Opinion: The Hidden Federal Formula Making NYC’s ‘Affordable’ Housing Unaffordable

“While politicians debate zoning and development, a little-discussed federal bureaucratic mechanism called the High Housing Cost Adjustment is systematically excluding working New Yorkers from programs designed to help them.”

A New York City teacher earning $70,000 applies for an affordable housing unit in Queens and is told she doesn’t qualify. Not because she makes too much money, but because she doesn’t make enough. The “affordable” one-bedroom requires a minimum income of $90,000, and even the studio required $75,000; just out of reach.

Stories like this illustrate a broader paradox in New York’s housing policy. While politicians debate zoning and development, a little-discussed federal bureaucratic mechanism called the High Housing Cost Adjustment is systematically excluding working New Yorkers from programs designed to help them.

Every housing discussion in New York centers on Area Median Income (AMI). It is the benchmark determining who qualifies for affordable housing. But the AMI used in New York isn’t what most people think it is. It’s not the actual median income of New Yorkers.

Instead, it’s been artificially inflated by the High Housing Cost Adjustment (HHCA), a federal multiplier that adjusts income requirements upward in expensive markets. For 2025, New York’s official AMI for a family of two was $129,600, and for a family of three it was $145,800. With an average household size of 2.55, you would then expect the average household income to be $137,700.

According to the U.S. Department of Housing and Urban Development’s (HUD) own calculations for the same geographic area, however, this actual number is $103,000. This indicates that the HHCA is skewing AMI values up roughly 33 percent.

To give an example of this, units at up to 135 percent of AMI can be included in the city’s Mandatory Inclusionary Housing program. If you apply that same 33 percent “inflation” from the HHCA mentioned earlier, that means “affordable” units are being built for those earning 180 percent of the real area median income. Is that true affordability?

The gap represents working families being systematically locked out of programs ostensibly designed to help them.

You might ask why the HHCA exists at all. HUD’s methodology explicitly allows income limits to be adjusted up in response to housing-cost-to-income disparities that deviate significantly from the national norm. In short, the HHCA was designed to prevent households in expensive areas from being disqualified from federal housing programs simply because the local cost-of-living (particularly rent) is out of step with median income figures. It reflects a federal intent to align eligibility standards with housing market realities, rather than rigid income metrics.

The geographic impact of the HHCA is evident across the city. In the Bronx, where median household income is around $46,000, “affordable” developments often require incomes that exceed what most neighborhood residents earn. This can create a perverse outcome: affordable housing resources that accelerate gentrification rather than prevent it. Low-income neighborhoods get developments that serve moderate and middle-income households from elsewhere, while local residents remain priced out.

Housing advocates typically blame wealthy suburbs in Westchester and Long Island for inflating regional income calculations. But the HHCA is what really transforms regional disparities into exclusionary policy. Yet, it receives little attention in housing debates outside of the most wonky corners. 

Mayor Eric Adams’ housing initiatives have focused on zoning reform to increase supply. Mayor Bill de Blasio largely did the same. More often than not, however, this means building “affordable” housing at the highest AMI bands. These projects count towards the total number of “affordable” units in the city (and bog down the Department of Housing Preservation and Development and other relevant city agencies), without actually addressing the affordable housing crisis. This is why there is a constant flow of headlines about new “affordable” housing developments without the situation ever seeming to change. 

There are multiple reasons for this. One is that the HUD’s AMI values must be used for determining eligibility for projects to use federal funds. The second is that it is simply very expensive to build in New York City. And, the third is that by building “affordable housing” for higher earners, politicians can gain political wins for supporting “affordable housing,” without putting substantial money behind the effort, all while retaining residents that are more politically active and attractive as part of the city’s tax base (higher earners).

A key reason why these inflated AMI levels matter so much is that they are not optional. When projects seek to tap federal resources (from Low-Income Housing Tax Credits, HOME funds, or other HUD programs) they are required to use HUD’s published AMI figures to determine who qualifies.

In New York, that means developers and housing agencies must design affordability bands around income thresholds that are already skewed upward by the High Housing Cost Adjustment. Even if a project sponsor wanted to serve lower-income tenants, the eligibility framework itself is defined by federal formulas.

