2023 Ownership and Rent Affordability Limits


What is affordable housing?

The Met Council's 2040 Housing Policy Plan defines affordable housing as housing that is affordable to low- and moderate-income families. The limits are based on the U.S. Department of Housing and Urban Development (HUD) area median income (AMI) calculations. Below, we provide context for these affordability measures and an opportunity for comment through our survey.

Who qualifies for affordable housing?

For 2023, the rental affordability limit is 60% of the area median income for TBRA, LCDA and LCDA-TOD, ownership affordability limit is 80% of the area median income. In 2023, the area median income (AMI) for a family* of four is $124,900. For details on how this is calculated, see History of Median Income.

We will use the following amounts as the upper limits for affordable housing in regard to the Livable Communities Act in 2023.

Annual updates of this page occur each spring dependent on timely updates of HUD data this page relies on. If you have questions about these values, please contact Hilary Lovelace at Hilary.Lovelace@metc.state.mn.us.

Rental housing

Rents include tenant-paid utilities. We have not separated tenant-paid utilities from the rent value because we want to consider all housing costs to determine affordability, rather than just rent alone.

2023 Rental Housing
# Bedrooms 30% AMI 50% AMI 60% AMI 80% AMI
Efficiency $652 $1,087 $1,304 $1,739
1 Bedroom $699 $1,165 $1,398 $1,864
2 Bedrooms $838 $1,397 $1,676 $2,235
3 Bedrooms $969 $1,615 $1,938 $2,584
4 Bedroom $1080 $1,801 $2,161 $2,881

Ownership housing

For owner-occupied housing, the income limit includes principal, interest, property taxes and home insurance.

Assumptions include:

  • Fixed-interest, 30-year home loan
  • Interest rate of 5.500%
  • A 28% housing debt-to-family income ratio
  • A 3.5% down payment
  • A property tax rate of 1.00% of the property sales price
  • Mortgage insurance at 0.85% of unpaid principal
  • $100/month for hazard insurance
2023 Home Ownership
Family Income Level Affordable Home Price
80% AMI ($95,650) $304,700
60% AMI ($74,520) $234,200
50% AMI ($62,100) $192,800
30% AMI ($37,250) $109,900


Applying an interest rate of 5.500% on a 30-year fixed-rate home loan for 2023 and other standard mortgage assumptions listed above to the 80% of AMI amount for a family of four ($95,560) yields an affordable purchase price of $304,700. With recent increases in mortgage interest rates from the low values of 2022, the affordable purchase price has decreased from the 2022 limit of $355,600 based on the limited purchasing power of a potential buyer.

Note: The term "family" is used here because that is how HUD calculates household incomes, and we wish to be consistent with language as HUD's calculated family incomes do differ than other household income calculations. The Met Council recognizes that many household units in the metro area are not defined by municipal code as "family units," and that calculating benefits by familial status is inequitable when family status including marriage has not been available to all residents throughout the history of our nation.

Is affordable housing affordable?

For the past several years, various cities, housing advocates, and residents in our region have expressed their doubts about how well the measure of Area Median Income (AMI) and the subsequent rental limits match the realities of the households. In 2022 the Met Council gave staff permission to explore how affordability is defined and the potential ways, if any, it can be modified to better reflect the experiences of our residents. With the release of the 2023 rental limits based on AMI, and the upcoming release of the 2050 Housing Policy Plan, staff would like to ask the stakeholders of our region — you — to weigh in on the issue of defining affordability.

What is area median income (AMI)?

Area Median Income (AMI) is the measure of median income for family households in the Twin Cities metropolitan area. This measure is calculated by the U.S. Department of Housing and Urban Development (HUD), and changes each year based on different factors in their formula such as average national income, average income in our region, and interest rates. Housing units are often classified into varying levels of affordability based on how affordable it is to households earning incomes at various percentages of the regional AMI — for instance, many define “deeply affordable housing” as affordable to households with making 30% of the AMI.

In order to receive funding including Low-Income Housing Tax Credits (LIHTC) to build low-income housing, potential developers need to use the federally set AMI standard in determining the affordability of their units, making this standard one of the main ways we classify housing unit affordability. Unfortunately, the way AMI is calculated and the respective rental limits do not capture the realities of many households being able to afford housing.

How does AMI fall short?

The use of AMI as the main standard for affordability in new housing construction has led to a few shortcomings that particularly misrepresent the needs of low-income households in our region. A few that staff have identified include the following.

Area Median Income (AMI) typically builds its assumptions of income off a family of four. However, not all households look like this — our region has many households of varying sizes, from households of one or two people to multi-generational households with more than five people, households with children, and households without. In fact, households that fit the HUD definition of family of four only make up 13.6% of our region's households and have the largest share of households that make incomes at 80% of the regional AMI or higher. Use our tool below to see where your household type median income fits in today’s AMI standards.

Our region has many households with only one income earner. The current way that AMI is calculated means that a certain number of income earners is assumed and dependents such as children, older family members and those unable to earn wages can be counted equal to members of a household who are earning an income.

Rental limits based on the HUD’s definition of AMI considers housing as affordable if housing costs make up 30% of a household’s income before taxes, but this 30% threshold is arbitrary and ignores that many households face different financial realities, including medical or student debt, childcare expenses, and disability. The chart lists some typical household expenses that people in our region face.

The way it is currently calculated, AMI uses the entire region as a benchmark for comparison, which can mean that AMI levels of do not necessarily reflect true affordability at the neighborhood level. For instance, building an apartment building consisting solely of units affordable at 60% AMI in a community where many residents make 30% AMI or less actually creates housing that is unaffordable to residents of that neighborhood.

Alternative measures to Area Median Income

We have been looking into alternative measures of housing affordability that more accurately consider household costs at a more local level, or in a more representative way of the households in our region and their expenses. Some other measures of affordability include the MIT Living Wage Calculator, Shelter Poverty measures, and Residual Income measures, which incorporate varying household sizes and types, other costs of living beyond housing, and more specific geographies.

History of area median income

Through 2010, the Council identified a purchase price ceiling for owner-occupied homes based on what a family of four with an income at or below 80% AMI could afford at prevailing interest rates. For affordable rental units, the limit was maximum monthly rents affordable for families at 50% AMI.

From 2011 through 2014, the Met Council used 60% AMI as the income limit for both rental and ownership costs.

This level was consistent with the funding criteria preference adopted by the Metropolitan Housing Implementation Group (MHIG) in 2001 and was a commonly-used threshold for affordability in federal, state, and local housing programs.

The table below lists the family incomes at previous levels of area median income, as calculated by the U.S. Department of Housing and Urban Development (HUD). Please note that due to constraints and adjustments used in HUD’s calculations, the income limits shown here do not necessarily equal the area median income multiplied by the given percentage.

HUD's Area Median Income for a family of four for the Minneapolis-Saint Paul-Bloomington Metropolitan Statistical Area
   
             AMI
2023 2022 2021
Area Median Income $124,900 $118,200 $104,900
80% of Area Median Income $94,650* $89,400* $79,900*
60% of Area Median Income $74,520 $70,380 $62,940
50% of Area Median Income $62,100 $58,650 $52,450
30% of Area Median Income $37,250 $35,200 $31,450
 

Note: The 80% of Area Median Income limit is capped at the U.S. national median family income, so this figure is less than 80% of the Minneapolis-Saint Paul-Bloomington MSA’s median family income. The large increase from 2021 to 2022 is the result of a substantial regional and national increase in median family income as well as an increase in inflation.