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Impact Dictionary

Freddie Mac’s commitment to affordable, quality rental housing is central to everything we do, including our research, the products, programs and services we offer, and much more. We’ve compiled this Impact Dictionary to help clarify frequently used terms that relate to housing affordability and underserved markets.

Click here to learn more about how we define a Diverse Borrower.

Click here to view statistics about our recent financings as measured by area median income.

Workforce Housing

Fundamentally, workforce housing is housing affordable to the ‘missing middle’ – those making modest incomes in markets across the country. Workforce housing properties tend to be older and have fewer amenities, however may also include newer properties intentionally built to be affordable to households with moderate incomes.

For our loan offerings and Impact Bonds, we define workforce housing as units with rents affordable to households making 80% or less of area median income (AMI) in most markets, with some variation in cost-burdened markets.

Workforce housing rent is affordable to households earning up to, and including:

  • 80% of AMI in standard markets
  • 100% AMI in cost-burdened markets
  • 120% AMI in very cost-burdened markets
  • 150% AMI in extremely cost-burdened markets

Naturally Occurring Affordable Housing

For our loan offerings and Impact Bonds, we define Naturally Occurring Affordable Housing (NOAH) as units affordable to households earning 60% of the AMI or less in most markets. There is some variation for cost-burdened markets, for households located in properties that are not supported by major public subsidies, and for associated regulatory agreements.

NOAH rent is affordable to households earning up to, and including:

  • 60% of AMI in standard markets
  • 80% AMI in cost-burdened markets
  • 100% AMI in very cost-burdened markets
  • 120% AMI in extremely cost-burdened markets

Targeted Affordable Housing

For our loan offerings, Targeted Affordable Housing (TAH) properties are those that receive federal, state, or municipal government subsidies to pay for a portion of development or operating costs. In exchange, developers/borrowers agree to keep all or a portion of the units affordable to renters at certain AMI levels for defined periods of time, depending on the jurisdiction and type of governmental support involved. The government subsidies can be either direct (e.g., Section 8 vouchers) or indirect (e.g., tax credits).

Mixed-Income Housing

Mixed-income housing can help to deconcentrate poverty and/or provide access to neighborhoods of opportunity for low- and moderate-income residents. This type of housing creates economic diversity and expands the availability of quality affordable housing throughout an area. Often federal, state or local programs will define mixed-income as a property in which at least 20% of the units are affordable to households making 50% or less of the AMI, or at least 40% of the units are affordable to households making 60% or less of AMI; and at least 20% of the units are unaffordable to households making less than 80% AMI. For the purposes of our Impact Bonds offerings, we consider mixed income properties to be those that have a mix of units affordable to renters earning up to 50% AMI and those earning above 80% AMI. Mixed-income housing is an important way to further residential economic diversity and federal, state and local programs may vary depending on market.

Directing Capital Towards Historically Underserved Markets

Affordable and mixed-income housing in one of the following areas can help direct capital to provide stable, quality housing and become a foundation for economic opportunity. The following are defined by reference to the Enterprises’ Duty to Serve Underserved Markets (the Duty to Serve, 12 CFR 1282.1). A list of census tracts for each category can be found using Freddie Mac’s Mission Map or on FHFA's website.

Areas of Concentrated Poverty (ACP)

An Area of Concentrated Poverty (ACP) is defined as an area that is either a Qualified Census Tract or a Racially- or Ethnically-Concentrated Area of Poverty (R/ECAP).

  • Qualified Census Tracts (QCT)

    A census tract designated by Housing and Urban Development (HUD), or equivalent geographic area defined by the Census Bureau, where at least 50% of households have incomes below 60% of Area Median Gross Income (AMGI) for the year or that has a poverty rate of 25% or more. HUD has defined 60% of AMGI as 120% of HUD's Very Low-Income Limits, which are based on 50% of AMI, adjusted for high cost and low-income areas. Duty to Serve uses this designation to help inform its classification of ACPs.

