Affordable Housing

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Affordable housing is a term that is used to refer to residential properties with costs that are considered reasonably priced for a group of people in a specific income range. While the term is often used in reference to rental properties that are within the financial ability of people in the lower income ranges of a certain area, affordable housing can also be used to refer to property that are affordable to renters and buyers in different income brackets.

In countries such as the United States and Canada, the commonly accepted criteria for affordable housing is that it comes at a cost that is not more than 30% of the gross income of a household. These housing costs typically include taxes and insurance for owners as well as the costs of utilities. When the monthly cost of a home is more than 30% to 35% of the household's income, then that housing cannot be considered affordable for that household.

Supply and demand plays an important part in determining household affordability, since properties that are considered affordable are typically found in areas where there is comparatively less demand relative to supply. In places where the supply of available properties is less than the existing demand, households that have low to moderate income will typically have a hard time obtaining properties that they can consider affordable. In these particular housing markets, the increase in the price of land values will often overtake the increase in income. Housing markets such as these will often experience limited supplies of residential land, or there may be several regulations that make it difficult or expensive to increase the supply of housing at rental rates that are affordable to buyers who have income that is below the local average.

In the United States, an important factor in determining the affordability of housing is how much time it takes to commute to certain key locations in the community. As in many other communities, potential homebuyers will have to decide if the comparatively high costs of housing near the center of town for example-with its easy access to service and entertainment centers-is justified, or if they would rather purchase a better house at a more affordable rate in exchange for a longer and more expensive commute.

Another important factor in determining housing affordability is the income of the household. This is commonly pinpointed by considering the percentage of income that a particular household spends on the costs of housing.

One other method of determining housing affordability takes into consideration the regular hourly wage of a community's full-time workers who earn the minimum wage as set by the local, regional, or national government. This method considers that full-time worker should be able to afford at least a modest apartment in the community that is fairly close to his or her place of work. Still other methods consider community residents who live in relative poverty, which is typically defined as earning less than 60% of the median household income for that region.

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