It’s no surprise to anyone, whether you’re looking for a new apartment or not, that monthly rent prices in many parts of the country are skyrocketing. Even in cities where post-pandemic rents have leveled off, that plateau is higher than it was before demand increased since 2021.
That means a lot of people making the same income as they were even just a couple of years ago are now priced out of affordable housing. And that is the reason why economical apartments and other low-income housing are in such demand now as well. In this article, we’ll explore how income-restricted rental housing and housing assistance fill in the gaps for lower-income renters.
Income-restricted apartment defined
The first significant housing crisis in the United States happened in the wake of the Great Depression. Then, in the 1960s, the federal government created the Department of Housing and Urban Development, or HUD. HUD was formed in part to help create affordable rental housing for low-income tenants and families.
The next decade brought legislation enforced by federal government agencies to prevent housing discrimination and to set rent and income caps on low-income apartments in government housing. Then in the 1970s, the feds shifted much of the responsibility to state and local authorities.
This is the beginning of modern income-restricted housing.
Income-restricted apartments are rented units limited to tenants earning below certain total household income thresholds. Depending on your state, this housing might be run by government agencies, nonprofit agencies or housing associations.
Income-restricted apartments vs income-based apartments
While often referred to together under general rental assistance, there are differences between income-restricted apartments and income-based apartments. One offers rents based more on the median income of the community and the other more on the individual tenant’s income.
Income-restricted apartments
Income-restricted apartments, also called rent-restrained apartments, can be owned by the local or state authority but more often are planned developments from private owners. They are specifically designed for renters with low or middle incomes. And they are often funded by a combination of government subsidies and non-profit donations.
Rents for income-restricted apartments are determined by the median income in the local area. Then the rent price is capped at a calculated percent of that figure. The percentage varies by state and by apartment size. Plus, all apartments must be in multi-unit dwellings like apartment complexes and buildings with multiple rental units.
Private landlords that provide income-restricted apartments must offer the program in every unit in the property to qualify.
Income-based housing
Income-based apartments are explicitly held by individual property owners who then must meet specific criteria. Among these are required renovations for income-based housing to meet certain HUD standards. The rent prices in an income-based apartment are calculated based on the individual tenant’s adjusted gross income. Then the rent is capped at 30 percent of that income irrespective of the area’s median income levels or tax credits.
Unlike income-restricted, income-based housing can be within an apartment complex or building where as low as only 20-40 percent of units are low-income apartments. Also, they aren’t constrained to traditional apartments. Income-based rentals can also include duplexes, townhouses and rowhouses — and even single-family homes.
Who is eligible for income-restricted housing?
Just as incomes vary across the country, so do tenant eligibility requirements for income-restricted housing. But regardless of location, eligibility for such apartments is based on certain income parameters. Most income-restricted housing is designated for those whose incomes are at least half of the median area income of the local community.
How the government determines eligible income guidelines
Each year, HUD calculates an estimated median income for every large metropolitan area. Using these annual income figures, it then determines a maximum adjusted income allowed to qualify in each community based on the family size that is delineated into three categories.
“Low income” are those making below 80 percent of the area median income, while “very low income” families are tenants earning under 50 percent. Individuals taking home just 30 percent of that are designated “extremely low income.”
In most communities, housing with income requirements is earmarked for those on “very low income” or below 50 percent of the area’s median income. That’s up to local officials to determine.
How rent is determined
If you or your family meet the qualifications for low-income housing, what then would you expect to pay for rent each month once you find an apartment? Different states and municipalities calculate rents differently. But it’s almost exclusively based on an area’s median income.
Rent limits fluctuate depending on local median income and market value
Income-restricted rent gets determined by what is affordable in the area based on median incomes and rental market rates, not an individual resident’s income. That’s solely to determine eligibility. You could make more or less than your neighbor, but you’ll be typically paying the same rent.
Rents themselves are calculated based on current area rental trends and the average income of the designated neighborhood, precinct or ZIP code. Rents cannot exceed local market value. And as expected, most landlords charge the maximum the community determines they are allowed.
How to find income-restricted apartments
So, if you qualify for an income-restricted apartment, where can you start looking for one? Eligible apartments are hard to find on your own because they aren’t listed on general apartment finder websites like Apartment Guide or Rent. You have to turn to the government for guidance.
Finding your Public Housing Authority
Programs to find income-restricted apartments are managed by a local Public Housing Authority, or PHA. These local offices are the first stops for finding an income-restricted apartment.
You can look up contact information for your local PHA on the Department of Housing and Urban Development’s public website. The local public housing agency can help find available income-restricted apartments in your desired size and location and determine exact rents.
If you’re seeking a government-owned apartment, your first action is to complete a PHA housing application. But if you’re looking to rent from a private owner, you can contact them directly from a list provided by your PHA. If there are any issues contacting your PHA, you can speak with your local HUD Field Office.
Applying for income-restricted apartments
Once you find an apartment, you will have to apply much like you would any apartment. A landlord or property manager will require photo identification for adults and birth certificates for children. Then all potential tenants must provide proof of current income as well as submit to a background check.
But be aware. Not everyone who qualifies can obtain such apartments right away. There is a higher demand for units than there are availabilities. This is especially true for publicly owned housing.
Don’t be frustrated if you are put on a waitlist. Apartments first go to those with a higher level of need. The best way to offset wait times is to demonstrate flexibility with apartment size (maybe a one-bedroom apartment is easier to find), obtain an additional tax credit or choose income-restricted over income based.
Income-restricted apartments may suit your needs
When needed, there are systems in place to provide affordable housing and tax credit access. But in the meantime, income-restricted apartments, as well as Section 8 and public housing, serve as viable options for those that meet income requirements.
Also note: Many income-restricted apartments look as nice and homey as any non-subsidized rentals and apartments you ever rent. Determine your need and reach out to your local PHA, local governments or Housing and Urban Development office.
To learn more common renter terms, visit our Renter Dictionary.
The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.