Key Terms

Key Terms

Accessory Dwelling Unit

An accessory dwelling unit (ADU) is a set of rooms that is permitted to be used as a separate living unit, even though it is located on a single-family lot in a single-family residential zone. A detached accessory dwelling unit (DADU) is the same except that the living area is housed in a separate structure, often a backyard cottage. Sometimes the owner of the ADU is required to live in either the ADU or the main dwelling unit on the property. 

Area Median Income

Area Median Income (AMI) is the median income of a geographical unit such as a city or county. It is calculated using data from the U.S. Census Bureau's American Communities Survey. The U.S. Department of Housing and Urban Development (HUD) uses AMI to set income limits for affordable housing. For example, a certain housing unit may be available only to "extremely low-income" families, those living at or below 30% of AMI. 

Bifurcated Economy

Also known as an "hourglass economy," a bifurcated economy has two increasingly separate labor markets. One labor market features high wages and knowledge-based skills, while the other has low wages, volatile hours, and minimal hours. Meanwhile, semi-skilled jobs disappear (and with them, the middle class).

Capital Gains Tax

In the United States, long-term capital gains are taxed at lower rates than regular income or short-term gains. Capital gains are profits from the sale of property or investment (but not dividends, which are taxed separately). Since 1997, profits from home sales have been exempted from capital gains taxes up to $250,000. Married homeowners receive an exemption up to $500,000. This makes homes an especially profitable investment, which is a boon for homeowners. However, it also increases the demand for expensive housing among investors who want to use it for speculative gain.

Community Benefits Agreement

A Community Benefits Agreement (CBA) is a binding contract negotiated between a coalition of community groups and a real estate developer. The contract requires the developer to provide certain amenities or mitigations to the local community as part of a specific development project. In exchange, community members agree not to oppose the project.

Community Development Block Grant

The Community Development Block Grant (CDBG) is one of the oldest programs administered by the U.S. Department of Housing and Urban Development (HUD). Beginning in 1974, the federal government began awarding states, cities, and counties grants for affordable housing and poverty alleviation. Localities had broad discretion in how to use the money. Over time, however, funding for the program has declined steeply; the nonpartisan Center on Budget and Policy Priorities reports that funding has fallen by 51% since 2000, adjusting for inflation. 

Community Land Trust

A Community Land Trust (CLT) is a non-profit organization that buys, holds, and stewards land for the benefit of the community. The CLT is governed by a board of residents and community representatives. A CLT can be a great tool for creating permanently affordable housing. Houses on community-owned land are sold to low- and moderate-income families at an affordable price. The occupants pay lower taxes, because the value of the home is less without the land. The CLT also helps the residents maintain the property. In exchange, if the homeowners decide to sell the house, they must do so at a restricted price, so that affordability is preserved for future families.

Domino Displacement

Domino displacement describes the experience of residents displaced from one neighborhood, only to be displaced again when their new neighborhood begins to gentrify as well.

Excise Tax

Excise taxes are "taxes paid when purchases are made on a specific good." They are usually included within the price of the product.

Fair Market Rent

Fair Market Rent (FMR) is a payment standard for rental housing that is published annually by the U.S. Department of Housing and Urban Affairs (HUD). FMRs are usually set at the level of the metropolitan area. For example, in the Philadelphia-Camden-Wilmington MSA, HUD set an FMR of $1,003 for 1-bedroom apartments in 2016. FMRs are used to set rent ceilings and to determine the allowable rent for voucher-holders seeking housing.


Gentrification is the process that occurs when low-income residents of a neighborhood are replaced by higher-income residents.

Inclusionary Zoning

Cities have the power to create zoning ordinances that set allowable building densities, heights, and uses for certain areas. In an inclusionary zone, residential developers are required to include a certain percentage of affordable units in new market-rate housing or mixed-use developments. Often, they are given the choice of building the units or paying an "in-lieu fee" into a fund that will build more affordable housing. In some cities, inclusionary zoning is not mandatory but optional. In this case, the developer receives density bonuses or other rewards in exchange for including affordable units.

