Why Many Philadelphians Cannot Afford Affordable Housing: Estimating an Alternative Area Median Income for the City/County of Philadelphia

Many federal, state, and local housing and community development programs define the eligible beneficiaries of those programs by a term known as Area Median Income (or AMI) – for example eligible households are those at or below 80% AMI. AMI is established by the US Department of Housing and Urban development each year for communities around the country. Areas for AMI are typically comprised of multiple counties. In the case of Philadelphia, PA, the AMI is based on eleven counties across four states. And while HUD publishes an AMI for each county in an area, every county in the area has the same income thresholds.

This is not a problem in an area wherein income levels of the component counties are reasonably similar. But in the case of Philadelphia, its county income is less than half of the two highest income counties in the area. Accordingly, the AMI is high relative to Philadelphia resident incomes. The implication of this is that programs that are keyed to households at, say, 80% AMI give the impression that they are serving people who are 80% of average (or substantially below average) when in fact incomes from that multi-state/county area are so far above what is typical in Philadelphia that 80% AMI is closer to the average Philadelphia income, not below average income for Philadelphia residents.

This Brief details the AMI issue and recomputes a Philadelphia-specific version of AMI using HUD’s methodology on data but representing Philadelphia residents only. With this new Philadelphia-specific AMI, we show that affordable rents under the Low Income Housing Tax Credit program would need to be more than $300 per month less to be affordable to the resident population. In sum, delivering programs to families at thresholds of AMI as defined by HUD does not serve most lower income households in Philadelphia, and this alternative formulation is an approach to better measuring and meeting resident needs.

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