Low-income housing and market-rate housing differ primarily in pricing, eligibility criteria, and funding sources. Low-income housing is designed to provide affordable rents for individuals or families earning below a set income threshold, often supported by government subsidies or tax incentives. Rents typically cap at a percentage of local median income (e.g., 30% of income). In contrast, market-rate housing is priced based on supply and demand without income restrictions, offering higher rents and purchase prices aligned with private-sector market conditions.

The distinction ensures equitable access to housing while addressing systemic affordability gaps. Low-income housing programs, such as Section 8 vouchers or public housing, require participants to meet income limits and demonstrate financial need, reducing displacement risks for vulnerable populations. Meanwhile, market-rate housing prioritizes profitability for developers and investors, often excluding lower-income buyers. Data from the U.S. Department of Housing and Urban Development (HUD) shows that in 2022, 11.4 million U.S. households spent over 50% of income on housing, highlighting the urgency of low-income housing solutions. Conversely, market-rate housing prices surged by 15% annually from 2019 to 2021, exacerbating inequality. The National Low-Income Housing Coalition reports a shortage of 7.4 million affordable units as of 2023, underscoring the gap between demand and supply in low-income housing. Government subsidies, such as the Low-Income Housing Tax Credit (LIHTC), fund 60% of new affordable units, yet funding shortfalls persist. Without such interventions, market-rate housing would further marginalize low-income families, deepening economic divides. Ultimately, the dual systems reflect policy priorities: low-income housing safeguards vulnerable groups, while market-rate housing drives economic growth, necessitating balanced investment to mitigate housing insecurity.