The nation’s severe affordable housing shortage has been the subject of much news coverage. Cities like San Francisco, New York, Washington and Boston have experienced huge increases in property values that make buying a home – especially a first home – impossible for most people. NHC’s Paycheck to Paycheck database demonstrates this very effectively. Today, a homebuyer in Washington, D.C., has to earn over $105,000 per year to afford a moderately priced home. This is significantly out of reach for nearly every teacher, legal secretary, firefighter and retail salesperson in the city. You can check housing affordability for median priced homes for purchase and for rental in your city here.
As property values have recovered in most communities, few homes today remain “under water” (where the value of the home is less than the amount owed on the mortgage). Yet many are still stuck at values too low to allow the owners to sell and have enough equity to move up to a larger home or move into a new neighborhood. Too low? How is that a bad thing?
First, these neighborhoods have been trapped in a cycle where property values are too low to support home construction and renovation because comparable properties used in appraisals make getting a mortgage with a modest down payment impossible. This is the case in parts of Atlanta, Cleveland, Detroit and Buffalo among other places. Second, when a home is priced below $150,000 many lenders will not make a mortgage on it because the costs of origination and servicing are too high to make it a good business decision. This is especially true of home prices under $100,000. So these homes stay cheap because the only viable market is cash sales by investors. You can read more about this at the Urban Institute’s website here. A recent article in the Detroit News discussed how this has led to a dramatic increase in the gap between white and African-American homeownership throughout the state of Michigan. This kind of disenfranchisement never ends well for anyone.
To help address this significant problem, several leaders in affordable housing including NHC have come together to create the Neighborhood Homes Investment Act (NHIA), which aims to revitalize distressed neighborhoods across the nation by mobilizing private investment to build and rehabilitate homes for moderate-and middle-income homeowners. The proposal would amend current law to permit states to exchange private activity bond cap for tax incentives under a similar formula. The NHIA would break this cycle by bridging the gap between the cost of developing or rehabbing owner-occupied homes in distressed neighborhoods and the price at which they can be sold (their appraised value). The NHIA is modeled on the Low Income Housing Tax Credit and the New Markets Tax Credit, which support affordable rental housing and economic development, respectively, but are not designed to build or rehabilitate single-family, owner-occupied homes. A similar bill was proposed by President George W. Bush in 2004 and had bipartisan sponsorship from 46 senators and 304 representatives.
Today at 2 p.m. EDT, NHC will host a Restoring Neighborhoods Task Force Webinar, led by Buzz Roberts of the National Association of Affordable Housing Lenders. I hope you check it out this afternoon, or at your leisure on our Webinars page.