What Is Section 42 Housing?


Quick Answer

Section 42 housing is a type of privately owned, government-subsidized housing for eligible low-income residents. Section 42 created a tax credit to encourage private developers to build affordable housing.

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Full Answer

Section 42 grants developers tax credits to fund the building or purchase of housing units on the condition that the units are offered at a rent below market rate. Rent is based on median household-income figures published by the Department of Housing and Urban Development. Rent varies depending on the size of the unit and the area in which it is located.

People who want to live in Section 42 housing need to apply and demonstrate that their expected household income for the upcoming year is below a certain threshold. This threshold is set as a percentage of the median household income of the area in which the applicant wishes to live. If accepted, the applicant pays a fixed amount of rent well below standard market rates.

The tax credit created by Section 42 gave private developers the incentive and ability to seek investment to build affordable housing. The program comes with conditions, such as a requirement that properties built using these tax credits remain below market rate for 15 to 30 years. The Section 42 program has been deemed a success for stimulating the creation of millions of affordable housing units in the United States that wouldn't have been built otherwise.

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