AMI Definition
Area Median Income (AMI) is the average income level within a particular region, where half the households in the area make more and half the households make less. AMI is usually based on household income before taxes. For most purposes, conversations about AMI use the AMI for 4-person households.
All housing programs use the U.S. Department of Housing & Urban Development's (HUD's) standards to determine average incomes within metro areas across the country.
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"Market rate" housing prices usually align within or above AMI. Anything below "market rate" can be considered affordable because it accommodates incomes that are below the AMI.
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HOWEVER,
There is a WIDE range of household incomes that fall below the AMI. |
The Chicago-Joliet-Naperville metro area's AMI in 2024 was $112,100.
So, even though 80% AMI is technically "below average," households at this income level can afford a lot more than households at 30% AMI. |
Who is Affordable Housing Affordable for?
To answer this question, the chart below breaks down how affordable rent differs across income levels.
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The top row of the chart shows the different income levels below AMI:
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Based on $112,100 being the AMI of our metro area, the second row shows the dollar amount of annual incomes for each income level.
The third row divides the annual incomes by 12 to determine monthly incomes for each level.
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Since the government definition of affordable housing is housing that costs 30% or less of a household's income, the last row shows 30% of each monthly income to show what affordable rent would be for different households.
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So, if a new housing development claims to have a percentage of affordable units, they would usually say something like "units will be affordable for households at 60% of the AMI."
Based on the information in the chart, we can now understand that 60% AMI means "for people with an annual income of at least $67,280."
Based on the information in the chart, we can now understand that 60% AMI means "for people with an annual income of at least $67,280."
After learning all of this, an issue that becomes apparent is the fact that the housing supply in most municipalities don't accommodate households in the lower income levels because the lowest rents might be closer to 50-60% AMI.
This makes members of these households have to pay more than 30% of their income on housing (becoming cost-burdened), making them have to work various jobs and/or rely on government benefits to supplement rent.
This makes members of these households have to pay more than 30% of their income on housing (becoming cost-burdened), making them have to work various jobs and/or rely on government benefits to supplement rent.
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