Jim Mork Challenged us with "lets come up with a figure that IS affordable
and then request proposals for building homes at that price or below."
Great question/challenge. "Affordable housing" is used to define housing
that ranges from affordable to the very poor (30% of average median income)
to "workforce housing" -- which is often described as "nurses, police, and
fire". Obviously, both income segments need "affordable housing," but their
housing problems are very, very different. It is appropriate that we ask
two questions:
1) What income segments exist within the current "affordable Housing"
definition?
Affordable Housing is usually broke down by "median income" and some
percentage of median. Customary breakdowns reference "median", 80%, 50% and
30%. I will use those.
2) What segments have such a shortage that some level of government
intervention is needed to provide enough housing?
According the US Census 2000, the median income for Hennepin County is
$51,711 for a family(1). Assuming 30% of their income can be used for
housing lets explore housing options for each segment. Here is some raw
data:
Annual 30% Annual Monthly Affordable
Segment Income Income mort/rent House
-----------------------------------------------------------
median $51,711 $15,513 $1,292.78 $170,000
80% $41,368 $12,410 $1,034.22 $135,000
50% $25,855 $ 7,756 $ 646.39 $ 84,000
30% $15,513 $ 4,539 $ 387.83 $ 50,000
-----------------------------------------------------------
The "affordable house" is an approximation. The final number depends on the
individuals other debts, credit scores, property taxes, insurance, interest
rates, etc. I believe the number is close to a maximum amount available
with no down payment.
For people at the median, it is easy to purchase good housing for $170K. It
is even easier to find good apartments for $1,292.78/month. Workforce
housing is in this range.
For people at 80% of the median, it is harder to find homes to purchase at
$135K, but they are available. The MLS has 110 homes below that price in
Mpls now. St. Paul has 137. Those homes might not be perfect, or in the
greatest neighborhoods, but most of us don't live like kings/queens. There
are MANY rentals available for $1,034/month.
For people at 50% of the median, it is very hard to purchase a home in the
twin cities. The MLS has 16 homes available for less than $84K in MPLS and
St. Paul. All of the homes look crummy (to me). However, there are SOME
two bedroom apartments available that rent for $646 per month. Maybe not
large, high amenity apartments, but they are available.
For people at 30% of the median, there are no marketplace options I am aware
of.
Jim Mork's original question is to come up with a figure that is
"affordable." Since "affordable housing" depends on income, I think the
valuable question is: At what point is the market no longer providing
affordable housing to the masses? I believe that point is near the 50% of
median income. Approximately $84K to purchase and $646 for rental.
The market appears to be serving people above 50% of median income and the
government should not need to use tax revenue to manipulate it.
Bill Cullen
Whittier Landlord
References:
(1) http://quickfacts.census.gov/qfd/states/27/27053.html
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