Naturally Occurring Affordable Housing (NOAH)

What Is Naturally Occurring Affordable Housing?

Naturally occurring affordable housing (NOAH) is rental housing that happens to be affordable to lower- and moderate-income households even though no government program subsidizes it or caps its rents. It is “naturally” affordable because of its age, size, condition, or location, not because of a contract.

NOAH is usually older, modest property, such as an aging garden apartment complex or a small walk-up building. It is still market-rate housing, because the owner is free to charge whatever the market allows. Its residents include both lower-income households and moderate-income working households.

How NOAH Works

No legal definition applies nationwide, so programs that fund NOAH write their own. Minnesota’s Community Stabilization program, a one-time state program created in 2023 to preserve NOAH, is one example. Its multifamily loan program, which is no longer accepting applications, required an eligible property to:

• Have four or more rental units
• Be at least 20 years old
• Have rents in a majority of units affordable to households at or below 60% of the state or area median income, whichever is greater
• Have no federal or state financing or tax credits that already impose income or rent restrictions, with a narrow exception for certain public housing

Because nothing locks the rents in, NOAH is easily lost. A new owner can renovate and raise rents to market levels, and rising demand in a neighborhood can push rents up even without renovation.

NOAH vs. Subsidized Housing

Preserving NOAH

Because NOAH has no protections of its own, communities try to preserve it before it disappears:

• Mission-driven acquisition capital. A 2017 article in a newsletter of the Office of the Comptroller of the Currency (OCC), a federal bank regulator, describes mission-driven real estate investment trusts (REITs) such as the Housing Partnership Equity Trust. These funds give nonprofit buyers a single source of capital that can be deployed quickly, so they can compete with market-rate buyers.
• Rent covenants tied to financing. Freddie Mac’s Workforce Housing Preservation option offers competitive loan pricing to borrowers who agree to keep at least 20% of units at rents affordable at 80% of AMI in standard markets, or at higher AMI levels in higher-cost markets. The restriction lasts for the loan term or 10 years, whichever is shorter, and requires no tenant income tests.
• Converting NOAH to restricted housing. A nonprofit or public buyer can record a deed restriction so that the affordability survives future sales.

Example

Suppose a 40-year-old, 12-unit building rents for well below newer apartments nearby. That makes it NOAH. If an investor buys it, upgrades the kitchens, and raises rents to match the newer buildings, those units stop being affordable, and no rule was broken. If a nonprofit buys it with preservation financing instead, rents can stay where they are under a recorded restriction.