Q. What is affordable housing in New Jersey and how are rents and sales prices determined?

A. The term, “affordable housing”  usually refers to housing for rent or purchase, whereby the rental rate or purchase price is established so that the home is affordable to a theoretical household of a specified size with a gross annual income that is below 80% of the median income for a housing region. “Affordability” is based on the assumption that a household can spend between 28% (to purchase) and 30% (to rent) on their housing costs.  Housing costs for purchase include the monthly payments of interest, principal, property tax, HOA fee, insurance and private mortgage insurance (where applicable).  For renters, housing costs include the gross rent, as defined to include an allowance for utilities paid by the tenant and the net rent that the tenant pays to the landlord.

We say, “usually,” because there is a myriad of programs that differ in the way in which rents and sales prices are calculated.

The modifier, “theoretically,” is used because the variables are derived from demographic and other statistical data, not on the actual situation of the applicants, purchasers or tenants.

Affordable housing is typically deed-restricted for a period of no less than 30 years and can be restricted for as much as 50 years or in perpetuity.