In our October issue, I wrote a story that went into some detail about the byzantine financing of affordable housing. It was a complicated subject, with detours into enormous government programs, past successes and failures and some current, mindnumbingly complex examples. But I didn’t have time to talk much about maybe the most interesting issue: What is affordable housing?
You probably qualify for affordable housing. That comes as a surprise to most middle-class working people. Most of us, after all, tend to think of affordable housing as synonymous with public housing. We think of poor people, slums and Section 8 vouchers. We think of drugs and crime and declining property values. We certainly don’t think of ourselves, our friends or colleagues.
But affordable housing potentially applies to a broad segment of the housing market. It’s a legal term closely tied to something called Annual Median Income. AMI is a figure – actually a matrix of figures based on the size of the household – calculated each year by the U.S. Department of Housing and Urban Development for every county in the country. In Honolulu, for example, AMI for a family of four in 2009 was $79,000. According to HUD rules, affordable housing can be made available to households earning between 50 percent and 140 percent AMI. In other words, a family of four, earning as much as $111,020 a year, may still be eligible for some form of subsidized affordable housing. That’s a lot of households.
And yet, the high cost of housing in Hawaii lends a real sense of credibility to that figure. Developer Chuck Wathen, who recently founded the Hawaii Housing Alliance and is a longtime advocate for affordable housing, has amassed considerable data on housing costs. For example, he cites Bureau of Labor Statistics on the ability to buy or rent market priced homes based on 2,500 occupation categories. “Out of those 2,500,” Wathen says, “only 1.2 percent make more than 140 percent AMI.” Another 10 percent, he says, are self-employed entrepreneurs or senior executives, but that still leaves more than 80 percent of Hawaii’s population unable to afford Hawaii’s available housing stock. That’s you and me.
And Wathen’s research suggests the situation is only getting worse. Over the last six years, while incomes have risen less than 30 percent, home prices have more than doubled. Wathen puts it this way: “For a worker today to have the same purchasing power as in 2000, salaries would have to be raised 102 percent.” At the same time, he notes that the inflation of home prices continues unabated, driven largely by speculation and the lack of entitled land. “I took a group of 10 houses that were 40 years old in 2003,” he says. “And then I took a similar group in 2006, and I looked at their assessed value records. The typical house in 2003 cost $300,000, and when you looked at the assessor’s records, he had the little old house at $150,000 and the land at $150,000. Roll the property forward to 2006 and it’s now worth about $600,000. The old wood house is still assessed at $150,000, but the entitled land is now $450,000.” To put that in context, at 100 percent AMI, HUD regulations say that a family of four can afford a $362,800 home. In some ways, Wathen says, the rental market is even bleaker. “For a city of a million people, we should have 60,000 apartment units or more.” In fact, Honolulu has perhaps half that many. And it’s the absence of these large apartment complexes that’s the signature of Hawaii’s housing market and is what drives rents higher.
In this context, it’s hard to see the problem getting any better. What set of policies can remedy the housing troubles of 80 percent of the population without bankrupting the state? What mix of incentives and restrictions will persuade Hawaii’s developers to wade into unprofitable and red tape wrapped construction projects? How do we balance our desire to preserve Hawaii’s conservation and agricultural lands with our escalating housing and transportation crises? In short, is there any answer at all to the riddle of affordable housing?