Affordable housing is a term used in many contexts and leveraged to make arguments for and against policies and funding programs at national, state, and local levels. To the lay person who doesn’t work in the housing industry, the term may seem vague and confusing. We hope this article will help clear up some of the confusion.
What is Affordable Housing?
A basic definition of affordable housing is housing that costs its occupants 30% or less of their gross household income. For example, for a homeowner or renter with a household income of $50,000 per year, an affordable rent or mortgage payment should be $1,250 or less.
Now let’s look at an example of a household with one adult earning minimum wage, which at the time of this writing is $10.10 in Michigan. Affordable housing for this household would be a rent or mortgage payment of $525 or less. This example represents a large percentage of households in Jackson: a single female with two or more children. Using this example, it’s easy to see how affordable housing is an issue in our community and communities all over the country.
Affordable Housing in Jackson, Michigan
The availability of housing units in Jackson has decreased since 2016, which has driven the cost of housing up. Wages haven’t kept pace with the rise in housing cost. Fair market rent for a two-bedroom apartment in Jackson is $829 per month. That’s nearly 50% of the single parent, minimum wage earner household example above, which means that household is severely cost burdened for housing.
Unfortunately, nearly 30% of households in the city of Jackson are cost burdened for housing. One of the causes of this problem is that there simply are not enough rental units available for people who need them. According to a study published by Local Housing Solutions (LHS), rental vacancy rates fell from 8.7% in 2016 to 5.2% in 2021.
Housing Instability On a Spectrum
From municipalities to nonprofits and grass roots organizations, there are a lot of ideas for solutions to the problem of a lack of affordable housing. To try to make sense of these solutions and how they impact the problem, it helps to understand the scale of the issue.
When it comes to housing instability, a person or household can fall somewhere along a continuum, ranging from homelessness to being cost burdened for housing.
On one end of the spectrum is homelessness. Someone can become homeless because of various situations, and with some help can get back on their feet and into housing. In other cases, homelessness can be a chronic situation and sometimes involves mental health problems.
On the other end of the spectrum of housing instability is when a person or household has housing but cannot reasonably afford it. This means they have to make impossible choices between things like paying for food, medication, etc., or paying for housing.
The middle of these two ends of the spectrum includes “transitional housing”, which is when someone may be working their way through programming designed to help them find a job and secure stable housing, for example.
How Does Habitat for Humanity Help With Affordable Housing?
Most of Habitat’s work “on the ground” involves providing opportunities for people to become homeowners. When a person enters Habitat’s homeowner program, he or she is guided through the process of obtaining an affordable mortgage to purchase a house they helped Habitat’s staff and volunteers build.
The process includes financial and credit education as well as training on what it means to be a homeowner: how to maintain and care for a home, where to find resources, etc. It generally takes approximately a year and a half to two years from start to finish to work through the program and finally be ready to close on the purchase of their first home.
Habitat believes the most reliable path to stability and affordability in housing is through homeownership. Generally, a monthly mortgage payment is a fraction of the cost of rent, and the mortgage is guaranteed to meet the standards of affordability mentioned earlier in this article (30% or less debt to income ratio for the monthly payment). In addition, owning a home provides security and stability, as it doesn’t carry the risks of being put out when the landlord chooses to sell the property or the lease runs out.
Homeownership Is Not for Everyone
However, homeownership isn’t the best option for everyone. The buyer will have to be able to afford a reasonable mortgage payment. While that’s usually less than market rate rent, it can still be unaffordable for households at the lowest income levels. For this reason, federal, state, and local governments have subsidized housing and rent assistance programs.
Since 2017, the inventory of available rental units has declined while the demand for them has increased. This imbalance has caused two serious problems:
The cost of rent has risen
People are not able to find a place to rent, even if they have rental assistance to help pay the monthly rent. There are people in our community who qualify for rental assistance through state and city programs but can’t use it because there aren’t available units.
The imbalance of available affordable rentals to the need for them can be eased if some of the current tenants could purchase a house, opening up a rental unit for someone else to move into. Many renters could be excellent homeowners if given the opportunity. This is where Habitat comes in!
Removing Barriers to Homeownership
Many renters could become homeowners if certain barriers were removed. Some of those barriers include
No money for a downpayment
Credit issues
Sales prices of current homes are too high
When a household is cost burdened for rent, there is no money left over to save for a down payment on a house or to pay off debt. Often credit issues fester and end up becoming insurmountable. Part of Habitat’s homeowner program is to work through credit repair and financial/budget planning.
Because of Habitat’s advocacy efforts and partnerships with local and state municipalities, people who purchase a home through Habitat have access to down payment assistance. In most cases, this assistance comes in the form of grants or loans that are forgivable under certain circumstances.
To help solve the problem of high sales prices, Habitat builds houses in partnership with the buyer using funds and services from volunteers and supporters. These builds are seeded with funds from the sale of previous builds, but most of the time those sales do not cover the cost of building the next house, which is where grants and supporters in the community come in.
Everyone Deserves a Safe, Decent Place to Live
Habitat’s programs don’t solve all the problems that cause a lack of affordable housing. No one agency or organization can do it all. Habitat partners with and supports organizations and municipalities that provide assistance for housing to low to moderate income households. And we leverage the power of our brand, experience, and knowledge to advocate for policies and funding to help remove barriers to affordable housing along the entire spectrum of the issue.
But the bulk of the work that Habitat does that can be seen and felt most is work that provides homeownership opportunities for people who are likely already housed but are severely cost burdened by keeping a roof over their heads. This has a ripple effect in a community of freeing up other resources to be used by people who need them and may not be ready to be homeowners yet.
If you would like to learn more about affordable housing issues in Jackson, what Habitat is doing about it, and how you can get involved, we invite you to reach out to Executive Director, Sheila Everts at 517-784-6620 or sheilae@jacksonhabitat.org.