U.S. Department of Housing and Urban Development | Office of Policy Development and Research

Impact of Oil and Gas Exploration 

on Affordable Housing

Stephen Komadina

Timothy McNally

Samuel Young

THE GSEs FUNDING OF AFFORDABLE LOANS: 

A 2004-05 UPDATE 

Harold L. Bunce 

December 2012 

Office of Policy 

Development 

and Research 

Housing Finance 

W O R K I N G P A P E R S E R I E S

U.S. Department of Housing and Urban Development 

Economic Market Analysis

March 2014

Working Paper No. EMAD-2014-02

The contents of this report are the views of the authors and do not necessarily reflect the views or policies of the U.S. Department of Housing and 

Urban Development or the U.S. government.
Impact of Oil and Gas Exploration on Affordable Housing

Economic Market Analysis Working Paper Series 1

This working paper, prepared by the U.S. Department of Housing and Urban Development (HUD), Office of Policy Development and Research (PD&R), Economic Market Analysis Division 

Gas/Oil Task Force (GOTF), examines the impact of oil and gas 

exploration on the affordable rental-housing market. The paper 

comprises three sections: the first provides a brief overview of 

affordable rental-housing programs, the second discusses the 

measurable impacts of oil and gas exploration on affordable 

housing, and the third reviews how HUD and state agencies are 

addressing these impacts. An appendix provides detailed definitions related to HUD and other affordable housing programs.

Overview of Affordable 

Housing Programs

Affordable rental-housing programs assist low-income households seeking affordable housing. The tenant-based1

 Housing 

Choice Voucher Program (HCVP), Section 8 Project-Based 

Rental Assistance (PBRA) programs, Section 202 (Supportive 

Housing for the Elderly)/811 (Supportive Housing for Persons 

with Disabilities) programs, Low-Income Housing Tax Credit 

(LIHTC) Program, and U.S. Department of Agriculture (USDA)—

Rural Development’s Rural Rental Housing Section 515 and 538 

loan programs are designed to provide affordable rental housing 

for very low-, low-, and moderate-income families.

Public Housing and the HCVP, which are administered by public housing agencies (PHAs), and the Section 8 PBRA, which is 

administered directly by HUD, are programs that are allocated 

a set amount of funding (some with annual funding and others 

with multiyear funding) to serve the greatest number of eligible 

applicants based on operating costs. In the HCVP, emergency 

exception payment standards or exceptions to Fair Market 

Rents (FMRs) can be approved for an area in response to housing market disruptions; however, it is important to note that 

the exceptions do not increase the total allocation of subsidy 

dollars to the PHA. Emergency exception payment standards 

increase the amount a single applicant can receive but in turn 

may decrease the total number of applicants served.

Section 8 Project-Based Rental Assistance programs 

(hereafter Section 8 PBRA) provide rental assistance for eligible 

families who live in specific housing developments or units. 

The Section 8 PBRA Program was authorized by Congress in 

1974 and developed by HUD to provide rental subsidies for 

eligible tenant families (including single people) residing in 

newly constructed, rehabilitated, or existing rental apartment 

projects. HUD subsidizes some residential unit rents using the 

Section 8 New Construction Program, the Substantial Rehabilitation Program, and the Loan Management Set-Aside Program. 

These subsidies are project based, which means HUD commits 

the subsidy for the assisted units of a particular property for 

a contractually determined period. Contract rents, plus utility 

allowances, initially may not exceed the FMRs for similarly 

situated units in newly constructed, substantially rehabilitated, 

or existing developments in the area, although, under special 

circumstances, HUD can approve initial contract rents (plus 

utility allowances) for particular assisted projects in an amount 

up to 120 percent of the applicable FMRs.2

 Many Section 8 

projects have reached the end of their original contract terms 

and, therefore, have the choice of opting out of the subsidy program if the project would be more profitable at market rents.

The goal of the Housing Choice Voucher Program, also 

known as the Section 8 Program (hereafter, the HCVP), is to 

make rental units in the private housing market affordable to 

low-income families, elderly people, and people with disabilities. Because assistance is tied to the family or individual and 

not a specific project, participants can choose their own housing, including single-family homes, townhomes, or apartments. 

