How the city calculates rent limits based on apartment size

Curious about how rent limits work in affordable housing? Then buckle up for a niche and wonky discussion!

We wanted to know how income limits are calculated for apartment size. To determine rent in “affordable” units, the city uses area median income (AMI), which is based on household size. But a unit has a certain number of bedrooms, with rent set before people move in. So what’s the correlation between household size and unit size?

Before getting to the answer, here’s a little necessary background on AMI.

AMI is the median income based on household size for every region in the country. It’s set by the U.S. Department of Housing and Urban Development (HUD). Any development that receives money from HUD sources has to use AMI when calculating rental limits.

Our region is the Detroit-Warren-Livonia area and covers Wayne, Oakland, Macomb, Lapeer and St. Clair counties. The AMI for a four-person household here is $95,900.

Bear with us as we do a little math. Rent limits are based on a percentage of AMI, and developments using HUD money cannot charge a household more than 30% of its income on rent. That means an 80% AMI unit would cap a four-person household’s income at $76,720, and the monthly rent at $1,918. For 50% AMI, the income cap would be $47,950, and rent $1,198.

Those amounts are still well above the median household income in Detroit , which the U.S. Census estimated at $36,453 in 2022. Residents, activists and officials have long said HUD’s calculation harms low-income renters who can’t even afford an “affordable” apartment in Detroit. (But that’s a discussion for another day.)

Here’s where our question comes in: How does the city calculate AMI based on the number of bedrooms?

Well, there’s a formula for that. A studio equals a one-person household, and a one-bedroom apartment equals 1.5-person household. Here’s the full table:

Let’s say a landlord is renting out a two-bedroom apartment with an 80% AMI cap. That means HUD’s calculation applies to a three-person household (see above chart: two bedrooms equals three people), which could earn no more than $69,120 a year. And the landlord could charge a max of $1,728 a month. You can look up “affordable” rents in Wayne County based on percentage of AMI, household size and income using the Michigan State Housing Development Authority’s income limits, published annually .

City spokesperson Corey McIsaac said the Housing and Revitalization Department contracts with a compliance manager called National Consulting Services, which monitors landlords and makes sure they’re not exceeding their rental caps.

Looking for an income-capped home? Check out the city’s affordable housing search tool , Detroit Home Connect, which lists units at multifamily properties along with their AMI limits.

Hopefully those rental amounts you see now make more sense.

How the city calculates rent limits based on apartment size · Outlier Media