Good data

Garbage in, garbage out they teach you in business school, though maybe not in those exact words. The idea is that a decision is only as good as the information backing it up. Rely on inaccurate or incomplete data or misinterpret or ignore the information available, and the mistakes will show themselves in the outcomes.

Some town staff members, along with Town Council members Donna Bell and Sally Greene, organized a task force on affordable housing. The group includes experts on the challenges and priorities of low-income earners, a few people who have made their careers in managing or arranging for housing for the modestly paid, and some developers, who presumably know how to keep construction costs to a minimum. The task force is sorely needed in a town that wants to pretty itself up to be worthy of the endless Best Places to Live rankings, and doesn’t know where to put its un-rich.

I don’t want to see the task force’s mission derailed by misguided input from developers who joined the group not to make room for the modestly paid but to exploit a niche market and enrich themselves.

No one begrudges a developer making a profit. But some of the proposals I’ve heard so far are to push development costs onto taxpayers in order to boost the profits of private developers.
If the task force doesn’t have a real estate attorney among its number, it needs to recruit one who can close loopholes and think creatively. Suggestions such as high-density overlay districts in exchange for keeping the rent low on a few units would not be legally binding in North Carolina. An attorney might be able to figure out how to spin off a certain number of units into a nonprofit, a sort of Community Home Trust for renters, and keep the remaining units at market rate to ensure a profit for the developer.

Increased density isn’t the answer. One reason Chapel Hill’s low-income public housing works so well is that many of the projects are small and blended into middle-income neighborhoods. The crises that accompany poverty can overwhelm a complex if it is too large or too dense. (Think Durham’s Few Gardens.) Density at any price point doesn’t pay for itself in terms of cost of services, and ultimately, taxpayers pick up the tab.

Expedited approval might be an answer. For years, I’ve heard developers complain that the town’s lengthy approval process makes their costs too high. But there is no way to enforce keeping the rents affordable. Once the project is approved, the developer can convert it into luxury living, and the town has no recourse for a developer reneging on a deal.

Finding ways to remain an inclusive community will be difficult. The task force needs to stay focused on accurate and complete information, seek advice from a retired developer whose counsel won’t be biased by the prospect of making money, and find a good real estate lawyer.
– Nancy Oates

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21 Comments

  1. Joe

     /  July 15, 2013

    “Increased density isn’t the answer.”

    And with that succinct statement, you’ve committed yourself to continue tilting at windmills, trying to fight with the insurmountable force of supply and demand…

  2. Many

     /  July 15, 2013

    As we have just seen, many existing units are in soon to be expanded flood zones. This fact will only serve to increase rebuilding infrastructure costs and delay permit approval.

    Volunteers might be able to make a difference the way Habitat for Humanity does. Perhaps UNC student volunteers and others cooperating with retired law and real estate professionals along with the prospective tenant might be able to hold their sweat equity in a trust, but the land and infrastructure costs will be a problem. Rents might be used to purchase more land or houses to fix up, but as you know the available inventory is very small.

    A problem also arises in how you define and maintain eligibility. The way the housing laws are written it will be next to impossible to set boundaries that target the people you are trying to help.

    Solving this is something that needs a significant sea change in housing laws and a lot of people pulling together at the same time and in the same direction.

  3. REO

     /  July 17, 2013

    This issue deserves discussion, starting with the question: what do you want? Who does affordable housing serve? How should it be owned? How many is enough? Should home ownership be encouraged? Should that ownership be a vehicle for personal enrichment (ie the resident keeps the capital gain) or should they benefit the community by remaining affordable?

    To say “density is not the answer” or say developers should not “exploit a niche market” suggests a certain point of view. Without knowing more about your vision, however, I can’t concur with the implications.

    Lack of affordable housing is always a market failure because it’s easier to finance market rate properties. If the Town wants more affordable housing, they need to help. For profit developers respond to incentives. If the incentives (market or governmental) are better in one area or another, they’ll respond and develop there. The result could be no affordable housing at all.

    Volunteer labor is not a sustainable model. It might build 5 or even 25 homes a year, but it doesn’t really have a noticeable effect. Scattered site development, in effect mixing in a few ‘affordable’ homes with more expensive ones, is not cost efficient. If the building cost is the same (ie to avoid criticism for lower construction finishes for poor folk) then the cost to build and sell at a loss has to be made up somewhere else. Again, 5-25 per development is all you can hope for. Unless those homes are run by an affordable housing foundation or are sold to owners with an affordability component as a deed restriction, they aren’t permanently affordable.

