I appreciate Michael Hohmann's summary of the affordable housing seminar last night. One part Michael wrote was:
Relative to the need for building more affordable housing, questions were raised regarding the high vacancy rates in the private rental housing market, and the responses indicated that high vacancies were at the upper-end of the rental market. Low-rent units were not adequately available, we were told. My response: One must define "low-rent" and "adequately available" to discuss this point. However, on 18-Oct-03, the Star Tribune reported "In units priced from $500 to $599, the vacancy rate rose from 3.5 percent during the third quarter of 2002 to 6.2 percent during the same period this year. And in units priced from $700 to $799, the vacancy rate rose from 1.9 percent last year to 6.6 percent this year."(1) Since a balanced market is considered to be 5% vacant, it appears we currently have an oversupply of housing priced $500 to $599. What is "low-rent?" Michael Hohmann continued: The Land-Trust model was brought up by Council Member Niziolek, as a way to make housing available at reduced cost via eliminating the cost of land and limiting equity growth in the property. My response: On 16-Nov-03, the Star Tribune had an article on "Minneapolis's first community Land Trust."(2) This article has a lot of contradictory data, so I am not sure how land trusts really works. However, I have five questions/comments: 1) This program was granted $125,000 from MCDA and $50,000 from General Mills to build "one or two" units. Each unit is sold for $155,000 -- not including the land. So, the non-profits are selling townhomes, charging rent for the land, and netting income of $242,500/unit ($155,000 + $87,500). Using the MLS, I searched Hennepin County for townhomes listed under $155,000. It found 80. When I searched on townhomes for under $242,500, it found 446. What problem did this land trust solve? 2) The owners cannot sell for more than 25% above original purchase price. And the owner only gets 25% of that gain. This is messy. Homeowners will be trapped in these homes. They will have SOME equity, but they will never be able to sell and "buy up" as their equity will not appreciate at the rate of the market. 3) How is the next owner selected? If a property cannot sell for more than 25% over purchase price and the owner has it 10 years, the property will be under market. Everyone will want to purchase it. How will the next buyer be picked? Lottery? What will keep the second buyer from immediately re-selling and pocketing a 25% gain? 4) What happened to the low down, low interest FHA loans that all us old timers used to purchase our first home? 5) Jim Graham, how many families could your organization put in EXISTING homes if you were given $175,000? Would those owners be limited in the equity they can earn? It is my opinion that creating a housing market which operates outside the real housing market is unlikely to be successful. Bill Cullen Whittier Landlord (1) http://www.startribune.com/stories/417/4141747.html (2) http://www.startribune.com/stories/836/4213294.html REMINDERS: 1. Think a member has violated the rules? Email the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. For state and national discussions see: http://e-democracy.org/discuss.html For external forums, see: http://e-democracy.org/mninteract ________________________________ Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls
