Cohousing-L Mailing List: Re: A strategy for affordability

[Brian Bartholomew (bb]

> In our economic system their house is perhaps the only potentially
> productive asset available to many if not most people of modest means.

Productive?  Let's do some figuring.  $150,000 mortgaged at 6.5% for
30 years is a monthly payment of $948.  The total mortgage payment is
$341,280.  Here are some maintenance costs: painting exterior $2,000
times 3; replumbing $4,000; new roof $6,000; new appliances $10,000;
real estate taxes $1,500/year; miscellaneous $50/month; total
maintenance payment is $89,000.  The total payments are now up to
$430,280.  You bought a new house worth $150,000.  Now it is 30 years
older, and you would have to sell it for $430,280 just to break even;
but perhaps you can sell it for half of the original price, $75,000.

Suppose instead they paid $3,000 up front to buy a travel trailer to
live in, and replaced the trailer every ten years.  Then they paid
$948 each month for 30 years to buy more of an investment, like a
bond, that earns 6.5% each year.  After 30 years their investment
would be worth about 1 million dollars.

This calculation was quick and dirty.  I used financial calculators on
the web, I'm ignoring details such as the down payment, currency
inflation, taxes, and that the repairs do not have to be financed for
the whole 30 years.  You'll also note the complete lack of predatory
lending practices in this example; a house you live in is not an
investment or savings vehicle even if the bank is reasonable.

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> With regard to Brian's thoughts, when I last looked, the costs of
> construction in many parts of the country were beyond the means of
> low income families--particularly if the cost of land and utilities
> are included.

Not true.  The costs of building construction are small; it is the
costs of permitting an inexpensive structure which are prohibitive.

                                                        Brian