Fannie Mae’s definition for affordability is that a household should pay no more than 30% of their income for housing, including utilities. Families that pay more, especially lower income families, are considered cost burdened because they may have difficulty paying for non-housing needs such as food, clothing, transportation, childcare, and medical care. The 30% standard can be applied to any income group. It is mostly used, however, to assess housing available to families earning less than the median income.
Those families are typically classified into “very low income” families earning less than 50% of the area median income (AMI), “low income” families earning 50 to 80% of AMI, and “moderate income” families earning 80 to 100) of AMI. So any family paying more than 30 percent of their income on housing needs affordable housing.
According to HUD, an estimated 12 million renter and homeowner households now pay more than 50 percent of their annual incomes for housing. A family with one full-time worker earning the minimum wage cannot afford the local fair-market rent for a two-bedroom apartment anywhere in the United States.