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Affordable Housing Have we made a dent?
Presented by Heidi Aggeler, Managing Director BBC Research & Consulting December 4, 2015
What is affordable housing?
Federal definition of affordability: 1). Housing costs are “affordable” if they do not exceed 30% of household’s gross monthly income 2). “Costs” include basic utilities, mortgage insurance, HOA fees and property taxes
Households paying >30% for housing are “cost burdened”
>30% >50%
Households paying >50% for housing are “severely cost burdened”
Evolution of Affordable Housing Policies and Programs
1934
1937 Public
Housing
1938 Federal National Mortgage Association
National Housing Act and Federal Housing Administration
1949 Urban Renewal
1965 HUD
1968 Fair Housing Act
1974 Section 8
1974 Community Development Block Grant
1986
Low Income Housing Tax
Credit
1987
McKinney Homeless Act
1990 Housing Investment Partnerships Program
1992
Housing Opportunities for Persons with AIDS
2008 Neighborhood
Stabilization Program
2009 American Recovery and Reinvestment Act
2010
Dodd-Frank Consumer
Financial Reform
2013
Disparate Impact Rule
Primary Programs Rental Programs Homeownership Programs
Provide direct subsidies to renters:
Housing choice voucher/Section 8
Other types of tenant based rental assistance (TBRA)
Create affordable rental housing:
Low Income Housing Tax Credit (LIHTC)
Home Investment Partnerships
Private activity (tax exempt) bonds
Local revenue streams
Provide direct subsidies to owners:
Home mortgage interest tax deduction
Federally subsidized mortgage insurance
Downpayment/low interest rate purchase assistance
Create affordable ownership housing:
Inclusionary zoning
Home Investment Partnership
Private activity (tax exempt) bonds
Local revenue streams
80-85% Rental Units
95-98% Homes
It is critical that the private sector is part of affordable housing strategies Role of
the Private Sector in Providing Housing
Eligibility levels usually based on Median Family Income (MFI)
$79,900
$99,400
MFI for a family of 4 (Denver-Aurora-Broomfield)
Who is Eligible for Affordable Housing Programs?
MFI for a family of 4 (Boulder)
Income Thresholds & Target Housing
< 30% MFI “extremely” low income
=< $24,000 per year, poverty level
30-50% MFI “very” low income
$24,000-$40,000 per year
50-80% MFI “low” income
$40,000-$65,000 per year
80-120% MFI “median” to “moderate” income
$65,000-$95,000 per year
Public housing, Section 8, tenant-based rental assistance, transitional housing, other deeply subsidized rentals.
Public housing, Section 8, rental tax credit developments, other rental products. Shared equity and land trust for homeownership.
Generally live in privately provided rental housing. Ownership with shared equity, land trust, other deed-restricted products, attached homes, homes in affordable areas.
Privately provided rental housing. General target for homeownership programs, can buy without assistance in affordable areas.
1). Physical development of housing lags behind the factors that create demand (direct assistance more flexible)
2.) Inconsistent philosophies if/how the government should address housing needs and poverty
3). Housing initiatives often driven by other policy goals
4). Housing is very dynamic, closely tied to many aspects of the economy: interest rates, tax incentives, returns on capital, employment levels, demographic shifts, in-migration
Why do we have affordable housing needs?
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
1980 1990 2000 2010 2012
Denver Region Population Growth 1980–2012
Housing units developed to accommodate growth:
550,000 (or 48% of the region’s
housing units)
Number of New Residents by Decade (Denver Region)
230,798
576,378
377,081
1980s
1990s
2000s
1,184,257 new residents
Total
+
+
+
Why do we gain or lose residents? Because of net migration
-40,000
-20,000
0
20,000
40,000
60,000
80,000
Natural Increase
Net Migration
Creates challenges in addressing needs because needs, characteristics and preferences of in-migrants are unknown
Housing Affordability
Overall changes in costs v. changes in incomes
Homeownership affordability
Rental affordability
Changes in Values v. Incomes Nationally, largest price jumps occurred in the 1970s and 1990s (rents only)
Regionally, price jumps occurred in the late 1990s
The “purchasing power” of renters has declined more than that of owners
United States 1970 1980 1990 2000 2014 1990-2014
Change
Median Home Value $17,100 $51,300 $79,831 $123,887 $160,000 100%
Median Owner Income $9,700 $19,800 $35,589 $50,505 $60,000 69%
Median Rent $108 $241 $256 $646 $850 232%
Median Renter Income $6,300 $10,500 $20,295 $26,848 $30,000 48%
Denver Region 1990 2000 2014 1990-2014
Change
Median Home Value $86,800 $189,000 $259,000 198%
Median Rent $429 $750 $1,124 162%
Homeownership Affordability Recent increase in home prices is steeper than in the past
Percent who can buy median-priced homes on downward trend since 2012
$0$100$200$300$400
Q191
Q192
Q193
Q194
Q195
Q196
Q197
Q198
Q199
Q100
Q101
Q102
Q304
Q305
Q306
Q307
Q308
Q309
Q310
Q311
Q312
Q313
Q314
($ in
tho
usan
ds) Median Price
0%20%40%60%80%
100%
Q191
Q192
Q193
Q194
Q195
Q196
Q197
Q198
Q199
Q100
Q101
Q102
Q304
Q305
Q306
Q307
Q308
Q309
Q310
Q311
Q312
Q313
Q314
Percent of Buyers who can Afford Median Home
How Denver Region Ranks in Home Purchase Affordability
