Income-restricted apartments: how the rent caps work, and the cities where they save the most

An income-restricted apartment is a unit where both the tenant's income and the rent are capped. You have to earn under a set limit to move in, and the landlord can't charge more than a set maximum. Most of these units come from the federal Low-Income Housing Tax Credit, or LIHTC, which gives developers a tax break in exchange for keeping rents down. The US Department of Housing and Urban Development counts 55,345 tax credit projects with 3.9 million units placed in service from 1987 through 2024.

It's different from income-based housing, like a Section 8 voucher, where your rent is pegged to your own paycheck. In an income-restricted unit, the rent is tied to the area's income limit, not yours. The cap is 30% of the limit, figured as if 1.5 people live in each bedroom, under the federal tax code. So if you earn well below the limit, the rent can still take a large share of your income. For how vouchers and public housing work, see how income-based apartments work.

Most tax credit units are set aside for households earning up to 60% of the area median income. Using HUD's 2026 limits, here's the most a 60% one-bedroom can legally cost in 17 big cities, next to typical one-bedroom rent in RentDataNow data.

The math behind the first row: HUD's 2026 limit at 60% in New York is $71,280 for one person and $81,420 for two. The average of those, $76,350, times 30% is $22,905 a year, or $1,909 a month.

The savings are biggest in New York, Boston, and San Diego, followed by Miami, Atlanta, and Nashville. In Phoenix, Austin, and Seattle, the cap sits slightly above typical one-bedroom rent, so it doesn't hold rents down much. There, any discount depends on what the property actually charges, which can be well under the legal maximum. The capped amount also includes a utility allowance, so the rent a tenant pays the landlord is usually lower than the maximum shown.

A few rules catch applicants off guard. Under the tax code, a unit occupied entirely by full-time students generally doesn't qualify, though there are exceptions, including single parents who aren't someone else's dependent and students who were in foster care. You'll need to document your income when you apply, and owners often recheck it each year. Some buildings use income averaging, which lets units be set at limits from 20% up to 80% of the area median, as long as the building averages 60% or less.

A raise doesn't automatically disqualify you. Under the tax code, if your income rises above 140% of the limit, your unit still counts as income-restricted, but the owner has to rent the next comparable unit that opens up to a qualifying household. We covered how that plays out in our story on over-income tenants in San Jose.

The restrictions don't last forever. Owners agree to keep rents restricted for a 15-year compliance period and an extended use period that runs at least 15 years beyond it. Many cities also require or encourage developers to set aside below-market units in new market-rate buildings, often under local inclusionary housing programs with their own income limits.

To find a unit, search HUD's LIHTC database by city, check your state housing finance agency's rental search site, and call properties directly, since many keep their own waitlists. For whether a given rent fits your budget, see how much rent you can afford under the 30% rule.

Sources

• HUD User, FY 2026 Multifamily Tax Subsidy Project income limits, effective May 1, 2026
• HUD User, LIHTC database
• 26 U.S. Code Section 42, Low-Income Housing Credit
• RentDataNow city rent data, anchored to the Zillow Observed Rent Index, September 2026