of mid-range housing. Advocates across the country (like our friends at the Incremental Development Alliance) are pushing for it to be more widely permitted and more widely built in order to create more housing options, as well as greater opportunities for small scale developers. Learn more here.
Small scale/incremental development — Small scale or incremental development is any housing or commercial construction or renovation that takes place with a small budget, led by a non-corporate developer. This type of development makes small improvements like rehabbing the exterior of a neglected home, converting a single family home into a duplex, or constructing a small mixed use downtown building.
We at Strong Towns are firmly convinced that small scale and incremental development is the best way to build lasting prosperity in our communities and to begin to address the housing challenges that so many of our towns face. Head to the Incremental Development Alliance website to learn more and get trained in being a small scale developer yourself. Visit our small scale developers page to read related stories on our site.
Tiny homes — Tiny homes are standalone cottages typically under 400 square feet. Although the tiny home movement is relatively new, small housing options have been available for decades in the form of trailers and mobile homes. Like accessory dwelling units, tiny homes are illegal in many communities, but a growing number of towns are beginning to allow them. One common way that tiny home dwellers skirt local regulations is by putting their homes on wheels so that they are technically categorized as trailers or mobile homes. Tiny homes are often a more affordable housing option than typically sized residences.
AFFORDABLE HOUSING TERMINOLOGY
The following terms often come up in discussions about subsidized affordable housing and they’re worth learning about if you’d like to be better informed on affordable housing discussions in your community. At Strong Towns, we don’t believe that any of these affordable housing interventions can fully solve the housing challenges that our communities face. Some may be helpful for certain populations in certain circumstances, but as broad policy, these subsidies will not be part of a lasting and economically viable solution to affordable housing.
Area median income (AMI) – This is the median income of all households in a given county or metropolitan region. In other words, if you lined up all the incomes of residents in a row, this one is the midpoint, and it’s used to determine who qualifies for certain subsidized affordable housing options like public housing and Housing Choice Vouchers. Typically, these qualifications are expressed as a percentage of AMI. For instance, you might hear about a new apartment going up in your neighborhood that has a portion of units set aside for affordable “below market rate” housing (for example, a 1 bedroom costs $600 a month instead of the $800 a 1 bedroom typically goes for in your neighborhood), and those units will be listed as available to anyone whose household income is 80% of AMI. The AMI is determined by the U.S. Department of Housing and Urban Development (HUD) on an annual basis.
One criticism that has been raised about AMI is that it does not take into account the sometimes massive variances in cost between different zip codes and even neighborhoods in a given region. In my metro area, for instance, the median income in some fringe zip codes is as high as $80,000 per year and in urban zip codes, it can be as low as $14,000. This can seriously skew the data and often means that poor residents are only able to live in poor neighborhoods, even when they have a housing voucher.
Housing Choice Vouchers – The Housing Choice Voucher program (formerly called Section 8) is, according to the HUD website, “the federal government’s major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.” It is a form of subsidized affordable housing in which families who qualify (usually by having an income that is 50% or less than the AMI) may be provided with government funding to pay a portion of their rent in standard, market-rate housing. It is overseen by local Public Housing Authorities, although the money comes from the federal government.
For those who gain a voucher, the subsidy remains with them even if they move, so long as they continue to meet the incomes requirements as well as other determining factors like household size. But waitlists for this program tend to be extremely long — many, so long that they aren’t even open to new applicants — making it a far cry from a true affordable housing solution. Learn more here.
Low income housing tax credits (LIHTC) – I’ll let Wikipedia kick us off with this one by explaining that LIHTC are “a dollar-for-dollar tax credit in the United States for affordable housing investments.” This means that a housing developer who agrees to reserve a portion of the units in a new apartment building for people who are low income (i.e. make a certain percentage of the AMI) and charge them lower than market rent to live in these units will earn a credit on the building owner’s income taxes. Owners and developers typically have to apply to their state government to access LIHTC and comply with certain requirements. Dig into the details here.
Around 90% of all the officially designated “Affordable Housing” in the United States today was developed through LIHTC. The LIHTC program has been criticized for a lack of oversight and for being more of a giveaway to big developers than a solution to affordable housing issues.
