Affordable Housing Helps The Economy

[ThomCat]

65 units of affordable housing creates $200 million in economic impact over 10 years when tax credits are used. So why aren't more units of affordable housing being built?


http://insiderealestatenews.com/2010/06/affordable-housing-helps-economy/

Affordable housing helps economy

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Affordable housing built with low-income housing tax credits not only helps people in need, but pumps millions of dollars into the Denver-area economy and creates hundreds of jobs, according to a study released today in Denver.

Elliot Eisenberg, senior economist at the National Association of Home Builders, presented the study results to about 70 public policy makers and other housing advocates at a breakfast today hosted by the Urban Land Conservancy and the Home Builders Association of Metro Denver.

Economic impact bigger than most imagine

“I think most people would be surprised by the size of the economic impact,” Eisenberg said. At one point, he showed a slide of the economic impact over a 10-year period of 615 units constructed, which is the typical number of units constructed every six years in the Denver area, it showed that the total impact to the economy topped $200 million. “I think that even surprised people in the audience, who are in the business,” Eisenberg said. “It even surprised me. I knew it was a big number, but I didn’t know it was going to be that big.”

He said there are many people who think of people living in subsidized rentals as not contributing anything to the economy. “After all, they don’t have much money, or they wouldn’t be living in tax-credit properties,” Eisenberg said. “The flip side is that they spend almost every dollar that they earn. They find themselves in this pickle because they don’t have much income, and most of it goes for food and services, health-care, educating their kids and so on. For the city, that creates a tremendous source of tax revenues. And all of their money is spent locally.”

[delightfulstar]

1. Why don't more communities help these prospective homeowners?

It's a win-win for everyone...the tax base grows, a deserving individual (or couple, or family) builds an interest in something tangible, and it's cheaper to own these days, if you cn do it. We need to make sure that there are good incentives (grant money, sweat equity, low-interest loans, etc.), and we need to make sure things are kept clean, with straightforward paperwork, financial counseling, and easy-to-understand terms. It's been proven that lower- and middle-class people have the power to make or break the eceonomy, based on their spending habits, and housing plays a big role in that.

[KamaAina]

3. Because in many people's minds, "low-income housing" equals "those people"

i.e. the ones the first group moved to the 'burbs to get away from. :eyes:

[notesdev]

2. Housing would be affordable as-is

without Fannie/Freddie/FHA grossly distorting the market, and the banks/Fed pumping out fraudulent loans.

It's no coincidence that as some of that has stopped, prices immediately started returning to affordability. We'll need a few more years of asset deflation to get to where we should be, but that's inevitable.

As a rough benchmark, if it cost $250k at the top of the bubble, it should go for 80kish after prices normalize, which would mean affordable housing for nearly everyone without having to spend any money to achieve it.

[karynnj]

4. These are rental units -not homes purchased with mortgages

In addition Freddie and Fannie as the culprits is pretty RW. The fact is that there were private companies that bought mortgages - just like the FMs - and they had a higher default rate. The bigger problem was the financial sector buying them and turning them into securities.

Where do you get that $250,000 properties will return to $80,000 - there are areas where tht kind of drop happened and res where prices have fallen less than 10%. Was that the same place you got the prediction in August 2009 that the market was going to crash big time by November 2009.

This was about a specific program that began decades ago - that helps build rental property with government help and agrees to rent it out for lower than market rates to people below a certain income.

Your parroting the right on the FMs and your attacks on the reality of climate change make me wonder - just a little bit.

[ThomCat]

7. The problem is, who will own those affordable units.

They are only required to remain affordable for 30 years. After that, the landlord can jack up the rent to whatever the highest market rate is, or turn the units into condos, or do whatever will bring in the most money.

That is what has traditionally happened to low income housing, except for the ones that remain as tenaments, until they get torn down.

We need a lot more affordable housing. Construction of affordable housing has been stagnant for 10 years. (which is absolutely predictable, given Bush.) The affordable housing and tenaments we did have has been getting torn down at a fast rate. The overall result is that we have far less affordable housing now than we need. Far less than we have had at any time in years.

So we need this program, desperately, but there are several big problems.

1. It waits for someone to come along to buy into it. The government isn't building and managing low income housing. At this point we need municipal housing authorities again.

2. Having low income housing that becomes high income housing in 30 years seems like a good way to shoot people in the back. Certainly the people who will be living in that housing in 30 years, at least.

[karynnj]

10. I agree with you completely

I hope that the 2008 Banking bill that included an affordable Housing fund that would increase the funds available has helped - it was a Kerry piece of legislation - pushed for about 10 years that Dodd accepted into the bill. Reed wrote the final language.

[GreenPartyVoter]

17. Agreed on both points 1 & 2.

[notesdev]

8. Fannie and Freddie as culprits is an easy case to make

Look at their mission statements (to "make housing affordable") then look at the price trend since they were instituted.

It's easy to understand - they operate by flooding the system with money that would not otherwise be there, leading to the inevitable result of prices rising to meet the extra money available to bid on properties.

The numbers I gave are approximations of the distance between the top of the bubble and the historical mean.

