Cohousing-L Mailing List: Affordable Housing vs Low Income Households

[Sharon Villines (sharon]

I spent too many hours this afternoon looking up all the data below but I was 
curious. My conclusion is that in order to build cohousing communities that are 
what most of us think of as “affordable" is not possible unless we drastically 
change our expectations and zoning requirements. We need new architecture, 
materials, space use, etc. Like Tiny Homes or converted school buses or pods.

Some communities have built affordable units (but how affordable?) with many 
hours of working on subsidies — this is a hard process and can leave the 
community with state and federal limitations into the future.

The chances of building cohousing communities for with incomes of $45,000 can 
afford is highly unlikely in most situations. That’s the low income cap 
4-person households. Others are lower.

I think what we need is to encourage building more rentals, and developing 
models where renters can feel ownership of the community. Learn to value 
investors. We were once afraid of developers (and them of us) but that has 
totally changed. Cohousing has blossomed now that we are working with 
developers (who actually know how to build most economically). We should be 
able to develop supportive rather than predatory relationships with investors 
who also want to build sustainable communities. And can apply their expertise 
in maintaining residential properties.

The details are below but many of you may already know them and others won’t 
care, so I put them in as footnotes.

Sharon
——
Sharon Villines, Washington DC
Takoma Village Cohousing


“Affordable" is usually used to describe housing and is based on the median 
price in a real estate market area. The median is the middle point between the 
highest price and the lowest price — not the average. Housing priced at 80% of 
the median, or lower, is considered affordable.

“Low income” refers to household income. “Affordability" and "low income" are 
often used interchangeably but that is where the rubber meets the road. There 
is no relationship. Each one is calculated on a different basis. A house that 
is “affordable” may be far beyond the reach of a household defined as “low 
income.”

At lower income levels it is almost always less expensive to rent than to buy.

Nerdwallet has an easy calculator to determine whether it is less expensive to 
buy or rent.
https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator

Definitions of Low Income —the amount required to meet basic needs in the US

> Low-income is considered 200 percent of the federal poverty level, and poor 
> is defined as 100 percent of the poverty level. For 2013, a family of four 
> making less than $23,624 is considered at the federal poverty level, and 
> $47,248 is considered low income.

> HUD defines low Income as 80 percent of the area's median income level

The common ratio of housing-costs-to-income in the United States and Canada to 
determine affordability is a housing cost not more than 30% of a household's 
gross income. India uses a 40% rule. Housing costs include more than the 
mortgage payment — add utilities, taxes, maintenance, etc. And consider other 
ongoing monthly payments — car payments, personal insurance, student loans, job 
training, music lessons, etc.

If a household’s income is $48,000, then 30% is $14,400 annually or $1200 a 
month for housing costs IF other debt is minimal. Running that through a couple 
of “how much house can I afford” calculators, that is below $160,000 assuming a 
mortgage. In some towns that is possible for older construction, meaning older 
heating, plumbing, etc.

At lower income levels it is almost always less expensive to rent than to buy. 
The problem often is finding rentals in the neighborhoods where one might want 
to buy. The trick cohousing can pull is to build the rentals.

Nerdwallet has an easy calculator to determine whether it is less expensive to 
buy or rent.
https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator

According the Business Insider: Home prices have increased significantly since 
the 1960s, when the median price of a home was less than $100,000 in today's 
dollars. Today the median home listing price in the US is nearly $226,800, 
according to Zillow. And it takes years to save a downpayment.

Zillow will calculate rental costs for homes so you can compare buying vs 
renting. Remember to add the overhead of buying —  utilities, taxes, 
maintenance, etc

A Business Insider article from June 2019 ranks the 51 states on the SF costs 
of homes. In West Virginia, the median rate is ~ $98 SF. Many of the middle 
cost states are in the ~$200+ SF range. Hawaii is up there at $500+ a SF. 
https://www.businessinsider.com/cost-to-buy-a-house-in-every-state-ranked-2018-8#41-kansas-11