Cohousing-L Mailing List: Re: 30% of Income Cohousing [was Unit price and budget questions

[R Philip Dowds (rphilipdowds]

The affordability calculation is highly elusive, and in fact politicized.

The federal standard for housing costs as a portion of household income was 25% 
in the 60s and 70s.  The Reagan administration boosted this “ceiling” to 30%, 
as a way of upping the rents in public housing.  The 30% number has stuck.

But … what’s in the 30%?  Again, back in the 60s and 70s, housing costs were 
computed as mortgage (or rent) plus insurance, taxes and basic utilities 
(electricity and phone Yes, but high-speed broadband and premium cable TV, not 
so much …).  Then came condos, and the monthly condo fee got factored into the 
calculation.  So what’s wrong with that?  Who cares if some of the insurance or 
utility bill is now carried in common, rather than by individual households?  
What’s wrong is that the condo fee is normally calibrated to include routine 
maintenance and eventual capital replacements.  These substantial property 
costs were never part of the 30% allowance for a single family home — even 
though single family owners certainly must struggle with such costs over time.  
So comparing condo costs to single family home costs is way tricky.

Finally, the household demographics have a big impact on what’s affordable 
and/or necessary.  A two-income household totaling, say, $80K a year in income, 
has one kind of expense profile if it is childless, and another if it has 
children.  The childless household might easily spend on housing either 20% of 
its income (e.g., living comfortably in a small flat) or 40% of its income 
(e.g., a splurge on a “luxury” unit, because kids aren’t burdening the budget) 
— and either way, position itself in an entirely suitable and appropriate 
financial circumstance.  (True enough, however: A low-income household paying 
50% for its housing is in a serious financial bind …)

None of which argues against striving to make cohousing more affordable.  But I 
would make two points:  (1) 30% is the roughest of rough measures.  And (2) 
America does not have a housing *supply* problem.  In America, there are more 
than enough square feet, bedrooms, refrigerators and toilets devoted to 
residential use.  What we have is a *distribution* problem.  Income inequality 
means some have too much housing, while others don’t have enough, or are paying 
too much for the little they have.  As long as we tolerate such extremes of 
income (and wealth) inequality, trying to shave a few dollars off of 
construction costs, or pushing for zoning reforms, will not make much of a dent 
in our chronic disappointments.

Thanks,
Philip Dowds
Cornerstone Village Cohousing
Cambridge, MA

mobile: 617.460.4549
email:   rphilipdowds [at] me.com

> On Nov 19, 2020, at 5:00 PM, Sharon Villines via Cohousing-L <cohousing-l 
> [at] cohousing.org> wrote:
> 
> This is not what most people think of when they think “affordable.” The 
> standard that financial managers use for affordable is 30% of income for all 
> housing costs, whether it is mortgage payments or rent. I’ve posted 
> calculations of income to housing in the past but you can figure it out 
> yourself. 30% of income for everything housing related, including utilities 
> and maintenance. If a household can pay that, they are considered 
> housing-stable. Lower income households often pay more but over 50% of income 
> would be bordering on housing-insecure.
> 
> So a good guide for your area would be 30% of the median area income as a 
> starting point. Then move down to the incomes of the people in your group or 
> in the population that you want to target.