[karynnj]

9. That is silly - there goal to make houig more affordable was to

make interest rates lower on people who qualify tha they could get without FM backing. Their default rate was LOWER than the non FM loaners. They existed from 1968 on - so why did it take until 2008 for them to cause the problem?

As I said, regional variation is huge. Not to mention, what what is the historical mean for something that has trended upwards for over a half century. It is true that FL and other places have seen falls of that magnitude, but there are plenty of areas that haven't.

So, what role did derivatives and credit swaps play? What role did Cox raising the mximum leverage from 1:12 to 1:44.

[notesdev]

12. There are two issues

One is the bubble itself - the FMs' business practices contributed to it but the main driver was monetary policy, removal of leverage limits, and unprosecuted rampant fraud throughout the RE and financial sectors.

The other is that half-century upwards trend, which just so happens to correlate quite closely to the institution of Fannie as a GSE. That trend towards unaffordability is a problem independent of the actual bubble, and the FMs have a great deal of responsibility for that trend.

[karynnj]

13. I woulld counter that the rise in home prices is easily explained

as supply and demand. 1968 was when the babyboom generation got out of college, As the largest generation, we certainly explain why there would be greater demand. In addition, a very large proportion of us women were also college educate and we got jobs that were equivalent to our husbands in many cases.

Think what that did to the distribution of how much a couple could offer for houses. This meant for the high end, prices were bid up. In some ways, it was our parents' generation that had a huge benefit from the wealth of dual income people in my generation. There are not a lot of FM supported homes in areas like suburban Northern NJ, but the value of homes went up every bit as fast there. (Nor was that the earliest time - in my town the historical museum has information on teh families that own it. It was built in the early 1800s for $25 - and sold near the end of them for $1,000. No FMs.

[ThomCat]

6. Yes, housing prices have been deliberately inflated

so that mortgages are astronomical. Banks wanted their mortgage business to be as profitable as possible. Inflating the cost of houses was one of the ways they did this.

1. Inflate the cost of every house, and therefore every mortgage.

2. Make it seem as easy as possible for people to get a mortgage so that everyone possible will have one, maximizing the number of mortgages.

3. Make sure that refinancing also seems as easy as possible, repeat step two.

4. Bundle and Trade those mortgages, keeping a commission each time they are traded, so that the bank keeps taking another sliver of money for proving absolutely no service whatsoever.

There we had a banker's dream. :(

[laughingliberal]

5. K & R nt

[leftstreet]

11. K&R

[bobbolink]

14. Immorality of the HOmelessness Crisis doesn't seem to affect people. Maybe understanding that it

BENEFITS the economy to *house* people might wake up stone-hearted ones.

This information needs to go viral!

Thanks for posting it, Thomcat! :pals:

[bobbolink]

15. Immorality of the HOmelessness Crisis doesn't seem to affect people. Maybe understanding that it

BENEFITS the economy to *house* people might wake up stone-hearted ones.

This information needs to go viral!

Thanks for posting it, Thomcat! :pals:

[bobbolink]

16. The issue is NOT "ownership" -- the issue is having a HOME!

[GreenPartyVoter]

18. Absolutely. There's a huge difference there, but people are so blinded by

the "American Dream" and the promise of an "ownership society" that they forget that it isn't the ownership issue that is important. It's seeing that all members of society are having their basics need met to the best of our government's ability. Some people might decry that as trying to be a "nanny state," but it's not. It's simply making sure that the people we elected into office do their part to uphold the social contract.

[bobbolink]

19. How desparately sad it is when COMPASSION is seen as "the nanny state".

Letting people die in abject poverty is sooo much better.

(Need I add.... :sarcasm: )

What a pathetic people we have become.

As for ownership, there is a whole lot of space between living in your car and owning your own home.

[GreenPartyVoter]

20. Or not even having a car to live in. :^( I agree with you. We have lost

our compassion, and our sense of morality and justice when it comes to poverty have become horribly skewed.

[bobbolink]

21. The fact that this is a good OP about the ECONOMIC benefits of subsidized housing and is being ignor

(ed) by "progressives" says it all.

Yet we are told how much "progressives" care about poverty!

A RWer wrote that report, and obviously cares more than most "progressives"!!!!

WTF??!!

[Skidmore]

22. Affordable housing, affordable food, affordable

medical care...all of them.

I was at the grocery store earlier today. Since when did potatoes become a luxury food? Six dollars for a five pound bag. Individually wrapped baking russets were labeled $.99/ea. Potatoes used to be dirt cheap and affordable to the masses. The same is true for rice now. And, as for sugar and flour, someone explain to me how raw sugar and unbleached flour are twice the price of the processed products. These foods are among the staples of most people's diets.

I used to be able to feed a family of four on $200/mo. Now I have problems keeping my bill under $100/wk., and there are only two of us at home.

[bobbolink]

26. Yet, we constantly read on DU why ending the COLA was "justified", and also how poor people

are just ignorant when they can't feed themselves on a pittance.

Aw, shit.... it really is no use trying to speak reality to people who have their minds made up, is it?

[maryf]

23. Kicking...nt

[GreenPartyVoter]

24. And kicking again

[amborin]

25. K&R (or kick at least, as it's too late to recommend)