Public housing/housing projects – Public housing, sometimes referred to colloquially as “projects” is any housing created by the government and typically offered to low-income residents. While the popular image of a public housing project is a crime-ridden 20- or 30-story tower, today many public housing developments are smaller scale (such as town homes) and more dispersed. As with Housing Choice Vouchers, funding for public housing projects tends to come from the federal government (administered by the U.S. Department of Housing and Urban Development) but is handled through local Public Housing Authorities. Also like Vouchers, public housing units tend to have long or even closed waitlists, again making them not a true solution to housing affordability issues. Additionally, they have historically been plagued with neglected maintenance issues, safety concerns and poor conditions.
Rent-burdened — For many years, policy makers, researchers, developers and regular people like you and me were taught that the amount you pay for housing should be equal to 30% or less of your income. It was widely agreed upon that anyone who was paying more than that for housing was “rent-burdened” i.e. paying too much for housing and straining their household budget in an unaffordable manner. In the last few years, this 30% number has been questioned and discounted as fairly arbitrary. Researchers and others working in the field of housing have begun pointing out that this percentage may be both too high (for example, a family getting by on $20,000/year would likely face serious challenges paying for other basic needs if they spent a full 30% of their income on housing) and too low (for example, a couple with no children making $100,000 a year might be able to comfortably afford paying as much as 40% or 50% of their income on housing if they chose to). See this article to learn more.
In the end, the term “rent-burdened” still needs some clarification but its basic meaning — being financially burdened by having to spend too much of your income on housing which leaves little money for any of your other basic needs — is valuable for those working on housing issues. At Strong Towns, we also advocate for other sorts of budget “burdens” to be more clearly considered by policy makers and residents — namely, household transportation costs. If you select a lower-priced home on the edge of town so as to avoid being rent-burdened you may instead end up being transportation-burdened because every trip to work, the store, etc. will require a car.
Rent control — Rent controls are government regulations that mandate specific prices and/or freezes on the cost of rent, as well as other requirements for how landlords must operate. New York state is the most prominent example of a government utilizing rent controls in the US.
Many have argued that rent controls artificially constrict housing markets and prevent more people from accessing housing — instead, only offering it to those who have been lucky enough to secure a rent-controlled unit. In addition, rent control policies also tend to impact landlords’ behavior in a way that further limits housing options as landlords attempt to “elude rent control by changing the status of their buildings and driving tenants out,” according to a recent City Lab article. At Strong Towns, we’re not in favor of this sort of artificial market constraint.
THE TRICKY SUBJECTS
The following controversial concepts are frequently referenced but far less frequently defined. Let’s change that today.
Gentrification — This loaded term and its various definitions was discussed at length by my colleague Kea Wilson in a recent essay, as well as an in-depth series by Strong Towns contributor, Daniel Herriges. Check both of those articles out to get the full scoop. What we might label, the inverse of gentrification, is something called concentrated poverty. This term refers to neighborhoods where a large majority of residents live in serious poverty, and some have argued that it is a far more significant problem than gentrification.Our friends at City Observatory have done thorough research into the problem and prevalence of concentrated poverty.
NIMBY & YIMBY – NIMBY stands for Not In My BackYard. The term refers to people who may express sympathy for a given change in their city (anything from adding a new affordable housing development to bike lanes) but say they don’t want it to happen in their neighborhood. The term is typically employed pejoratively by advocates who favor a given change and use the word to call out residents who may be hindering the preferred development. Basically, this is the grumpy old guy shouting in the city council meeting that he just wants his neighborhood to stay the same forever. NIMBYs are quite present in most debates about housing, whether it’s something as simple as allowing a single family home to be converted to a duplex or as big as constructing a new 15-story condo building.
YIMBY, as you might now guess, stands for Yes In My BackYard. The YIMBY movement began a few years ago with residents in expensive American cities like San Francisco and New York organizing to advocate for more housing to be built, especially by lifting regulations that currently hinder residential development.
You may find it amusing to note that Strong Towns is regularly contacted by both YIMBY-type people (in favor of development and against regulations) and NIMBY-type people (opposing new developments or changes in their community) who believe that we’ll help support their cause. We don’t find ourselves neatly aligned with either group, but we certainly lean YIMBY.
Transit-Oriented Development (TOD) – Transit-oriented development is any effort to strategically create dense urban living around a transit stop, increasing transit ridership. It often appears in the form of large mixed-used apartment buildings and condos near rail stations in urban areas.
At Strong Towns, we prefer to focus on development-oriented transit. That means creating transit options (whether bus or rail) that connect existing productive neighborhoods, rather than building expensive rail lines and large new developments all in the hopes of inducing people to live in a given place and use public transit more often.