Strictly
defined, it is based on household size and income compared to the
median income of the local county. The median is found by determining
the mid point between which 50% of households make more and 50% make
less. Generally the categories are as follows: Extremely low (less than
40%), Very Low (40%-59%), Low (60-79%), Moderate (80-120%) of the
median. Some communities do not consider any housing beyond 100% for
Moderate
Income. Above this point the housing is considered Market Rate. This
calculation is adjusted at a minimum annually and sometimes twice a
year.
Household size ranges from one to six with above six given a multiplier.
The average size household is generally assumed to be four. These
calculations come into play when a community requires a percentage of
affordable housing as mitigation for development, often referred to as
"Inclusionary Housing." Additionally some states, such as California,
allow for density bonuses in residential zoned areas when a percentage
of affordable housing is provided. This allows an increase in the
number of overall market rate units by including a percentage of
affordable units. This is "by right" in California and over-rides local
zoning. In addition certain Tax Credit funding is available only to
affordable housing or a particular mix of affordable and market rate
depending on the program each year.
There can be dramatic differences from county to county in what is
considered affordable. To see what your state considers to be affordable
visit the state housing development authority website.