The share of rent HUD pays is based on the payment standard 

and on the gross rent minus what the tenant pays, which is 30 

percent of the tenant’s household income. The PHA determines 

a payment standard, typically set between 90 and 110 percent 

of the FMRs for the area. By law, during the initial lease-up 

period, the tenant may not pay more than 40 percent of his or 

her adjusted gross income for rent.3 This restriction can limit 

the use of housing choice vouchers (HCVs). In areas affected 

by steep rent increases, such as oil- and gas-impacted areas, the 

1

 Section 8 voucher programs generally are associated with eligible tenant households and whatever units those households choose that pass inspection and in which 

the owners agree to accept the vouchers. PHAs may also tie a certain percentage of their Section 8 vouchers to projects through long-term contracts with project 

owners. These vouchers are referred to as project-based vouchers, or PBVs.

2

 HUD PIH (2013c).

3

 HUD PIH (2013b).

Impact of Oil and Gas Exploration on Affordable Housing
Impact of Oil and Gas Exploration on Affordable Housing

Economic Market Analysis Working Paper Series 2

difference between the charged rent and the subsidy may be so 

high that the HCVs cannot be used effectively. HUD’s Office of 

Public and Indian Housing (PIH) maintains utilization rates for 

HCVPs, which the GOTF is analyzing.

The Section 202 program, which began in 1959, and the

Section 811 program, which began in 1991, are intended to 

encourage development of affordable housing for very lowincome seniors and people with disabilities by providing nonprofit groups with interest-free capital advances. HUD permits 

funds to be used for building, purchasing, or rehabilitating a 

project and provides a minimum ongoing 3-year rental-assistance 

payment that covers the difference between the nonprofit’s operating costs and tenant rental payment amounts. The capital 

advances are forgiven if a property participates in the programs 

for 40 years.4, 5

The Section 515 and 538 Rural Rental Housing programs, 

administered by the USDA—Rural Development office, encourage commercial financing of rural rental housing and provide 

affordable housing for very low-, low- or moderate-income 

families. Income levels are defined as follows: very low income 

is less than 50 percent of the Area Median Income (AMI); low 

income is between 50 and 80 percent of AMI; and moderate 

income is capped at $5,500 more than the low-income limit. 

The Section 515 Rural Rental Housing program provides direct, 

competitive mortgage loans to nonprofit or for-profit rural 

housing developers to provide affordable housing for very lowincome, low-income, and moderate-income families; elderly 

people; and people with disabilities.6

 A loan to a nonprofit 

organization or public body may be for up to 100 percent of 

loan to value (LTV), while a loan to a partnership, limited partnership, or for-profit corporation operating on a limited-profit 

basis cannot exceed 97 percent of LTV. Funds may be used to 

construct new housing or to purchase and rehabilitate existing 

structures for rental purposes; the maximum term is 30 years, 

with an amortization period not to exceed 50 years.7 Section 8 

or state rental assistance may also be used in conjunction with 

the Section 515 loan. Tenants in properties financed with Section 515 loans may also receive Section 515 rental assistance, 

which pays the difference between 30 percent of the tenant’s 

income and the monthly rental rate.

The Section 538 program focuses on partnerships between the 

USDA and qualified lenders to provide decent, affordable rental 

housing for low- and moderate-income rural households with 

incomes of up to 115 percent of AMI, which is higher than those 

served by the Section 515 program. Rents, including utilities paid 

by the tenant, cannot exceed 30 percent of 115 percent of AMI.

The Low-Income Housing Tax Credit (LIHTC) Program is an 

indirect subsidy program of Section 42 of the Internal Revenue 

Code.8

 It is administered by state housing finance agencies and 

overseen by the Internal Revenue Service (IRS). The IRS issues 

credits to state agencies, which in turn allocate the credits to 

multifamily developers. The qualification process and standards 

vary by state, but states must adhere to a number of federal 

requirements. Developers can raise capital for their projects by 

selling equity stakes in the project to investors, enabling those 

investors to reduce the amount of federal taxes they owe. Investors receive the tax credits for 10 years provided the property 

continues to meet program requirements, which provides incentives for the investors to ensure the property is well managed 

over the life of the credits.

