I am often called and asked about “affordable housing programs” and grants for “1st time buyers”… the term has become somewhat confusing in the past two decades. We know have two more terms to confuse the “so-call” category of affordable housing: emerging markets and workforce housing. both thought to be affordable.
Reprinted from HousingPolicy.org:
There is no single definition of affordable housing. What is considered “affordable” by a family earning $100,000 a year will likely 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.
There is no single definition of affordable housing. What is considered “affordable” by a family earning $100,000 a year will likely 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 often are used to determine affordability. For example, the federal government considers housing to be affordable if a family spends no more than 30 percent 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 percent) for mortgage payments, taxes and insurance. A family making $200,000 per year can afford to spend 30 percent 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 percent for housing. A family’s capacity to meet other expenses depends on other factors such as family size and age of children.
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Danette O'Neal, PhD 