Skip to Content

Common Incentives and Offsets in Mixed-Income Housing

Benefits of Mixed-Income Communities

Under strong housing market conditions, the market-rate share of a mixed-income development can generate more income than is necessary to cover costs for developing these units. These profits can fill the gap between income and expenses for the portion of units that are rented or sold at affordable (below-market) rates. This “pure” cross-subsidy model is likely to be viable only in strong markets, where rents and/or home prices are high enough to generate profits to cross-subsidize the affordable units.

As the federal funding available for affordable housing has declined in recent years, communities and developers have sought more cost-effective and market-based strategies for increasing the supply of affordable homes. The inclusion of market-rate units within a mixed-income development or community can make the development more financially feasible and less reliant on public subsidy through cross subsidization.

Another reason for the popularity of mixed-income housing among policy makers and developers is its perceived social benefits. There appears to be widespread agreement among housing practitioners that including a mix of incomes within a development can be helpful in creating a safe, healthy and sustainable living environment for families.  More research is necessary to determine the extent to which and under what circumstances mixed-income housing achieves its social goals.

Practitioners recommend a mixed-income housing approach for the following reasons, among others:  

  • Deconcentration of poverty, and racial and socioeconomic integration – High concentrations of poverty are associated with negative child and family outcomes. Many practitioners believe that mixed-income communities provide a safer environment that offers a greater range of positive role models and exposure to more job leads for area residents.
  • High quality of maintenance and amenities – In order to attract market-rate tenants, mixed-income developments must be attractive and well-maintained, and must offer desirable amenities and services (i.e. pools, tennis courts, free parking and access to public transportation and job centers). As a result, lower-income tenants enjoy better quality homes and neighborhoods than they generally would in developments that are 100-percent subsidized. On the other hand, the need to provide such amenities may increase the cost of the affordable units, reducing the effectiveness of cross subsidies to some degree.
  • Economic development – When sited in “revitalizing” neighborhoods, mixed-income developments may be an effective tool for promoting economic development. The influx of higher-income residents may lead to higher property values, better schools, improved access to transportation and more retail options.
  • Political acceptance – Mixed-income housing carries a political advantage in that the inclusion of market-rate housing makes “affordable housing” more acceptable to those who might otherwise oppose such projects.

What Makes a Mixed-Income Development Successful?

A mixed-income development’s ability to attract and keep residents depends on a number of factors, not all of which can be controlled (e.g., market conditions). Some common elements of success that designers of mixed-income housing should keep in mind include:

  • A convenient location with access to public transportation, job centers and high quality schools.
  • Design that does not distinguish market-rate units from affordable units by either appearance or amenities, and that disperses units at all affordability levels throughout the development.
  • A continuum of income levels rather than a strict division between “market-rate” and “low-income” tenants.
  • A well-designed community that is attractive and fits seamlessly into the surrounding neighborhood. Many mixed-income developments include innovative design features such as a pedestrian-friendly layout, ample outdoor space and “green” buildings.

Refine Topics