Mixed-Income Housing

What Is Mixed-Income Housing?

Mixed-income housing deliberately puts households with different incomes in the same building or neighborhood. HUD’s Office of Policy Development and Research describes it as mixing units with rents and prices at a variety of levels, including market-rate and subsidized units. A mixed-income community can be a single apartment building or a large master-planned neighborhood.

The goal is to avoid concentrating poverty. The strategy gained national momentum in the early 1990s, when HUD’s HOPE VI program began replacing the most distressed public housing with mixed-income developments.

How Mixed-Income Housing Works

Developers usually combine several funding sources and assign each unit a rent or income tier. Common routes include:

• Inclusionary zoning and density bonuses. Local rules require or reward restricted units inside otherwise market-rate projects.
• Low-Income Housing Tax Credit income tests. Under Section 42 of the tax code, a project must meet a 20–50 test (at least 20% of units for households at or below 50% of area median income), a 40–60 test (at least 40% of units at or below 60%), or the average income test. Congress added the average income test in 2018. It lets tax-credit units carry income designations from 20% to 80% of area median income, in 10-point steps, as long as the designations average no more than 60%.
• Public housing redevelopment. HOPE VI and its successors mixed replacement public housing with tax-credit and market-rate units.

HUD’s review notes that affordable and market-rate units are generally indistinguishable from the outside, and that design matters for marketing the homes.

Example

Suppose a 100-unit building uses income averaging. It sets aside 20 units at 40% of AMI, 20 at 60%, and 20 at 80%, which averages 60%. The other 40 units rent at market rates. That single building houses lower-income renters, moderate-income workers, and market-rate tenants.

Why It Matters for Workforce Housing

Mixed-income structures are one of the few ways to reach the workforce band inside a subsidized project. Income averaging lets tax-credit units serve households up to 80% of AMI, and units for households earning 80% to 120% can be added without federal subsidy. That makes mixed-income design central to affordable workforce housing.

Criticisms and Limitations

HUD’s 2013 research review reported that low-income residents who moved into these communities had better living spaces, improved health, and markedly greater feelings of safety. The hoped-for social benefits were harder to see. Most interaction was casual and took place among residents of similar backgrounds, and some former public housing residents reported feeling excluded and unwelcome. Researchers cited in the review concluded that more and better research was needed, including comparisons of different income mixes and designs. Mixed-income projects are also complex to finance, because developers must combine several funding sources and meet the conditions of each one.