Defending the Castle
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When you start looking at the array of federal, state and local programs intended to expand the pool of "affordable" housing, you come to a few unsettling conclusions:
? The issue of affordable housing has migrated from "low-income" people to non-career workers in the "service economy" and now to the professionals and craftsmen long thought of as the ballast of our society -- firefighters, police officers, teachers, construction workers and others who have good jobs.
? Houses are "unaffordable" because people aren't paid enough to buy them. Employers are skimping on pay raises year after year despite growing productivity, then they're complaining they can't hire or retain people. Income and wealth disparity is growing dramatically. Companies are waiting for government to "do something," instead of creating company-provided housing or other targeted benefits.
? The dramatic rise in "median" home prices reflects not just price inflation in real estate but also rising expectations. The median new single-family home today is a third larger than in 1978, according to national U.S. Census Bureau figures, and more than twice as many new homes (61% in 2005) have 2.5 bathrooms or more. Construction standards and amenities have burgeoned, from hurricane-proofing and wiring for our electronic gadgetry to the comforts like air conditioning (42% of new homes built in 1978 didn't have it vs. 11% in 2005) and fancier kitchens and bathrooms.
? Affordability analysis is usually based on using 30% of income for housing, a typical lending standard, but maybe we should ask for more belt-tightening in other categories to get a government subsidy.
? Governments add to the problem, then try to subsidize solutions. They promote economic development like crazy, with tax breaks and subsidies for businesses, and governments are rolling in dough from rising property values, yet they say they lack money to subsidize people who can't afford housing-bubble prices. The federal mortgage deduction actually pumps up demand, and prices. As for housing for the poor, attorney David Midgett of Ocala, whose clients include the local housing authority, notes that the federal Section 8 program allows the same rent for three bedrooms in both "600-square-foot shotgun shacks and 2,200-square-foot beautiful homes."
? We want to stop sprawl into the exurbs, but we lack the will to do it by regulation and planning. So now we are subsidizing downtown "infill." In Tallahassee, former mayor and Realtor Penny Herman recently complained that the city is subsidizing 10 new downtown condos at $100,000 apiece to get the price down to $160,000, yet she found 50 existing homes for sale under $160,000 within two miles of downtown.
? We can't decide between controlling growth and building lower-priced housing. "The permitting process for affordable housing remains very, very slow," says Richard Gentry, longtime lobbyist for the Florida Home Builders Association who now is in a private lobbying practice in Tallahassee. Drawn-out processes that wear everyone down seem to be politicians' substitute for telling people no. "No phrase is more true than time is money. There's somebody out there holding a mortgage, and a clock is ticking," Gentry says. With thinner margins on lower-cost housing, delays and extra costs drive builders out of town.
? Higher densities would allow for more affordable units, but both nearby residents and growth-management advocates have resisted higher densities because of their impact on neighborhood character as well as on infrastructure and environment. Floridians want what city dwellers elsewhere long ago gave up: Yards. "It's very difficult to have a lot of people in affordable housing if you don't have adequate densities," says Wellington Meffert, general counsel of the Florida Housing Finance Authority.
No quick fix
The Legislature, whose regular session starts March 6, isn't likely to deal with this problem in a comprehensive way this year. It's way too complicated -- a lot worse than property insurance, where the state could just take over some risk from insurers and pray for no more hurricanes.
Besides a general assault on property-tax levels, at issue this session will be money for the state's subsidy programs, which comes primarily from the 1992 Sadowski Act and an additional 10-cent documentary-stamp tax on each $100 worth of property transferred. Over the years through fiscal 2006, says the legislative Committee on Intergovernmental Relations, $2.3 billion has been spent on affordable housing programs, while $350 million was diverted to other uses and $450 million was collected but not spent (most of that in the last three years).
Two years ago then-Gov. Jeb Bush wanted to eliminate the Sadowski (and other) trust funds. The legislative compromise was a cap on the portion of documentary-stamp taxes set aside for housing programs. Unless the cap is lifted, only $243 million will be available for affordable housing for 2007-08, compared with more than $600 million (including $250 million in hurricane relief) in the current year. Even without the cap, the number of units created under these plans has fallen from 19,000 five years ago to 7,000 in 2006 because of a wider gap between market prices and affordable prices for homes, says Lloyd Boggio, whose Carlisle Development Group in Miami builds subsidized housing.
There are really three basic subsidies:
? Subsidies to developers to help them finance developments with lower selling prices;
? Low-interest or no-interest loans directly to home buyers;
? Equity-sharing arrangements, in which the government or an employer puts up part of the down payment on a house in exchange for a share of the future profits upon sale or in which a "community land trust" owns the land and leases it for free to qualified home buyers, who pay only for the house. Some local governments offer to waive some growth regulations or fees for builders who include lower-priced housing in their developments.
At the Shimberg Center on Housing at the University of Florida, director Robert Stroh urges the use of employer bargaining power. "An employer with a large nursing staff might say, 'I'll direct them to you, Mr. Banker, if you'll cut three points off the loan cost.' It doesn't cost the employer a penny."
Something's got to give
At some point, when enough people can't buy the homes that developers are building, they'll build homes people can buy. Midgett, the Ocala lawyer, says there are more Section 8 units available now than six months ago because the "cooling housing market" has forced some developers of higher-end spec houses intended for resale to instead rent out those units at moderate rents.
The best thing about the soft housing market is that the affordable-housing policy-makers may at least be able to catch their breaths and adapt programs. Prices were beginning to outstrip the ideas as well as the money.
"Loans started out being forgivable for people who stayed five to seven years," says Jaimie Ross, president of the Florida Housing Coalition and head of the affordable housing project at 1000 Friends of Florida. "But then they would sell the house, and we were not really able to help the next person." Ross is a strong advocate of land trusts, using land donated by governments or non-profits. It has the additional advantage of retaining control over that land far into the future.
Ultimately, government policy is going to have to reconcile the contradictory impulses in its policies. You can't have subsidized, rapid economic growth, adequate infrastructure, effective land use, lower tax levels and little growth in housing costs. Something will have to give. Until then, the only thing legislators can do is ignore the problem or throw more money at it. And employers might learn to fend for themselves.