A Really, Really Long Definition of Affordable Housing

18 02 2016

The term “affordable housing” gets thrown around a lot these days by a lot of different people, sometimes talking about pretty different things.  Everyone’s talking about it, we all want more of it, but it’s often a little fuzzy what the “it” actually is.  Even at CCHO, we can alternate between broader and more narrow definitions of affordable housing, depending on the context.  The basic idea of affordable housing is simple, but the landscape is complex, so we thought we’d take a minute to break it down.

100% Affordable Housing built by the nonprofit developer Community Housing Partnership.

Zgymundt Arendt homes, a 100% affordable housing development built by the nonprofit developer Community Housing Partnership.

The basic definition of “affordable”:

Housing is generally considered affordable when residents can pay their rent or mortgage as well as meet their other basic needs, and when that home is safe and secure for the long term. Policymakers and advocates typically consider someone’s housing affordable when it  costs no more than 30% of the household’s income, including rent or mortgage payments, insurance, taxes, and utilities. For homeownership the conventional wisdom on affordability is more like 35% of income.

According to this basic definition, lots of different types of housing could be considered “affordable,” depending on who is trying to afford it and how much it costs.  In San Francisco, however, homes meeting this casual definition of affordable housing are hard to come by on the open market, especially for low- and moderate-income people. In order to provide housing for households at these income levels in the city and in proximity to their workplaces, this affordable housing must be produced through a combination of subsidies and regulations.

This gets us to a much more specific definition, and what we at CCHO are talking about when we advocate for affordable housing: price-controlled, permanently-affordable housing.

Let’s examine both of those criteria in turn:

Market-Rate vs. Price-Controlled Housing

San Francisco’s housing stock can generally by divided into two types, market-rate housing and price-controlled housing – and this is one of the most important distinctions when talking affordable housing. It all comes down to who is setting the price and how that price is set. With “market-rate” housing, the cost to buy or rent is set entirely by the market – at whatever amount the owner can get. With price-controlled housing, the cost to rent or buy is in some way set or regulated and enforced.  Though sometimes (and frankly, almost never in San Francisco’s current housing market) residents can find market-rate homes that meet the basic definition of “affordable” (30% of their income or less), when we talk about affordable housing, we are specifically talking about price-controlled homes.

“Price-controlled” is a wide-ranging category, including everything from public housing and nonprofit-owned affordable housing to rent-controlled homes, where rent increases are limited by law.

What’s the difference between permanently affordable housing and rent-controlled housing?

Now that we are within the world of price-controlled housing, we can narrow things down even further by examining the second important distinction for our definition: permanently affordable housing vs. rent-controlled housing.


A rent-controlled apartment in Chinatown where protesters fight the Ellis eviction of long-term tenants.

Rent-controlled housing is an important piece of San Francisco’s affordability landscape, comprising the largest portion of the housing in the City that is still practically affordable to a range of San Franciscans, but it isn’t permanently affordable.  Though many people refer to San Francisco’s system as “rent-control,” it is technically “rent-stabilization,” because the “control” does not stay with the apartment when it’s re-rented to another person – it goes back to market-rate pricing when the tenant moves out. Rent control does not provide permanent affordability tied to a particular unit. However what it DOES do, very importantly, is keep the rent affordable to the tenant while they are living in the unit – which means stability for a person or a family over time. As one of the core purposes of affordable housing is to provide stability and quality of living for residents, especially for poor, working-class and moderate/”middle” income people whose needs aren’t met by market-rate housing, rent control is an invaluable part of keeping San Francisco affordable.

The passage of rent control in California cities is closely tied to the passage of Prop 13 in 1978. As landlords got a reduction and “stabilization” of their property taxes through Prop 13, many renters demanded a similar stabilization to their rents, and a few cities were able to pass rent control laws.  San Francisco’s rent control law, however, currently prevents any building completed after 1979 from being subject to rent control, so any rent-controlled units we lose (through demolition or conversion) cannot be replaced. It is thus incredibly important (and one of the main goals of CCHO’s work) to preserve the existing rent-controlled housing we have.

Permanently affordable housing developments, on the other hand, provide homes at low rents to residents who qualify and these restrictions stay with the unit, usually for the life of the building or at least 55 years. Permanently affordable housing is often price-controlled according to AMI, or Area Median Income. “Median” means that half the people in the area make less than that amount, and half the people make more. Based on AMI, the federal government classifies household earnings into different income levels: Very Low Income (those earning less than 50% of the median), Low Income (incomes between 50% and 80% of the median), and Moderate Income (those earning between 80% and 120% of the median).  Affordable housing units are built for a particular income level, and are price-controlled so that the rent or cost of those units equals 30% of that income level.  In order to be eligible for affordable housing, a resident has to qualify by showing that they are within that particular income level when they move in, though their incomes can change in the future and they would still retain their housing. When one resident moves out, the unit will remain affordable for the next tenant who moves in.