  • Racially- or Ethnically-Concentrated Area of Poverty (R/ECAP)

    A Racially- or Ethnically-Concentrated Area of Poverty (R/ECAP) is a census tract designated by HUD that has a non-white population of 50% or more and a poverty rate that is at least (a) 3X higher than the metropolitan/micropolitan area or (b) 40% or more. A R/ECAP means a geographic area with significant concentrations of poverty and minority populations.

High Needs Rural Regions

This category includes rural areas in Middle Appalachia, Lower Mississippi Delta, Colonias or tracts located in Persistent Poverty Counties.

High Opportunity Area

Freddie Mac uses the definition of High Opportunity Areas as described in the Duty to Serve Regulation and the associated Duty to Serve Evaluation Guidance published by FHFA. Per Duty to Serve, a High Opportunity Area is designated in two ways: by a state’s Qualified Allocation Plan (QAP) or by HUD’s Difficult Development Area (DDA) designation.

  • Difficult Development Area (DDA)

    Certain areas designated by HUD as a Difficult Development Area (DDA) during any year covered by an Enterprise’s Underserved Markets Plan (Plan) or in the year prior to a Plan’s effective date, with a poverty rate that falls below 10% (for metropolitan areas) or below 15% (for non-metropolitan areas), are identified by FHFA as High Opportunity Areas. It is important to note that HUD’s DDAs were developed using zip codes (for MSAs) and counties (outside of MSAs) as the geographic units. Because Duty to Serve’s designation using DDAs is at the census tract level, there are some cases of geographic discrepancy. A list of census tracts can be found using Freddie Mac’s Mission Map or on FHFA's website.

  • Qualified Allocation Plan (QAP)

    Certain census tracts from eligible LIHTC QAPs are identified by FHFA as High Opportunity Areas. These have a poverty rate that falls below 10% (for metropolitan areas) or below 15% (for non-metropolitan areas). A list of eligible LIHTC QAPs can be found here. A list of census tracts can be found using Freddie Mac’s Mission Map or on FHFA's website.

Rural Area

A rural area is defined as:

  • A census tract outside of a metropolitan statistical area (MSA) as designated by the Office of Management and Budget (OMB); or
  • A census tract that is in an MSA as designated by OMB that is outside of the MSA’s Urbanized Areas as designated by the U.S. Department of Agriculture’s (USDA) Rural-Urban Commuting Area (RUCA) Code #1, and outside of tracts with a housing density of over 64 housing units per square mile for USDA’s RUCA Code #2 (per 12 CFR 1282.1).

Persistent Poverty Counties (PPC)

Persistent Poverty Counties (PPC) are defined as a county in a rural area that has had 20% or more of its population living in poverty over the past 30 years, as measured by the most recent decennial censuses.

Opportunity Zones

Per the Internal Revenue Service, Opportunity Zones are economically-distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by a state, the District of Columbia, or a U.S. territory and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.

Opportunity Zones are designed to spur economic development and job creation by providing tax benefits to investors who invest eligible capital into these communities. Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act. The IRS maintains current lists of Opportunity Zones and has posted a list of Frequently Asked Questions on their website.

The Rental Assistance Demonstration Program (RAD)

The Housing and Urban Development (HUD) Rental Assistance Demonstration (RAD) program was created to give public housing authorities a powerful tool to preserve and improve public housing properties and address the $26 billion nationwide backlog of deferred maintenance. RAD also gives owners of three HUD "legacy" programs (Rent Supplement, Rental Assistance Payment and Section 8 Moderate Rehabilitation) the opportunity to enter into long-term contracts that facilitate the financing of improvements. For more information visit https://www.hud.gov/RAD.

Underserved Populations

Some examples, as listed in the Social Bond Principals, of such an underserved population include:

  1. Persons living below the poverty line
  2. Excluded and/or marginalized populations and/or communities
  3. Persons with disabilities
  4. Migrants and/or displaced persons
  5. Undereducated
  6. Underserved, owing to a lack of quality access to essential goods and services
  7. Women and/or sexual and gender minorities
  8. Aging populations and/or vulnerable youth
  9. Other vulnerable groups, including refugees as a result of natural disasters