Area Median Income (AMI) is a fundamental metric for determining household eligibility for housing subsidies and setting rental rates for affordable housing. It represents the midpoint of household incomes in a region—half of the households earn more, and half earn less. Notably, in New York City, AMI is calculated using incomes from the entire metro area, including wealthier suburbs like Westchester and Long Island.

This inclusion of suburbs outside of the boroughs inflates the AMI significantly, making it appear that NYC residents earn more than they do in reality. For example, the AMI for a family of four in 2023 was $106,800—far higher than the incomes in many neighborhoods and boroughs, like the Bronx. This inflated AMI results in “affordable” housing that’s still unaffordable for many of the city’s least affluent residents, for whom the system should be geared most towards serving.

The High Housing Cost Adjustment (HHCA)

The High Housing Cost Adjustment (HHCA) further complicates this problem. The Department of Housing & Urban Development (HUD) uses the HHCA to adjust AMI in high-cost areas, intending to reflect local housing costs. Essentially, when a market’s rents are grossly out of line with what would be considered ‘affordable’ based on area incomes, the AMI becomes calculated based on market rental rates instead, completely divorcing the metric from incomes.

Prioritizing Middle-Income Families Over Those in Greatest Need

Affordable housing programs — like Mandatory Inclusionary Housing (MIH), a popular city level program —often favor households earning 80-120% of AMI. These households are considered “middle income,” and while these units are technically affordable, they remain out of reach for the lowest-income families. With current AMI rates, developments often include units for households earning well over $100,000, creating a disconnect between the housing that gets built and the needs of the city’s residents who most need affordable housing. This allows developers to meet affordability quotas— and for the city to say it is building affordable housing— without addressing the root of the housing crisis.

Geographic Mismatch

There is also a mismatch in where affordable housing is built versus where it’s needed. Most projects are concentrated in outer boroughs like Mott Haven and East New York; areas with lower land costs and less resistance from local communities. However, these neighborhoods already have a large supply of “affordable housing,” while wealthier or gentrifying areas like Manhattan and parts of Brooklyn remain underserved. High land costs and local opposition make building in these areas difficult, further isolating low-income residents.

Even within affordable projects in low-income areas, many units are priced for households earning 60-130% of AMI, leaving local residents who earn far less unable to afford them. Instead, higher-income households from other parts of the city often occupy these units, contributing to displacement and gentrification.

What Do We Do?: Rethinking Affordability

New York City’s reliance on an inflated AMI and adjustments like HHCA distorts what “affordable” housing truly means. While the city has increased its affordable housing production, much of it is geared toward middle-income households, leaving the most vulnerable behind.

Policymakers must revisit how AMI is calculated and prioritize developments that serve the lowest-income residents. This AMI reform requires two modifications:

• The first is that the city can begin to utilize HUD’s Small Area Fair Market Rents (SAFMR) which calculates AMI per ZIP code instead of per metro region. This ensures that affordable housing is affordable in the specific ZIP code it is built in instead of at a regional scale. Without changing wider policy, this would encourage more affordable development in higher income neighborhoods which currently get no affordable housing (because the higher AMI in these areas would defray the higher land costs for developers) and the affordable projects in lower income neighborhoods would be affordable for the current residents in the area instead of encouraging wealthier residents to move to less affluent neighborhoods.

• The second change requires more cooperation between the municipal government and HUD to modify the AMI calculations at the federal level to eliminate the ability for AMI to be pegged to market-rate rents in expensive markets. This would have the effect of having AMI actually reflect the Area Median Income and therefore ensure that projects which qualify for federal funding are actually going to be affordable. With this, affordable rental rates will drop, and middle income households would no longer qualify. If the city and federal government want to subsidize housing for middle income families—which they should—they can adjust the top AMI rate to permit developments for higher income households to qualify. For instance, programs could accept tenants making 150% AMI (instead of the current 130% AMI cap), but what we should not do is continue to dilute ourselves into thinking the current metrics represent the reality of incomes in our city.

April, 2023

RESEARCH TEAM

Galia Solomonoff, Director

Eddie Palka, Adjunct Associate Research Scholar, ‘18 M.Arch

Kavyaa Rizal, Graduate Research Assistant, ‘23 MSUP

Jamon Mok, Graduate Research Assistant, ‘23 MArch

Lula Chou, Graduate Research Assistant, '24 MSRED, MArch