    LIHTC (low income housing tax credit), a federal program to encourage affordable housing is one way to build 100+ units at a time. These properties are well run, look attractive, and at 40-60% of area median income, help those who work two jobs with a safe, clean place to live. However, the local jurisdiction must take care to properly assess the real estate taxes and occasionally provide secondary financing. Will Chapel Hill do so?

    What about manufactured housing? Homes generally run from $30-65,000. There are a few communities in town, could there be more?

    Finally, and to be purposely provactive, does this matter? Does Chapel Hill need an affordability initiative? There are inexpensive places to live in Pittsboro, Mebane, Durham, Raleigh, Sanford, all over the area: why does Chapel Hill need to add to the supply? If you want a one acre lot, Chapel Hill may not have something you can afford.

    Personally, I think the town would be poorer for not having affordability, but then, I’ve spent a lot of time in affordable housing finance. You have to do more than wag a finger if you want a solution: you have to promote some ideas.

  4. REO

     /  July 17, 2013

    “Purposefully provocative” about the necessity of affordable housing.

  5. DOM

     /  July 18, 2013

    “You have to do more than wag a finger if you want a solution: you have to promote some ideas.”

    Ms. Oates?

  6. Many

     /  July 18, 2013

    REO. I am in agreement with your analysis. However, I do want to point out that since 1976, Habitat for Humanity has built or repaired over 600,000 dwellings. While the HFH model is likely not the answer to the question at hand, to me their accomplishment is by definition sustainable.

  7. Terri Buckner

     /  July 18, 2013

    Why do all the affordability discussions always focus only on low-income residents and just on housing?

    The general standard is that housing and associated costs such as insurance and taxes should consume no more than 35% of monthly income. The local median income is approx $57,000. The average cost of a local home is $350,000. Whether you calculate based on a single person or a family of 4, take home pay (barring any non-standard deductions) is between $1400-$1500 per month. A 30-year mortgage at 5% interest with $100,000 down payment would be about $1600. So someone earning the median income would still be paying more than 35% of their income on housing.

    The discussion around affordability needs to be more inclusive. It needs to look at the average residents, and especially those who have real-life costs of living such as health insurance/health care, student debt, car payments, daycare expenses, etc.

  8. REO

     /  July 18, 2013

    Many: my comment already ran long, so I edited the bit about Habitat. You are correct that they have done great work. I’ve helped build a handful of homes with them myself and the quality of the homes is quite good.

    My ‘sustainability’ comment referred to both the financing (they make excellent use of donations and reduced land prices) and the ability to coordinate numerous construction projects. To my mind, they are a valued partner in maintaining homes, but I’m not sure that they can add to supply in a meaningful way, largely because land prices are probably too high.

    They are doing interesting developments in Rodgers Road and Efland, but that runs up against Nancy’s comment about blending affordable homes into mixed income neighborhoods.

    Thus the conundrum.

  9. Many

     /  July 18, 2013

    REO

    Thank you for your service and thoughtful comments. I agree with the conundrum you describe.

  10. Many

     /  July 18, 2013

    Terri,

    I think the focus is on housing and low-income because that is where the disconnect appears to be.

    Is the solution that you are suggesting to pay people more than market rate or provide special services so they can live in Chapel Hill?

  11. Bonnie Hauser

     /  July 18, 2013

    One piece that we have to factor into the numbers is the students are distorting the picture. So if you look at poverty in Chapel Hill – according to census, about 22% of the town is in poverty – but 13% is students (net 9% of the town is in poverty). Can’t tell how students are distorting income or ownership trends.

    Many ideas are noteworthy – there are many great examples of low income housing incorporated in mainstream properties (as Nancy suggests). Rogers Road offers interesting potential for affordable housing development. There’s no “ideological” answer -just some creative thinking applied ot the areas in question.

    Carrboro appears to be doing better in affordable housing. Why?

  12. Many

     /  July 18, 2013

    Not sure Carrboro is doing better, but maybe they are. I wonder what per capita comparisons would show.

    I would like to understand the “why and how” if Carrboro is indeed more successful. Remember Carrboro’s tax rate is even higher than Chapel Hills, so their solution may well be greater subsidies.