LIHTC projects must have at least 20 percent of their units available to households with incomes of less than 50 percent of 

AMI or at least 40 percent of their units available to households 

with incomes of less than 60 percent of AMI. Gross rents are 

restricted to a maximum of 30 percent of 60 percent of AMI, 

regardless of household income; maximum rent and income 

limits are adjusted for different unit and household sizes, respectively. These restrictions must remain in place at the property 

for at least 15 years, during which time investors may face tax 

penalties for noncompliance. If owners do not opt out of the 

program after 15 years, the affordability restrictions must remain in place for the federal minimum of 30 years. Many state 

agencies, however, require longer affordability periods.9

LIHTC properties may also accept HCVs, subject to the requirements of the HCVP program. This feature can be particularly 

important to low-income households that meet AMI requirements 

but are still unable to afford a unit without paying 40 percent of 

their income in rent. If gross rents were less than FMRs, households would have to make rent payments equal to only 30 percent of their income.

4

 HUD MFH (2013a).

5

 HUD MFH (2013b).

6

 USDA Rural Development (2013a).

7

 USDA Rural Development (2013b).

8

 GPO (2013).

9

 HUD (2013d).
Impact of Oil and Gas Exploration on Affordable Housing

Economic Market Analysis Working Paper Series 3

What Impacts on Affordable 

Housing Can Be Measured?

As oil and gas exploration and drilling begin in an area, large 

numbers of workers temporarily move to the area and need 

access to housing. Many energy companies and energy-related 

employers provide a housing allowance for workers to use toward 

rent, and the influx of workers into relatively rural areas can 

rapidly absorb most vacant units. Property owners may raise 

rents and not renew existing leases in hopes of attracting wellpaid energy workers, displacing current tenants and forcing 

them to look for other housing. Seniors and other residents 

on fixed incomes may be disproportionately affected by sharp 

increases in rent levels, because a greater share of their fixed 

income may need to be spent on housing.

Subjective and anecdotal information regarding the effects on 

affordable housing in oil-impacted areas is typically easy to 

obtain. It is important, however, to gather and analyze data 

that can be compared over time and across geographical areas. 

The GOTF found three primary variables to measure affordable 

housing market impacts across oil-impacted areas: (1) rental 

vacancy rates, (2) rent changes, and (3) HCV utilization rates.

Rental Vacancy Rates

The rental vacancy rate is one common variable for measuring 

rental-housing markets. A rental-housing market is considered 

to be balanced when the supply of vacant, available housing is 

sufficient to allow for adequate mobility of existing households. 

Large inflows of energy-sector workers can absorb any vacant 

units, leading to a tight rental market. Tight rental market conditions are very likely in rural, oil-impacted areas where the 

number of existing rental units is low. As the supply of available 

vacant rental units declines, rents typically rise. Figure 1 highlights the impact on housing market rents and rental vacancy 

rates in the Minot-Williston area of Mountrail, Ward, and Williams 

Counties in North Dakota. Because many of the oil-impacted 

areas are in rural counties, however, data on real-time rental 

market conditions are lagged or may not be readily available.

Rent Changes

The second common variable for measuring rental-housing 

markets is rent changes. If rents increase and vacancies decline 

enough, property owners who offer affordable rental options 

may discontinue program participation to take advantage of 

housing market conditions, further decreasing the supply of 

rental units available to low-income households. During 2011 

and 2012, two Section 8 PBRA projects in North Dakota opted 

out of their rental assistance contracts. One is a 30-unit project 

in Williams County, and the other is a 96-unit project in Ward 

County. The Ward County project had been renting a twobedroom unit for $485 a month; after the transition to conventional units, the rent for the same unit increased to $1,100 a 

Figure 1. Minot-Williston, North Dakota: Market Rents Have Increased and Vacancy Rates Have Declined Sharply 

Since 2009

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0.0

10.0

200820092010201120122013

20.0

30.0

40.0

50.0

60.0

70.0

80.0

Year-over-year percentage change in asking rent (left scale) Vacancy rate (right scale) 

Source: Analyst’s estimates
Impact of Oil and Gas Exploration on Affordable Housing

Economic Market Analysis Working Paper Series 4

month. The combination of sharp rent increases and a decrease 

in the number of affordable units available will further constrain 

affordable housing markets in impacted areas.

