What are Income-Restricted Apartments? Rental Definition and Examples

It’s no surprise to anyone, whether you’re looking for a new apartment or not, that monthly rent prices are skyrocketing in many parts of the country. Even in cities where post-pandemic rents have stabilized, this plateau is higher than it was before the increase in demand since 2021.

This means that many people who earned the same income as just a few years ago are now being deprived of prices for affordable housing. And that is why budget apartments and other low-income housing are also in high demand. In this article, we will explore how limited income rental housing and housing assistance fills the gaps for low income renters.

Limited income apartment defined

The first major housing crisis in the United States occurred 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 renters and families.

The following decade brought legislation enforced by federal government agencies to prevent housing discrimination and to set rent and income ceilings for low-income apartments in public housing. Then, in the 1970s, the federal government transferred much of the responsibility to state and local authorities.

This is the beginning of modern income-tested housing.

Limited income apartments are rented units reserved for tenants whose income is below certain total household income thresholds. Depending on your state, this housing may be run by government agencies, nonprofits, or housing associations.

Income-Limited Apartments vs Income-Based Apartments

Although they are often mentioned together under general housing assistance, there are differences between incomeslimit apartments and income-based apartments. One offers rents based more on the median income of the community and the other more on the income of the individual tenant.

Limited income apartments

Revenue-limit flats, also known as rent-restricted flats, may be owned by the local or state authority, but are more often developments planned by private landlords. They are specifically designed for low to middle income tenants. And they’re often funded by a combination of government grants and nonprofit donations.

Rents for low-income apartments are determined by the median income in the area. Then the rental price is capped at a calculated percentage of this figure. The percentage varies depending on the state and size of the apartment. Additionally, all apartments must be in multi-unit buildings such as apartment complexes and multi-unit buildings.

Private landlords who offer limited income apartments must offer the program in every unit of the property to qualify.

Income-Based Housing

Revenue-based apartments are explicitly owned by individual owners who must then meet specific criteria. Among these are the renovations needed to bring income housing up to certain HUD standards. Rental prices in an income-based apartment are calculated based on the adjusted gross income of the individual tenant. Then, rent is capped at 30% of that income, regardless of median income levels or tax credits in the area.

Unlike limited-income housing, income-based housing can be in an apartment complex or building where only 20-40% of the units are low-income apartments. Moreover, they are not limited to traditional apartments. Income-based rentals can also include duplexes, townhouses, and townhouses — and even single-family homes.

Who can benefit from means-tested housing?

Just as incomes vary across the country, so do the eligibility requirements for renters for income-tested housing. But regardless of location, eligibility for these apartments is based on some income parameters. Most low income housing is for those whose income is at least half of the local community area median income.

How the government determines allowable income guidelines

Each year, HUD calculates an estimated median income for each major metropolitan area. Using these annual income figures, it then determines a maximum adjusted income allowed to qualify in each community based on family size which is delineated into three categories.

“Low incomes” are those earning less than 80% of the region’s median income, while “very low income” families are renters earning less than 50%. People who bring home only 30% are designated as “extremely low income”.

In most communities, income-tested housing is reserved for those on “very low income” or below 50% of the area’s median income. This is up to local authorities to determine.

How rent is determined

If you or your family qualify for low-income housing, how much do you expect to pay in rent each month once you find an apartment? Different states and municipalities calculate rents differently. But it’s almost exclusively based on a region’s median income.

Rent limits fluctuate based on local median income and market value

Income-tested rent is determined by what is affordable in the area based on median incomes and rental market rates, not an individual resident’s income. This is only to determine eligibility. You might earn more or less than your neighbor, but you’ll usually pay the same rent.

The rents themselves are calculated based on the area’s current 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 that the community determines they are allowed.

How to find limited income apartments

So if you qualify for a limited income apartment, where can you start looking for one? Eligible apartments are difficult to find on your own as they are not listed on general apartment search websites such as Apartment Guide or Lease. You should look to the government for advice.

Find your HLM management

Limited income apartment finding programs are run by a local public housing authority, or PHA. These local offices are the first stops to find an apartment with limited incomes.

You can find contact details for your local ASP on the Department of Housing and Urban Development website. public website. The local public housing agency can help you find low-income apartments available in the size and location you want and determine exact rents.

If you are looking for a government-owned apartment, your first action is to complete a PHA housing application. But if you are looking to rent from a private landlord, you can contact them directly from a list provided by your PHA. If there are problems contacting your PHA, you can speak with your local HUD field office.

Apply for apartments with income conditions

Once you have found an apartment, you will need to apply much like you would for any apartment. A landlord or property manager will require photo ID for adults and a birth certificate for children. Next, all potential tenants must provide proof of current income and submit to a background check.

But be aware. Not all eligible persons can obtain such apartments immediately. There is a greater demand for units than there is availability. This is especially true for public housing.

Don’t be frustrated if you are put on a waiting list. Apartments go first to those with a higher level of need. The best way to compensate for wait times is to be flexible with the size of the apartment (perhaps a one-bedroom apartment is easier to find), get credit for additional tax or choose limited income rather than income based on income.

Limited income apartments may meet your needs

Where needed, systems are in place to provide affordable housing and access to tax credit. But in the meantime, limited income apartments, along with Section 8 and social housing, are viable options for those who meet the income requirements.

Also note: many low-income apartments look just as nice and welcoming as rentals and unsubsidized apartments you’ve already rented. Determine your need and contact your local PHA, local governments or housing and urban development office.

To learn more about common tenant terms, see our Tenant Dictionary.

The information in this article is for educational purposes only and does not constitute and is not intended to constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice if they deem it necessary.