Affordable Housing Institute : US

The Washington Post’s Michael Grunwald, in an essay that’s gaining a fair bit of buzz in the housing community, puts a human and neighborhood face on the affordability gap that we featured in Web Update 58 (link in .pdf):

 

In the past five years, housing prices in Fairfax County have grown 12 times as fast as household incomes. Today, the county’s median family would have to spend 54% of its income to afford the county’s median home; in 2000, the figure was 26%.

 

 

It costs twice as much

As I’ve previously posted, the same phenomenon is hitting Las Vegas, Santa Barbara, and many other cities around the country.

The situation is so dire that Fairfax recently began offering housing subsidies to families earning $90,000 a year; soon, that figure may go as high as $110,000 a year.

 

Forty years ago, the Federal affordability standard was 25% of income for rent.

 

Forty years ago, when cars were bigger,

Houses were smaller, and so were their costs

Today’s statutory definition is 30%, and as the preceding statistics indicate, the line is rising.

One-third of Americans now spend at least 30% of their income on housing, the federal definition of an “unaffordable” burden, and half the working poor spend at least 50% of their income on rent, a “critical” burden.

 

The rising affordability line is boosted, paradoxically enough, by the proliferation of information-based home businesses; when the office is the home, the price of occupancy can be expected to rise because the cost of office consumption is being packaged into the dwelling.

The problem has climbed the income ladder and moved to the suburbs, where service workers cram their families into overcrowded apartments, college graduates have to crash with their parents, and firefighters, police officers and teachers can’t afford to live in the communities they serve.

If called upon to guess [And what is blog anyway, if not to guess? — Ed.], I’ll speculate that we will be at a 35%-of-income affordability standard by 2020 at the latest, more likely 2015. (This is yet another reason why modern American single-family homes tend to be price-drop-resistant.)

Homeownership is near an all-time high, but the gap is growing between the Owns and the Own-Nots — as well as the Owns and the Own-80-Miles-From-Works.

The real estate boom of the past decade has produced windfalls for Americans who owned before it began, but affordable housing is now a serious problem for more low- and moderate-income Americans than taxes, Social Security or gas prices.

Yet nobody in national politics is doing anything about it — or even talking about it.

 

I’m too busy not talking about who leaked me information

Well, some of us have been blathering away for years … but then, I’m not in national politics.

For most of the past 70 years, housing was a bipartisan issue.

 

This coincides with the period of rising homeownership rates. Starting immediately after World War II, homeownership became the announced American Dream, and over the ensuing six decades we as a nation have made great strides, with financial product and market innovations second to none, with the proliferation of home-lending federal, state, and local entities, and with continuing investment in financial literacy and first-time homebuyer initiatives. In some very fundamental sense, for most of America, homeownership is a ’solved problem’.

 

In recent decades, its association with urban poverty made it more of a Democratic issue. But now it is simply a non-issue. The current crunch falls hardest on renters in Democratic-leaning cities and metropolitan areas, but Democrats have ignored the issue as resolutely as Republicans. Neither Sen. John F. Kerry (D-Mass.) nor President Bush even bothered to propose affordable housing plans during the 2004 presidential campaign.

 

“I won’t mention housing if you don’t.”

Actually (as Grunwald notes later in the piece), first candidate and then incumbent president Bush twice proposed a homeownership tax credit while on the 2000 and 2004 campaign trails, but they might as well have not been introduced for all the notice they received … or, for that matter, for the political capital the newly elected (or re-elected) president expended on it after inauguration.

 

“Even 10 years ago, that would have been unimaginable,” says Ron Utt of the conservative Heritage Foundation. “But now the problems are so much worse, and nobody cares. . . . I find myself on panels where I’m the token conservative, and I’m the one asking: Doesn’t anyone care about affordable housing?”

Solving the homeownership problem allowed many Americans, if not most, to conclude that since most Americans did own their home, those who did not were ‘those’ people who in some sense chose not to own or deserved not to own.

 

That prejudice was only reinforced by the public’s association of affordability with public housing, and public housing with slums:

But for the past two decades, the public face of public housing has been decrepit projects such as Chicago’s Robert Taylor Homes and Cabrini-Green.

 

Cabrini-Green, before the demolition began

And the only new federal housing initiative has been HOPE VI, a Clinton administration program that has demolished 80,000 units of the worst public housing and built mixed-income developments in their place. The program has eliminated most of the high-rise hellholes that gave public housing a bad name, including Robert Taylor and Cabrini-Green, and has revived some urban neighborhoods. But it has razed more subsidized apartments than it has replaced.

Overall, the number of households receiving federal aid has flat-lined since the early 1990s, despite an expanding population and a ballooning budget.

 

It is incredibly discouraging that, over two decades (1980-2000) in which the American population has grown 24%, 54.9 million people, or an estimated 20,800,000 households (54.9 / 2.63), we have not added affordable apartments, we have lost them.

 

That is, during an interval where we probably should have been creating (say) 5,000,000 new affordable homes, we’ve created less than 1,500,000 of them, about 1,200,000 via the Low Income Housing Tax Credit, the remainder via Section 202/811, 515, and scattered state production programs. [All figures are AHI top-of-the-head estimates; background here.]

 

The result is shortage, and de facto rationing:

 

They might as well be lining up for housing

[Continued tomorrow in Part 2.]

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