As with the Section 8 PBRA programs and the Section 8 HCVP, 

certain aspects of the LIHTC Program can limit its effectiveness 

in providing affordable housing in oil- and gas-impacted areas. 

In housing markets with strong annual rent growth and tight 

vacancy rates, multifamily developers and investors have less 

incentive to accept 30 years of rent restrictions and be limited 

to income-qualified tenants by participating in the LIHTC Program. The equity advantage to participation may not be as critical in areas where the oil industry’s impact on employment and 

population growth is expected to continue for 10 to 25 years 

and where housing construction has not been able to keep pace 

with demand. If developers and private lenders believe that 

recent trends in rent growth will continue for the foreseeable 

future, higher LTV ratios could be seen as an acceptable risk.

HCV Utilization Rates

The third common variable for measuring rental-housing 

markets is HCV utilization rates. Because energy companies 

often provide housing allowances to cover housing costs, this 

subsidy can drive up housing market rents in oil-impacted 

areas. These rent changes can be measured by looking at the 

size and frequency of rent concessions and changes in gross 

rents over time. The short-term dislocation that strong rent 

growth causes can lead PHAs to ask for emergency exception 

payment standards. A recent example was Mountrail, Ward, 

and Williams Counties in North Dakota. The fiscal year (FY) 

2013 two-bedroom FMRs for the three counties were $614, 

$641, and $605, respectively. These FMRS were based on the 

American Community Survey data collected through the end of 

2010. After a request for emergency exception payment standards, HUD commissioned a local survey of gross rents. Based 

on the findings from the survey, the 2013 FMRs were revised 

to $1,041, $1,087, and $1,026.10 Adjusted FMRs enable PHAs 

to increase the amount a low-income family can receive for 

monthly rent expenses. While the amount received by an HCV 

holder increases, the total amount of funds provided to the 

PHA does not. Figure 2 details the relationship between the 

cost per HCV and the number of HCVs used in Minot, North 

Dakota. Despite the implementation of emergency exception 

payment standards in July 2011, HCV utilization continued to 

decline, resulting in fewer families being served.

10 HUD (2013a).

Figure 2. Decreasing HCV Utilization and Increasing Cost per Voucher

200

250

300

350

400

450

500

550

600

400

450

500

550

600

650

700

750

800

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Total vouchers used (left scale) Monthly costs ($) (right scale)

HCV = housing choice voucher.

Source: HUD Office of Public and Indian Housing
Impact of Oil and Gas Exploration on Affordable Housing

Economic Market Analysis Working Paper Series 5

HCVs enable very low-income tenants to rent any market-rate 

rental-housing unit, with a rent that is less than the payment 

standard, which meets the housing quality standards of the 

program. The tenant pays a portion of the rent, based on his or 

her income, directly to the landlord; the PHA pays the difference between the tenant’s portion and the charged rent. When 

market rents are relatively close to the FMRs, the program 

affords low-income households many rental-housing choices.

Energy exploration and drilling, and the influx of workers it 

creates, typically put strong upward pressure on housing market 

rents. As a consequence, either the market rents exceed the FMR 

or the amount that a PHA needs to subsidize a unit increases 

and fewer households can be assisted. When such upward pressure occurs, HCV utilization rates go down. For example, the 

HCV utilization rates for Minot and Williston, North Dakota, 

and Sydney, Montana, were all less than 50 percent in May 

2013, down from 88, 98, and 97 percent, respectively, in May 

2009.11 By comparison, during the same period, the national 

HCV utilization rate remained relatively constant at nearly 95 

percent. HCV utilization rates are measured by dividing the 

number of unit months leased using HCVs by the total number 

of unit months available. Unit months available is the number of 

units a PHA is permitted to serve using its Annual Contributions 

Contract. PHAs can choose to lease more than that amount but 

will not receive housing assistance payments (HAPs) from HUD 

for those units, and the HAPs will not count toward their annual 

funding level rebenchmarking. Most PHAs stay well below the 

number of unit months available based on available funding. 

HUD’s Regional Public Housing Offices maintain the data and 

update it monthly.

