A “deep subsidy” enables an individual or family to pay a specific percentage of their income toward rent and utilities. The subsidy pays the difference, up to an established payment limit. Subsidies are often set so the individual or family pays no more than 30% of their monthly adjusted income or ten percent (10%) of their monthly gross income, whichever is higher. Though the individual or family’s income may fluctuate, the percentage of income paid toward housing remains the same. If income decreases, the subsidy may increase, and vice versa.
A “shallow subsidy” does not fluctuate based upon income. Instead, the rent is set at a level affordable to households in a certain income range (e.g., households that earn 50% to 60% of the area median income). The rent remains “flat,” regardless of changes to income. Flat rents targeted to people in specific income ranges are usually lower than rents for similar units in market rate properties, but they are not always affordable for people at the lowest end of the income scale and those on fixed incomes (e.g., SSI or SSDI). If the flat rent (including utilities) is more than 30-40% of the individual or family’s monthly income, it may not be affordable.