Market-Rate vs Affordable Housing
Home to over 5,000 SoCal residents, QRM Corp. prides itself as an industry leader of multifamily management. With the state’s highly diverse demographic, the demands of California’s housing market ranges from the lowest to the highest economic profile. In order to answer the needs of our local Southern California community, QRM’s portfolio boasts 21 properties of both Affordable and Market-Rate homes. When distinguishing between the two categories a few questions arise: Where is the line economically between them? Who qualifies for each? And what is truly being done to assist those who have the greatest need for housing? Read on to learn the basics of what defines Market-Rate vs. Affordable housing.
Market-Rate Housing
At one level, market-rate, or “conventional,” housing is straightforward and easy to understand. As its name suggests, this type of housing relies on local market values and demand to determine costs. In general, rents are set by calculating what percentage of income a household would pay toward housing costs. This formula relies on the Area Median Income (AMI) as determined by the Department of Housing & Urban Development (HUD). The AMI is created by finding the average of all incomes in a county or metropolitan area.1
Alternatively, costs for Market-Rate housing can be determined by measuring the average costs of comparable housing in the area. This measurement takes into account all aspects of the unit in question. Factors such as available amenities and features, location, and condition would be used to determine if a home is worth more or less compared to similar homes in the area. The market value is then determined by answering the question “at what price would this home be worth renting as compared to local competition?”
Affordable Housing
Market-rate and affordable housing are not entirely mutually exclusive, yet are generally considered to be different categories. QRM manages 11 multi-family and senior living affordable communities in Southern California. Affordable Housing, rather than being the opposite of market-rate, is a complex category of its own with specific qualifications and various available programs within the larger umbrella.
The most obvious difference is that affordable housing is priced below market value. There is a clear hard line determining this: housing costs must consume 30% or less of a household’s income to be considered “affordable.”2 Most affordable housing developments are considered Low Income Housing. These homes require that applicants “income qualify” in order to be accepted, as the federal government pays for a portion of the housing costs through various programs. This process ensures that housing and assistance funding are reserved for families and individuals who would otherwise struggle to find a home within their means.
In order to understand who qualifies for affordable housing better, we need to examine how the cost of housing realistically affects the average tenant. According to HUD, a resident is considered “cost-burdened” if their rent consumes more than 30% of their income, and “severely cost-burdened” if it amounts to 50% or higher.3 Studies have shown that the average resident of the most populous regions of California is “cost-burdened” by housing expenses.4 Federal affordable housing programs intend to alleviate this burden so that lower income households can afford to pay for housing while retaining enough income to pay for other necessities.
Government Housing Assistance
Affordable Housing is in higher demand than ever before and supply falls short of the sky high needs of California’s housing crisis. As a management company, QRM Corp. is committed to being a front runner of the affordable housing community. We take seriously the needs of our residents and participate in the programs which create greater access to housing for residents of our communities. The Federal Government provides housing funds through multiple programs in order to widen this access.
Section 8 housing vouchers, or housing choice vouchers, provide housing assistance to individuals of very low income to provide access to quality housing. As their name implies, vouchers allow the renter to choose their housing according to their family’s needs. They are eligible to be used for affordable and market-rate homes alike, if the landlord accepts vouchers and the home meets the program requirements such as health and safety standards. When presented to the property owner, a Public Housing Agency pays the landlord the determined subsidy and the tenant pays the difference. If the tenant chooses to move, they take their voucher with them so long as they continue to qualify.5 At QRM Corp., we proudly accept Section 8 vouchers at each of our 21 modern apartment complexes.
HUD Subsidized housing is a partnership between the department and private owners, such as QRM Corp. Subsidized homes ensure that low-income residents are provided with affordable rent rates to meet their housing needs. Similar to housing choice vouchers, tenants are able to pay a percentage of their rent with the subsidy covering the remainder. The main difference is that the subsidy is specific to the property rented at and does not go with the renter if they move. With the private owner receiving this subsidy, the costs of managing the home are covered, which allows a sustainable system of keeping rent costs low while providing quality housing to the tenants. We provide HUD Subsidized Housing at our property Sycamore Court Apartments in Garden Grove, CA.6
Section 42 or the Low Income Housing Tax Credit (LIHTC) is a program in which the federal government incentivizes companies to acquire, develop, or rehabilitate housing to be set aside as Low-Income Affordable Housing. This program benefits renters by pushing for increased development of affordable communities that can directly address the housing shortage nationwide. While the entire development does not need to be affordable housing, the owner is required to set aside a specified number of units in order for the development to qualify.7 QRM Corp. dedicates the entirety of its Affordable Communities to low-income qualifying housing to create the maximum number of available accessible homes possible.
Quality Driven Management
Southern California’s housing needs are as varied and diverse as its community. Market-Rate and Affordable Housing developments each play an important role economically to accommodate the budgets of tenants from low to moderate income. QRM Corp. works tirelessly to ensure that each of our residents can equally enjoy living in a top of the line, updated apartment. Housing is a necessity and every person deserves access to a safe, quality living space that they are proud to call home.
Schedule a tour today at one of our beautiful communities and start your journey today to find your new home with QRM!
References
“Market-Rate Housing vs. Affordable Housing: Commonbond.” CommonBond Communities, CommonBond Communities, 1 Nov. 2022, commonbond.org/market-rate-housing-vs-affordable-housing/#:~:text=What%20is%20Market%2DRate%20Housing,of%20subsidies%20or%20government%20assistance.
“Resources: Affordable Housing 101.” California Housing Consortium RSS, California Housing Consortium , calhsng.org/resources/affordable-housing-101/what-is-affordable-housing/. Accessed 10 Oct. 2023.
“What Is Affordable Housing?” Local Housing Solutions, Abt Associates and NYU Furman Center, 1 Feb. 2022, localhousingsolutions.org/housing-101-the-basics/what-is-affordable-housing/.
Cromwell, Molly. “Renters More Likely than Homeowners to Spend More than 30% of Income on Housing in Almost All Counties.” Census.Gov, U.S. Census Bureau, 8 Dec. 2022, www.census.gov/library/stories/2022/12/housing-costs-burden.html.
“Housing Choice Voucher Program Section 8.” HUD.Gov / U.S. Department of Housing and Urban Development (HUD), U.S. Department of Housing and Urban Development, 11 Jan. 2022, www.hud.gov/topics/housing_choice_voucher_program_section_8.
“Assisted Housing: National and Local.” Assisted Housing: National and Local | HUD USER, U.S. Department of Housing and Urban Developement, www.huduser.gov/portal/datasets/assthsg.html. Accessed 12 Oct. 2023.
“Low-Income Housing Tax Credit (LIHTC) Rent Requirement: Frequently ...” California State Treasurer’s Office, California State Treasurer’s Office, 5 Dec. 2022, www.treasurer.ca.gov/ctcac/2022/compliance.pdf.