HCV utilization rates declined in states with rural areas affected 

by shale oil and gas drilling activity (Figure 3). During May 2009, 

before much of the nationwide increased energy activity, HCV 

utilization rates in North Dakota and Montana were more than 

85 percent. After the sharp increase in energy exploration in 

both states, HCV utilization rates in affected rural areas declined 

to less than 50 percent in May 2013. In energy-impacted areas 

near urban centers, however, the decline in utilization rates was 

11 HUD PIH (2013a). Note: HUD’s Office of Public and Indian Housing manages the SharePoint site; readers may require special privileges to access this site.

1.1 

– 1.0 

– 1.6 – 1.7 – 1.8 – 1.8 

– 2.3 

– 3.3 – 3.5 

– 5.2 – 5.4 

– 6.2 

– 13.2 

– 14.0

– 12.0

– 10.0

– 8.0

– 6.0

– 4.0

– 2.0

0.0

2.0

TX 

PA MD WY OH U.S. total CO NY VA MT WV NM ND 

Percentage point change 

HCV = housing choice voucher. PHA = public housing agency.

Source: HUD Office of Public and Indian Housing

Figure 3. An Increasing Portion of PHAs With Low HCV Utilization Rates Are Located in Rural Areas in Oil- and 

Gas-Impacted States 
Impact of Oil and Gas Exploration on Affordable Housing

Economic Market Analysis Working Paper Series 6

less pronounced. For instance, in Texas, the percentage-point 

change in HCV utilization rates increased slightly, by 1.1 percent, 

from May 2009 to May 2013. The proximity of the Eagle Ford 

Shale area to Houston allows for the relatively large supply of 

housing resources in the urban area to absorb some of the impact 

of net in-migration of energy workers. A similar experience is 

reported for the Niobrara Shale area in northeastern Colorado. 

The Fort Collins-Loveland and Greeley metropolitan areas are 

near the epicenter of oil activity in the Niobrara area. The supply 

of housing, hotels, and apartments in these metropolitan areas 

absorbs a portion of energy personnel, limiting impacts on the 

surrounding rural housing market areas. As a consequence, the 

percentage-point change in HCV utilization rates in Colorado 

declined by 2.3 percent from May 2009 to May 2013, only 

slightly more than the national average decline of 1.8 percent.

How HUD and State Agencies 

Manage the Impact

This section highlights the adjustments made to existing HUD 

programs and the new affordable housing resources made available from funds provided by state housing finance agencies. The 

response from HUD and state agencies focused on increasing 

program flexibility and providing additional resources and funding to areas impacted by natural resource exploration.

In areas experiencing significant shocks to the rental-housing 

market and with little or no market-based data on which to base 

revised FMRs, HUD/PD&R, in conjunction with the Department’s 

PIH, can authorize emergency exception payment standards for 

PHAs to use. Developed for use in disaster-impacted areas where 

annually published FMRs may not be able to capture rapidly 

changing conditions, emergency exception payment standards 

increase a PHA’s flexibility by permitting HCVs to be set up to 

135 percent above FMRs. Without an approved exception rent, 

PHAs can set HCVs up to 110 percent above FMRs.

FMRs are set using the most recent data available, but the data 

lag real-time rental-housing market conditions. After emergency 

exception payment standards are approved, they remain in effect 

until (1) HUD is able to complete a thorough housing market 

analysis, (2) new data become available, or (3) new, higher 

FMRs are set. Areas impacted by natural resource exploration 

and development are eligible for emergency exception payment 

standards. In North Dakota, the areas approved for emergency 

exception payment standards include the city of Minot, Burleigh 

County, Foster County, McHenry/Pierce County, Mountrail 

County, and Stutsman County. In Pennsylvania, Susquehanna, 

Bradford, and Tioga Counties were approved for emergency 

exception payment standards. (The GOTF is currently collecting data and monitoring the impact of emergency exception 

payment standards in affected areas to analyze their effectiveness. The result of this analysis will be presented in a future 

working paper.)

State agencies are using new legislation and existing programs 

to provide additional funding and affordable housing resources 

to areas directly impacted by natural resource exploration, especially in rural counties. The Pennsylvania Act 13/Impact Fee legislation, signed into law in February 2012, enacted a fee on every 

unconventional natural gas well drilled in the Marcellus Shale 

formation in the state. The fee amount depends on the price 

of gas during the year of production; 60 percent of the funds 

collected are allocated to areas directly impacted by natural resource exploration activity. Projects eligible for funding through 

the Pennsylvania Act 13/Impact Fee legislation include infrastructure, environmental programs, delivery of social services, and 

affordable housing.12

The Pennsylvania Housing Finance Agency (PHFA) was allocated 

$2.5 million of impact fee funds that were collected in 2011, and 

in 2012 (and each year thereafter), $5.0 million will be collected 

for use in counties where active unconventional wells are present. 

