What is Affordable Housing? Addressing the Big Misconceptions

As a firm, we are proud that we have team members focusing on affordable housing issues. CPAs play an important role in helping developers and investors navigate tax credits, financing issues, cost certifications, and regulations. But for us, our focus on affordable housing is about more than navigating tax issues. It’s about being part of the solution to the crisis in affordable housing in our country and in our community.

More than half of U.S. families who rent and nearly a quarter of those who own homes pay more than a third of their monthly income toward their housing costs, which leaves little to cover the other costs Americans face today, like food, health care, transportation, and utilities. This often forces families to rely on government safety net programs, and during the pandemic, everything has gotten harder.

The only way to address this problem is to add to the stock of affordable housing, but communities often object to the development of affordable housing for various reasons, some of which are simply attitudes about what affordable housing is and what it will mean for their community.

Here are six common misconceptions that stand in the way of the development of affordable housing and the facts behind thinking differently:

1. Myth: Affordable housing is “the projects” or “Section 8.”

Facts: The Department of Housing and Urban Development says families paying more than 30% of their income for housing are “cost-burdened,” and affordable housing refers to housing that costs less than 30% of a family’s income. One way to make housing more affordable is to bolster programs that aid first-time homebuyers in their purchase of reasonably priced homes, for example, which has nothing to do with large-scale government housing.

Perhaps the most successful programs for adding to the stock of affordable housing are tax credits, which benefit property owners and developers as they create or rehabilitate affordable housing units.

2. Myth: Affordable housing will bring down the property values of the neighborhood.

Facts: Affordable housing increases property values overall. Even low-income housing, which is part of the affordable housing mix but not all of it, often increases property values, depending on the characteristics of the neighborhood. A 2016 Stanford Graduate School of Business analysis found that when a low-income housing development is created in a low-income neighborhood, it raises home prices by more than 6% over a 10-year period. And in a higher-income neighborhood with a large population of people of color, there is no effect on property values. Only high-income neighborhoods with small minority populations see a decline in property values with the addition of a low-income housing development.

Also, advocates for housing development argue that the decision to build low-income housing only in low-income areas because of concerns about the impact on property values means concentrating poverty in certain areas and ignoring issues of diversity and integration.

3. Myth: Affordable housing costs taxpayer money.

Facts: Research shows that the affordable housing crisis has a huge cost to Americans. The National Low-Income Housing Coalition estimates that the shortage of affordable housing actually costs more than $2 trillion a year because unstable housing is linked to poor health outcomes, low educational attainment, lower wages and productivity.

Also, many programs that address the crisis, like the Low-Income Housing Tax Credit, don’t cost taxpayers money overall, as they simply serve to decrease the tax burden of affordable housing property owners. Research suggests that, overall, adding affordable housing is a net benefit to a community because the owners of affordable housing are often improving or replacing substandard housing and then paying taxes and contributing to the local economy.

4. Myth: Affordable housing increases crime rates

Facts: In low-income areas where low-income housing is added, there is actually a drop in crime rates, according to research, and in higher-income areas where low income housing is added, there is no change in crime rates, according to the 2016 Stanford analysis.

5. Myth: Affordable housing = gentrification

Facts: Gentrification is a loaded and complicated term in the world of housing development. Its most basic definition is when the character of a poorer neighborhood changes because of an influx of wealthier people who improve housing and create new businesses, which increases the cost of living and drives out the current residents. When neighborhoods lack investment, they often lack services, too, and the residents suffer. When they are forced to move to lower-income areas, they continue to suffer.

Community leaders and developers must provide a balance and work to revitalize neighborhoods while honoring the character of the neighborhood and providing opportunities for neighborhood residents to lift themselves up. A key to this is providing affordable and low-income housing in such areas, providing ways for current residents to stay in their neighborhoods even as the neighborhood grows and changes. When developers involve community leaders throughout the development process, they can identify community needs, including services, housing, and infrastructure, and ensure the revitalization process is focused on meeting these needs. To read more about gentrification and affordable housing, visit the National Low-Income Housing Coalition.

6. Myth: Affordable housing is for people “on welfare”

Facts: The most costly tax program related to housing actually helps people of all income levels, as homeowners receive a federal tax deduction for mortgage interest paid. This amounts to the largest housing subsidy in the country. The mortgage interest deduction costs the government almost $90 million, whereas other programs related to affordable housing cost about half that.

Additionally, it’s helpful to think about the way the housing affordability crisis affects all of us, even those who can comfortably afford their current housing situation. It affects the quality of life of everyone around us, and impacts residents’ ability to maintain their health, work productively, and raise their families in safe communities.