NYC Affordable Housing Programs: Inclusionary Zoning, HPD Financing, 80/20 Rule, and AMI Limits
10 min read · Updated 2025-01-15
Overview of NYC affordable housing programs: Mandatory Inclusionary Housing (MIH), Voluntary Inclusionary Housing (VIH), HPD financing programs, 80/20 tax-exempt bond financing, and AMI targeting.
NYC Affordable Housing Program Overview
What is Mandatory Inclusionary Housing (MIH) in NYC?
Mandatory Inclusionary Housing (MIH) is a zoning policy adopted in 2016 that requires all new residential development above 10 units (or 12,500 sq ft residential) in designated MIH areas to include a permanent affordable housing component. MIH areas are typically established through rezonings. Developers must choose one of several MIH options, each specifying the percentage of units that must be affordable and the AMI levels. Unlike voluntary programs, MIH cannot be waived by payment of a fee — the affordable units must be built on-site or off-site within the same Community Board.
What are the standard MIH options and affordability levels?
As currently structured, MIH offers four options: Option 1: 25% of units at average 60% AMI (with no unit above 120% AMI); Option 2: 30% of units at average 80% AMI; Option 3 (Deep Affordability Option): 20% of units at 40% AMI; Option 4 (Workforce Option): 30% of units at 115% AMI (limited to designated areas). Each option results in a different mix of tenant incomes. Developers run feasibility analysis on each option to determine which best fits their financing and market.
What is the difference between MIH and Voluntary Inclusionary Housing?
MIH is mandatory in designated areas — if you develop above the threshold, you must include affordable units. Voluntary Inclusionary Housing (VIH) is available in other areas and offers FAR bonuses (more developable area) in exchange for affordable units, but it's optional. A developer who doesn't want the FAR bonus simply builds without the affordable units. VIH produces less affordable housing than MIH but creates an economic incentive for developers to include affordability voluntarily.
What HPD financing programs are available for affordable housing?
HPD offers a range of financing programs: (1) New HoPe (Homeownership and Preservation) — rehabilitation loans for small buildings; (2) Mixed-Income Program — financing for mixed-income rental buildings; (3) Extremely Low & Low-Income Affordability (ELLA) — for buildings serving 60-80% AMI households; (4) Senior Affordable Rental Apartments (SARA) — for senior housing; (5) Supportive Housing Loan Program — for housing combined with supportive services. Each program has eligibility requirements, affordability covenants, and application processes.
What is the 80/20 rule in tax-exempt bond financing?
The "80/20 rule" refers to a structure for using tax-exempt mortgage revenue bonds to finance affordable housing. Under federal tax law, if at least 20% of the units in a project are restricted to households at or below 50% of AMI, the project's entire mortgage can be funded with tax-exempt bonds (which carry lower interest rates than taxable bonds). The 80% refers to the market-rate or unrestricted units. This structure is often used with Low Income Housing Tax Credits (LIHTC) to create mixed-income rental housing.
What are Low Income Housing Tax Credits (LIHTC)?
LIHTC (commonly called "Housing Tax Credits") are a federal subsidy for affordable rental housing. Credits are awarded by state housing agencies (in NY, the HFA) to developers who commit to income and rent restrictions. The credits are sold to investors (typically banks or insurance companies) who receive dollar-for-dollar reductions in federal tax liability in exchange for equity investment in the project. The equity investment lowers the amount of debt required, making the project financially feasible. LIHTC is the largest affordable rental housing production program in the U.S.
What is an AMI limit and how does it affect affordable rents?
Area Median Income (AMI) is published annually by HUD for each metropolitan area. NYC's AMI is among the highest in the country ($120,000 for a family of four in 2024). Affordable housing programs set maximum rents based on AMI percentages — a unit "affordable at 50% AMI" means the monthly rent can be no more than 30% of 50% AMI income for the appropriate household size. As AMI increases annually, affordable rents may also increase (unless the program caps rent at a fixed level), which can gradually increase housing costs for lower-income residents even in "affordable" units.
How does the NYC affordable housing lottery work?
Affordable units in HPD-financed buildings are rented through NYC's Housing Connect platform (formerly Housing Preservation & Development Lottery). Buildings list available units, and eligible households apply through the online portal during the open marketing period. NYC uses a lottery system to rank applicants, with preferences given to residents of Community Boards, current residents of the borough, current residents of HPD buildings, and certain other categories. Applicants are screened for income eligibility, credit, and rental history before an apartment is offered.