What does it mean for housing to be “'affordable housing?” Let's start with the basics.

In the United States, housing is commonly considered "affordable" if a household spends 30% or less of their gross income on housing costs. Gross income is your total pre-tax income, before anything gets taken out for taxes, retirement, or health insurance.

For renters, housing costs typically include rent plus utilities. For homeowners, it's usually the mortgage payment, property taxes, and insurance. You might notice that upkeep and repairs are missing from this list. Even though maintenance is a real cost of housing, it's generally left out of affordability calculations because it's harder to predict and varies so much from one property to another.

Why 30%?

If you've ever wondered where the "30% of income" rule comes from, you're not alone. It's not a number pulled from thin air. It has a real history rooted in federal housing policy.

The 30% standard originated in the 1960s and was formally codified into law through the Brooke Amendment of 1969 and later the Housing and Community Development Act of 1981. Before this, public housing tenants paid flat rents regardless of their income, which created significant hardships for families struggling financially. Senator Edward Brooke of Massachusetts championed legislation that capped rent at 25% of a tenant's income, which was later increased to 30% in 1981.

The thinking behind 30% is straightforward: it attempts to strike a balance. Households need enough income left over after paying for housing to cover other essentials—food, healthcare, transportation, childcare, clothing, and savings for emergencies. When housing costs creep above 30%, families often face impossible choices: Do we pay the full rent or buy groceries? Do we skip a doctor's appointment to keep the lights on?

Research has consistently shown that households spending more than 30% of their income on housing are "cost-burdened," and those spending more than 50% are "severely cost-burdened." These thresholds correlate with real hardships. Cost-burdened families are more likely to skip meals, defer medical care, carry debt, and experience housing instability.

But here's the important part: The 30% threshold is a guideline, not a magic number. It's a useful tool for policymakers and housing developers to determine who needs assistance and how much, but it doesn't capture every household's reality. A high-income household spending 35% on housing might be perfectly comfortable, while a low-income household spending 29% might still be struggling because of high medical bills, student loans, or other expenses. Context matters.

Still, the 30% rule gives us a common language. When we talk about "affordable housing," we're usually referring to housing that allows families to stay at or below this threshold, leaving them with enough income to build stable, healthy lives. It's an imperfect measure, but after more than 50 years, it remains the most widely used standard for assessing housing affordability in the United States.

How is Affordability Measured?

Since affordability depends on each household's unique income and housing costs, there's no one-size-fits-all answer to what counts as "affordable housing." A rent that works perfectly for one family might be completely out of reach for another, even in the same neighborhood.

So how do we measure affordable housing without evaluating every household individually? The federal government needed a system that could work at scale. Enter the United States Department of Housing and Urban Development, better known as HUD. HUD divides the country into areas based on metropolitan statistical areas (MSAs), counties, or HUD Metro FMR Areas, then calculates the Area Median Income (AMI) for each region. The AMI is the midpoint of what all households in that area earn. Half earn more, half earn less.

You might wonder why we use the median instead of the average (mean). The median gives us a more accurate picture of the "typical" household because it isn't thrown off by extremes. If a billionaire moves into a neighborhood, the average income skyrockets, but the median barely budges. For affordable housing policy, we need to know what most people are actually earning, not what a few outliers make.

Of course, this system isn't perfect. HUD has to make tradeoffs when deciding how large each area should be. They try to capture entire housing markets by considering economic and geographic factors, but larger areas can hide significant local differences. Take Baltimore, for example. Baltimore City is part of the Baltimore-Columbia-Towson MSA, which includes several counties. A family in Roland Park faces very different housing costs than one in Westport, yet they're measured by the same AMI. When wealthier areas are included with lower-income neighborhoods, the AMI can end up higher than what many residents in a neighborhood actually earn, making it harder for affordable housing programs to serve those who need it most.

One more thing to keep in mind: affordable housing programs don't always count every person's income in a household. Students, minors, and live-in aides are often treated differently in the calculations. So while the 30% rule and AMI provide a framework, the actual determination of who qualifies for affordable housing programs can be more nuanced than it first appears.

Examples

Straightforward Single Person Household

Billy has an annual income of $100,000. Billy spends $24,000 per year to rent an apartment and $5,000 on utilities. Billy’s total expenses for his housing are therefore $29,000. Since Billy spends 29% of his income on his housing, Billy’s housing is considered “affordable.” However, Billy’s expenses might be stretched because of transportation, childcare, debt, healthcare, or other costs and thus make this amount of housing expense unaffordable for him. The 30% threshold is a rule of thumb, not a universal truth.

Double Income and No Kids Couple

Walter and Susan are a couple who live together. Walter earns $50,000 and Susan earns $60,000. Their apartment’s yearly rent is $36,000 and the utilities for the apartment are $4,000 per year. Walter and Susan have a combined income of $110,000 and a yearly housing expense of $40,000. Their yearly expense on housing is 36.4% of their total income. This means that Walter and Susan’s housing is not “affordable.” However, Walter and Susan might be doing fine with their total expenses and this “unaffordable” designation is based on the 30% cutoff which is a convention, not a magic number.

Multigenerational Family

Gene and Fran are a couple. They live in a house with their 2 kids and Gene’s father. Gene and Fran are the only two employed household members and earn $90,000 collectively. Gene and Fran own their house and pay $1,500 per month for their mortgage, $5,000 per year for their taxes, and $500 per month for their insurance. Their yearly upkeep on the house averages to $1,200. The commonly considered housing costs for this household is $29,000. Using the 30% rule of thumb, the 29% of gross income they spend on housing is considered affordable for their household. However, if you include the yearly upkeep costs, their cost of housing exceeds the 30% threshold by $200. This may or may not have an impact on the households lifestyle, but it is an example of how upkeep can change the math behind affordability and how the 30% rule of thumb isn’t universal.

The Section 8 Voucher Holder

Maria is a single mother with two children earning $28,000 annually (about 35% of Baltimore's AMI). She receives a Housing Choice Voucher that limits her rent payment to 30% of her income ($700/month). The voucher covers the difference between her payment and the actual rent. This shows how affordable housing programs work in practice and why AMI calculations matter for eligibility.

The Senior on Fixed Income

Robert, 72, receives $1,800/month in Social Security ($21,600/year). His rent in a subsidized senior building is $540/month (30% of his income), but market-rate units in his neighborhood rent for $1,200+. Without affordable housing, Robert would spend 67% of his income on rent alone. This illustrates why senior housing is often prioritized in affordable housing development.

The Essential Worker

Jamal works as a nursing assistant at Johns Hopkins earning $42,000/year. He can afford about $1,050/month for rent and utilities. But one-bedroom apartments near his workplace average $1,400-$1,600. He commutes 90 minutes each way from a more affordable area, spending 15 hours weekly and $300/month on transportation. This shows how housing unaffordability creates a ripple effect on time, transportation costs, and quality of life. Although Jamal is able to find affordable housing, the commuting requirement takes a significant amount of his time.

The Small Business Owner

Lisa runs a small catering business with variable income. Some months she earns $6,000, others just $2,000. Her average annual income is $50,000, but housing applications typically require proof of consistent monthly income. This example highlights how the affordable housing system struggles to accommodate gig workers and entrepreneurs, even when their annual income would qualify them.

The Cost-Burdened Homeowner

The Johnson family bought their Baltimore rowhome in 2019 for $180,000. With rising property taxes, insurance, and necessary repairs (new roof, plumbing issues), their housing costs now exceed 40% of their $75,000 combined income. They're technically homeowners but are "housing cost-burdened." This challenges the assumption that homeownership automatically means housing security.