Since December 2012, PHFA has awarded $16.05 million to 

fund 59 projects in 22 counties.13 Funded projects will provide 

new affordable housing units, rehabilitative home improvements 

to existing owner and renter units, or rental assistance.

Projects and programs funded during 2012 and 2013 in Pennsylvania include the 50-unit Wyalusing Meadows, an affordable 

townhome rental development for general occupancy in Bradford 

County. In Fayette County, in southwestern Pennsylvania, 36 

new single-family homes for purchase by low- and moderateincome households will be constructed at the Glen at Three 

Oaks. Half of the new homes will be sold to low-income households and the remaining half to moderate-income households. 

A rental rehabilitation program, which offers money to current, 

past, and prospective landlords, will help stabilize the availability 

of affordable housing units for low- and moderate-income households available at the FMRs for a period of 7 years in Wyoming 

County. The six-unit Clinton Street Gardens Homeless Veterans 

12 PA PUC (2013).

13 PHFA (2013a).
Impact of Oil and Gas Exploration on Affordable Housing

Economic Market Analysis Working Paper Series 7

Housing project will provide affordable units for homeless veterans in Indiana County. Proposals for FY 2013 funds were due in 

June 2013, and PHFA is expected to dispense $8.7 million. Proposals must ensure that at least 30 percent of the funds awarded 

will be used to help families with incomes equal to or less than 

50 percent of the AMI. A comprehensive list of funded projects 

in 2012 and 2013 is available on the PHFA’s website.

In North Dakota, the state legislature in 2013 reauthorized the 

Housing Incentive Fund (HIF) with $35.4 million to create 

1,000 new affordable rental-housing units for essential service 

workers (ESW) and low- and moderate-income households. 

The units must remain affordable for a minimum of 15 years. 

An ESW is an individual employed by a city, county, or school 

district; a medical or long-term care facility; the state of North 

Dakota; or others determined by the North Dakota Housing 

Finance Agency (NDHFA) to fulfill an essential public service. 

In August 2013, the NDHFA committed more than $20 million 

from the HIF to fund 18 projects with nearly 500 rental units.14

Examples of projects funded include 43 units that are reserved 

for ESW within the 74-unit Williston State College Housing 

Phase II and 23 units that are reserved for ESW within the 43-

unit Renaissance on Main, both of which are in Williston, North 

Dakota. In Minot, the 48-unit Rolling Ridge Estates, with 24 ESW 

units, was funded. The conversion of the former Williston Junior High School into 44 LIHTC units for elderly people started 

renovations in 2012 and opened in 2013. The project was 

supported with funds from the HIF and the Neighborhood 

Stabilization Program.

Appendix. Glossary of Terms

For the convenience of the reader, we provide the following 

definitions of terms (in alphabetical order) related to HUD and 

other affordable housing programs.

emergency exception payment standards. HUD regulations 

enable public housing agencies to request emergency exception 

payment standards outside the “basic range” of 90 to 110 percent 

of the Fair Market Rent (FMR). These emergency exception 

payment standards are typically used to accommodate cases in 

which the prevailing rents in part of the FMR area are significantly 

more or less than the FMRs for the entire area. In 2012, HUD 

created a methodology to adjust rental assistance payment standards for housing market areas that experience significant shocks 

from increased natural resource exploration.15

Fair Market Rents (FMRs). Section 8 of the United States Housing Act authorizes housing assistance to aid lower income families 

in renting safe and decent housing. Housing assistance payments 

are limited by FMRs established by the U.S. Department of 

Housing and Urban Development for different geographic areas. 

