Section 42 housing is a type of subsidized housing intended to assist low-income renters get safe, affordable housing. To qualify for a Section 42 apartment, you must meet certain income requirements, as defined by your local Department of Housing and Urban Development (HUD). Section 42 housing can be especially helpful in expensive rental markets like San Francisco, CA and Seattle, WA .
Section 42 housing was created as part of the Tax Reform Act of 1986 . The subsidy comes in the form of a tax credit given to your landlord. Your landlord receives the credit by earmarking the unit as affordable housing and renting it for a below-market rate. They must also comply with special requirements and submit to regular screening to ensure the home is well-maintained.
Want to learn more? Here’s our comprehensive guide to Section 42 and how to qualify for an affordable apartment .
If you want to live in Section 42 housing, you must meet the income and asset qualifications based on the size of your family. In order to qualify:
Because these qualifications depend on your income and assets, you’ll need to submit financial statements, including income verification, to qualify. You’ll also need to recertify your eligibility yearly, as the subsidy is an annual tax credit. You should notify your landlord or property manager immediately if your income changes.
Because eligibility depends on your family composition, you’ll need to send a written notification if your household size changes. A new dependent may open up more affordable housing options, for example.
In addition to family size and income, eligibility can also be affected by residency status and if you have a criminal record. Legal residents, permanent residents, and naturalized citizens are eligible for Section 42 housing.
Incomes for Section 42 must be less than 50 percent of your county’s average mean income, also known as AMI. It’s important to remember that Section 42 requirements are not the same from one county to the next because all county’s have a different AMI. You will also need to research your local HUD’s requirements and programs.
Low-income housing is typically based on a simple calculation similar to this:
Percentage x AMI = Income Cap
For example, if your city’s Section 42 income restriction is 50 percent of AMI, and your city’s AMI is $48,000, the highest annual gross income you can make is $24,000. The calculation looks like this:
50% x $48,000 = $24,000
Most of the time, Section 42 housing has a floor set at 30 percent of AMI, meaning people earning less than 30 percent of AMI are eligible for additional housing assistance, mainly Section 8 housing or similar programs. It’s possible to qualify for both Section 8 and Section 42, but you cannot use both programs simultaneously. Here’s a closer look at the difference between Section 8 and Section 42 housing assistance.
Section 42 and Section 8 are both affordable housing programs offered by the federal government and intended to assist people with little to no income. But you should be aware of several important distinctions between the two.
The Housing Act of 1937 created Section 8 housing for people with very low income. People who qualify for Section 8 pay 30 percent of their income toward rent, and the government pays the remainder of the rent. As a tenant’s income fluctuates, so does their rent payment. To apply for Section 8, you must apply with a public housing agency (PHA) office.
Section 42 housing is for people who aren’t very low-income but could still greatly benefit from housing assistance. Section 42 tenants pay a rent amount determined by HUD guidelines and the landlord, but this amount is capped. The cost of utilities is factored in when determining rent prices, though the rent payment doesn’t usually cover all utilities. To apply for Section 42, you can apply through your landlord or property manager.
Though typically funded by the federal government, affordable housing programs are administered on the state and local levels. So policies, income caps, and other specifics can vary from state to state. Depending on where you live, more affordable housing programs may be available through local governments.
Before deciding on Section 42 housing, assess your situation. Calculate your income using your pay stub or tax returns, and look up local HUD guidelines for affordable housing. You want to make sure that you meet the eligibility requirements. You’ll also want to gather all the information you need to complete the rental application process, including your financial statements.
During the application process, you’ll need to provide information, such as your name, gender, social security number, date of birth, and citizenship status. Non-citizens are also eligible to apply. These are reporting requirements set by the government and are not a violation of equal opportunity laws. You’ll also be required to submit income verification, such as your tax returns. Take your time filling out the application, as errors can delay the process or result in rejection.
If you’re eligible, you will continue to move through the leasing process.