    It is a good point that students are distorting the picture, but that would also be true in Carrboro I think. Non resident students are probably also distorting other local outcomes in much the same way as prison populations distort the census figures. Technology exists today to allow students to absentee vote in their home towns and districts on local issues.

  13. Bonnie Hauser

     /  July 18, 2013

    My impressions are anecdotal – my mom lives in Carolina Springs – an afforable housing project for seniors in Carrboro – there’s a bunch more all around her. I know folks who own affordable townhouses. Subsidies may be coming from national sources and real estate trusts -not local taxpayer funding. Of course, it can be a great tax write off.

  14. Affordable housing discussions tend to focus on Habitat, govt. housing, & other charities/subsidies. As a builder, I can attest that homes cost a lot. The banks, the insurance companies, the building code, and material costs are the biggest drivers of the cost. What is lost in these discussions is that , in our hyper-capitalist economy, the actual affordability is lost in the predators that make big bucks off of housing. If we had a living wage, people could afford homes. That is the missing link – housing will become affordable when people can afford them.

  15. Many

     /  July 20, 2013

    Maybe the solution is for corporations tell their low wage employees how to manage their meager earnings?

    http://www.practicalmoneyskills.com/mcdonalds/documents/McD_Journal2.pdf

    Sadly, I read through the guide above and found most aspects impractical and un-schievable. Good thing Chapel Hill does not allow any more McDonalds.

    Problem solved, crisis averted.

  16. Nancy

     /  July 20, 2013

    Many — I get the irony of a low-wage employer giving people tips on saving money. But what parts of the guide are impractical and unachievable?

  17. Terri Buckner

     /  July 20, 2013

    Mark–Chapel Hill and Carrboro both pay a living wage. Carrboro has been discussing a housing wage since a living wage is insufficient.
    http://livingwage.mit.edu/counties/37135
    http://nlihc.org/library/wagecalc

  18. Many

     /  July 20, 2013

    Nancy,

    Perhaps impractical was the wrong word, fantasy is probably a better description. In the real world things cost more, but take home wages are the same or less (the example shows someone with an after tax income of $24,720 which puts any subsidies out of reach even for a family of three)

    Never mind that they don’t offer advice like stop lending the government interest free money by managing your W-4 properly, but how about $20 dollars for heath insurance does that seem real to you?

    How about your entire budget is blown if you don’t have two jobs? (I know it is becoming more normal to have two part time)

    TWC shows basic cable for 50.00 per month and you could probably do with out it, but its on the budget. Now add the taxes and fees and your over $60 per month pretty quickly, add in a low cost cell phone with taxes and fees, overages and you go past 100.00 fast.

    I would like to find a place where heat/electric utilities only totaled $150.00, maybe if you are sharing an apartment, but that isn’t spelled out.

    How about the things they forgot, like fuel, clothing and groceries?

    That budget might work in some places but I don’t think it works in very many. I agree budgeting skills are needed, but I also believe in a realistic view is necessary to success.

  19. Many

     /  July 20, 2013

    Nancy,

    By the way, I think if the guide had categorized expenses in the percentage context of the department of labor average expenditures that gaps would be even more painfully obvious:

    http://www.creditloan.com/blog/how-the-average-us-consumer-spends-their-paycheck/

    Leaning budgeting skills are necessary, but not sufficient……..

  20. Nancy

     /  July 20, 2013

    Not that the average consumer is to be emulated. Someone with that income in Chapel Hill would have to pay much more in housing, so that has to come from elsewhere in the budget. The higher the percentage that goes to housing the less discretionary income consumers have. Hence the attraction to out-of-county Walmarts.

  21. Many

     /  July 21, 2013

    Nancy,

    Average is just that no more, no less.

    If you superimpose the income McDonald’s projects onto the US Department of Labor percentages and categories. Then further superimpose on that calculation the reality of Chapel Hill costs, I think too many gaps to be overcome by rational choice are obvious. For example, a person might take advantage of Chapel Hills subsidized transportation, but that alone is not enough to offset housing and the bus doesn’t go to the library so you can use the internet (sorry, couldn’t resist).

    As far as out of county Wal-Marts; most peoples decision to shop there is the intersection of perceived cost, quality, availability and convenience. I mostly shop where my consumer interests are met.

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