0
50
100
150
200
Q191
Q192
Q193
Q194
Q195
Q196
Q197
Q198
Q199
Q100
Q101
Q102
Q304
Q305
Q306
Q307
Q308
Q309
Q310
Q311
Q312
Q313
Q314
National Rank, 2015Regional Rank, 2015
Denver has never made “least” or “most” list produced by the National Association of Home Builders (NAHB)
Note: Lower numbers indicate higher levels of affordability
Homeownership Affordability Indicators are Confused by…
Influx of higher income (>$100,000) buyers into region
Low interest rates
‒ Played a bigger factor in keeping homes affordable than any other single policy
23% v. 40% now in 1999
Rental Affordability
$0$400$800
$1,200$1,600
Q198
Q498
Q399
Q200
Q101
Q401
Q302
Q203
Q104
Q404
Q305
Q206
Q107
Q407
Q308
Q209
Q110
Q410
Q311
Q212
Q113
Q413
Q314
Q215
Average Rents, Denver Region
Very low levels of post-recession development
rapid influx of renters
highest rents in history
+ =
02,0004,0006,0008,000
10,000
New Apartment Units Added in Metro Area by Year
Rental Affordability
89,000 renters earning
<$20,000
(28% of all renters)
1999 Now
110,000 renters earning
<$20,000
(26% of all renters)
57,000 units affordable to renters
earning <$20,000
(18% of all units)
26,000 units affordable to renters
earning <$20,000
(7% of all units)
We are Growing Quickly, Again
480,718
618,821
313,333
62,138
663,862
314,638
558,503
Adams County
Arapahoe County
Boulder County
Broomfield County
Denver County
Douglas County
Jefferson County
Population, 2014
3 million people Total
-4,000-2,000
02,0004,0006,0008,000
10,00012,00014,000
0 10 20 30 40 50 60 70 80Age in Years
Growth Today is Different from 1990–2000
Slower in pace
Similar in numbers
Different in housing preferences
Huge migration of 24-35 year olds
(their housing decisions will heavily influence growth)
Net Migration by Age, Denver Region, 2000-2010
Deeply Affordable Rental Housing Remains Concentrated in Denver
Units Affordable at <$25,000/year Units Affordable at <$50,000/year
Broomfield 1%
Douglas 1%
Boulder 6%
Jefferson 12%
Adams 13%
Arapahoe 16%
Denver 49%
Broomfield 1%
Douglas 3%
Boulder 10%
Adams 13%
Jefferson 16% Arapahoe
21%
Denver 35%
Denver is also the 2nd worst city behind New York for the percentage of low income households living in low income areas
AND has the 3rd largest increase in segregation between 1980 and 2010
Top Income Segregated Cities in the Nation
We are Very Income Segregated
Lower is better!
Residential Income Segregation Index (RISI) = 55 in 2010 v. 34 in 1980
New York City
San Antonio
Philadelphia
Denver
1st
2nd
3rd
4th
Homeownership Less Affordable
Out of 68 metro areas, Denver is the 34th most affordable region in the Western U.S. for home purchases v. Portland (41st), Santa Fe (43rd), and San Francisco (68th)
61% of homes affordable to median income buyer in 2015
60% in 1990
64% today
25% in 1990
31% today
Homeownership Cost Burden
31%
20,000 more poor renters than in 1999 v. 50,000 more rich renters (earning <$75,000)
New development priced to accommodate new high income renters. Low rent units moved up to accommodate middle income renters.
54% of renters today are cost burdened v. 39% in 1999
Shortage of 84,000 units renting at <$500/month
The region lacks reliable, effective means to address low income renters’ needs
City of Denver still disproportionate provider of region’s rentals, but:
‒ Now has some of the highest rents ‒ Lack of larger units + rising rents = families seeking units in
suburbs, where rental development remains very minimal.
Critical Needs: Low Income Renters
54%
Low Income Renters Grown dramatically in numbers
Number experiencing cost burden much higher
Few resources to address—no federal budget increases, few local solutions
Growth in suburban poverty has not been met with housing alternatives
Would-be Owners Benefitted from historically low interest rates
Lack of homes to buy in desirable areas, close to work a major challenge
Current Owners Region still affordable if coming from many Western metro areas
Long time residents have trouble “buying their home now”
Lack of diverse product types to accommodate aging residents
Transit, availability of services in suburban areas a challenge in future
SUMMARY: Have We Made a Dent?
Two largest age cohorts with economic power—Millennials and Baby Boomers—will determine housing demand
Short Term
Millennials will start families and move to…?
Their parents may relocate to…?
Long Term Increase of 1.22 million people by 2040 to 4 million
276,000 Adams County
277,000 Arapahoe County
192,000 Douglas County
256,000 Denver County 85% of
growth will occur in these 4 counties
More seniors
new homes
new homes
1980-2010 2010-2040
Long Term Home Construction
48%
100% By 2040, we will need:
400,000 more housing units
Long Term Services We will also need expanded social services and transit for:
Population of residents with disabilities, increase of 250,000 Persons living in poverty, increase of 140,000 Seniors, the vast majority of whom will age in place. Suburban
counties will age the fastest.
1 in 5 (or 800,000)
1 in 10 now
residents will be seniors v.
Equalize the geographic distribution of amenities Millennials and in-migrants demand
Distribute a variety of housing products to accommodate workers closer to areas of employment. Focus on micro-economies within region.
Continue to expand transit options
Reduce economic inequality
How Can We Grow Smarter?
$ / ¢