9- Ch. Housing Affordability:
When is Housing Affordable?
-affordability, the term, has varied over time in what it means, and remains vague.
-US Department of Housing and Urban Development standard is that a household should
spend no more than 30% of total income on housing costs, including mortgage or rent
payments and utilities.
*Households paying more than 30% of income are housing cost burdened, and those
paying more than 50% are severely housing cost burdened.
*most affordability indices underestimate affordability problems for large and/or lowincome households.----30% is more significant to some people
-1991 census bureau, 1/3 homes are shelter poor and cant afford to be paying what
they were.
*US median household income in 2002 was $56,500, but varied on location
-metropolitan areas: $60,300
-nonmetropolitan areas: $45,000
Households and Housing Costs:
-One must differentiate between cost increases due to our greater consumption of housing
compared to real changes in cost.
1982- median cost of single-family home $69300;
2002- $187,500
*In part, due to inflation
*Increase in costs of labor and materials
*land values have increased
*changes in households demands for more space of higher quality *(for bedrooms,
bathrooms and garages)
*13.4 million renter and 14.5 owner households have affordability problems.
*for cost-burdened renters, struggle is to pay rent and utilities; cost-burdened owners,
struggle is property maintenance and holding onto equity.
Homeownership and Affordability:
-Affordability index over 100, means with median income can afford median
priced home.
-Younger people are less likely to own a home
-over 50% of households with the householder aged 30+ owned their homes. Over
80% of households in which head was 55+ owned home in 2002.
*Homeownership rates for Hispanics are best since 1983, 7%....whites: 5.4%
*rising home values and falling interest rates gave sector boost in 2002
*amount of people spending 50% or more from 1997- 5.8 mil; 2001=7.3 mil.
Renting and Affordability:
-Renter households make up 1/3 of households in US.---36 million
-supply of low-cost rental housing units hasnt been sufficient for demand,
especially in low-income bracket people.
*Higher income outbid for rental units and re-rent at higher price.
*low income renters experience worst housing affordability problems.
*no US region where minimum wage is adequate to afford 2-bedroom Fair market
Rent if shouldnt spend more than 30%
Understanding the Shortage in Affordable Housing:
Increasing the Cost of Housing: Additional Space and Amenities:
-Homes have increased more than 10% in size
-lot sizes have decreased by almost 8% in 10 years, so households are buying
additional space and features.
Increasing the Cost of Housing: The Role of Local Govt Regulations:
-Impact Fees also know as System Development Charges (SDCs), are placed on
developers by local governments as a way of funding infrastructure improvements
associated with the development (sewage, streets, parks, schools). These pass
from developers to homebuyers
-Code Restrictions continually raise standard of housing and create additional
bureaucratic steps that increase development costs
-Growth Restrictions slow the pace of expanding road systems, water supply,
waste disposal; however, it limits available land for housing making prices go up.
-Exclusionary Zoning further limits the supply of affordable housing, and
restricts land available for it.
Increasing the Cost of Housing: Failure to Preserve Existing Affordable
Housing:
-Loss of affordable units to gentrification or lack of repairs, makes shortage in
affordable housing.
-in gentrification, many low-income families can no longer afford home property
taxes, and become displaced.
Challenges for Low-income Households
-Term: Low-Income:
-based on size, income, and where it resides.
-if income falls below 50% of the area medianvery low income
-extremely low income in households earning below 30% of area median.
-1996, Personal Responsibility and Work Opportunity and Reconciliation Act
(PRWORA)= led to increasing discussion on housing problems for those receiving or
newly terminated from welfare benefits.
-25% of welfare recipients receive direct housing subsidies through public housing.
-Women head 59% of worst case housing needs families
-30% of female-headed homes are poor.
-Rural households are more likely than urban dwellers to live in inadequate housing
Solving the Affordability Problem
-28 million households spend more than 30% of income on housing.
-First step is solving the affordability problem, and correct misperceptions of housing
programs and replace them with more positive images.
-when public embraces need for affordable housing, then we reduce housing cost or
increase resources households can access to fulfill hosing needs.
Reducing the Cost of Housing
-One land use strategy is to promote higher density and mixed-use development.build
above income-producing businesses.
-municipalities should reduce minimum lot sizes.INCREASE HOUSING DENSITY.
-reduce land regulations that drive up costsuch as design standards.
-crate inclusionary zoning, which requires developers to make certain percentage of units
affordable to low-income families.
***Unique strategy: Community Land Trust (CLT):
-decrease housing costs by controlling land costs
-Typically, low-income homebuyer purchases home in a CLT, while nonprofit
organization holds the land itself in a trust.
-now, buyers cost is for the house only.
-if buyer sells, buyer and CLT share in appreciated equity.
-sold to another low-income buyer and property remains affordable
*Burlington Community Land Trust was first one and largest.
Building and Management Costs:
-Factory-built housing, offers economies in the manufacturing process that can
significantly reduce costs.
-site-built homes, in urban areas, often suffer from vandalism and theft.
-Manufactured home suffer image problem mobile home
-way to decrease building cost is use donated labor and amaterials.
-Resident labor is a form of donated labor, used in homesteading programs
Finance Costs:
-Low-interest rate loans for constructing or rehabilitating affordable housing can
reduce the price of each house
-Government supports the development of affordable rental housing through the
Low Income Housing Tax Credit. Used by housing developers.
-HOME Investment Partnership grant can be used for production of new
affordable units. Development Block Grant too.
Increasing Resources for Housing
-US government encourages homeownership.
-educated buyers have lower risk of default.