The U.S. Department of Housing and Urban Development (HUD) sets income limits each year that inform eligibility guidelines for low-income housing programs. At the bottom of the earnings ladder are households whose earnings are at or below 30 percent of their area's median income. HUD categorizes these families as "extremely low-income." According to NLIHC, there were 9.2 million extremely low-income renter households in the country, as of the 2008 American Community Survey, but only 6.1 million rental units in the nation's housing stock they can afford.
Low-income housing programs strive to increase the supply of housing affordable to the nation's neediest families. As NLIHC points out, consensus among housing experts is that if a family spends more than 30 percent of its income on rent and utilities, its housing expenditure is not affordable. Most subsidized housing schemes are structured to ensure that participants do not, in most cases, surpass the 30-percent threshold. To keep their housing expenses down, NLIHC contends many low-income families settle for substandard housing and overcrowded conditions.
Virtually all low-income housing programs use some form of subsidization. The two largest programs come from HUD. Section 8, or the Housing Choice Voucher program, subsidizes the segment of a low-income family's private market rent that is greater than 30 to 40 percent of their income. HUD's public housing program consists of housing units owned and operated by local public housing agencies with rents set at affordable levels.
Some cities run their own programs in addition to Section 8 and public housing. Many San Francisco Bay Area cities, for example, use some type of below market rate program. In Palo Alto, California, for example, the non-profit Palo Alto Housing Corporation (PAHC) administers the city's below market rate program. Generally, households cannot apply to live in one of the properties contained in the program if they earn more than 80 percent of Palo Alto's median income, according to the PAHC website.
Some programs contain a home ownership component; however, the magnitude of these initiatives pales in comparison to efforts aimed at renters. PAHC, for example, executes Palo Alto's "Below Market Rate Purchase Program," which offers properties at below market prices. The City of Palo Alto requires developers to make at least 15 percent of the units in buildings of five units or more below market sales opportunities. Other cities, including New York and San Francisco, run similar programs aimed primarily at renters.
A vast majority of low-income housing programs use income as the main eligibility criterion. Most defer to HUD's income limits, which change yearly and vary by location and household size. Like the above-mentioned Palo Alto endeavors, HUD's public housing program allows renters at or below 80 percent of their area's median to apply. The Section 8 program limits income at 50 percent of an area's median; however, housing authorities must distribute 75 percent of their Section 8 vouchers to families at or below 30 percent of their area's median.