In general, the FMR is the amount needed to pay the gross rent 

(shelter rent plus utilities) of privately owned, decent, and safe 

rental housing of a modest (nonluxury) nature with suitable 

amenities. The FMR is generally set at the 40th percentile gross 

rent level for units in a housing market area. A public housing 

agency may establish a payment standard for its jurisdiction 

that falls between 90 and 110 percent of the FMR.

income limits. Income limits are used to determine the income 

eligibility of applicants for public housing, Section 8, and other 

programs subject to Section 3(b)(2) of the United States Housing Act of 1937, as amended. The most important definitions 

relating to income limits are—(1) low income is defined as 80 

percent of Median Family Income (MFI), (2) very low income

is defined as 50 percent of MFI, and (3) 30 percent of Area 

Median Income is defined as an income targeting standard in 

the 1998 Amendments to the Housing Act of 1937. Income 

limits are adjusted based on family size; larger families have 

higher income limits.16

Median Family Income (MFI). MFI estimates use 5-year data 

collected by the American Community Survey (ACS), augmented 

by the most recent 1-year ACS information, and updated with 

Consumer Price Index data.17 The Census Bureau defines a family

as “a group of two or more people (one of whom is the householder) related by birth, marriage, or adoption and residing 

together,” and defines a household all people who occupy a housing unit.18 One-half of families have incomes greater than the 

estimated MFI, and one-half have incomes that are less than the 

MFI.

14 NDHFA (2013).

15 HUD PD&R (2013a).

16 HUD PD&R (2013b).

17 HUD (2013b).

18 United States Census Bureau (2013).
Impact of Oil and Gas Exploration on Affordable Housing

Economic Market Analysis Working Paper Series 8

public housing agency (PHA). A PHA is an entity tasked with 

managing housing for low-income residents at rents they can 

afford. HUD administers federal aid to PHAs and provides technical and professional assistance. PHAs determine eligibility for 

low-income housing based on income, age, disability status, 

and citizenship.19 PHAs are also charged with administering 

the Housing Choice Voucher Program. An individual PHA may 

manage public housing units, a voucher program, or both.

tax credit. A tax credit is a subtraction from the amount an 

individual or a business entity owes in taxes. Federal housing 

tax credits derived from Section 42 of the Internal Revenue 

Code are awarded to developers of qualified projects by state 

and local entities. Developers then sell equity interest in these 

projects to investors to raise capital for their projects, reducing 

the amount of debt the developer would otherwise have to 

borrow. Because the debt is less, a tax credit property can, in 

turn, offer lower, more affordable rents. Provided the property 

maintains compliance with the statutory requirements, investors receive a dollar-for-dollar credit against their federal tax 

liability each year over a period of 10 years, creating a return 

on their capital investment. The annual credit amount is based 

on the amount invested in the affordable housing.20

References

North Dakota Housing Finance Agency (NDHFA). 2013. 

“Agency Selects Projects Addressing Critical Housing Needs.” 

Available at http://ndhousing.areavoices.com/2013/08/12/

agency-selects-projects-addressing-critical-housing-needs/

(accessed September 2013).

Pennsylvania Housing Finance Authority (PHFA). 2013a. 

“2012 PHARE Project Summaries.” Available at http://www.

phfa.org/forms/phare_plan/2012_PHARE_Project_Summaries.

pdf (accessed September 2013).

———. 2013b. “Act 105 of 2010 PHARE Plan.” Available 

at http://www.phfa.org/legislation/act105.aspx (accessed 

September 2013).

Pennsylvania Public Utility Commission (PA PUC). 2013. “Act 

13 (Impact Fee).” Available at http://www.puc.state.pa.us/

filing_resources/issues_laws_regulations/act_13_impact_fee_.

aspx (accessed September 2013).

United States Census Bureau. 2013. “Current Population 

Survey (CPS).” Available at http://www.census.gov/cps/about/

cpsdef.html (accessed September 2013).

U.S. Department of Agriculture (USDA), Rural Development. 

2013a. “Direct Rural Rental Housing Loans.” http://www.

rurdev.usda.gov/HAD-Direct_Rental_Loans.html (accessed 

September 2013).

———. 2013b. “Multi-Family Housing Programs and Loan 

Services.” Available at http://www.rurdev.usda.gov/Support

Documents/3560-3chapter02.pdf (accessed September 2013).

U.S. Government Printing Office (GPO). 2013. “GPO’s Federal 

Digital System, Collections Page.” Available at http://www.gpo.

gov/fdsys/browse/collectiontab.action (accessed September 

2013).

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