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Last revised July 24, 2014
<br />Housing Cost Burden Example
<br />While the 30% "rule of thumb" by which housing is "affordable" when a household pays no more
<br />than 30% of income on housing is pertinent to households across the full array of households, it
<br />neglects to account for the remaining differences in income available for other life needs as
<br />illustrated below.
<br />Household A (low-income)
<br />Family of four
<br />Monthly gross income: $3,500
<br />30% of income (housing costs): $1,050
<br />Income for other life expenses (transportation,
<br />food, clothing, child care, insurance, etc.):
<br />$2,450
<br />Household B (high -income)
<br />Family of four
<br />Monthly gross income: $15,000
<br />30% of income (housing costs): $4,500
<br />Income for other life expenses (transportation,
<br />food, clothing, child care, insurance, etc.):
<br />$10,500
<br />Presuming both households succeed in locating a unit at or below the 30% rule of thumb, we
<br />can reasonably say they are both "affordably housed." Presuming their spending on other life
<br />"essentials" is on par -let's say other life necessities cost both households an average of
<br />$1,800 per month -it becomes clear that not only does Household B enjoy much more
<br />discretionary income ($8,250 to Household A's $650), it could theoretically spend an additional
<br />$7,600 per month on housing alone and still have the same amount of money left over as
<br />Household A for college funds, retirement savings, or an occasional vacation.
<br />An inadequate supply of affordable housing
<br />To address housing cost burden, the public sector invests in affordable housing development and
<br />provides rental assistance to low-income households. The seven -county region has 57,900 publicly -
<br />subsidized affordable rental units, including public housing and units built with capital y�iicaci;. .l by
<br />Low -Income Housing
<br />Tax Credits.
<br />In addition to the
<br />publicly -subsidized
<br />affordable housing
<br />stock, there are also
<br />many units of naturally -
<br />occurring affordable
<br />housing -housing
<br />whose rents or sale
<br />prices make them
<br />affordable to low- and
<br />moderate -income
<br />households. Using an
<br />affordability threshold
<br />of 80% of area median
<br />2014 Area Median Income (AMI) by household size
<br />Minneapolis -St. Paul -Bloomington metropolitan statistical area
<br />Extremely Low Very Low Low Income (at
<br />Income (at or Income (at or or below 80%
<br />below 30% AMI) below 50% AMI) AMI)
<br />One -person
<br />Two -person
<br />Three -person
<br />Four -person
<br />Five -person
<br />Six -person
<br />Seven -person
<br />Eight -person
<br />$17,400
<br />$19,900
<br />$29,050
<br />$33,200
<br />$44,750
<br />$51,150
<br />$22,400
<br />$37,350 $57,550
<br />$24,850
<br />$26,850
<br />$28,850
<br />$41,450
<br />$44,800
<br />$48,100
<br />$63,900
<br />$69,050
<br />$74,150
<br />$30,850
<br />$51,400 $69,250
<br />$32,850
<br />$54,750 $84,350
<br />2040 HOUSING POLICY PLAN I METROPOLITAN COUNCIL
<br />DRAFT RELEASED FOR PUBLIC COMMENT Part I: Introduction I Page 7
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