Your landlord may have additional responsibilities regarding screening and other requirements towards your application. Don’t be afraid to ask your landlord questions to ensure you do your part of the process correctly.
Beyond the low cost, a huge benefit of Section 42 apartments is that they’re usually located in areas with higher rents that are too expensive on average for low-income renters. Residents who would otherwise be pushed away now have affordable access to the area’s amenities and local job market.
You’ll also be able to rely on your landlord or property manager to take good care of your apartment unit. The unit must comply with certain maintenance and safety requirements for your landlord to receive the tax benefit. That means no broken appliances or out-of-date fire extinguishers. Or at least quickly repaired or replaced by your landlord .
Finally, the landlord takes care of many of the utilities in a Section 42 apartment. Though internet and electricity are not typically included, you could save on bills such as trash collection, gas, and non-electric heating.
Section 42 housing is in short supply in most places, so finding a unit can be difficult. Some extra effort is also needed to navigate the affordable housing system. You’ll need to prepare and submit additional paperwork, and you’ll need to stay on top of any changes to your income or family size.
Discuss even small changes in your income with your landlord or property manager, like taking a part-time job. They will be able to give you some guidance to ensure that you remain eligible for the program.
Section 42 housing is a national program that’s deployed a little bit differently in every area it serves, so things can get confusing. Here are answers to some of the most common questions about Section 42 affordable housing.
Assets are possessions that hold value. Examples of assets include money in a checking or savings account, vehicle, and retirement savings. When it comes to subsidized housing requirements, HUD only places limits on assets that generate an income, such as a high-yield savings account. Your car, clothing, furniture, and other personal belongings will not count toward your limits.
Compliance is the act of adhering to principles, rules, and guidelines set forth by an entity. In the case of Section 42 housing, both renters and landlords must comply with the rules set forth by HUD. For renters, compliance includes meeting income restrictions and residency requirements.
Non-citizens, citizens, and permanent residents, often meet residency requirements, so don’t let your citizenship status deter you from seeking assistance. Mixed-eligibility households can still qualify for partial benefits, just understand your county’s or city’s local guidelines.
Maximum income levels are dependent on the average incomes in your area. Hud provides an income limits dataset that makes it easy to see the limits the organization has set for your area.
You calculate your total income by adding together any source of income, which can include:
Rent for section 42 apartments is determined by guidelines set by HUD. Rent is calculated based on the number of bedrooms and the area median income (AMI).
For example, a two bedroom apartment in an area where the AMI of a three-person household is $48,000 would be rented for a maximum of $1,200.
($48,000 x 0.3 ) / 12 months = $1,200 monthly rate
In most metro areas, HUD will have a price list available on your local government website where the calculations are done for you.
Every year you need to recertify that your income and family size meet the guidelines of the program. This recertification ensures that you are eligible for section 42, and it enables your landlord to continue receiving a tax subsidy.
If your household makeup changes at any time during your lease, you need to notify your landlord or property manager in writing immediately. Your household size and income affect your eligibility. Remember that your landlord is dependent upon your eligibility in order to receive the annual tax credit, so your lease may have special requests if you want to bring another person into your home. It may make sense to discuss your intentions with your landlord before letting someone move in.
Section 42 housing is a great program for renters and landlords alike. For those who qualify, the lower and stable rent costs are worth the additional compliance requirements. For a successful affordable housing rental experience, be sure to take the time to research local guidelines and prepare the documentation you’ll need beforehand. Your local HUD office should have additional information and resources.
If you are represented by an agent, this is not a solicitation of your business. This article is for informational purposes only, and is not a substitute for professional advice from a medical provider, licensed attorney, financial advisor, or tax professional. Consumers should independently verify any agency or service mentioned will meet their needs. Learn more about our Editorial Guidelines here.
Chibuzo is a Content Marketing Specialist on Redfin’s content marketing team. He’s been with Redfin for over two years and enjoys running and playing basketball when he’s not writing. His dream home is a Mediterranean-style house with a large kitchen and plenty of windows.