This requirement creates a disconnect between federal rules and local realities. On paper, a household earning 80 percent of AMI may qualify as “low income,” but in practice that figure can be far above what many neighborhood residents actually earn.

The result is that projects built with federal dollars often end up out of reach for the very households those funds are intended to benefit. Instead of anchoring affordability in the lived conditions of local communities, federal mandates lock projects into a standardized metric that reflects more about financing structures than about need.

The high rents embedded in today’s “affordable housing” numbers are not simply the product of developer greed or government indifference. They are, in large part, a reflection of the underlying costs of building in New York City. Land prices remain among the highest in the country, and construction costs (driven by labor, materials, insurance, and regulatory requirements) have only risen in recent years.

When the city and federal government peg “affordability” to Area Median Income levels, what is really happening is that the rents being targeted are the lowest that developers can feasibly offer while still covering the enormous costs of acquiring land and financing construction.

This tension gives validity to the claims developers often make: without additional subsidy, tax relief, or creative financing tools, they cannot simply lower rents on their own. Housing, unlike other markets, carries an upfront cost structure that is fixed long before a single tenant moves in. If land, labor, and materials command a certain price, then rents must follow that logic; unless public dollars or policy interventions absorb part of the burden. The affordability levels are calibrated to the cost of the project, not the income of the neighborhood.

The result is a distortion in what “affordability” actually means. Rather than reflecting the economic realities of households, the rent thresholds are often backfilled to make projects pencil out. In other words, AMI-driven affordability has become a financing tool more than a true measure of local need. This is not to dismiss the role developers play in shaping housing outcomes, but to recognize that the system as designed leaves them little room to maneuver without the government stepping in to close the gap.

One of the quieter dynamics at play in New York’s housing policy is that “affordable housing” has often been defined in ways that serve higher earners, not the lowest-income households most at risk of displacement. By setting affordability benchmarks at levels aligned with inflated AMIs, elected officials can claim credit for producing large numbers of “affordable units” without committing the resources required to reach those most in need. In doing so, they sidestep the political and fiscal challenges of funding deeper subsidies, while still delivering ribbon-cuttings, press releases, and campaign talking points about their dedication to solving the housing crisis.

This approach also has a built-in political logic. Higher-earning households who qualify for these so-called affordable apartments are more likely to be stable contributors to the tax base, and they are often more politically engaged. By calibrating housing policy to capture this population, the city not only bolsters revenue but also retains a constituency that is seen as more desirable to court. The cost, of course, is that the very groups most harmed by rising rents are left out of the picture. The politics of affordability, in other words, too often privilege appearances and fiscal security over true equity

New York’s housing crisis has multiple causes, but one is within local control: how the city works within federal policy frameworks that may not serve local needs effectively on their own. City and state officials should advocate for reforms to HHCA calculations at the federal level, as proposed by U.S. Sen. Kirsten Gillibrand in 2024. They should also intentionally build at lower AMIs to counteract the HHCA. To do this, they will need to further supplement federal funds with those at the city and state levels.

But addressing this issue requires first acknowledging it exists. There is not an easy answer to this question, but we should not delude ourselves into thinking that the “affordable” housing we are currently building will ever create a truly equitable city. Currently, housing policy debates focus heavily on supply and zoning, but give little attention to how federal definitions and formulas determine what “affordability” really means.

The consequences are real. Working professionals consistently find themselves excluded from affordable housing programs despite earning salaries that would suggest they need assistance with housing costs. When the federal bureaucracy creates affordability requirements that don’t match local economic realities, the resulting contradictions undermine the effectiveness of affordable housing policy.

The question for New York’s leaders is whether they will examine how federal policy frameworks interact with local housing needs, and whether they’re willing to advocate for changes that could make affordable housing programs more accessible to the New Yorkers they’re intended to serve.

Once we recognize that AMI is not what it seems, the question is: would we rather the city invest funds, time, and energy into subsidizing additional housing for those earning well above the actual median income in the city, or instead turn our investments to those who most need it?

Eddie Palka is a practicing architect in New York City who has focused on affordable housing throughout his career. He is also an Associate Research Scholar at the Columbia University Housing Lab, researching the affordable housing crisis, as well as a Senior Research Fellow at the NYIT Center for Offsite Construction. He is also part of the Association of Collegiate Schools of Architecture’s Academy for Public Scholarship on the Built Environment.