The rule of thumb for housing affordability is an amount that is not more than 30% of household income.
Housing Cost Burdens
Households paying more than 30% of income to housing costs (including utilities) are said to be “cost burdened.” Households paying more than 50% of income for housing are said to be “severely cost burdened.”
Cost-burdened extremely low-income (ELI) households were a growing housing problem in Delaware, even before this recession. The prolonged economic downturn has only exacerbated this crisis. ELI households have incomes at or below 30% of the area median income. For these households there is not enough left over after paying housing expenses to cover other basic expenses such as food or clothing.
In 2010, of the more than 20,000 ELI renter households in the state, 69% are severely cost-burdened. Of the more than 14,000 cost-burdened ELI owner-occupant households in the state, 77% are severely cost-burdened. (Kotz, 2007)
- Moderate Income - Households with incomes between 120% and 80% percent of area median income (AMI).
- Low Income - Households with incomes below 80% of AMI.
- Very Low Income - Households with incomes below 50% of AMI.
- Extremely Low Income - Households with incomes below 30% of AMI.
ELI households and individuals include the majority of the homeless and those at risk of homelessness, households who are housing cost-burdened, elderly on fixed incomes, people with disabilities, and many of the working poor. The extremely low-income population suffers regardless of tenure, with homeowners and renters almost equally represented.
A housing unit that is permanently affordable, whether home ownership or rental, will be affordable to future lower income households who occupy it. Such a property is able to be affordable "in perpetuity" through a mechanism such as a deed restriction or ground lease. Community Land Trusts ("CLTs") use a ground lease which restricts resale value. Permanent affordable home ownership is also referred to as "shared equity," meaning that the occupant receives the benefit of an affordable housing unit and, upon resale, shares the equity increase with the CLT or other sponsor.