Different Types of Permanently Affordable Housing

Okay, so we are almost there!  There are several different categories of permanently affordable housing that exist in San Francisco, some of which are still being built, and some of which are no longer being built.

Most permanently affordable housing units rely on public subsidy to cover part of their costs.  Over the years, however, who is building affordable housing, what types of subsidies they’re using, and when they use these subsidies has changed.

Public housing in Bernal Heights.

Public housing in Bernal Heights.

Federally-Subsidized Housing (AKA, Public Housing and Section 8 Housing)

The way permanently affordable housing used to get built was primarily through federal subsidies.  Federally-subsidized affordable housing includes public housing and Section 8 housing, and some housing cooperatives.  Public Housing was owned and run by the federal government through local Housing Authorities. Section 8 housing was built by private developers receiving federal subsidies to cover the difference between what a low-income renter can pay and the fair market rent of the apartment. The important thing to know is that the Federal government no longer subsidizes the construction of new public housing – these types of housing were primarily built between the 1940s and 1970s.

St. Peter's Place, 100% affordable housing development for people with special needs, built by Bernal Heights Neighborhood Center.

St. Peter’s Place, a 100% affordable housing development for people with special needs, built by Bernal Heights Neighborhood Center.

Today’s Affordable Housing

Because the federal government is no longer building public housing and has cut way back on its funding for operating and maintenance subsidies, the way most affordable housing gets built today is through a complicated mix of funding sources (usually including money from local government and Federal tax credit investors).  In San Francisco, most affordable housing is built by community-based, nonprofit housing developers (most of which are members of CCHO), though there are also regional nonprofit and for-profit developers of affordable housing.  Another important distinction between the old public housing and new affordable housing, besides the quality of design and construction, is that typically these newer developments depend on substantial up-front investments rather than requiring ongoing public subsidies throughout the life of the building.  This means that the “affordable” rents that tenants pay are sufficient to cover the building’s operating and maintenance costs, making these developments less likely to fall into disrepair (like many public housing developments have as the federal government cut back on subsidies).

Typically, this newer permanently affordable housing serves various income ranges under 60% AMI (what HUD defines as “Low Income” in San Francisco). Some buildings serve specific populations, such as formerly homeless, low-income families, or seniors. Permanently affordable developments may be in new construction buildings or may be in rehabbed existing buildings, such as residential hotels (also called “SROs” or Single-Room Occupancy) or old hospitals. They often include on-site “supportive services”: case-management, treatment or job counseling, senior programs, food bank deliveries, family activities or childcare, or other supports. Smaller apartment buildings are also sometimes acquired and converted to permanently affordable housing – what we call “small sites acquisition and rehab” – a strategy that has been especially important in recent years to protect tenants vulnerable to evictions and preserve rent-controlled housing that could get “flipped” by speculators.

NEMA, a market-rate housing project with on-site rental BMRs.

NEMA, a market-rate housing project with on-site rental BMRs.

And Lastly, Inclusionary Housing Units within Market-Rate Developments (AKA “Below-Market-Rate” or BMR units)

Some affordable housing units are also built today by market-rate developers through inclusionary housing requirements.  This is one way in which cities are able to get units built for households with incomes between 50% and 120% AMI, for which there are no Federal tax credits or other subsidies, and compel developers to help mitigate the affordable housing needs created by market-rate housing. In 2002, CCHO and other housing advocates got the city to implement “inclusionary zoning,” which requires market-rate developers (of 10 units or more) to either build mixed-income buildings with on-site, price-controlled units, build these below-market-rate units at another site, or pay an “in lieu” fee to the Mayor’s Office of Housing for the development of affordable housing. The inclusionary housing ordinance in San Francisco requires these homes to be affordable to households at 55% AMI for rental apartments, and affordable to households at 90% AMI for ownership homes. The basic concept here is to use the profits from the market-rate units to offset the cost of the affordable, price-controlled units. Because there are no public subsidies to help build this type of “moderate income” housing, the City’s inclusionary program is the only source of units affordable to households making close to the median income. A measure on the ballot this June may make some important changes to inclusionary housing, including increasing the percentage of affordable housing required and adding an additional requirement for middle-income housing for people earning 100% and 120% of AMI.


So, there you have it!  When CCHO advocates for building new “affordable housing” today, we mean price-controlled, permanently affordable housing, generally built by nonprofit housing developers for people below 50% AMI, or inclusionary housing built by market-rate developers for people earning 55%-90% AMI (though this may soon expand to include people earning 100% to 120% AMI).  If you’re feeling overwhelmed by our very long definition, the most important thing to remember is why it matters to have affordable housing, of whatever typology: because it provides stability and quality of living for San Francisco residents, including the low-income, working-class, and moderate/middle-income people who are otherwise permanently shut out of the housing market. This is the housing that isn’t getting built by the market and helps keep our city affordable to all.