Limited-Equity Cooperative

Limited-equity co-ops (LECs) are housing cooperatives designed to serve low-income populations. They became popular in New York City after arson and abandonment left many apartment buildings in the city’s hands. The city encouraged tenants to convert the buildings into LECs. In an LEC, the tenants do not own the housing itself, but a share in the corporation that owns the housing complex. The price of the owner shares is determined by a formula determined by the cooperative, instead of by the market. This formula restricts the resale price of the owner shares, thus limiting household equity. The result is guaranteed long-term affordability (lasting until the cooperative dissolves or lifts restrictions).

Low-Income Housing Tax Credit

The Low-Income Housing Tax Credit (LIHTC) is a federal tax credit administered by state agencies. Affordable housing projects receive credits if they meet certain standards. Developers typically sell the credits to investors in order to finance construction. The LIHTC has helped build nearly three million affordable units since it was created in 1986. But it now costs taxpayers more and produces fewer units than it did 20 years ago.

Mortgage Interest Deduction

The U.S. home mortgage interest deduction (MID) lets homeowners deduct the interest they pay on their home loan from their taxable income. This can represent enormous savings for taxpayers. The same deduction does not apply to other kinds of loans, so it acts as a reward for homeownership. In Canada, the deduction applies only for landlords, not for taxpayers' private residence.  In France and other countries, mortgages are not tax deductible or only to a small extent.  

Qualified Allocation Plan

Qualified Allocation Plans (QAPs) are plans that dictate how state housing authorities award tax credits for housing projects. Every state must have a QAP and update it annually. The plan must prioritize projects serving the lowest-income people for the longest periods of time in qualified census tracts. Beyond that, state QAPs vary in the priority they place on projects that serve the disabled, rural areas, and so on. 


Redlining is the practice of refusing services to people who are deemed to live in areas of financial risk. Beginning in the 1930s, the Homeowners Loan Corporation (HOLC), a government-sponsored corporation, created residential security maps that literally outlined in red areas where banks should refuse to lend. The boundaries were drawn in overtly racist ways. Predominantly African American, Asian American, Jewish, and other minority neighborhoods were denied loans because they were thought to be "declining" or "high risk." Today, the denial of supermarkets or healthcare to low-income areas also results in a redlining effect.

Root Shock

"Root shock," as defined by Dr. Mindy Fullilove, is "the traumatic stress reaction to the loss of some or all of one's emotional ecosystem." The term is used to describe the experience of people who are displaced from their neighborhoods.

Sanctuary City

Sanctuary cities refuse to cooperate with the federal government in apprehending and deporting unauthorized immigrants. Specific practices vary among sanctuary cities in the U.S. But generally, when police in sanctuary cities arrest unauthorized immigrants, they apply the law as they would in any other case and decline to notify federal Immigration and Customs Enforcement (ICE) before releasing the arrestee.

Transfer of Development Rights

Transfer of Development Rights (TDR) programs incentivize property owners to sell their rights to develop their property to real estate developers in other areas, who can then build bigger, more densely, or for different uses than zoning law would normally allow.

Urban Renewal

Urban renewal was a nationwide program in the 1940s and 50s that gave cities massive federal grants to rebuild their downtowns. It was an attempt to keep cities economically viable, even as they lost large parts of their middle-class residents to the suburbs. Most urban renewal projects replaced dense industrial and residential neighborhoods with large-scale office and commercial development, highways, and high-rise housing. In 1963, famous essayist James Baldwin called urban renewal "Negro Removal" because of the way cities used it to displace large numbers of blacks and other poor and minority residents. 


A voucher is a "demand-side subsidy." Instead of building public housing or rent-controlled apartments, governments give qualifying households a voucher that they can use towards the rent of any unit they choose, up to a certain rent threshold. For example, the U.S. Department of Housing and Urban Affairs (HUD) operates the Housing Choice Voucher program. Voucher-holders pay 30% of their income towards rent and HUD pays the rest. However, there are far fewer vouchers than qualifying households, making waiting lists very long